Table of Contents
- Banking And Finance:
- Terms related to the Indian Economy
- Gig Economy
- Current Account Deficit
- RBI’s Financial Stability Report
- Financial Services Institutions Bureau (FSIB)
- New GST Rates
- Yield Inversion, Soft-landing and Reverse Currency Wars
- Windfall Tax
- Amendments to rules of the Foreign Contribution Regulation Act (FCRA)
- International Trade Settlement in Indian Rupees (INR)
- BENAMI TRANSACTIONS ACT
- PRIVATISATION OF PUBLIC SECTOR BANKS
- CENTRAL BANK DIGITAL CURRENCY
- GROSS STATE DOMESTIC PRODUCT
- INDIA BLOCKCHAIN PLATFORM
- THE DEVELOPED COUNTRY GOAL
- GUIDELINES TO REGULATE DIGITAL LENDING
- DIGITAL CURRENCY
- RBI'S SURVEY AND THE INDIAN ECONOMY
- GOLD EXCHANGE-TRADED FUNDS
- MONETARY POLICY REVIEW
- DECLINE IN COUNTERFEIT NOTES
- INDIA'S UNIQUE JOB CRISIS
- FINANCIAL INCLUSION INDEX
- The First Quarter GDP Growth
- India pips the UK to become the world's 5th biggest economy
- Central Bank Digital Currency
- Stockpiling of Forex Reserves
- Banking System Liquidity going into 'Deficit Mode'
- Financial Stability and Development Council
- India-US Startup SETU: Supporting Entrepreneurs in Transformation & Upskilling
- Inflation Rate Across States
- IBBI's Amended Norms
- Small Savings Schemes
- Reserve Bank Innovation Hub (RBIH)
- Textiles listed in the UNESCO document
- Card Tokenization
- Impossible Trinity
- Credit Guarantee Scheme for Startups
- Forex Reserves
- Digital Banking Units
- World Economic Outlook Report
- Concerns over the Economic Growth Trajectory of India
- GDP and GVA
- First Loss Default Guarantee(FLDG) system
- Emotional Labor
- Public Financial Management System
- Surety Bond Insurance
- Startup India Seed Fund Scheme (SISFS)
- Goods Trade Barometer
- Utkarsh 2.0
- Financial Stability Report
- Business Confidence Index
- Additional Tier 1 Bonds
- First Advance Estimates
- India Adopts T+1 Settlement System
- Short Selling
- Global Economic Prospects
- National Financial Reporting Authority
- Adani Enterprises Calls Off FPO
- Har Payment Digital Mission
- City Finance Rankings 2022
- Fugitive Economic Offenders (FEO)
- International Intellectual Property Index 2022
- International Arms Transfers
- Fall in Rice Cultivation in India
- Revision of Wheat Allocation to States under the National Food Security Act (NFSA), 2013
- Government Panel on MSP, Natural Farming and Crop Diversification
- The Platform of Platforms(POP)
- 11th Agriculture Census
- FOOD INFLATION
- SELF-SUFFICIENCY IN UREA
- ETHANOL PLANT
- Curbs on Rice Exports
- Pokkali Rice
- GM Mustard
- Kalanamak Rice
- State of Food and Agriculture Report 2022
- Agriculture Investment Portal
- GI Status for Kerala’s Five Agricultural Products
- Tandur Red Gram
- Open Market Sale Scheme
- PM KUSUM Extended
- Startup India Seed Fund Scheme
- Millet International Initiative for Research and Awareness (MIIRA)
- National Flagship Programmes for Fisheries
- PM MITRA Parks
- समर्थ (Samarth)
- Mega 5G Spectrum Auction
- World Competitiveness Index
- India's Largest Floating Solar Power Project
- U.S. Priority Watch List for IPR – Annual Special 301 Report
- MoU FOR MULTI MODAL LOGISTICS PARK
- GOLD JEWELLERY EXPORTS TO UAE UP 42%
- INDIA ENERGY EXCHANGE PROCUREMENT
- NEW NORMS TO INVEST OVERSEAS
- DRAFT INDIAN PORTS BILL, 2022
- New MoU Signed For Developing Multi-Modal Logistics Park At Jalna Dry Port In Maharashtra
- Rs 1,900 Crore Bulk Drug Park Project In Himachal's Una
- National Logistics Policy in India
- A Push for the Semi-Conductor Industry
- The Draft Telecom Bill
- Global Innovation Index
- Telecom Technology Development Fund (TTDF) Scheme
- Biomass Co-firing
- India’s Sugar Industry
- ‘herSTART’ platform
- India Mobile Congress
- Purse Seine Nets
- Nobel Prize in Economic Sciences 2022
- National Highways Infra Trust (NHAI InvIT)
- Trade Summit
- SHAKTI Policy
- Wet Leasing of Aircraft
- Digi Yatra
- PM Adi Adarsh Gram Yojana
- India Internet Governance Forum (IGF)
- Amrit Bharat Station scheme
- City Finance Rankings
- “Broadcast Infrastructure Network Development (BIND)” Scheme
- Hakku Patra
- Ganga Vilas
- Global Quality Infrastructure Index
- Sagar Parikrama
- International Centre of Excellence for Dams
- Khanan Prahari App
- Pradhan Mantri Mudra Yojana
- SWAMIH Investment Fund
- SWAYATT Initiative
- Sagar Manthan Dashboard
Banking And Finance:
Terms related to the Indian Economy
- Context: Economists and politicians in the USA are debating whether monopolistic companies are fueling inflation.
- What is Greedflation:
- It is based on the idea that big companies have seized on inflation to jack up prices more than necessary. It's a term for the art of corporate price gouging.
- Price gouging refers to when retailers and others take advantage of spikes in demand by charging exorbitant prices for necessities, often after a natural disaster or another state of emergency.
- It is being argued that price gouging by dominant companies is squeezing consumers' purchasing power and supercharging inflation. This hypothesis is known as greedflation.
- Significance: This led Experts in economics ponder three questions:
- Are companies charging more than necessary to cover their rising costs?
- If so, is that enough to meaningfully accelerate inflation?
- And is all this happening because large companies have market power
they didn’t decades ago
- Context: India is expected to witness slowing growth and faces an upside risk to the fiscal deficit owing to the recent excise duty cuts on fuel, but it has a low risk of stagflation owing to prudent stabilisation policies, the Department of Economic Affairs said in its Monthly Economic Review for May 2022.
- What is Stagflation?
- Stagflation is a term that defines a situation characterized by a simultaneous increase in prices (inflation) and stagnation of economic growth.
- Stagflation can also be defined as a period of inflation combined with a decline in the gross domestic product (GDP).
- The situation may comprise of following elements-
- the growth rate of the economy slows down
- the level of unemployment remains steadily high
- yet the inflation or price level remains high at the same time.
- The term Stagflation was coined by Iain Macleod, a Conservative Party MP in the United Kingdom, in November 1965. It was the time when many developed economies experienced rapid inflation and high unemployment as a result of an oil shock.
- Context: Recently, NITI Aayog released a report 'India's Booming Gig and Platform Economy'.
- ‘India's Booming Gig and Platform Economy’
- The report is a first-of-its-kind study that presents comprehensive perspectives and recommendations on the gig–platform economy in India.
- The report provides a scientific methodological approach to estimate the current size and job-generation potential of the sector.
- It highlights the opportunities and challenges of this emerging sector and presents global best practices on initiatives for social security and delineates strategies for skill development and job creation for different categories of workers in the sector.
- What is the gig economy?
- The gig economy is based on flexible, temporary, or freelance jobs, often involving connecting with clients or customers through an online platform.
- The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and the demand for flexible lifestyles.
- At the same time, the gig economy can have downsides due to the erosion of traditional economic relationships between workers, businesses, and clients.
Current Account Deficit
- Context: India’s Current Account Deficit (CAD) increased to $23 billion (2.7 per cent of GDP) in the third quarter (Q3) of 2021-22 from $9.9 billion (1.3 per cent of GDP) in Q2 of 2021-22 and $2.2 billion (0.3 per cent of GDP) in Q3 of 2020-21.
- What is the CAD?
- The current account measures the flow of goods, services and investments into and out of the country. The country runs into a deficit if the value of goods and services we import exceeds the value of those we export.
- The current account includes net income, including interest and dividends, and transfers, like foreign aid.
- It represents a country’s foreign transactions and, like the capital account, is a component of a country’s Balance of Payments (BOP).
- It is measured as a percentage of GDP. The formulae for calculating CAD is:
- Current Account = Trade gap + Net current transfers + Net income abroad
Trade gap = Exports – Imports
- Current Account = Trade gap + Net current transfers + Net income abroad
- Twin Deficits
- Current Account Deficit and Fiscal Deficit (also known as “budget deficit” is a situation when a nation's expenditure exceeds its revenues) are together known as twin deficits and both often reinforce each other, i.e., a high fiscal deficit leads to higher CAD and vice versa.
RBI’s Financial Stability Report
Context: Recently, the Reserve Bank (RBI) released the 25th issue of the Financial Stability Report (FSR), which reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the financial system.
- The Financial Stability Report (FSR) is a biannual report released by the Reserve Bank of India (RBI).
- As per the report, the country’s financial system remains stable despite weakening domestic growth despite the risks from global economic uncertainties and geopolitical developments.
- The outlook for the global economy is shrouded by considerable uncertainty because of the war in Europe, front-loaded monetary policy normalisation by central banks in response to persistently high inflation and multiple waves of the COVID-19 pandemic.
- Notwithstanding the challenges from global spillovers, the Indian economy remains on the path of recovery, though inflationary pressures, external spillovers and geopolitical risks warrant careful handling and close monitoring. Banks, as well as non-banking financial institutions, have sufficient capital buffers to withstand shocks.
- The capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) rose to a new high of 16.7 per cent, while their gross non-performing asset (GNPA) ratio fell to a six-year low of 5.9 per cent in March 2022.
- Macro stress tests for credit risk reveal that SCBs would be able to comply with the minimum capital requirements even under severe stress scenarios.
- The latest edition of the FSR includes a survey of international regulatory and supervisory practices as applied to BigTech entities.
- In its survey of financial service offerings by BigTech companies, the RBI listed Google, Apple, Facebook, Amazon and Alibaba among the service providers.
- Regulators and supervisors across the world highlight three major concerns around the presence of BigTechs in financial services. These concerns are concerning financial stability, governance and legislative issues.
- The FSR pointed out that while BigTechs entered the financial domain mainly as payment service providers, they are now offering a host of financial services including credit, asset management, insurance and crowdfunding. They increase financial stability risks by bundling several financial activities through their platforms. Their rising operational interconnectedness with financial incumbents through outsourcing partnerships also enhances risks to financial stability.
Non Performing Assets:
- Concerning non-performing assets (NPA), the banking system’s asset quality has improved, with the GNPA ratio falling from 7.4% in March 2021 to a six-year low of 5.9% in March 2022.
- The capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) has reached a new high of 16.7%.
Provisioning Coverage Ratio (PCR):
- The proportion of funds set aside by a bank for bad debt losses is known as the PCR. A high PCR might help banks protect themselves against losses if NPAs begin to rise rapidly.
- It increased from 67.6% in March 2022 to 70% in March 2022.
Global Financial Stability Report:
- The International Monetary Fund (IMF) releases the Global Financial Stability Report twice in a year — April and October.
- The Global Financial Stability Report focuses on the financial ramifications of the economic issues highlighted in the IMF’s World Economic Outlook Report.
Financial Services Institutions Bureau (FSIB)
Context: Delhi HC recently struck down powers of the Banks Board Bureau; a new body to select chiefs of PSU banks and insurance firms.
What is Financial Services Institutions Bureau (FSIB)?
- The Appointments Committee of the Cabinet (ACC) has approved a government resolution for establishing the Financial Services Institutions Bureau (FSIB) in place of the Banks Board Bureau (BBB).
- It’s a government body set up under the Department of Financial Services (DFS), Ministry of Finance. The board will be entrusted with making recommendations for the appointment of full-time directors and non-executive chairman of state-run financial services institutions.
- It would also issue guidelines for selecting general managers and directors of public sector general insurance companies. While its main task is to play the role of finding the best manpower for the state-owned financial services entities, the board will also be involved in formulating and developing business strategies for state-run banks and help them in their fund-raising plans.
Why has it replaced Banks Board Bureau (BBB)?
- The BBB was declared an incompetent authority last year by the Delhi High Court when a general manager at state-owned National Insurance Company challenged the appointment of a person junior to him for the Director’s position by the BBB. Consequent to the order, 10–11 directors appointed by the BBB had to vacate office.
- To end this logjam, the BBB had to be struck down and a new body, namely, FSIB had to be put in place vide approval from the Appointments Committee of the Cabinet, headed by the prime minister.
What is FSIB’s mandate?
- The primary role of FSIB is to identify manpower capabilities and ensure the proper selection of talent for senior positions at financial institutions owned by the government. However, when BBB was brought into force in April 2016, it was envisaged as a body that would efficiently corporatise and make government entities function like private players, but it didn’t make much headway on that front.
- With FSIB, the intent is to go beyond the man-manager role and assist the government in formulating a code of conduct and ethics for whole-time directors in these entities. It would also monitor and assess the performance of public sector banks, government-owned financial institutions and insurance companies.
How critical is the role of FSIB?
- When BBB was brought into action, there was consolidation within public sector banks, first with Bank of Baroda in 2018 and then a year later with 10 PSU banks. Again, there could be another round of bank mergers and privatisation of both banks and insurance companies.
- The criticism often surfacing is whether PSU entities are ready to withstand the test of privatisation from an operations and management perspective — and this has a deep nexus with the efficiencies of manpower at all layers. Therefore, the silent mandate of FSIB would be to willing banks and insurance companies for the privatisation process and undertake the necessary clean-up/HR upliftment practices.
Who heads the new entity, and who are its members?
- FSIB would be headed by a chairman, a central government nominee. The board would comprise the Secretaries of the DFS, the chairman of IRDAI, and a deputy governor of the RBI. Additionally, it will have three part-time members who are experts in banking and three more from the insurance sector.
New GST Rates
Context: The GST rates were hiked on several items at the 47th Council Meet, chaired by Union Finance Minister Nirmala Sitharaman last month in Chandigarh.
More on the news:
- The Goods and Services Tax (GST) Council in its 47th meeting held last week undertook a series of rate changes as part of the correction of the inverted duty structure, and withdrawal of certain exemptions in what could be a precursor for an overall tweaking of tax slabs and rate rationalisation in future.
- In the changes, which are expected to affect consumers at the most basic level, GST exemption has been withdrawn from ‘pre-packaged and labelled’ retail packs which will include food items such as curd, lassi, puffed rice, wheat flour, buttermilk, but items sold loose or unlabelled shall continue to remain exempt.
- 5 per cent GST on pre-packed, labelled food items like atta, paneer, and curd
- 12 per cent GST on hotel rooms with the tariff of up to Rs 1,000/day, maps and charts
- 5 per cent GST on hospital rooms, except ICU, with rent above Rs 5,000
- 18 per cent GST on tetra packs, and cheques — lose or in book form
- 18 per cent on LED lamps, ink, knives, blades, pencil sharpener, blades, spoons, forks, ladles, skimmers, skimmers, cake servers; printing, writing and drawing ink; fixture and their metal printed circuits board
- 12 per cent GST on solar water heater instead of the previous 5 per cent
- Works contract for roads, bridges, railways, metro, effluent treatment plant, crematorium and others by 18 per cent
- 18 per cent GST on RBI, Irda, and Sebi services and renting of a residential dwelling to business entities
- 12 per cent GST on bio-medical waste treatment facilities
The GST Council:
- The Goods and Services Tax regime came into force after the Constitutional (122nd Amendment) Bill was passed by both Houses of Parliament in 2016. More than 15 Indian states then ratified it in their state Assemblies, after which the President gave his assent.
- The GST Council – a joint forum of the Centre and the states — was set up by the President as per Article 279A (1) of the amended Constitution.
- The members of the Council include the Union Finance Minister (chairperson), and the Union Minister of State (Finance) from the Centre. Each state can nominate a minister in charge of finance or taxation or any other minister as a member.
Why was the GST Council set up?
- The Council, according to Article 279, is meant to “make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws”.
- It also decides on various rate slabs of GST. For instance, an interim report by a panel of ministers has suggested imposing 28 per cent GST on casinos, online gaming and horse racing. A decision on this will be taken at the Council meeting.
Supreme Court Judgement and the Council:
- The Supreme Court in May this year, stated recommendations of the GST Council are not binding.
- The court said Article 246A of the Constitution gives both Parliament and state legislatures “simultaneous” power to legislate on GST and recommendations of the Council “are the product of a collaborative dialogue involving the Union and States”. This was hailed by some states, such as Kerala and Tamil Nadu, who believe states can be more flexible in accepting the recommendations as suited to them.
Yield Inversion, Soft-landing and Reverse Currency Wars
Context: With the USA's inflation rate at 9.1% in June, the highest in 40 years, we take a look at three key terms: Yield inversion, soft-landing and reverse currency war.
What is Bond Yield Inversion?
- Bonds are essentially an instrument through which governments (and also corporations) raise money from people.
- A bond's yield is the return to an investor from the bond's coupon or interest payments.
- Typically government bond yields are a good way to understand the risk-free interest rate in that economy.
- The yield curve is the graphical representation of yields (profit) from bonds. E.g. If one was to take the Indian government bonds of different tenures and plot them according to the yields they provide, one would get the yield curve.
- Under normal circumstances: any economy would have an upward sloping yield curve.
- Meaning normal profit from investment in the bond.
- Inverted Bond yield curve: As one buys bonds of longer tenure — one gets higher yields. This is logical. If one is parting with money for a longer duration, the return should be higher.
- However, An inversion of the yield curve essentially suggests that investors expect future growth to be weak.
- For instance, bonds with a tenure of 2 years end up paying out higher yields (returns/ interest rate) than bonds with a 10-year tenure.
- Over the years, inversion of the bond yield curve has become a strong predictor of recessions.
What is Soft-landing?
- When a central bank is successful in slowing down the economy without bringing about a recession, it is called a soft-landing — that is, no one gets hurt.
- But, when the actions of the central bank bring about a recession, it is called hard-landing.
What are Reverse Currency Wars?
- As the US FED rate increases, investor finds it more attractive and less risky. So, more and more investors are rushing to invest money in the US. This, in turn, has made the dollar become stronger than all the other currencies.
- The relative weakness of their local currency against the dollar makes their exports more competitive. This can be good for economies.
- However, today, every central bank is trying to counter the US Fed and raise interest rates themselves in order to ensure their currency doesn’t lose too much value against the dollar. This has been termed ‘reverse currency war’.
Context: Recently, the Indian government has cut the recently imposed cesses and levies on diesel and aviation turbine fuel (ATF) and removed the cess on exports of petrol.
What is Windfall Tax?
- A windfall tax is a higher tax rate on profits that result from a sudden windfall gain to a particular company or industry, often as the result of a geopolitical disturbance, war or natural disaster that creates unusual spikes in demand and/or interruptions to supply.
- Historically, taxes on windfall profits have been imposed as a result of opportunistic 'price gouging' or 'profiteering', whether real or perceived. Notable instances of sudden and dramatic increases in oil industry profits that provoked such taxes around the world include the 1970's OPEC oil embargo, the Persian Gulf wars and the global economic sanctions imposed on Russia in response to their invasion of Ukraine.
- The purpose is to redistribute excess profits in one area for the greater social good; however, this can be a contentious ideal.
Amendments to rules of the Foreign Contribution Regulation Act (FCRA)
Context: Recently, the new rules – Foreign Contribution (Regulation) Amendment Rules, 2022, were notified by the Ministry of Home Affairs (MHA) through a gazette notification.
What is FCRA?
- The Foreign Contribution (Regulation) Act (FCRA), 2010 consolidates the law to regulate the acceptance and utilization of foreign contributions or foreign hospitality by certain individuals or associations or companies.
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security or are detrimental to the national interest.
- The Act extends across India and also applies to the citizens of India outside India.
- Associate branches or subsidiaries, outside India, of companies or bodies corporate, registered or incorporated in India also have to follow the rules of the Act.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- It is mandatory for all associations, groups and NGOs which intend to receive foreign donations to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
- Registered associations can receive foreign contributions for social, educational, religious, economic and cultural purposes.
Changes in the FCRA rules:
- Allowed Indians to receive up to Rs 10 lakh annually from their relatives abroad under FCRA. The limit earlier was Rs 1 lakh.
- It has given individuals and organisations or NGOs 45 days for the application of obtaining 'registration' or 'prior permission under the FCRA to receive funds. Earlier it was 30 days.
- Organisations receiving foreign funds will not be able to use more than 20 % of such funds for administrative purposes. The earlier limit was 50 % before 2020.
- Added five more offences under the FCRA “compoundable”, making 12, instead of directly prosecuting the organisations or individuals.
International Trade Settlement in Indian Rupees (INR)
Context: Recently, the Reserve Bank of India (RBI) announced an arrangement for domestic traders to settle imports and exports in rupees, a move experts said is aimed at facilitating trade with sanctions-hit Russia.
More on the news:
- In order to promote the growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR.
- Before putting in place this mechanism, Authorised Dealers (AD) banks shall require prior approval from the Foreign Exchange Department of Reserve Bank of India, Central Office at Mumbai.
The broad framework for cross-border trade transactions in INR under Foreign Exchange Management Act, 1999 (FEMA) is as delineated below:
- Invoicing: All exports and imports under this arrangement may be denominated and invoiced in Rupee (INR).
- Exchange Rate: Exchange rate between the currencies of the two trading partner countries may be market determined.
- Settlement: The settlement of trade transactions under this arrangement shall take place in INR in accordance with the procedure laid down in Para 3 of this circular.
- It is a good move as far as India is concerned. Since we import more than we export, we will save foreign currency under the new arrangement. For instance, under normal circumstances, we would have had to pay Russia in dollars for oil purchases, which can now be done through the rupee-rouble route.
- Under the mechanism, Indian importers will make payments in rupees, to be credited to the Vostro account of the correspondent bank of the partner country. Similarly, Indian exporters will be paid the export proceeds in rupees from the balances in the Vostro account of the partner country.
- The pressure on India’s forex reserves would diminish, a collateral benefit of the move to allow trade in rupees.
- With the new payment mechanism in place, India will be able to avoid sanctions placed on several countries such as Russia and Iran.
- Trade between Brazil, Russia, India, China and South Africa (BRICS) and South Asian nations would grow if India had rupee-rupee transactions, a long-standing demand from the industry.
BENAMI TRANSACTIONS ACT
- The Supreme Court on Tuesday declared that Section 3(2) of the Benami Transactions (Prohibition) Act 1988 as unconstitutional on the ground of being manifestly arbitrary.
- What is a Benami transaction?
- Introduced in 1988, the Benami Transactions (Prohibition) Act prohibits Benami transactions and gives the government the right to recover Benami property.
- According to the act, a Benami transaction is a transaction “where a property is transferred to or is held by, a person, and the consideration for such property has been provided, or paid by, another person”.
- It also includes transactions where “the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration.”
- In simpler terms, if “A” has paid for the property, but it is in the name of some other person “B”, it is labelled as a Benami property.
- Here, if either A or B are fictitious, the property is considered a Benami property. This law also stands in the case of the owner denying any knowledge of holding such property.
- However, when the property is held by a member of a Hindu undivided family (HUF) on behalf of the HUF, or on behalf of his spouse or children, it cannot be considered Benami. Also, if the property is held in a fiduciary capacity, it does not come under the ambit of the law.
- According to the law, the Centre can confiscate any property that has been tagged as a Benami property.
- Cash and sensitive information can also be termed as 'property' under the act.
- What were the amendments to the act in 2016?
- The amendment that came into effect on November 1, 2016, inserted a sub-section 2 in section 3 of part 3 of the act. It specified that whoever enters a Benami transaction shall be punishable with imprisonment for a term of up to three years or a fine or both.
- The new punishment was also being applied retrospectively to the transactions that took place before 2016.
- SC, on Tuesday, stated that the provisions under section 3 are 'unduly harsh' and declared them unconstitutional.
- The provisions under section 5, which allows the government to confiscate the property, were also declared unconstitutional and they were 'half-baked'.
- What did The Supreme Court Rule?
- Section 3(3) of the 2016 Act
- It extended the three-year imprisonment to seven years and a fine of up to 25% of the fair market value of the property if a person enters into any Benami transactions.
- The Supreme Court ruled that “Concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act (25th October 2016). As a consequence of the above declaration, all such prosecutions or confiscation proceedings shall stand quashed”.
- Forfeiture of Benami Properties
- The Supreme Court also held the provision in the 1988 Act regarding forfeiture of Benami properties as unconstitutional and added that the provision in the 2016 amended Act on the same can only be applied prospectively.
- As it is not concerned with the constitutionality of independent forfeiture proceedings contemplated under the 2016 Amendment Act on the other grounds, it was leaving open the question to be decided in appropriate cases.
- Prevention of Money Laundering Act (PMLA), 2002
- A recent judgement of the Supreme Court upheld the provision of PMLA which allows authorities to take possession of the property before trial in exceptional cases.
- The Supreme Court has said that such a provision leaves the scope for arbitrary application.
PRIVATISATION OF PUBLIC SECTOR BANKS
- In the Union Budget 2021-22, the government announced its decision to privatise two Public Sector Banks.
- Public Sector and Private Sector Banks
- Public Sector
- Public Sector Banks (PSBs) are those banks where the government holds more than 50% ownership.
- Further, the government regulates the financial guidelines, because of government ownership, and most depositors believe that their money is more secure in public sector banks.
- As a result, most public sector banks have a large customer base.
- For example, The State bank of India (SBI) is the largest public sector bank in India.
- In this bank, the Indian government holds more than 63% share.
- Private Sector Banks
- Private sector banks are those banks where private individuals or private companies own a major part of the bank’s equity.
- Even though these banks follow the nation’s central bank’s guidelines, they can formulate their independent financial strategy for the customers.
- What is the Privatisation of banks?
- The transfer of ownership, property or business from the government to the private sector is termed privatisation. The government ceases to be the owner of the entity or business.
- Privatisation is considered to bring more efficiency and objectivity to the company, something that a government company is not concerned about.
- India went for privatisation in the historic reforms budget of 1991, also known as the 'New Economic Policy or LPG policy'.
- Need to Privatise Public Sector Banks?
- Issues with Public Sector Banks
- Non-Performing Assets (NPA) are loans that the borrower fails to pay back to the bank, further high levels of NPAs erode a bank’s profitability.
- Most of PSBs are also unable to maintain a capital adequacy ratio.
- In the case of many a PSBs, the RBI had to restrict the normal functioning of the banks — this is referred to as the banks being put under Prompt Corrective Action (or PCA) — and forced them to improve their financial performance metrics before being allowed to resume normal banking activities.
- Losses in Rural Branches
- Most of the rural branches are running at a loss because of high overheads and the prevalence of the barter system in most parts of rural India.
- The smooth functioning of banks has been hampered by red-tapism, long delays, lack of initiative, and failure to take quick decisions.
- Financial Burden to Government
- Rather than wasting taxpayers’ money to recapitalise PSBs, the government should simply sell them off to the private sector.
- This would reduce the financial burden on the government while also ensuring that PSBs become more efficient and profit-making entities under private ownership.
- According to the Union Budget 2021-22, the government had announced its decision to start by privatising two PSBs.
- Efficient Performance of Private Sector Banks
- Efficient: The Private sector Banks (PVBs) are far more efficient, far more productive, and far less corrupt than the PSBs.
- Less Amount of NPA: Private sector banks have lower gross NPAs.
- Enhanced Banking Facilities: They provide a more significant contribution towards extending loans and a higher percentage of contribution to getting deposits from savers.
- More Branches and More Jobs: They created more branches and new jobs while the public sector banks saw declines on both counts.
- Fetches More Market Value: When the Economic Survey reviewed bank nationalisation in 2020, it is found that every rupee of taxpayer money invested in PSBs fetches a market value of just 71 paise. This is called the market-to-book ratio. In stark contrast, every rupee invested in new private sector banks fetches a market value of Rs 3.70. In other words, private banks give more than five times more value than PSBs.
- Who is More Efficient?
- Financial Inclusion
- Pradhan Mantri Jan Dhan Yojana (PMJDY), envisages universal access to banking facilities with at least one basic banking account for every household.
- Public Sector Banks provide 36.2 crore beneficiaries while Private sector banks accounted for just Rs 1.3 crores of the total of almost Rs 46 crore beneficiaries.
- While the private banks dominate the metropolitan areas, it is the public sector banks that operate branches in rural India.
- PSBs provide more ATMs in rural India.
- PSBs are more efficient than PVB in Financial Inclusion, while when profit maximisation is the sole motive, the efficiency of the PVBs has always surpassed that of their public sector counterparts.
- However, when the objective function is changed to include financial inclusion—like total branches, agricultural advances and PSL advances— PSBs prove to be more efficient than PVBs (middle and bottom panel).
- Relevance in Economy
- The relevance of banking lies in knowing whether banks lend when borrowers need the money the most.
- Thus, PSBs have a lion’s share in infrastructure finance lendings and their role has been especially crucial against the backdrop of the withering away of erstwhile development financial institutions.
- Way Forward
- There is a need for a nuanced approach and further, members of RBI’s Banking Research Division have warned against the conventional perspective of viewing privatisation as a panacea for all ills.
- The big bang approach of privatization of the public sector banks may do more harm than good as the repercussions could lead to the vulnerable population losing their financial inclusion and further making it difficult for them to access banking and related facilities.
- That’s why It is best to steer clear of an ideologically-driven stance and instead focus on achieving a mix of public and private banks that best serves the needs of a diverse economy such as India.
CENTRAL BANK DIGITAL CURRENCY
- Reserve Bank of India’s (RBI) digital rupee — the Central Bank Digital Currency (CBDC) — may be introduced in phases beginning with wholesale businesses in the current financial year.
- What is Central Bank Digital Currency (CBDC)?
- CBDC is the legal tender issued by a central bank in digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different
- The digital fiat currency or CBDC can be transacted using wallets backed by blockchain.
- Though the concept of CBDCs was directly inspired by Bitcoin, it is different from decentralised virtual currencies and crypto assets, which are not issued by the state and lack the ‘legal tender’ status. CBDCs enable the user to conduct both domestic and cross-border transactions which do not require a third party or a bank.
- The main objective is to mitigate the risks and trim costs in handling physical currency, costs of phasing out soiled notes, transportation, insurance and logistics.
- It will also wean people away from cryptocurrencies as a means for money transfer.
- Benefits & Challenges of CBDC
- A Combination of Traditional and Innovative
- CBDC can gradually bring a cultural shift towards virtual currency by reducing currency handling costs.
- CBDC is envisaged to bring in the best of both worlds:
- The convenience and security of digital forms like cryptocurrencies
- The regulated, reserved-backed money circulation of the traditional banking system.
- Easier Cross-Border Payments
- CBDC can provide an easy means to speed up a reliable sovereign-backed domestic payment and settlement system partly replacing paper currency.
- It could also be used for cross-border payments, it could eliminate the need for an expensive network of correspondent banks to settle cross-border payments.
- Financial Inclusion
- The increased use of CBDC could be explored for many other financial activities to push the informal economy into the formal zone to ensure better tax and regulatory compliance.
- It can also pave the way for furthering financial inclusion.
- Privacy Concerns
- The first issue to tackle is the heightened risk to the privacy of users—given that the central bank could potentially end up handling an enormous amount of data regarding user transactions.
- This has serious implications given that digital currencies will not offer users the level of privacy and anonymity offered by transacting in cash.
- Compromise of credentials is another major issue.
- Disintermediation of Banks
- If sufficiently large and broad-based, the shift to CBDC can impinge upon the bank’s ability to plough back funds into credit intermediation.
- If e-cash becomes popular and the Reserve Bank of India (RBI) places no limit on the amount that can be stored in mobile wallets, weaker banks may struggle to retain low-cost deposits.
- Other risks are
- Faster obsolescence of technology could pose a threat to the CBDC ecosystem calling for higher costs of upgradation.
- Operational risks of intermediaries as the staff will have to be retrained and groomed to work in the CBDC environment.
- Elevated cyber security risks, vulnerability testing and the costs of protecting the firewalls.
- Operational burden and costs for the central bank in managing CBDC.
- Way Forward
- In order to obviate some weaknesses of CBDCs, the usage should be payment-focused to improve the payment and settlement system.
- Then it can steer away from serving as a store of value to avoid the risks of disintermediation and its major monetary policy implications.
- The data stored with the central bank in a centralised system will hold grave security risks, and robust data security systems will have to be set up to prevent data breaches.
- Thus, it is important to employ the right technology that will back the issue of CBDCs.
- The sizing of the infrastructure required for the CBDC will remain tricky if payment transactions are carried out using the same system.
- The RBI will have to map the technology landscape thoroughly and proceed cautiously with picking the correct technology for introducing CBDCs.
- The financial data collected on digital currency transactions will be sensitive in nature, and the government will have to carefully think through the regulatory design.
- This would require close interaction between the banking and data protection regulators.
GROSS STATE DOMESTIC PRODUCT
- Recently, the Union Ministry of Statistics and Programme Implementation has released figures for the Gross State Domestic Products.
- The economies of 19 states and Union Territories exceeded their pre-Covid levels, with 7 recording double-digit growth rates during 2021-22.
- The growth rates of 11 states including Gujarat and Maharashtra were not available for 2021-22.
- Key Findings
- Size of the Gross State Domestic Product (GSDP) of the 19 states and UTs had contracted or recorded a negligible growth during 2020-21 — the year when the government had imposed a nationwide lockdown in view of the Covid-19 outbreak.
- These 19 states and UTs are Andhra Pradesh, Rajasthan, Bihar, Telangana, Delhi, Odisha, Madhya Pradesh, Haryana, Karnataka, Tripura, Sikkim, Himachal Pradesh, Meghalaya, Jharkhand, Tamil Nadu, Jammu and Kashmir, Punjab, Uttarakhand and Puducherry.
- Their economies (GSDP) bounced back in 2021-22 and exceeded their pre-Covid (2019-20) levels.
- Kerala and Uttar Pradesh are the only exceptions in 2021-22 which recorded GSDP below the pre-Covid levels.
- Andhra recorded the highest growth of 11.43%, Puducherry recorded the lowest at 3.31%.
- Besides Andhra Pradesh, five other states and one UT recorded double digit growth in 2021-22:
- Rajasthan: 11.04%
- Bihar: 10.98%
- Telangana: 10.88%
- Odisha: 10.19%
- Madhya Pradesh: 10.12%
- Delhi: 10.23%
- Sharp jump in the GSDP of some states is due to the base effect, the general trend mirrors the post-pandemic economic recovery.
- In 2021-22, India’s GDP expanded at 8.7% against a 6.6% contraction in 2020-21.
- What is Gross State Domestic Product?
- Gross State Domestic Product (GSDP) is a measure in monetary terms, the sum total volume of all finished goods and services produced during a given period of time, usually a year, within the geographical boundaries of the State, accounted without duplication.
- Gross State Domestic Product (GSDP) or State Income is the most important indicator for measuring the economic growth of a State.
- These estimates of the economy, over a period of time, reveal the extent and direction of the changes in the levels of economic development.
- The State Domestic Product is classified under three broad sectors such as Primary sector, Secondary sector and Tertiary sector and is compiled economic activity wise as per the methodology prescribed by the National Accounts Division, National Statistical Office, Ministry of Statistics & Programme Implementation, Govt. of India.
- In 2015, NSO introduced the new series of national accounts statistics with base year 2011-12, replacing the previous series with the base year 2004-05.
INDIA BLOCKCHAIN PLATFORM
- Recently, India has made several efforts to become a digital society by building a large citizen-scale digital public infrastructure with a significant push from the government.
- Public Digital Infrastructure
- It refers to digital solutions that enable basic functions essential for public and private service delivery, i.e., collaboration, commerce, and governance.
- Indian Initiatives
- The Government of India and the Reserve Bank of India (RBI) have been promoting simplification and transparency to increase the speed of interaction between individuals, markets, and the government.
- With the commencement of the Digital India mission in 2015, the payments, provident fund, passports, driving licenses, crossing tolls, and checking land records all have been transformed with modular applications built on Aadhaar, Unified Payments Interface(UPI), and the India Stack.
- Not Interconnected
- The existing different digital infrastructures are not interconnected as a design.
- Not Interoperable
- There is need for a technical integration is required to make them conversant and interoperable.
- Today, information travels across multiple systems, and they mostly rely on limited private databases, which makes it more complex, as more network grows it increases the cost and creates inefficiency.
- Other Efficient Digital Systems
- Web 3.0
- Web 3.0 is a decentralized internet to be run on blockchain technology, which would be different from the versions in use, Web 1.0 and Web 2.0.
- The internet in Web 1.0 was mostly static web pages where users would go to a website and then read and interact with the static information.
- In Web 2.0 users can create content – primarily, a social media kind of interaction.
- In Web 3.0, users will have ownership stakes in platforms and applications unlike now where tech giants control the platforms.
- The Web 3.0 architecture establishes a new version of the Internet protocol incorporating token-based economics, transparency, and decentralization.
- It is not only the cryptocurrencies but also NFTs or non-fungible tokens, representing physical assets or digital twins.
- A user can access all ecosystem benefits using a distributed token where they can show proof of ownership, tax history, and payment instruments.
- The blockchain records could be visible, compiled, and audited by the regulators in real time.
- A blockchain is a distributed database or ledger that is shared among the nodes of a computer network.
- As a database, a blockchain stores information electronically in digital format.
- Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.
- The innovation of a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.
- Global Adoption
- Estonia, the world’s blockchain capital, is using blockchain infrastructure to verify and process all e-governance services offered to the general public.
- China, launched BSN (Blockchain-based Service Network) to deploy blockchain applications in the cloud at a streamlined rate.
- In Britain, the Centre for Digital Built Britain is running the National Digital Twin program (NDTp) to foster collaboration between owners and developers of digital twins in the built environment.
- The Brazilian government recently launched the Brazilian Blockchain Network to bring participating institutions in governance and the technological system that facilitates blockchain adoption in solutions for the public good.
- They are well-established decentralized finance (DeFi) platforms that rely on blockchain infrastructure.
- These platforms have a multi-country presence and usage and do not come under any particular regulatory ambit.
- DeFi allows users to borrow and lend cryptocurrencies on a short-term basis at algorithmically determined rates.
- DeFi users are rewarded with tokens that confer governance rights, which are analogous to seats on the protocol’s board.
- For example: The blockchain provider Solana launched a prototype smartphone with hardware and security that can support decentralized apps for people interested in crypto wallets, Web3, and NFTs.
- How can India Benefit from Blockchain?
- Create Interoperability
- The Indian digital community, including fintech, academia, think tanks, and institutions, should focus on supporting research in standards, interoperability, and efficient handling of current known issues with the distributed technologies,
- e.g., scalability and performance, consensus mechanisms, and auto-detection of vulnerabilities.
- At the present time, blockchain models are partially permitted or are public like Ethereum which is unregulated and relies on intrinsic standards.
- Creating National Ecosystem on Blockchain
- The ideal solution to solving most of the known issues of decentralized technologies lies in the middle path, i.e., a national platform operating at L1(layer-1) that interconnects blockchains (both permissioned and public), application providers (decentralized applications — dApps — and existing), token service providers, and infrastructure managers.
- Together they can form a reliable and efficient network for the Indian digital economy.
- The ecosystem can further deploy relevant and purpose-specific applications at L2(Layer-2) for very little cost and effort.
- Further, all chains on this public infrastructure will communicate with each other, thus replicating the communication (and avoiding the need for complex integrations with each other) on the Internet for existing Indian digital infrastructures.
- Create Interoperability
- Web 3.0
THE DEVELOPED COUNTRY GOAL
- Recently, the Prime Minister in his Independence Day Speech laid out Panch Pran (Five Vows) to be completed by 2047 when India celebrates 100 years of Independence,
- The first vow is for India to become a Developed Country in the next 25 years.
- The remaining pledges for 2047 are – removing any sign of servility, pride in heritage, unity and fulfilling our duties.
- What is a Developed Country?
- A Developed Country is industrialised, has a high quality of life, a developed economy and advanced technological infrastructure relative to less industrialised nations.
- Whereas developing countries are those in the process of industrialisation or are pre-industrial and almost entirely agrarian.
- The most common criteria for evaluating the degree of economic development are:
- The Gross Domestic Product (GDP), or the monetary measure of all goods and services produced in a country in a year.
- Countries with a high GDP and per capita income (the amount of money earned per person) are considered developed.
- The Countries in which the tertiary (companies that provide services such as entertainment, financial, and retailers) and quaternary sectors of industry (knowledge-based activities such as information technology, research, and development, as well as consulting services and education) dominate are described as developed.
- Also, the developed countries generally have more advanced post-industrial economies, meaning the service sector provides more wealth than the industrial sector
- Other criteria are the scale of infrastructure, the general standard of living, and the Human Development Index (HDI).
- As the HDI focuses on indices for life expectancy and education and does not take into account factors such as the net wealth per capita or the relative quality of goods in a country.
- This is why even some of the most advanced countries, including the G7 members (Canada, France, Germany, Italy, Japan, the UK, the US, and the European Union) and others, do not do too well on HDI. That's why countries like Switzerland rank high on HDI.
- What is the Definition of a Developed Country?
- There is no all-agreed definition of a developed country.
- Agencies such as the United Nations, the World Bank, the World Trade Organization, and the World Economic Forum use their indicators to club developed and developing countries.
- For example, the UN classifies countries into low, lower-middle, upper-middle, and high-income countries.
- This classification is based on an individual country’s gross national income (GNI) per capita.
- Low –Income Economy: GNI per capita of up to $1,085
- Lower Middle-income: GNI per capita up to $4,255
- Upper-Middle-income: GNI per capita $13,205
- High-Income economy: GNI per capita above $13,205
- Why is the United Nations Classification Contested?
- The UN classification is not very accurate as it focuses on limited analytical value. due to which only the top three countries – the US, the UK & Norway are categorized as developed countries.
- Whereas, almost there are 31 developed countries, and the rest except 17 (economies in transition) are designated as developing countries.
- In the case of China, the country’s capita income is closer to Norway’s than Somalia’s.
- China’s per capita income is 26 times that of Somalia’s while Norway’s is just about seven times that of China’s, but still, it got the tag of a developing country.
- On the other hand, a country like Ukraine, with a per capita GNI of $4,120 (a third of China’s) designated as economies in transition rather than a developed nation.
- Where Does India Stand?
- India is currently far behind both the developed countries, as well as some developing countries.
- In terms of GDP, India is the sixth largest economy but in the case of per capita income, India is behind even Bangladesh.
- Further, China’s per capita income is 5.5 times that of India, and the UK’s is almost 33 times.
- To map this inequality and match the scores of India and other countries we look at Human Development Index (HDI),
- India has performed fairly well.
- The life expectancy at birth in India has gone from around 40 years in 1947 to around 70 years now.
- India has also taken giant strides in education enrolment at all three levels — primary, secondary, and tertiary.
- To be called a developed country there is a need to grow the per capita income as the people as a unit matters more.
- The disparities in per capita income often show up in the overall quality of life in different countries.
- Where Does India Lag?
- According to a 2018 diagnostic report on India by the World Bank, despite being the third largest economy in terms of purchasing power parity most Indians are still relatively poor compared to the people in other middle-income or rich countries.
- Almost 10% of Indians, at most, have consumption levels above the commonly used threshold of USD 10 (PPP) per day expenditures for the global middle class.
- Further, other metrics, such as the food share of consumption, suggest that even rich households in India would have to see a substantial expansion of their total consumption to reach the levels of poor households in rich countries.
- How can India Achieve the Developed Country Goal by 2047?
- As per The World Bank’s 2018 report, by 2047 — the centenary of its independence — at least half its citizens could join the ranks of the global middle class.
- This will mean that households have access to better education and health care, clean water, improved sanitation, reliable electricity, a safe environment, affordable housing, and enough discretionary income to spend on leisure pursuits.
- Further, the report highlighted the precondition of income well above the extreme poverty line, as well as vastly improved public service delivery.
- What are India's Achievements Since Independence?
- India's GDP rose from Rs 2.79 lakh crore in 1950-51 to an estimated Rs 147.36 lakh crore in 2021-22.
- India's economy, currently at USD 3.17 trillion, is expected to become the fifth largest in the world in 2022.
- India's foreign exchange reserves have risen from Rs 911 crore in 1950-51 to Rs 45,42,615 crore in 2022.
- Now, India has the fifth-largest forex reserves in the world.
- India's foodgrain production has increased from 50.8 million tonnes in 1950-51 to 316.06 million tonnes now
- The literacy rate has also improved from 18.3% in 1951 to 78%. The female literacy rate has improved from 8.9% to over 70%.
GUIDELINES TO REGULATE DIGITAL LENDING
- Recently, the Reserve Bank of India (RBI) issued the first set of guidelines for digital lending, to crack down on illegal activities by certain players.
- Towards addressing concerns that had sprung up, the RBI had constituted a Working Group on ‘digital lending including lending through online platforms and mobile apps’ (WGDL) in January, 2021.
- The group has proposed stricter norms for digital lenders in November 2021, some of which have been accepted and included in the new norms while others are under examination.
- What is Digital Lending?
- It consists of lending through web platforms or mobile apps, by taking advantage of technology for authentication and credit assessment.
- Banks have launched their own independent digital lending platforms to tap into the digital lending market by leveraging existing capabilities in traditional lending.
- Financial Inclusion: It helps in meeting the huge unmet credit need, particularly in the microenterprise and low-income consumer segment in India.
- Reduce Borrowing from Informal Channels: It helps in reducing informal borrowings as it simplifies the process of borrowing.
- Time Saving: It decreases time spent on working loan applications in-branch. Digital lending platforms have also been known to cut overhead costs by 30-50%.
- Highlights of the Guidelines
- For Loan Disbursals and Repayments
- All loan disbursals and repayments will be required to be executed only between the bank accounts of the borrower and the Regulated Entities (RE) without any pass-through or pool account of the Lending Service Providers (LSP) or any third party.
- Regulated Entities include a bank or a non-banking financial company.
- Regarding Payment
- The new rules mandate that fees or charges payable to LSPs in the credit intermediation process will be paid directly by the bank or Non-Banking Financial Companies (NBFCs) and not by the borrower.
- Regarding Loan Disclosure
- All-inclusive cost of digital loans in the form of Annual Percentage Rate (APR) is required to be disclosed to the borrowers.
- Regarding increase in Credit Limit
- The new norm prohibits any automatic increase in credit limit without the explicit consent of the borrower.
- Regarding Exiting Digital Loans
- It also provides, as part of the loan contract, a cooling-off/ look-up period during which the borrowers can exit digital loans by paying the principal and the proportionate annual percentage rate without any penalty.
- To Protect Data Privacy
- To protect data privacy, the data collected by digital lending apps has to be need-based, with the customer’s prior consent, and can be audited, if required.
- Grievance Redressal Officer
- Banks will have to ensure that they, and the LSPs engaged by them, must have a suitable nodal grievance redressal officer to deal with fintech- or digital lending-related complaints.
- This officer will also deal with complaints against their respective Digital Lending Apps (DLAs).
- Current guidelines allow for the borrower to complain to the Integrated Ombudsman Scheme of the RBI if their grievance was not resolved by the bank within 30 days.
- Reporting of Loans
- REs are required to ensure that any lending done through DLAs has to be reported to Credit Information Companies (CICs), irrespective of its nature or tenor.
- More importantly, lending through the Buy Now Pay Later (BNPL) model also needs to be reported to CICs.
- Who comes under RBI’s New Purview?
- While announcing the norms, RBI classified digital lenders into three categories.
- Entities regulated by the RBI and permitted to carry out lending business.
- Entities authorized to carry out lending as per other statutory or regulatory provisions but not regulated by RBI.
- Entities lending outside the purview of any statutory or regulatory provisions.
- The central bank’s regulatory framework is focused on the digital lending ecosystem of regulated entities and the LSPs engaged by them to extend various permissible credit facilitation services.
- However, the lenders in the other categories do not come under the new guidelines and can consider formulating appropriate rules and regulations on digital lending based on the recommendations of the working group.
- What is the Need for Such Guidelines?
- With the advent of technological innovation, there has been immense development in the digital lending ecosystem, which has resulted in several fintech firms extending credit services.
- However, this growth has led to mis selling to unsuspecting customers, unethical business conduct by digital lenders and excessive engagement of third parties, and concerns over data privacy of the borrower.
- There have also been several complaints by consumers that digital lending apps are charging exorbitant interest rates or they were committing fraud, among others.
- Way Forward
- India is on the verge of a digital lending revolution and making sure that this lending is done responsibly can ensure the fruits of this revolution are realized.
- Digital lenders should proactively develop and commit to a code of conduct that outlines the principles of integrity, transparency and consumer protection, with clear standards of disclosure and grievance redressal.
- Apart from establishing technological safeguards, educating and training customers to spread awareness about digital lending is also important.
- According to a recent study by the United Nations Trade and Development Body (UNCTAD), over 7% of India's population owned Digital Currency in 2021.
- Also, India was ranked seventh in the list of top 20 global economies for digital currency ownership as share of population.
- Other Highlights of the Study
- Developing countries accounted for 15 of the top 20 economies when it comes to the share of the population that owns cryptocurrencies.
- Ukraine topped the list which is followed by Russia, Venezuela, Singapore, Kenya, and the US.
- Global use of cryptocurrencies has increased exponentially during the Covid-19 pandemic, including in developing countries.
- Issues Highlighted by the Study
- Unstable Financial Asset
- Private digital currencies have rewarded some and facilitated remittances, but they are an unstable financial asset that can also bring social risks and costs.
- As these Digital currencies are not regulated, there has been a rapid rise in their demand in developing countries as it also helps in facilitating remittances and act as a hedge against inflation.
- Volatile System
- The recent digital currency shocks in the market suggest that there are private risks to holding crypto, but if the central bank steps in to protect financial stability, then the problem becomes a public one.
- Jeopardies the Monetary Sovereignty
- If cryptocurrencies become a widespread means of payment and even replace domestic currencies unofficially (a process called cryptoisation), this could jeopardies the monetary sovereignty of countries.
- Undermine Domestic Policies
- Cryptocurrencies can undermine domestic resource mobilisation in developing countries.
- Suggestions Highlighted by the Study
- The Government can facilitate remittances, they may also enable tax evasion and avoidance through illicit flows.
- The study urged authorities to take steps to curb the expansion of cryptocurrencies in developing countries, including ensuring comprehensive financial regulation of cryptocurrencies by regulating crypto exchanges, digital wallets and decentralized finance, and by prohibiting regulated financial institutions from holding cryptocurrencies (including stablecoins) or offering related products to customers.
- It also called for restrictions on advertising related to digital currencies, as with other high-risk financial assets.
- Further, providing a secure, reliable and cost-effective public payment system that is fit for the digital age; Implement global tax harmonization on digital currency tax practices, regulations and information sharing, and redesign capital controls to accommodate the decentralized, borderless and pseudonymous characteristics of digital currencies.
- What is Digital Currency?
- Digital currency is a form of currency that is available only in digital or electronic form.
- It is also called digital money, electronic money, electronic currency, or cybercash.
- It does not have physical attributes and is available only in digital form.
- The transactions involving digital currencies are made using computers or electronic wallets connected to the internet or designated networks.
- Whereas, physical currencies, such as banknotes and minted coins, are tangible, meaning they have definite physical attributes and characteristics.
- Digital currencies can be centralized or decentralized.
- Fiat currency, which exists in physical form, is a centralized system of production and distribution by a central bank and government agencies.
- Prominent cryptocurrencies, such as Bitcoin and Ethereum, are examples of decentralized digital currency systems.
- Fast Transaction time
- Because digital currencies generally exist within the same network and accomplish transfers without intermediaries, the amount of time required for transfers involving digital currencies is extremely fast.
- Do not require Physical Manufacturing & Saves Cost
- Many requirements for physical currencies, such as the establishment of physical manufacturing facilities, are absent for digital currencies. Such currencies are also immune to physical defects or soiling that are present in physical currency.
- Ease Implementation of Monetary and Fiscal Policy
- Under the current currency regime, the Central bank works through a series of intermediaries—banks and financial institutions—to circulate money into an economy. CBDCs can help circumvent this mechanism and enable a government agency to disburse payments directly to citizens.
- Make Transaction Costs Cheaper
- Digital currencies enable direct interactions within a network. For example, a customer can pay a shopkeeper directly as long as they are situated in the same network.
- Fast Transaction time
- Susceptible to Hacking
- Their digital provenance makes digital currencies susceptible to hacking. Hackers can steal digital currencies from online wallets or change the protocol for digital currencies, making them unusable.
- Volatile Value
- Digital currencies used for trading can have wild price swings.
- For example, the decentralized nature of cryptocurrencies has resulted in a profusion of thinly capitalized digital currencies whose prices are prone to sudden changes based on investor whims.
- Susceptible to Hacking
RBI'S SURVEY AND THE INDIAN ECONOMY
- Recently, the RBI unveiled its latest monetary policy review and seven surveys, ranging from consumer confidence to GDP growth expectations, that help it ascertain how the economy is doing.
- Widening Trade Deficit & Falling Rupee are also areas of major concern for Indian Economy.
- Which Surveys were Unveiled by RBI?
- Consumer Confidence Survey (CCS)
- The CCS asks people across 19 cities about their current perceptions (in comparison with a year ago) and one-year ahead expectations on the general economic situation, employment scenario, overall price situation and own income and spending.
- The Current Situation Index (CSI)
- CSI has been recovering since falling to a historic low in July 2021.
- The Future Expectations Index (FEI)
- The FEI is in the positive bracket but even now it stays below the pre-pandemic levels.
- An index below the 100 mark implies people are pessimistic and a value higher than 100 conveys optimism.
- The Current Situation Index (CSI)
- Inflation Expectations Survey (IES)
- It tracks people’s expectations of inflation.
- Households’ inflation perception for the current period has moderated by 80 bps to 9.3%.
- OBICUS Survey
- OBICUS stands for “Order Books, Inventories and Capacity Utilisation Survey”
- It covered 765 manufacturing companies in an attempt to provide a snapshot of demand conditions in India’s manufacturing sector from January 2022 to March 2022.
- Capacity Utilisation (CU)
- A low level of CU implies that manufacturing firms can meet the existing demand without needing to boost production.
- It has negative implications for job creation and the chances for private sector investments in the economy.
- The CU is well above the pre-pandemic level, suggesting India’s aggregate demand is recovering steadily.
- Industrial Outlook Survey (IOS)
- This survey tries to track the sentiments of the businessmen and businesswomen.
- The survey encapsulates qualitative assessment of the business climate by Indian manufacturing companies.
- Services and Infrastructure Outlook Survey (SIOS)
- This survey does a qualitative assessment of how Indian companies in the services and infrastructure sectors view the current situation and the future prospects.
- The companies in the services space are far more optimistic than the companies in the infrastructure sector.
- Bank Lending Survey (BLS)
- It captures the mood (qualitative assessment and expectations) of major scheduled commercial banks (SCBs) on credit parameters (loan demand and terms & conditions of loans) for major economic sectors.
- Survey of Professional Forecasters (SPF)
- It is a survey of 42 professional forecasters (outside the RBI) on key macroeconomic indicators such as GDP growth rate and inflation rate in the current year and the next financial year.
- GDP Expectations
- India’s real GDP is expected to grow by 7.1% in 2022-23, projections revised down by 10 basis points from the last survey round and it is expected to grow by 6.3% in 2023-24.
- The highest probability is that GDP growth will range between 7%-7.4%, the second most probable outcome is that the growth rate will decelerate to 6.5%-6.9% range.
- Consumer Confidence Survey (CCS)
GOLD EXCHANGE-TRADED FUNDS
- In July 2022, Gold Exchange Traded Funds (ETFs) witnessed a net outflow of Rs 457 crore as investors parked their money in other asset classes as part of their portfolio rebalancing strategy.
- This was in comparison to a net inflow of Rs 135 crore in June 2022.
- What are Gold Exchange Traded Funds?
- Gold ETF, which aims to track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion.
- Gold ETFs are units representing physical gold which may be in paper or dematerialised form.
- One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity.
- They combine the flexibility of stock investment and the simplicity of gold investments.
- There is complete transparency on the holdings of an ETF.
- Gold ETFs have much lower expenses as compared to physical gold investments.
- No wealth tax, no security transaction tax, no VAT and no sales tax is levied on ETFs.
- There is no fear of theft as ETFs are safe and secure as units held in Demat Account of the holder.
- What could be the Reasons for the Outflow?
- Investors’ expectations of a rising interest rate cycle leading to a fall in gold prices.
- The fall in the gold price impacted the net flows into the gold ETFs.
- A falling rupee is another factor that has likely impacted the demand and supply dynamics of gold.
- It has been witnessed globally too, with gold ETF’s posting significant outflows on the back of lower gold prices.
- Investors’ expectations of a rising interest rate cycle leading to a fall in gold prices.
- Exchange Traded Fund
- An Exchange-Traded Fund (ETF) is a basket of securities that trade on an exchange, just like a stock.
- ETF reflects the composition of an Index, like BSE Sensex. Its trading value is based on the Net Asset Value (NAV) of the underlying stocks (such as shares) that it represents.
- ETF share prices fluctuate all day as it is bought and sold. This is different from mutual funds that only trade once a day after the market closes.
- An ETF can own hundreds or thousands of stocks across various industries, or it could be isolated to one particular industry or sector.
- Bond ETFs are a type of ETFs which may include government bonds, corporate bonds, and state and local bonds—called municipal bonds.
- A bond is an instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).
- Besides being cost efficient, ETFs offer a diversified investment portfolio to investors.
MONETARY POLICY REVIEW
- Recently, the Reserve Bank of India (RBI) in its Monetary Policy Committee (MPC) Review announced a 50-basis point hike in the repo rates thereby taking the cumulative rate hike over the last three months to 140 basis points.
- Key Rates
- Policy Repo Rate: 5.40%
- Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Here, the central bank purchases the security.
- Standing Deposit Facility (SDF): 5.15%
- The SDF is a liquidity window through which the RBI will give banks an option to park excess liquidity with it.
- It is different from the reverse repo facility in that it does not require banks to provide collateral while parking funds.
- Marginal Standing Facility Rate: 5.65%
- MSF is a window for scheduled banks to borrow overnight from the RBI in an emergency situation when interbank liquidity dries up completely.
- Under interbank lending, banks lend funds to one another for a specified term.
- Bank Rate: 5.65%
- It is the rate charged by the RBI for lending funds to commercial banks.
- Cash Reserve Ratio (CRR): 4.50%
- Under CRR, the commercial banks have to hold a certain minimum amount of deposit (NDTL) as reserves with the central bank.
- Statutory Liquidity Ratio (SLR): 18.00%
- SLR is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities.
- GDP Growth for 2022-23: 7.2%
- Gross Domestic Product (GDP) gives the economic output from the consumers’ side. It is the sum of private consumption, gross investment in the economy, government investment, government spending and net foreign trade (the difference between exports and imports).
- Inflation Projection for 2022-23: 6.7%
- Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
- Key Rates
- Why a Hike in the Repo Rate?
- Even as the consumer price inflation has eased from its surge in April 2022, it is expected to remain uncomfortably high and above the upper threshold (6%) of the target.
- These elevated levels of inflation remained the key concern for the MPC as the inflation target of Government of India according to RBI is (4%+/- 2%)
- It is expected that Inflation would remain above the Upper Threshold (6 %), in Q2 and Q3 (FY 2022-23).
- This sustained high inflation may destabilise inflation expectations and harm growth in the medium term.
- The withdrawal of Monetary Accommodation (Expanding money Supply) or increasing Rates can keep inflation expectations in range and contain the Second-Round Effects of Inflation.
- Second-round effects occur when inflation passes to impact the wage and price setting, leading to a wage-price spiral.
- How will Hike in repo rate impact Borrowers and Depositors?
- It will hit the home loan customers and prospective borrowers, as it will result in a hike in lending rates.
- It will benefit the conservative investors, who like to park their funds in bank fixed deposits, since the deposit rates are expected to increase following the rate hike.
- The deposit rate hike will help fulfil the credit demand in the economy and also help banks raise additional funds.
- What about Liquidity?
- While improving the availability of funds with the banks, Rates Hike will lead to a gradual decline in systemic liquidity.
- To maintain adequate liquidity in the system, RBI will conduct two-way fine-tuning operations in the form of Variable Rate Repo (VRR) and Variable Rate Reverse Repo (VRRR) operations of different maturities.
- The Variable Rate Operations are usually undertaken to reduce the money flow by taking out existing cash present in the system.
- The central bank has been rebalancing the surplus liquidity in the system by shifting it out of the fixed-rate overnight reverse repo window to VRRR auctions of longer maturity.
DECLINE IN COUNTERFEIT NOTES
- Recently, the Ministry of finance has informed Lok Sabha that the value of counterfeit currency in the banking system reduced from Rs 43.47 crore in 2016-17 to about Rs 8.26 crore in 2021-22.
- What is Counterfeit Money?
- Counterfeiting, manufacture of false money for gain, a kind of forgery in that something is copied so as to defraud by passing it for the original or genuine article.
- Because of the value conferred on money and the high level of technical skill required to imitate it, counterfeiting is singled out from other acts of forgery and is treated as a separate crime under section 489A of the Indian Penal Code.
- Counterfeiting is the oldest technique used by fraudsters to cheat unsuspecting individuals of their money.
- What are the Threats of Counterfeiting?
- Economic Terrorism
- FICN (Fake Indian Currency Notes) can be seen as a form of “economic terrorism” practiced by external sources to damage India’s economy.
- Economic terrorism refers to the behind-the-scenes manipulation of a nation’s economy by state or non-state actors.
- The circulation of FICN threatens India’s economy while the profit that is earned from doing so is used to fund covert activities targeting India.
- The circulation of a large amount of fake currency increases the amount of money in circulation, which may lead to high demand for goods and commodities.
- The rise in demand in turn creates a scarcity of goods, leading to a rise in the price of the goods.
- This leads to currency devaluation.
- Non-Reimbursement of Loses
- The non-reimbursement policy of banks is another issue that occurs when banks reject the fake notes and do not reimburse the losses.
- Firms which are involved in daily cash transactions face heavy losses in the long run thanks to the infiltration of FICN into the economy.
- Loss of Public Confidence
- Other effects of counterfeit currency include the loss of public confidence, black marketing of products, illegal stocking of products, etc.
- What are the Measures to Control Fake Currency?
- On 8th November 2016 Rs. 500 and Rs. 1,000 notes were withdrawn from the system in 2016, to discourage the use of high-denomination notes for illegal transactions and to curb Counterfeiting.
- Demonetisation is the act of stripping a currency unit of its status as legal tender.
- Bi-Luminescent Security Ink
- The Council of Scientific and Industrial Research (CSIR)-National Physical Laboratory has developed a bi-luminescent security ink which glows in red and green colours when illuminated by two different excitation sources.
- Terror Funding and Fake Currency (TFFC) Cell
- A Terror Funding and Fake Currency (TFFC) Cell has been constituted in National Investigation Agency (NIA) to conduct focused investigation of terror funding and fake currency cases.
- FICN Coordination Group
- FICN Coordination Group (FCORD) has been formed by the Ministry of Home Affairs to share intelligence/information among the security agencies of the states/centre to counter the problem of circulation of fake currency notes.
- MoU between India-Bangladesh to Counter Fake Currency
- Memorandum of Understanding (MoU) has been signed between India and Bangladesh to prevent and counter smuggling and circulation of fake currency notes.
- Also, security at the international borders has been strengthened by using new surveillance technology.
INDIA'S UNIQUE JOB CRISIS
- As per a recent study, there are fewer people employed in agriculture today, but the transformation has been weak.
- Those moving out of farms are working more in construction sites and the informal economy than in factories.
- How much Employment does the Agriculture Sector provide?
- In 1993-94, agriculture accounted for close to 62% of the country’s employed labour force.
- The labour percentage in agriculture (based on data from the National Statistical Office’s Periodic Labour Force Surveys), dropped almost 6% points by 2004-05 and 9% points over the next seven years.
- The declining trend continued, albeit at a slower pace, in the subsequent seven as well.
- Between 1993-94 and 2018-19, agriculture’s share in India’s workforce came down from 61.9% to 41.4%.
- It is estimated that given its level of per capita GDP in 2018, India’s farm sector should be employing 33-34% of the total workforce.
- 41.4% may not be a substantial deviation from the average
- 41.4% may not be a substantial deviation from the average
- It is estimated that given its level of per capita GDP in 2018, India’s farm sector should be employing 33-34% of the total workforce.
- How has India's Employment Trends been?
- Reversal of Trend
- There’s been a reversal of the trend in the last two years, which has seen the share of those employed in farms rise to 44-45% in 2020-21.
- This has primarily to do with the Covid-induced economic disruptions.
- Structural Transformation
- Even the movement of workforce from agriculture that India has witnessed over the past three decades or more does not qualify as what economists call “structural transformation”.
- Structural transformation would involve the transfer of labour from farming to sectors – particularly manufacturing and modern services – where productivity, value-addition and average incomes are higher.
- However, the share of manufacturing (and mining) in total employment has actually fallen along with that of agriculture.
- The surplus labour pulled out from the farms is being largely absorbed in construction and services.
- The structural transformation process in India has been weak and deficient.
- There is movement of labour taking place away from farms – even if stalled, possibly temporarily.
- But that surplus labour isn’t moving to higher value-added non-farm activities, specifically manufacturing and modern services.
- The labour transfer is happening within the low-productivity informal economy.
- Service Sector
- The services sector does include relatively well-paying industries such as information technology, business process outsourcing, telecommunications, finance, healthcare, education and public administration.
- The bulk of the jobs in this case are in petty retailing, small eateries, domestic help, sanitation, security staffing, transport and similar other informal economic activities.
- This is also evident from the low share of employment in organised enterprises, defined as those engaging 10 or more workers.
- Reversal of Trend
- How is the Information Technology Sector Emerging as a Job Provider?
- Between 2020-22, the combined employee headcount at India’s top five IT companies (Tata Consultancy Services, Infosys, Wipro, HCL Technologies and Tech Mahindra) has gone up from 11.55 lakh to 15.69 lakh.
- That’s a jump of 4.14 lakh or nearly 36% in the period post the pandemic, when most other sectors, barring agriculture, were shedding jobs and slashing salaries.
- These five companies, put together, have more employees than the Indian Railways and the three defense services, respectively.
- Much of the IT sector’s recent success is courtesy of exports.
- These have boomed due to Covid’s triggering increased demand for digitisation even among businesses that were hitherto slow in adoption:
- India’s net exports of software services have surged from $84.64 billion in 2019-20 to $109.54 billion in 2021-22.
- Between 2020-22, the combined employee headcount at India’s top five IT companies (Tata Consultancy Services, Infosys, Wipro, HCL Technologies and Tech Mahindra) has gone up from 11.55 lakh to 15.69 lakh.
- What could be done to Curb Unemployment?
- Skills of Agriculture Labours
- Schemes for upskilling the workforce involved in the agriculture sector should be prioritized by the government.
- It would provide the dual benefit of enhancing the knowledge for efficient farming and also, in case the labour wants to switch careers, they can look for other superior areas of employment.
- Promoting Labour Intensive Industries
- There are a number of labour-intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
- Special packages, individually designed for each industry are needed to create jobs.
- Decentralisation of Industries
- Decentralisation of Industrial activities is necessary so that people of every region get employment.
- Development of the rural areas will help mitigate the migration of the rural people to the urban areas thus decreasing the pressure on the urban area jobs.
- Government’s Initiatives
- Support for Marginalized Individuals for Livelihood and Enterprise (SMILE)
- PM-DAKSH (Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi)
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
- Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
- Start Up India Scheme
- Skills of Agriculture Labours
- What are different types of Unemployment?
- Disguised Unemployment
- It is a phenomenon wherein more people are employed than actually needed.
- It is primarily traced in the agricultural and the unorganised sectors of India.
- Seasonal Unemployment
- It is an unemployment that occurs during certain seasons of the year.
- Agricultural labourers in India rarely have work throughout the year.
- Structural Unemployment
- It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market.
- Cyclical Unemployment
- It is a result of the business cycle, where unemployment rises during recessions and declines with economic growth.
- Technological Unemployment
- It is the loss of jobs due to changes in technology.
- Frictional Unemployment
- The Frictional Unemployment also called as Search Unemployment, refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs.
- Vulnerable Employment
- This means, people working informally, without proper job contracts and thus sans any legal protection.
- These persons are deemed ‘unemployed’ since records of their work are never maintained.
FINANCIAL INCLUSION INDEX
- The Reserve Bank of India has released the Composite Financial Inclusion Index (FI-Index) for the year ended 31st March 2022.
- What are the Findings?
- India’s Financial Inclusion Index has improved to 56.4 from 53.9 in the previous year 2021.
- The improvement has been seen across all its sub-indices (Access, Usage and Equality).
- What is the Financial Inclusion Index?
- It is a comprehensive index incorporating details of banking, investments, insurance, postal as well as the pension sector in consultation with the government and respective sectoral regulators.
- It was developed by the RBI in 2021, without any ‘base year', and is published in July every year.
- To capture the extent of Financial Inclusion across the country.
- The FI-Index is responsive to ease of access, availability and usage of services and quality of services, consisting of 97 indicators.
- It captures information on various aspects of financial inclusion in a single value ranging between 0 and 100, where 0 represents complete financial exclusion and 100 indicates full financial inclusion.
- It comprises three broad parameters (weights indicated in brackets) viz., Access (35%), Usage (45%), and Quality (20%) with each of these consisting of various dimensions, which are computed based on a number of indicators.
- The index is responsive to ease of access, availability and usage of services, and quality of services for all 97 indicators.
- What is the Significance of FI Index?
- Measures Level of Inclusion
- It provides information on the level of financial inclusion and measures financial services for use in internal policy making.
- Development Indicators
- It can be used directly as a composite measure in development indicators.
- Fulfil the G20 Indicators
- It enables fulfilment of G20 Financial Inclusion Indicators requirements.
- The G20 indicators assess the state of financial inclusion and digital financial services, nationally and globally.
- Facilitate Researchers
- It also facilitates researchers to study the impact of financial inclusion and other macroeconomic variables.
- Measures Level of Inclusion
The First Quarter GDP Growth
- Context: India’s economy grew 13.5 percent from a year ago in the April-June quarter this fiscal, its fastest year-on-year growth rate in four quarters.
- It was led by higher household consumption, especially of contact-intensive services, and buoyant investment activity, as compared to the same quarter of the last fiscal that bore the brunt of the second Covid-19 wave.
- But this was lower than the Reserve Bank of India's estimate that the GDP growth rate was likely to be around 16.2 percent in the first quarter.
- Finance Secretary T V Somanathan's statement:
- He said the Indian economy is “on course” to achieve over 7 percent growth this fiscal.
- “It (Q1 GDP) is good enough to achieve the rate of growth that we think everyone including the IMF and RBI has expected as real GDP growth for four quarters of this year. We are on course to achieve more than 7 percent GDP growth in the year, in the range of 7.0-7.5 percent. The IMF has predicted 7.4 percent,” he said at a briefing.
- Data released by NSSO:
- It showed that even though the revival of economic activity has pushed the gross domestic product (GDP) of Rs 36.85 lakh crore for the June-quarter past the pre-Covid levels, the Government received a proposal from the Reserve Bank of India in October 2021 for an amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form. RBI has been examining use cases and working out a phased implementation strategy for the introduction of CBDC with little or no disruption.
- During the first quarter of the last fiscal, GDP growth was recorded at 20.1 percent.
- Somanathan said the Q1 GDP growth tends to be lower than the Q4 GDP of the previous fiscal year due to higher government spending in the last quarter.
- Headwinds Ahead:
- In the months ahead, headwinds are predicted including a slide in global growth prospects, the impact of rising inflation on consumption, and a hike in interest rates, alongside the waning of the base effect. These could end up slowing the growth momentum.
- The two bright spots:
- Private final consumption expenditure — a measure of consumption of goods and services by individuals — grew by 25.9 percent year-on-year during April-June while gross fixed capital formation – a proxy for investment activity – grew by 20.15 percent
- The government is focusing on higher capex even as revenue expenditure remains proportionately lower.
- Government capital expenditure:
- Government capital expenditure has increased 62.5 percent year-on-year to Rs 2.1 lakh crore during April-July this year.
- Among the eight key sectors, trade, hotels, and transport services recorded a GVA growth (gross value added, which is GDP minus net product taxes) of 25.7 percent in April-June, while construction and utility services grew 16.8 percent and 14.7 percent, respectively. The manufacturing sector recorded a GVA growth of 4.8 percent in the June quarter, while agriculture saw a growth of 4.5 percent.
- Views of Economists:
- “GDP growth will certainly moderate in Q2 FY2023, as the base effect normalizes, as underscored by the moderation in the core sector growth in July 2022. Additionally, an uneven monsoon is likely to weigh upon agri-GVA growth and rural demand. However, robust demand for services and some easing in the commodity price-inflicted pain for producers should support a YoY GDP growth of 6.5-7.0 percent in the ongoing quarter, and 7.2 percent for the year as a whole,” Aditi Nayar, Chief Economist, ICRA said.
- Knight Frank India’s Director-Research Vivek Rathi said: “In the coming months, India’s economy would face headwinds primarily arising from widening trade deficit as a result of decelerating exports due to global demand slowdown. Additionally, the investments in the economy could get hindered due to tightening borrowing costs and elevated input costs.”
- On the impact on growth from the slowdown in China, Somanathan said the effects for India will not be “significantly adverse” as India is a net importer and not a net exporter. “So, unlike other countries, the Chinese slowdown is less likely to affect our exports because we are huge net importers. So for us, the issue is of less significance as for certain other economies in the region,” he said.
India pips the UK to become the world's 5th biggest economy
- Context: India has overtaken the UK to become the world’s fifth largest economy, calculations by Bloomberg showed.
- India has become the fifth-largest economy in the world beating the United Kingdom.
- This is a proud moment for the country and India’s position would strengthen further in the coming years on the back of higher economic growth, business leaders and analysts said.
- As per the International Monetary Fund (IMF) data, India overtook the United Kingdom in the final three months of 2021 to become the fifth-largest economy in the world.
- Now India is just behind four countries in terms of the size of the economy in terms of dollar terms. The countries whose economy size is bigger than India are the United States, China, Japan, and Germany.
- The UK is now behind India in the sixth position.
- “We have exceeded the UK in GDP figures in 2022. By 2027, we will be much higher than them in terms of economic performance. UK’s economy is shrinking, India’s is booming,” said Charan Singh, economist, and chief executive of EGROW.
- “Before 2014, we were in fragile five economies. It is a huge feat to become the 5th largest economy and surpass an economy like Britain from that position,” said Meenakshi Lekhi, Minister of State for External Affairs and Culture.
- Concerns about per capita comparison:
- While India has overtaken the United Kingdom in terms of the size of its economy, the per capita income in India remains very low because of the high population.
- India $3.5 trillion vs UK $3.2 trillion. But a reality check of population denominator: India: 1.4 billion vs UK 0.068 billion. Hence, per capita GDP we at $2,500 vs $47,000.
Central Bank Digital Currency
- Context: In her Budget speech on February 1, Finance Minister Nirmala Sitharaman said that the central bank would launch the CBDC in the financial year 2022-23.
- What is CBDC?
- According to the RBI, “CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.” The digital fiat currency or CBDC can be transacted using wallets backed by blockchain.
- How is it different from Bitcoin?
- Though the concept of CBDCs was directly inspired by Bitcoin, it is different from decentralized virtual currencies and crypto assets, which are not issued by the state and lack ‘legal tender' status.
- CBDCs enable the user to conduct both domestic and cross-border transactions which do not require a third party or a bank.
- How will it help?
- The introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, and reduced settlement risk.
- The introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated, and legal tender-based payment option.
- However, there are also associated risks that need to be carefully evaluated against the potential benefits.
- RBI has repeatedly flagged concerns over money laundering, terror financing, tax evasion, etc with private cryptocurrencies like Bitcoin, Ether, etc. Introducing its own CBDC has been seen as a way to bridge the advantages and risks of digital currency.
- What will the introduction of the digital rupee change for citizens?
- There are several models proposed by technology experts and evangelists on how the digital rupee could be transacted, and the formal announcement by the RBI will likely provide the details.
- One chief difference could be that a digital rupee transaction would be instantaneous as opposed to the current digital payment experience.
- How will it come into effect?
- The government received a proposal from the Reserve Bank of India in October 2021 for an amendment to the Reserve Bank of India Act, 1934 to enhance the scope of the definition of ‘bank note’ to include currency in digital form.
- RBI has been examining use cases and working out a phased implementation strategy for the introduction of CBDC with little or no disruption.
Stockpiling of Forex Reserves
- Context: Accumulating large reserves of forex and food has helped India immensely. There is a cost to stockpiling — but that is similar to spending on defense and a standing army, and its utility is proven only in times of economic crises or war.
- What is happening?
- Since October 29, 2021, the rupee has depreciated hardly 6% (from 74.94 to 79.69 to the dollar), and the RBI’s repo rate has gone up only 140 basis points (4% to 5.4%).
- However, this has come with a larger forex reserve depletion — from a peak of $642.02 billion to $550.87 billion as on September 9 this year.
- Similarity with the financial crisis in 2013:
- In 2013, between May 1 and August 28, the rupee plunged from 53.67 to 68.81 to the US dollar — a 22% depreciation in four months. During this period, the country’s foreign exchange reserves fell from $294.31 billion to $275.49 billion, even as the Reserve Bank of India (RBI) hiked its benchmark lending rate by 300 basis points, from 7.25% to 10.25%.
- 2013 was a crisis year and so is 2022.
- But the current crisis is worse than nine years ago.
- What happened in 2013?
- The 2013 crisis was largely triggered by the US Fed proposing a phased reduction (“taper”) in its purchases of bonds and other assets amounting to $85 billion a month.
- While the plan was revealed by then-Fed chairman Ben Bernanke on May 22, 2013, actual tapering did not start until the end of that year.
- Yet, that announcement — which was only about a gradual unwinding of monetary stimulus (read the printing of dollars) as opposed to tightening — had a huge impact on India, basically due to the large current account deficits (CAD) in its external balance of payments. These touched record levels of $78.16 billion in 2011-12 and $88.16 billion in 2012-13 (April-March).
- As the “taper tantrum” led to capital flows drying up — and with forex reserves already dwindling from the previous high of $320.79 billion attained on September 2, 2011 — it created doubts over the country’s ability to finance its massive CADs.
- The result: a run on the rupee.
- The RBI was forced to defend the currency against speculative attacks by selling dollars from its reserves, as well as by jacking up interest rates.
- What is happening now?
- In 2013, the big central banks were only phasing out monetary stimulus or slowing the rate of injecting liquidity into their economies.
- Today, they are tightening by reducing the money supply and raising interest rates.
- Since mid-March, the US Fed has increased its fund's rate from 0-0.25% to 2.25-2.5%, and is expected to take this further up to a 3-3.25% target range on September 20-21.
- The ECB has also hiked its key refinancing rate from 0 to 1.25%.
- They are unlikely to stop — for the simple reason that annual retail inflation is now ruling at 8.3% in the US and 10.1% in the European Union.
- These are price increases that people in those countries last saw in the early 1980s.
- The commitment of their central banks to target inflation at 2% would entail real monetary tightening and high-interest rates for a sustained time — unlike in 2013.
- That has obvious implications for capital inflows into India.
- Rising interest rates in the US and Europe are, if anything, sucking away capital from emerging markets.
- This isn’t helped by India’s CAD, which is projected to top $120 billion in 2022-23, surpassing even the levels of 2011-12 and 2012-13.
- The situation is thus worse on both counts — external capital flows and CAD.
- India’s war chest:
- But despite the far more hostile external environment, the rupee hasn’t been in free fall, and the RBI has not had to resort to exceptional monetary measures as it did during the taper tantrum period.
- It may still raise rates, but more to control inflation than depreciation.
- In other words, to defend the rupee’s “internal” rather than “external” value.
- The primary reason why things have been different is that India entered this crisis with a much bigger war chest than it had in 2013.
- The forex reserves of $642.02 billion on October 29 last year were sufficient ammunition to deter any speculator from taking short positions on the rupee — selling expecting it to fall against another currency and booking profits by repurchasing later at a lower exchange rate — including through “non-deliverable forward contracts” in offshore markets such as Singapore and Hong Kong.
- Accumulating large forex stockpiles is a strategy many countries have employed, especially after the lessons learned from the 1992 “shorting” of the pound by the currency speculator George Soros, the 1997-98 Asian financial crisis, and the 2013 taper tantrum.
- It is true that India’s forex reserves have suffered a drawdown of over $91 billion from its peak of lesser than 11 months ago.
- But reserves are meant for use in a crisis, like arms and ammunition in war.
- And it makes a difference when one starts with a nearly $650-billion stockpile than with under $300 billion.
- The unresolved ‘F’:
- India’s economic growth has traditionally been hobbled by the three ‘Fs’: forex, food, and fuel.
- The first two were the bugbears in the 1960s, the third in the 1970s, and the first and third in the run-up to the 1991 payments crisis.
- Stockpiling has helped mitigate problems from the first two, but there’s no solution yet to the vulnerabilities from oil, gas, and coal.
Banking System Liquidity going into 'Deficit Mode'
- Context: For the first time since May 2019, the banking system's liquidity situation turned into a deficit mode of Rs 21,873.4 crore on September 20, 2022.
- What is banking system liquidity?
- Liquidity in the banking system refers to readily available cash that banks need to meet short-term business and financial needs.
- On a given day, if the banking system is a net borrower from the RBI under Liquidity Adjustment Facility (LAF), the system liquidity can be said to be in deficit and if the banking system is a net lender to the RBI, the system liquidity can be said to be in surplus.
- The LAF refers to the RBI’s operations through which it injects or absorbs liquidity into or from the banking system.
- Reasons behind the deficit:
- An improvement in demand for credit has led to the same.
- The recent advance tax outflow, which is a quarterly phenomenon, has further aggravated the situation.
- Besides, there is the continuous intervention of the RBI to stem the fall in the rupee against the US dollar.
- “The deficit in the liquidity situation has been caused by an uptick in the bank credit, advance tax payments by corporates, intervention of the RBI into the forex market, and also incremental deposit growth not keeping pace with credit demand”, said a leading Economist.
- Impact on Consumers:
- A tight liquidity condition could lead to a rise in the government securities yields and subsequently lead to a rise in interest rates for consumers too.
- The short-term rates would increase at a faster pace as the direct reflection of tighter liquidity and RBI’s rate hike would be on these papers.
- A rise in the repo rate will lead to a higher cost of funds.
- Banks will increase their repo-linked lending rates and the marginal cost of funds-based lending rate (MCLR), to which all loans are linked to.
- This rise will result in higher interest rates for consumers.
- What can RBI do to deal with this situation?
- Experts feel that RBI’s actions will depend upon the nature of the liquidity situation.
- If the current liquidity deficit situation is temporary and is largely on account of advance tax flow, the RBI may not have to act, as the funds should eventually come back into the system.
- However, if it is long-term in nature then the RBI may have to take measures to improve the liquidity situation in the system.
Financial Stability and Development Council
- Context: Recently, the Financial Stability and Development Council's 26th meeting was presided over by the Union Minister of Finance and Corporate Affairs (FSDC).
- What are the main points of discussion?
- The council placed a strong emphasis on issues such as improving the effectiveness of the current financial and credit information systems, early warning indicators for the economy and how prepared we are to deal with them, and governance and management concerns in systemically important financial institutions.
- It was underlined that the government and authorities must continuously evaluate the financial sector's risks, financial conditions, and market developments in order to take prompt, appropriate action to reduce any vulnerabilities and strengthen financial stability.
- The council noted the planning for the financial sector concerns that will be discussed during India's 2023 G20 Presidency.
- About FSDC:
- It was established in 2010 by Executive Order as a non-statutory apex council under the Ministry of Finance.
- FSDC was initially proposed by the Raghuram Rajan group on banking sector reforms in 2008.
- Its members comprise the chiefs of all financial sector regulators (RBI, SEBI, PFRDA, and IRDA), the finance secretary, the secretaries of the departments of economic affairs (DEA), financial services (DFS), and the chief economic adviser. It is chaired by the Finance Minister.
- In 2018, the government reorganized FSDC to include the Secretary of the Department of Electronics and Information Technology, the Chairperson of the Insolvency and Bankruptcy Board of India (IBBI), and the Minister of State in charge of the Department of Economic Affairs (DEA).
- The Governor of the RBI is in charge of the FSDC sub-committee.
- If necessary, the Council may call for the attendance of specialists.
- To improve inter-regulatory coordination, institutionalize financial sector development, and strengthen the system for preserving financial stability.
- To keep an eye on the macroprudential control of the economy. It evaluates how well-functioning major financial conglomerates.
India-US Startup SETU: Supporting Entrepreneurs in Transformation & Upskilling
- What is the program?
- The program aims to provide mentorship and customized assistance with the deal flow of the best startups from across India to US-based Investors and startup ecosystem leaders.
- The Mentorship, Advisory, Assistance, Resilience, and Growth (MAARG) program is a single-stop solution finder for startups in India.
- The portal has been developed with the idea to be accessible from every corner of the country to connect with a mentor.
- A mentor will offer human intelligence in guiding startups.
- The value of human intelligence is irreplaceable.
Inflation Rate Across States
- Context: Retail inflation which shot up to an eight-year high of 7.79% in April, cooled slightly to 6.7% by July. However, in several States and Union Territories (UTs), including Assam, Andhra Pradesh, Gujarat, Haryana, and Telangana, consumers continued to face over 7% inflation in July, while 11 States, including West Bengal, Uttar Pradesh, and Bihar, saw the accelerated price rise in the month.
- Inflation measured by the Consumer Price Index (CPI) crossed the central bank’s upper tolerance limit of 6% in January and has averaged 6.8% till July 2022.
- Which States are seeing the highest inflation and where are consumers better off?
- 14 States as well as three UTs, including Jammu and Kashmir, have faced higher than the national inflation, most of them averaging over 7% in the same period.
- While consumers in Telangana (8.32%), West Bengal (8.06%), and Sikkim are worst-hit with 8%-plus inflation, other major States are not too far behind, with some of them posting a spike in price rise in July.
- The average 2022 retail inflation so far in Maharashtra and Haryana has been 7.7%, followed by Madhya Pradesh (7.52%), Assam (7.37%), Uttar Pradesh (7.27%), Gujarat, and J&K both of which have averaged 7.2% and Rajasthan (7.1%).
- By contrast, a dozen States have recorded retail price rise of less than 6% through 2022, including Kerala (4.8%), Tamil Nadu (5.01%), Punjab (5.35%), Delhi (5.56%) and Karnataka (5.84%). Manipur, Goa and Meghalaya, in fact, averaged inflation below 4%, at 1.07%, 3.66% and 3.84%, respectively.
- Andhra Pradesh and Jharkhand’s inflation averaged just 0.1% over the national rate of 6.9%, but the former averaged 8.18% in the April to June quarter before easing slightly to 7.38% in July, while the same numbers were 7.36% and 5.65% for the latter, respectively.
- The explanation for variations in price rise among states:
- Food price inflation which dropped to a five-month low of 6.8% in July, is a key differentiating factor for States’ inflation experience.
- States that are not major crop producers have higher food inflation as transport costs are added on, and those with predominantly rural areas also clock more inflation as the CPI for rural areas assigns a higher weightage to food.
- Consumption patterns and divergences in different items’ price trends also influence variations among States.
- For example; Tomato inflation dropped to 44% from 158.4% in June, while meat and fish price rise cooled to a 46-month low of 3% in July.
- Why does it matter?
- While the share of private consumption has spiked to nearly 60% of GDP in Q1 2022-23, this persistently high inflation has dented spending propensity, particularly in rural India which is facing more price pressures.
- “Private consumption is improving, with urban demand getting support from contact-intensive services. Had it not been for high inflation and subdued rural demand due to negative real rural wage growth, private consumption would have grown faster,” said CRISIL’s chief economist Dharmakirti Joshi.
- With the monsoon’s progress still uneven, there is anxiety about rural demand even as inflationary pressures will continue to cramp household budgets.
- Identifying what is driving inflation higher (or lower) in some States vis-à-vis others could help policymakers address those pressure points more specifically to provide lasting relief to consumers, apart from other broad-brush ploys such as interest rate hikes and trade curbs to cool prices of individual items.
- The Centre and States can coordinate to pinpoint and address the price triggers that may not be driven by global headwinds but by local factors.
IBBI's Amended Norms
- Context: IBBI has amended its regulations to allow the sale of one or more assets of an entity undergoing an insolvency resolution process, besides other changes.
- In a move that will provide better market-linked solutions for stressed companies, watchdog IBBI has amended its regulations to allow the sale of one or more assets of an entity undergoing an insolvency resolution process, besides other changes.
- Also, the Committee of Creditors (CoC) can now examine whether a compromise or an arrangement can be explored for a corporate debtor during the liquidation period.
- The Insolvency and Bankruptcy Board of India (IBBI) has amended the regulations with the “objective to maximize value in resolution” and they came into effect on September 16.
- The regulator has permitted a resolution professional and the CoC to look for the sale of one or more assets of the corporate debtor concerned in cases where there are no resolution plans for the whole business.
- The Insolvency and Bankruptcy Code (IBC) provides for a market-linked and time-bound resolution of stressed assets.
- The amended regulations will also enable a “resolution plan to include the sale of one or more assets of CD (Corporate Debtor) to one or more successful resolution applicants submitting resolution plans for such assets and providing for appropriate treatment of the remaining assets.
- With the amendments to IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, the marketing of assets of a corporate debtor can be done which will help in the wider dissemination of information to a wider and targeted audience of potential resolution applicants.
Small Savings Schemes
Context: The government announced minor upticks of 0.1% to 0.3% in the interest rates payable on five small savings instruments (SSIs), including the Kisan Vikas Patra, Senior Citizens’ Savings scheme, and time deposits for 2 and 3 years.
- Small savings instruments help citizens to achieve their financial goals over a particular time period.
- The small savings instruments include:
- Public Provident Fund Account (PPF)
- Sukanya Samriddhi Scheme
- Senior Citizen Savings Scheme
- Post Office Savings Account
- 5-Year Post Office Recurring Deposit Account (RD)
- National Savings Certificates (NSC)
- They are the major source of household savings in India.
- The small savings schemes basket can be classified under three categories:
- Postal deposits: Post Office Savings Account(SB), National Savings Recurring Deposit Account(RD), National Savings Time Deposit Account(TD), etc.
- Savings certificates: National Savings Certificates (VIIIth Issue), Kisan Vikas Patra (KVP), etc.
- Social security schemes: Public Provident Fund (PPF), Senior Citizens ‘Savings Scheme (SCSS), etc.
- Interest rates are reviewed every quarter by the Government for these schemes.
- They are popular as they not only provide returns that are generally higher than bank fixed deposits but also come with a sovereign guarantee and tax benefits.
- All deposits received under various small savings schemes are pooled in the National Small Savings Fund.
- The money in the fund is used by the central government to finance its fiscal deficit.
Reserve Bank Innovation Hub (RBIH)
Context: India Post Payments Bank (IPPB) and Reserve Bank Innovation Hub (RBIH) collaborate for innovations in Financial Products and Services.
- The Reserve Bank Innovation Hub is a wholly owned subsidiary of the Reserve Bank of India (RBI) set up to promote and facilitate an environment that accelerates innovation across the financial sector.
- The aim is to foster and evangelize innovation across the financial sector to enable access to suitable, sustainable financial products to a billion Indians in a secure frictionless manner.
- In addition, RBIH would create internal capabilities by building applied research and expertise in the latest technology.
- The hub will collaborate with financial sector institutions, policy bodies, the technology industry, and academic institutions and coordinate efforts for the exchange of ideas and the development of prototypes related to financial innovations.
Textiles listed in the UNESCO document
Context: UNESCO has released a list of 50 exclusive and iconic heritage textile crafts of India under the title “Handmade for the 21st Century: Safeguarding Traditional Indian Textile”.
- Handmade for the 21st Century: Safeguarding Traditional Indian Textile outlines the origins and lore of the textiles, explains the intricate and closely guarded techniques used to create them, discusses the reasons for their waning appeal, and offers preservation tactics.
- Major obstacles to preservation: According to UNESCO, the absence of good inventory and documentation is one of the major obstacles to the preservation of intangible cultural heritage in South Asia.
- The publication aims to bridge this gap and bring together years of research on the 50 selected textiles.
- Some of the traditional crafts published in the list include:
- Khes from Panipat, Chamba rumals from Himachal Pradesh, Thigma or wool tie and dye from Ladakh, and Awadh Jamdani from Varanasi are a few of the famous handcrafted textiles from north India that have been documented.
- Ilkal and Lambadi or Banjara needlework from Karnataka, Sikalnayakanpet Kalamkari from Thanjavur, and other southern textiles have been added.
- The list of 50 famous textiles also includes Kunbi weaves from Goa, Mashru weaves and Patola from Gujarat, Himroo from Maharashtra, and Garad-Koirial from West Bengal.
Context: The Reserve Bank of India (RBI) signaled that it would not extend the October 1, deadline for the implementation of the tokenization of card-based payments.
- Tokenization is the process of replacing your card details with a unique code or token, allowing you to make online purchases without revealing sensitive card details.
- Tokenization services generate unique alternate codes to facilitate card transactions.
- The 16-digit customer card number is replaced with a non-sensitive value called a token.
- This means that a customer’s card information is no longer available to the merchant, payment gateway, or third-party provider who assists in processing digital transactions today.
- With card tokenization, consumers no longer need to be afraid to store their card details.
- Cardholders must provide explicit consent to be collected for tokenization.
Benefits of Tokenization:
- Customers’ card details are stored by merchants and poor security measures put all customers at risk.
- There have been several instances in the past of merchants’ websites being hacked and debit and credit card details leaked. RBI wants to eliminate it.
- By requiring card tokenization, the burden of security falls on payment processors and banks, not on merchants.
- Tokenized card transactions are therefore considered more secure as the actual card details are not shared with merchants during transaction processing.
- Tokenization ensures the standardization of card-stored transactions through an irreversible higher security standard compared to existing reversible encryption standards.
- In addition to this, it provides faster checkout, simple card management, relief from false rejections, etc.
Context: The Impossible Trinity or trilemma has come under focus recently as the U.S. Federal Reserve has been raising interest rates to fight rising prices.
- The impossible trinity, or the trilemma, refers to the idea that an economy cannot pursue independent monetary policy, maintain a fixed exchange rate, and allow the free flow of capital across its borders at the same time.
- According to economists, any economy can choose to pursue only two out of the three policy options noted above simultaneously in the long run.
- The idea was proposed independently by Canadian economist Robert Mundell and British economist Marcus Fleming in the early 1960s.
- Practically speaking, in today’s world in which capital is largely free to move across borders with ease, the choice before policymakers is between maintaining a fixed exchange rate and pursuing an independent monetary policy.
- If policymakers choose to peg or maintain the value of their currency at a certain level against a foreign currency, this decision will limit the kind of monetary policy they can adopt in the long run.
- This is because the decision to peg the exchange value of the currency can tie down the hands of central bankers when it comes to their domestic monetary policy stance.
- For example, if a country’s policymakers want their currency to appreciate, or become stronger, against foreign currencies, they cannot achieve this goal and maintain the external strength of the currency over a considerable period of time without adopting a tight domestic monetary policy stance which will weaken domestic demand.
- This is because loose monetary policy will put pressure on the country’s currency to depreciate in value.
- Thus, policymakers will have to choose between maintaining the strength of their currency and upholding nominal demand in the domestic economy which is heavily influenced by monetary policy.
Credit Guarantee Scheme for Startups
Context: The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry has notified the establishment of the Credit Guarantee Scheme for Startups (CGSS).
- The scheme will provide credit guarantees for Startups to loans extended by Scheduled Commercial Banks, NonBanking Financial Companies, and Securities and Exchange Board of India (SEBI) registered Alternative Investment Funds (AIFs).
- Objective: Providing credit guarantees up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers.
- Eligibility: To all the startups as defined in the Gazette Notification issued by DPIIT.
- Credit guarantee cover:
- The cover under the Scheme would be transaction-based and umbrella based.
- The exposure to individual cases would be capped at Rs. 10 crores per case or the actual outstanding credit amount, whichever is less.
- Transaction-based guarantees will promote lending by Banks/ NBFCs to eligible startups.
- On the other hand, umbrella-based guarantee cover will provide a guarantee to Venture Debt Funds (VDF) registered under the AIF regulations of SEBI.
- Operational oversight: DPIIT will be constituting a Management Committee (MC) and a Risk Evaluation Committee (REC) for reviewing, supervising, and operational oversight of the Scheme.
- Operating agency: The National Credit Guarantee Trustee Company Limited (NCGTC) will be operating the Scheme.
Context: According to the Reserve Bank of India (RBI), India’s forex reserves have fallen by USD 110 billion in the last 13 months.
- Forex reserves are assets held on reserve by a central bank in foreign currencies, which can include bonds, treasury bills, and other government securities.
- Most foreign exchange reserves are held in US dollars.
- Components: Foreign Currency Assets, Gold reserves, Special Drawing Rights, Reserve position with theInternational Monetary Fund (IMF).
- Significance of Forex Reserves :
- Supporting and maintaining confidence in the policies for monetary and exchange rate management.
- Provides the capacity to intervene in support of the national or union currency.
- Limits external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.
Digital Banking Units
Context: The Prime Minister has dedicated 75 Digital Banking Units(DBU) across 75 districts to the nation.
- A digital banking unit is a specialized fixed point business unit or hub housing a certain minimum digital infrastructure for delivering digital banking products and services as well as servicing existing financial products and services digitally in self-service mode at any time.
- Commercial banks (other than regional rural banks, payment banks, and local area banks) with past digital banking experience are permitted to open DBUs in tier 1 to tier 6 centers, unless otherwise specifically restricted, without having the need to take permission from the RBI in each case.
- Services to be provided by the DBUs include:
- DBUs will be brick-and-mortar outlets that will provide a variety of digital banking facilities to people such as opening savings accounts, transfer of funds, investment in fixed deposits, loan applications, stop payment instructions for cheques issued, applying for credit/debit cards, viewing statement of account, pay taxes, pay bills among others.
- They will also spread Digital Financial Literacy and special emphasis will be given to customer education on cyber security awareness and safeguards.
World Economic Outlook Report
Context: Recently, the International Monetary Fund released its latest edition of the World Economic Outlook Report (WEO) 2022. It is a comprehensive report published twice a year by the International Monetary Fund (IMF).
- Global Growth Projections:
- According to projections, global growth will drop from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.
- With the exception of the global financial crisis and the severe phase of the COVID-19 pandemic, this is the worst growth profile since 2001.
- In 2023, the rate of global growth is anticipated to further slow. The worst is still to come, and for many, 2023 will seem like a recession.
- The growth rate in China is anticipated to reach its lowest level in decades in 2023, except for the initial coronavirus outbreak, while the slowdown in the Euro area is anticipated to worsen.
- Forecasts predict that the global inflation rate of global inflation would increase from 4.7 percent in 2021 to 8.8 percent in 2022 before falling to 6.5 percent in 2023 and 4.1 percent by 2024.
- Most advanced economies have experienced upside inflation surprises, whereas emerging markets and underdeveloped nations have experienced greater fluctuation.
- Global Economic Challenges:
- A slowdown in major economies: The world’s biggest economies is currently experiencing substantial slowdowns e.g. decline in the US economy in the first half of 2022, and a decline in the Euro in the second half of 2022.
- Extended COVID-19 outbreaks and lockdowns in China with an escalating crisis in the real estate market.
- Three major factors:
- The Russian invasion of Ukraine,
- A cost-of-living problem brought on by persistent and expanding inflation pressures and China’s slowdown, all have a significant impact on the current global economic situation.
- China property crisis: If the crisis in China’s real estate market worsens, it might have significant cross-border implications on the banking industry as well as the economy of the country.
- World Economic Outlook Report 2022 on India:
- The IMF has reduced its Financial Year 2023 growth forecast for India from its July projection of 7.4 percent to 6.8 percent.
- For 2023, India has been projected to grow at 6.1%.
- This is the largest reduction it has made for any major economy other than the USA.
- The IMF’s action comes after the World Bank lowered its FY23 growth prediction for India from 7.5 percent to 6.5 percent.
Concerns over the Economic Growth Trajectory of India
Context: Declining growth rate of India.
- Indian economy is somewhere ‘in between’, implying that it is neither doing too well nor performing badly.
- Though the exchange rate of the Indian rupee is very poor and inflation is at 7.41%, these are due to global phenomena and nearly all currencies are losing out against the U.S. dollar.
- India is performing poorly in terms of employment generation. The unemployment rate is as high as 7.8%.
- According to International Labour Organization (ILO) data collated and presented by the World Bank, youth unemployment in India (for the age group 15 – 24 years) is at 28.3%.
- This places India in the group of troubled West Asian countries like Iran (27.2%), Egypt (24.3%), Syria (26.2%), and in a much worse situation in comparison to many Asian countries like Indonesia (16%), Malaysia (15.6%), and Bangladesh(14.7%).
- The GDP growth of India in 2021-22 was 8.7%, which was among the highest in the world. But it should be noted that this growth is relative to the growth during the pandemic.
- In 2020-21, it was minus 6.6%, placing India in the bottom half of the global growth chart.
- The International Monetary Fund has cut India’s growth forecast to 6.1% for the year 2022-23. Two concerns associated with this are:
- Most of the growth is happening at the top end. With a high unemployment rate, it is very likely that large segments of the population are actually experiencing negative growth.
- Another concern is India’s own sliding performance in comparison to its previous performance.
Investment rate of India:
- The economic slowdown in India began much before the COVID-19 pandemic. It started in 2016 and for four consecutive years, the year-on-year growth rate was lower than the previous year.
- This downward spiralling of growth rates for four consecutive years has happened for the first time since 1947.
- One of the major reasons behind India’s poor performance over the last six years is the low investment rate.
- The investment rate is the fraction of the national income that is spent on infrastructure development like roads, bridges, factories, and also human capital.
- For many years India had a low investment rate translating into slow growth. The investment rate gradually rose and crossed the 30% mark in the year 2004-05. It reached 39.1% in the year 2007-08. This was the first time India was growing faster than the super performers.
- The investment rate remained just below 40% for 6 years and then began to drop gradually. It had fallen to 32.2% by the year 2019-20.
- There are several drivers for the investment rate in the country like monetary and fiscal policies. It also depends on social and political factors. The level of trust in the economy also determines the investment rate.
- The policy focus should shift from a few rich corporations to farmers, small businesses, and ordinary laborers that constitute a large section of the population.
- Moreover, there should be fiscal policy interventions that transfer income to the poor segments of society.
- This can be a significant step as inequality has disproportionately risen in India in the past few years.
- It is also important to build trust among the general public and focus more on inclusive growth.
GDP and GVA
Context: Recently, the Ministry of Statistics and Programme Implementation (MoSPI) released India’s economic growth data for the second quarter of the current financial year (2022-23 or FY23).
- India’s gross domestic product (GDP) for the July-September quarter (Q2) of the ongoing financial year 2022-23 slowed to 6.3 percent, as per provisional estimates released by National Statistical Office (NSO) recently.
- The GDP growth was dragged down mainly by the poor performance of the manufacturing and mining sectors.
- While the GDP had expanded by 8.4 percent in the corresponding quarter of 2021-22, it saw a growth of 13.5 percent in the preceding April-June quarter of 2022-23.
- The Reserve Bank of India in its report earlier this month projected a growth rate between 6.1-6.3 percent in Q2.
- Notably, India remained the fastest-growing major economy as China registered an economic growth of 3.9 percent in July-September 2022.
- As per the government data, the gross value added (GVA) at basic price at constant terms during the September quarter rose 5.6 percent. The GVA at basic price at current prices rose 16.2 percent in Q2 2022-23.
- As per the data by the NSO, the GVA of trade, hotels, transport, communication & services related to broadcasting witnessed a rise of 14.7 percent while that of financial, real estate & professional services climbed 7.2 percent.
- The construction segment grew by 6.6 percent while Electricity, gas, water supply & other utility services climbed 5.6 percent, and the agriculture, forestry & fishing segment witnessed a 4.6 percent rise in GVA, the data showed.
- The GVA in the manufacturing sector contracted 4.3 percent during the quarter from 5.6 percent growth during the year-ago period. GVA in mining also declined by 2.8 percent in the quarter compared to 14.5 percent growth. The GVA growth in the construction sector also decelerated to 6.6 percent in the quarter from 8.1 percent.
- Reflecting on the GDP numbers, Chief Economic Advisor V Anantha Nageswaran said the Indian economy is on track to achieve a 6.8-7 percent GDP growth in the current fiscal.
- He said the economic recovery momentum is continuing and the GDP is averaging the 2019-20 level.
- “In 2022-23, the economy is on track to reach a 6.8-7 percent growth in the current fiscal,” he said, adding festival sales, PMI, bank credit growth, and auto sales data show that the economy has maintained momentum despite global headwinds.
About GDP and GVA:
- The GDP measures the monetary measure of all “final” goods and services— those that are bought by the final user— produced in a country in a given period.
- The GVA calculates the same national income from the supply side.
- It does so by adding up all the value added across different sectors.
- According to the RBI, the GVA of a sector is defined as the value of output minus the value of its intermediary inputs.
- This “value added” is shared among the primary factors of production, labor, and capital.
First Loss Default Guarantee(FLDG) system
Context: Two months after the Reserve Bank issued guidelines on digital lending, banks, non-banking financial companies, and fintech players are still awaiting clarity on many aspects including the First Loss Default Guarantee(FLDG) system.
- FLDG is a lending model between a fintech and a regulated entity in which a third party guarantees to compensate up to a certain percentage of default in a loan portfolio of the regulated entities (RE).
- Under these agreements, the fintech originates a loan and promises to compensate the partners up to a pre-decided percentage in case customers fail to repay.
- The bank/NBFC partners lend through the fintech but from their own books. FLDG helps expand the customer base of traditional lenders but relies on the fintech's underwriting capabilities.
- A report by an RBI-constituted working group on digital lending has laid down the risks of FLDG agreements with unregulated entities. The other concern is that FLDG costs are often passed on to customers.
Context: A survey shows emotional labor falls to women in the workplace and at home more than men.
- Invisible unpaid labor, like doing the office tea rounds, falls disproportionately on women — who then have to manage their emotional response to carrying out unwanted tasks.
- Women are expected to do more non-work office tasks, such as organizing staff away days and cards and gifts for colleagues, than men. Even if a woman says no to a task like this, it’s likely that another woman will be asked in her place.
- Women are fearful of being seen as difficult and more likely to agree to take on the invisible and unpaid labor that detracts from their other responsibilities.
- They may think, “If I don’t do it, another woman will.” And women have to hide their displeasure or discomfort and pretend to be accommodating even at the cost of their own mental health.
- This process of managing, modulating, and suppressing one’s emotions to fulfill expectations from others or to achieve professional goals is called “emotional labor”.
- American sociologist Arlie Hochschild first introduced the concept of emotional labor in 1983 to mean that emotions have a market and exchange value in our capitalist society.
- People are required to regulate their emotions to fit in with the emotional norm and manage their emotions to ensure the smooth flow of business necessary to get a wage.
- Emotional labor was never intended to be a gendered term. But invisible unpaid labor, like doing the office tea round, falls disproportionately on women — who then have to manage their emotional response to carrying out unwanted tasks.
Public Financial Management System
Context: The Public Accounts Committee (PAC), in its report, found that the tasks related to the implementation of the PFMS appeared to have been dealt with with a casual approach and there was no proper financial planning.
- The Public Financial Management System (PFMS) is a web-based online software application developed and implemented by the Controller General of Accounts (CGA), Department of Expenditure, Ministry of Finance, Government of India.
- PFMS started in 2009 with the objective of tracking funds released under all Plan schemes of the Government of India, and real-time reporting of expenditure at all levels of Programme implementation.
- Subsequently, the scope was enlarged to cover direct payment to beneficiaries under all Schemes.
- Gradually, it has been envisaged that digitization of accounts shall be achieved through PFMS, and beginning with Pay & Accounts Offices payments, the O/o CGA did further value addition by bringing in more financial activities of the Government of India into the ambit of PFMS.
- The outputs/deliverables for the various modes/functions of PFMS include (but are not limited to):
- Payment & Exchequer Control
- Accounting of Receipts (Tax & Non-Tax)
- Compilation of Accounts and Preparation of Fiscal Reports
- Integration with Financial Management Systems of States.
- The primary function of PFMS today is to facilitate a sound Public Financial Management System for the Government of India by establishing an efficient fund flow system as well as a payment cum accounting network.
- PFMS provides various stakeholders with a real-time, reliable, and meaningful management information system and an effective decision support system, as part of the Digital India initiative of the Government of India.
Surety Bond Insurance
Context: Union Minister for Road Transport and Highways recently launched one of India’s first-ever Surety Bond Insurance products.
- A surety bond can be defined in its simplest form as a written agreement to guarantee compliance, payment, or performance of an act.
- A surety is a unique type of insurance because it involves a three-party agreement. The three parties in a surety agreement are:
- Principal -The party that purchases the bond and undertakes an obligation to perform an act as promised.
- Surety – The insurance company or surety company that guarantees the obligation will be performed. If the principal fails to perform the act as promised, the surety is contractually liable for losses sustained.
- Obligee – The party who requires, and often receives the benefit of the surety bond. For most surety bonds, the obligee is a local, state, or federal government organization.
- It will act as a security arrangement for infrastructure projects and will insulate the contractor as well as the principal.
- The product will cater to the requirements of a diversified group of contractors, many of whom are operating in today’s increasingly volatile environment.
- The product gives the principal a contract of guarantee that contractual terms and other business deals will be concluded in accordance with the mutually agreed terms.
- In case the contractor doesn’t fulfill the contractual terms, the Principal can raise a claim on the surety bond and recover the losses they have incurred.
- Unlike a bank guarantee, Surety Bond Insurance does not require large collateral from the contractor thus freeing up significant funds for the contractor, which they can utilize for the growth of the business.
- The product will also help in reducing the contractors’ debts to a large extent thus addressing their financial worries.
Startup India Seed Fund Scheme (SISFS)
Context: The Minister of State in the Ministry of Commerce and Industry recently said that 656 Startups are Supported by Approved Incubators under Startup India Seed Fund Scheme (SISFS).
- The Startup India Seed Fund Scheme (SISFS) was implemented with eﬀect from 1st April 2021 with a corpus of Rs. 945 crores.
- The Scheme aims to provide ﬁnancial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.
- As per provisions under SISFS, the Government has constituted an Experts Advisory Committee (EAC) which is responsible for the overall execution and monitoring of the SISFS.
- The EAC evaluates and selects incubators for funds under the Scheme.
- These incubators thereon select the startups based on certain parameters outlined in Scheme guidelines.
- 126 incubators have been approved and these incubators have selected 656 startups under the Scheme as of 30th November 2022.
Goods Trade Barometer
Context: Latest World Trade Organization (WTO) Goods Trade Barometer hints toward slowing of trade growth in the rest of 2022 and into 2023.
- The Goods Trade Barometer, formerly the World Trade Outlook Indicator, is a leading indicator that signals changes in world trade growth two to three months ahead of merchandise trade volume statistics.
- The Services Trade Barometer is a coincident indicator that illustrates the current state of services trades slightly ahead of official statistics.
- Both barometers are intended to complement conventional trade statistics and forecasts.
- Its baseline value is 100. A value greater than 100 suggests above-trend growth while a value below 100 indicates below-trend growth.
- The current Goods Trade Barometer Index reading is 96.2.
Context: The Reserve Bank of India’s Medium-term Strategy Framework for the period 2023-2025 – ‘Utkarsh 2.0’ – was launched recently by Shri Shaktikanta Das, Governor, RBI.
- The Reserve Bank of India’s Medium-term Strategy Framework for the period 2023-2025 – ‘Utkarsh 2.0’ – was launched recently.
- The first strategy framework (Utkarsh 2022) covering the period 2019-2022 was launched in July 2019. It became a medium-term strategy document guiding the Bank’s progress toward the realization of the identified milestones.
- Utkarsh 2.0 harnesses the strengths of Utkarsh 2022 by retaining the six Vision statements as well as Core Purpose, Values, and Mission statement.
- Collectively, they create a strategic guiding path.
- The Vision in Utkarsh 2.0 that will guide the Reserve Bank of India over the period 2023-25 are:
- Excellence in the performance of its functions;
- Strengthened trust of citizens and Institutions in the RBI;
- Enhanced relevance and significance in national and global roles;
- Transparent, accountable, and ethics-driven internal governance;
- Best-in-class and environment-friendly digital and physical infrastructure; and
- Innovative, dynamic, and skilled human resources.
- The desired outputs are proposed to be realized in terms of strategies calibrated through milestones.
- The Reserve Bank of India attaches high importance to its medium-term strategy and monitors its implementation and progress through a Sub-committee of its Central Board.
Financial Stability Report
Context: Reserve Bank of India’s Financial Stability Report which was released recently.
- FSR is published biannually and includes contributions from all the financial sector regulators.
- It reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability.
- RBI in its latest Financial Stability Report (FSR) conducted macro stress tests, to assess the resilience of banks’ balance sheets.
- Key Findings include:
- India's banks and non-bank lenders are in a position to withstand even the worst macroeconomic stress originating from global spillovers.
- By September 2022, the gross non-performing assets (GNPA) ratio had slowly declined to 5% to a seven-year low.
- As of September 2022, the net non-performing assets (NNPA) ratio stood at a ten-year low of 1.3%, whereas private banks (PVBs’) NNPA ratio was below 1%.
- Stress tests indicate that the GNPA ratio of all banks may improve from 5% in September 2022 to 4.9% by September 2023, under the baseline scenario.
- However, if the macroeconomic environment worsens to a medium or severe stress scenario, the GNPA ratio may rise to 5.8% and 7.8%, respectively.
- At the bank group level, under the severe stress scenario GNPA ratios of:
- Public sector banks may rise from 6.5% in September 2022 to 9.4% in September 2023;
- Private sector banks would go up from 3.3% to 5.8%; and
- Foreign banks would increase from 2.5% to 4.1%.
- Macro stress tests for credit risk reveal that SCBs would be able to comply with the minimum capital requirements even under severe stress scenarios. The system-level capital to risk-weighted assets ratio (CRAR) in September 2023, under baseline, medium, and severe stress scenarios, is projected at 14.9 percent, 14.0 percent, and 13.1 percent, respectively.
- Assessment of Systemic Risk:
- Monetary tightening in advanced economies, tightening of financial conditions, geopolitical risks, global growth uncertainty, and growing risks from private cryptocurrencies and climate change are cited as the major contributors to the rise in the global, financial market and general risks.
- The majority of the respondents saw further improvement in credit prospects for the Indian economy and remained confident about the stability of the Indian banking sector.
- Nearly ninety percent of the respondents assessed that the prospects of the Indian banking sector are likely to improve or remain unchanged over a one-year horizon.
- What are GNPA and NNPA?
- GNPA: It refers to the sum of all the loans that have been defaulted (not repaid within the ninety-day period) by the borrowers within the provided period.
- NNPA: NNPA subtracts the provisions made by the bank from the GNPA. Therefore, net NPA gives the exact value of non-performing assets (NPA) after deducting provision for doubtful & unpaid debts from GNPA.
- NNPA= GNPA – Provisions
- NNPA constitutes the actual loss experienced by the organization after debts have defaulted.
- CRAR also known as Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital to its risk.
- CRAR is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
- The Basel III norms stipulated a capital to risk-weighted assets of 8%.
- In India, scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12% as per RBI norms.
Business Confidence Index
Context: The Confederation of Indian Industry Business Confidence Index (CII- BCI) has shown an apparent increase in the October-December 2022 quarter, indicating optimism in the Indian industry and the country’s economic resilience.
- The index rose to the level of 67.6 during the quarter, up from 62.2 in the previous July-September 2022 quarter.
- The Index is based on the findings of a survey of over 120 firms of varying sizes across all industry sectors and regions of the country.
- Growth is expected to moderate further in the next year on global headwinds. Hence, to support growth, it is critical that RBI refrains from raising the interest rates any further.
- The latest first advance estimates of GDP for the current fiscal put the GDP print at 7 percent.
- Nearly half of the respondents (47 percent) have indicated that they have already started feeling the impact of the policy rate hikes by the RBI on the overall economic activity, revealed the survey.
- High-interest rates have impinged on private investment levels too.
- Currently, most of the heavy lifting to support growth is being done by public capex, with private capex playing a supporting role.
- Even as global economic growth is witnessing headwinds due to tightening financial conditions and geopolitical tensions, an overwhelming 73 percent of the survey respondents expect only a moderate impact on the Indian economy.
- In addition to high borrowing costs, the prevailing heightened uncertainty has prevented firms from furthering their investment plans.
- About CII:
- It is a non-government, not-for-profit, industry-led, and industry-managed organization.
- It was founded in 1895; its headquarters is in New Delhi.
- It works to create and sustain an environment conducive to the development of India, partnering with industry, Government, and civil society, through advisory and consultative processes.
Additional Tier 1 Bonds
Context: The Bombay High Court canceled the write-off of Additional Tier-1 (AT1) bonds worth Rs 8,400 crore issued by Yes Bank Ltd, bringing relief to investors.
- AT1 bonds are unsecured, perpetual bonds with no pre-determined maturity date issued by financial institutions to fulfill their capital adequacy requirements.
- Though these bonds never mature, they are issued with a call option. The call option gives the issuers of AT1 bonds, usually banks, the right (but not an obligation) to buy these bonds back from investors by paying the principal amount to investors.
- These bonds are typically used by banks to bolster their core or tier-1 capital.
- AT1 bonds are subordinate to all other debt and only senior to common equity.
- Mutual funds (MFs) were among the largest investors in perpetual debt instruments.
- These bonds were introduced by the Basel accord after the global financial crisis to protect depositors.
First Advance Estimates
Context: The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation is releasing in this Press Note the First Advance Estimates (FAE) of National Income at both Constant (2011-12) and Current Prices, for the financial year 2022-23.
- India’s GDP is expected to grow at 7% for the financial year 2022-23. This is slower than the 8.7% GDP growth in 2021-22 but slightly higher than the RBI’s forecast of 6.8% for the current financial year.
- Real GDP or GDP at Constant (2011-12) Prices in the year 2022-23 is estimated at ₹157.60 lakh crore (to grow at 7%), as against the Provisional Estimate of GDP for the year 2021-22 of ₹147.36 lakh crore, released in May 2022.
- The country's nominal GDP, which factors in the inflation rate, is expected to grow by 15.4% in 2022-23, down from 19.5% in 2021-22.
- Gross Value Added (GVA) is expected to grow at 6.7% in 2022-23 as against 8.1% in 2021-22.
- Private final consumption expenditure – a measure of consumption of goods and services by individuals – is seen growing at a slower pace of 7.7% in FY23 as against 7.9%a year ago.
- Gross fixed capital formation – a proxy for investment activity – will grow at 11.5% as against 15.8 percent growth last fiscal.
- Government expenditure will grow by 3.1% as against 2.6% last fiscal coming on the back of a capital expenditure push.
- Further, it expects exports to rise by 11.9% in H2(second half of a fiscal year) FY2023.
- Calculation of FAE:
- The FAE is derived by extrapolating the available data. Extrapolation is a process of estimating the values of a particular metric by assuming that existing trends will continue.
- The sector-wise estimates are obtained by extrapolating indicators like:
- Index of Industrial Production (IIP) of the first 7 months of the financial year.
- Financial performance of listed companies in the private corporate sector available for Q1 and Q2 2022-23.
- The 1st Advance Estimates of crop production.
- Production estimates of Major Livestock Products for the summer season of 2022-23;
- Fish Production; Production/Consumption of Cement and Steel;
- Net Tonne Kilometres and Passenger Kilometres for Railways;
- Passenger and Cargo traffic handled by Civil Aviation;
- Cargo traffic is handled at Major Sea Ports;
- Sales of Commercial Vehicles;
- Bank Deposits & Credits
- The accounts of central & state governments.
India Adopts T+1 Settlement System
Context: After the implementation of the T+1 settlement cycle in the Indian stock market, India's equity mutual funds are now moving to the T+2 settlement cycle from 1st February 2023.
- The T+1 settlement cycle means that trade-related settlements must be done within a day, or 24 hours, of the completion of a transaction.
- For example, under T+1, if a customer bought shares on Wednesday, they would be credited to the customer’s demat account on Thursday.
- This is different from T+2, where they will be settled on Friday.
- As many as 256 large-cap and top mid-cap stocks, including Nifty and Sensex stocks, will come under the T+1 settlement from January 27.
- After China, India will become the second country in the world to start the ‘trade-plus-one’ (T+1) settlement cycle in top-listed securities from January 27.
- This will help in bringing operational efficiency, faster fund remittances, share delivery, and ease for stock market participants.
- The United States, United Kingdom, and Eurozone markets are yet to move to the T+1 system.
- In the T+1 format, if an investor sells a share, she will get the money within a day, and the buyer will get the shares in her demat account also within a day.
- This shorter trade settlement cycle augurs well for the Indian equity markets from a liquidity perspective, and it shows how well we have grown on the digital journey to ensure seamless settlements within 24 hours.
- This will also help investors in reducing the overall capital requirements with the margins getting released on T+1 day, and in getting the funds in the bank account within 24 hours of the sale of shares.
- The shift will boost operational efficiency as the rolling of funds and stocks will be faster.
Context: Hindenburg Research disclosed short positions in Adani Group, alleging stock manipulation and accounting fraud in its latest investigative report.
- Buy low, sell high is the traditional investment strategy in which one buys a stock or security at a particular price and then sells it when the price is higher, thereby booking a profit.
- This is referred to as a long position and is based on the view that the price of the stock or security will appreciate with time.
- Short selling, or shorting, on the other hand, is a trading strategy based on the expectation that the price of the security will fall.
- While fundamentally it is based on the buy low, sell high approach, the sequence of transactions is reversed in short selling — to sell high first and buy low later.
- Also, in short selling, the trader usually does not own the securities he sells, but merely borrows them.
- In the stock market, traders usually short stocks by selling shares they have borrowed from others through brokerages.
- When the price of the shares falls to the expected levels, the trader would purchase the shares at the lower price and return them to the owner, booking a profit in the process.
- If, however, the price of the shares appreciates instead of falling, the trader will be forced to buy shares at a higher price to return to the owner, thereby booking a loss.
Global Economic Prospects
Context: The World Bank released its latest Global Economic Prospect.
- It is released by World Bank twice a year, the report examines global economic developments and prospects, with a special focus on emerging markets and developing economies.
- Highlights Of The Report:
- The global economy will come very close to a recession this year, led by weaker growth in all the world’s top economies — the United States, Europe, and China.
- Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.
- World Bank has slashed its forecast for global growth this year by nearly half, to just 1.7%, from its previous projection of 3%.
- The deceleration in global growth is due to the lagged effect of the monetary policy tightening by central banks around the world and weakening external demand.
- The impact of a global downturn would be particularly hard on poorer countries in areas like Saharan Africa, where the World Bank predicts per capita income will grow just 1.2% in 2023 and 2024. This rate is so low, that poverty rates could rise.
- The report also noted that rising interest rates in developed economies like the United States and Europe will attract investment capital from poorer countries, thus depriving them of crucial domestic investment.
- At the same time, those high-interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices high.
- Weakness in growth and business investment will worsen the already devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change.
- Developing Economies:
- The bank expects developing countries to fare better, growing 3.4% this year, the same as in 2022, though still only about half the pace of 2021. It forecasts Brazil’s growth slowing to 0.8% in 2023, down from 3% last year.
- In Pakistan, it expects the economy to expand just 2% this year, one-third of last year’s pace.
- Indian Scenario:
- India is expected to be the fastest-growing economy of the seven largest Emerging Markets and Developing Economies (EMDEs).
- The Indian economy is projected to grow at a robust 6.6% in 2023-24 (FY24), slowing down from an estimated 6.9% in 2022-23 (FY23), due to limited spillovers to Asia’s third-largest economy from a projected global slowdown.
- The report, however, noted that consumer inflation was above the RBI’s upper tolerance limit of 6%, for most of the last year. This led to the policy rate being raised by 2.25% points between May and December.
- India’s goods trade deficit has more than doubled since 2019, and was $24 billion in November, with deficits for crude petroleum and petroleum products ($7.6 billion) and other commodities (ores and minerals at $4.2 billion) accounting for the widening.
- However, governments increased infrastructure spending and various business facilitation measures, will crowd in private investment and support the expansion of manufacturing capacity.
National Financial Reporting Authority
Context: The National Financial Reporting Authority (NFRA) has published the draft requirements for the preparation and publication of the Annual Transparency Report (ATR) by auditors and audit firms, towards enhancing transparency about management and governance of audit firms and their internal policy framework.
- NFRA is an independent regulator for the auditing profession under the Ministry of Corporate Affairs
- Constituted in 2018 by the Government of India under Sub Section (1) of section 132 of the Companies Act, 2013.
- The authority consists of a chairperson, three full-time members, and a secretary, and the total number of members should not exceed fifteen
- Over 6,800 companies come under NFRA purview, which includes listed as well as unlisted companies.
- The NFRA can impose a penalty of not less than ₹1 lakh but not exceeding 5 times the fees collected.
- Protect the public interest and the interests of investors, creditors, and others associated with the companies or bodies corporate governed under Rule 3 by establishing high-quality standards of accounting and auditing and exercising effective oversight of accounting functions performed by the companies and bodies corporate and auditing functions performed by auditors.
- Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
- Monitor and enforce compliance with accounting standards and auditing standards;
- Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service.
- ATR requirements:
- The objective is to ensure high-quality audits and prevent conflict of interest by maintaining independence.
- The ATR requirements are on the lines of the contemporary international best practices implemented by certain prominent Independent Audit Regulators in other jurisdictions
- Rule 8(2) of the NFRA Rules 2018 empowers the NFRA to require an auditor to report on its governance practices and internal processes designed to promote audit quality, protect its reputation and reduce risks including the risk of failure of the auditor and may take such action on the report as may be necessary.
- It contains certain critical information about the auditor’s operational activities, management, governance and ownership structures, and policies and procedures necessary to deliver high-quality audits, etc.
- The information contained in the ATR will be useful to the Investors, Audit Committees, Independent Directors, and the public at large.
- The ATR requirements are proposed to be implemented in a gradual manner for PIEs starting with Statutory Auditors of the Top 1000 Listed Companies (by market capitalization) with effect from the financial year ending on 31 March 2023.
- The ATR has to be published within three months from the end of each financial year.
Adani Enterprises Calls Off FPO
Context: Adani Enterprises decided on February 1 to call off its ₹20,000 crore follow-on public offer and return the money that it had collected from investors.
- Adani Enterprises decided to call off its ₹20,000 crore follow-on public offer (FPO) and return the money that it had collected from investors.
- The Adani Group has seen the stocks of its publicly listed companies crash steeply, causing its overall market capitalization to drop significantly.
- A report by U.S. firm Hindenburg Research had accused the Adani Group of stock manipulation and accounting fraud. The Group has denied all allegations.
Follow-on Public Offer:
- An FPO is a process through which companies that are publicly listed on the stock market, issue additional shares to investors.
- During an FPO, a company could decide to issue fresh shares to investors, or existing shareholders in the company could decide to sell their shares to other investors.
- An FPO is similar to an initial public offering (IPO), except that an IPO refers to the issuance or sale of shares by a company to investors when it taps into the public market for the very first time.
- In an IPO, the price is either fixed or variable as a range, while in an FPO the price is dependent upon the number of shares as they increase or decrease and is market-driven
- FPOs can also be a way for existing shareholders to sell their shares and exit the company.
- It also provides an opportunity for existing shareholders to increase their stake in the company.
- FPOs are used by companies to diversify their equity base and raise capital for their business. This capital can be used for a variety of purposes such as general corporate expenses, working capital, expansion, and debt reduction.
- FPOs are typically offered at a discount to the current market price of the shares, which can make them more attractive to retail investors. This allows them to participate in the potential upside of the company's performance.
- Additionally, FPOs come with the advantage of more information being available about the company, as it has already been listed on the exchange and has a track record of performance.
- This allows investors to make more informed decisions about investing in the company.
- Also, by the time of FPO, the company already has a well-established corporate governance structure and investors have a better idea about the management's track record.
Qualified Institutional Buyers:
- The FPO) of Adani Enterprises Ltd (which was eventually called off by the company) was significantly subscribed by Qualified Institutional Buyers (QIBs).
- SEBI defines a QIB as an institutional investor that possesses the necessary expertise plus the financial background to carefully evaluate and strategically invest in capital markets.
- As per DIP (Disclosure and Investor Protection) Guidelines formulated in 2000, SEBI designates the following as QIBs:
- Public financial institution as defined in the Companies Act, 1956;
- Scheduled commercial banks;
- Mutual funds;
- Foreign institutional investors registered with SEBI;
- Multilateral and bilateral development financial institutions;
- Venture capital funds registered with SEBI;
- State Industrial Development Corporations;
- Insurance Companies registered with (IRDA);
- Provident Funds with a minimum corpus of Rs.25 crores;
- Pension Funds with a minimum corpus of Rs. 25 crores.
- These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs.
Additional Surveillance Mechanism:
- The National Stock Exchange (NSE) has placed Adani Enterprises, Adani Ports, and Ambuja Cements under the additional surveillance mechanism (ASM).
- This means trading in their shares will require a 100% margin, which is aimed at curbing speculation and short-selling.
- The move comes as shares of Adani group companies continue to fall in the light of accusations of stock manipulation and fraud leveled against the group by New York-based Hindenburg Research.
- ASM was introduced in 2018 with the intention to protect investors from market volatility and unusual changes in share price.
- The shortlisting of securities for placing in ASM is based on criteria that are jointly decided by the SEBI and exchanges.
- It covers the following parameters: high-low variation, client concentration, market capitalization, volume variation, delivery percentage, and the number of unique PANs.
- Put simply, an ASM shortlisting signals to investors that the stocks have seen unusual activity.
- However, the shortlisting of securities under ASM is purely on account of market surveillance and it should not be interpreted as an adverse action against the concerned company/entity.
- Global index provider MSCI has changed its weightage for four Adani Group stocks in its various widely tracked indices.
- This was done after reviewing how many shares are available in the “free float” category — that is, shares that can be freely traded without any restrictions.
- MSCI, or Morgan Stanley Capital International, is a leading provider of critical decision support tools, including stock indexes, and services for the global investment community. It has over 160,000 indexes in its portfolio.
- MSCI Indexes facilitate the construction and monitoring of portfolios in a cohesive and complete manner, avoiding benchmark misfits.
- At the core is its modern index strategy, which provides consistent treatment across all markets, followed globally by investors.
Har Payment Digital Mission
Context: RBI launches Mission ‘Har Payment Digital’ on the occasion of Digital Payments Awareness Week 2023.
- Reserve Bank of India (RBI) recently launched the Mission ‘Har Payment Digital’ on the occasion of Digital Payments Awareness Week (DPAW) 2023.
- This is part of RBI’s endeavor to make every person in India a user of digital payments.
- DPAW 2023 will be observed from the 6th to the 12th of March, 2023. The campaign theme is “Digital Payment Apnao, Auron ko bhi Sikhao” (Adopt digital payments and Also teach others).
- RBI Governor Shaktikanta Das said, “Har Payment Digital” is aimed at reinforcing the ease and convenience of digital payments and facilitating the onboarding of new consumers into the digital fold. Various campaigns highlighting the digital payment channels available are being planned by banks and non-bank payment system operators. This will further encourage and support the adoption of digital payments in the country, He added. He informed that payment systems in India have witnessed over one thousand crore transactions every month since December 2022.
- Mr. Das said RBI's Regional Offices will take up Jan Bhagidari activities to promote the acceptance and use of digital payments under the G20 theme of promoting digital public infrastructure during the Indian presidency. The Reserve Bank will also initiate a ‘75 Digital Villages’ program in observance of 75 years of Independence. Under this program, Payment System Operators will adopt 75 villages across the country and convert them into digital payment-enabled villages.
- While launching the Mission “Har Payment Digital”, the Governor appealed to all the stakeholders – banks, non-banks, payment system operators, digital payment users, etc. – to adopt digital payments and teach others about the merits of using digital payments. This would encourage every person to become a digital payment user.
City Finance Rankings 2022
Context: The Ministry of Housing and Urban Affairs recently launched the City Finance Rankings 2022.
- The Ministry of Housing and Urban Affairs recently launched the City Finance Rankings 2022 under which urban local bodies in the country will be evaluated on the basis of their financial health.
- The urban local bodies will be evaluated on 15 indicators across three key parameters:
- resource mobilisation
- expenditure performance
- fiscal governance.
- The objective is to evaluate, recognize and reward municipal bodies across the country based on the quality of their current financial health and improvement over time in financial performance.
- The cities will be ranked based on their scores under four population categories — above 40 lahks, 10 lakh40 lakh, one lakh to 10 lahks, and below one lakh. Awards would be given to the top three cities in each category.
- At a state- and national level, the rankings will highlight the outcomes achieved by municipalities and provide critical insights to key policymakers into the state of finances of urban local bodies.
- Thus, the rankings will serve as a constant motivation for city/state officials to continue to implement municipal finance reforms.
- It will help the ULBs in identifying areas in their financial performance where they can make further improvements and enable them to deliver quality infrastructure and services to their citizens.
- It would create a conducive environment for developing a robust municipal finance ecosystem for promoting financially healthy, transparent, and sustainable cities.
Fugitive Economic Offenders (FEO)
Context: India has called upon G20 countries to adopt multilateral action for faster extradition of fugitive economic offenders (FEOs).
- India has called upon G20 countries to adopt multilateral action for faster extradition of fugitive economic offenders (FEOs) and recovery of assets both on the domestic front as well as from abroad.
- The call was made at the first anti-corruption working group (ACWG) meeting of G20 Nations held in Gurugram, which was chaired by India.
- India has been fighting cases in UK courts for the extradition of Nirav Modi and Vijay Mallya for several years now.
- Similarly, many countries are facing the problem of economic offenses and it becomes difficult to prosecute such offenders when the person flees overseas.
- India has called for better coordination, streamlining of judicial processes, and timely disposal of cases for multilateral action rather than bilateral coordination.
- The reason is that bilateral coordination proves to be more complex and presents obstacles in making progress on cases related to economic offenders.
- Due to India’s legislative initiative, the Enforcement Directorate has been able to transfer assets worth $180 billion to public sector banks that suffered losses of around $272 billion due to frauds committed by high-net-worth individuals.
Fugitive Economic Offenders Act, 2018:
- It seeks to confiscate the properties of economic offenders who have left the country to avoid facing criminal prosecution or refuse to return to the country to face prosecution.
- Fugitive economic offender:
- A person against whom an arrest warrant has been issued for committing an offense listed in the Act and the value of the offense is at least Rs. 100 crore.
- Some of the offenses listed in the act are:
- Counterfeiting government stamps or currency.
- Cheque dishonor.
- Money laundering.
- Transactions defrauding creditors.
- Declaration of a Fugitive Economic Offender:
- After hearing the application, a special court (designated under the PMLA, 2002) may declare an individual a fugitive economic offender.
- It may confiscate properties that are proceeds of crime, Benami properties, and any other property, in India or abroad.
- Upon confiscation, all rights and titles of the property will vest in the central government, free from encumbrances (such as any charges on the property).
- The central government may appoint an administrator to manage and dispose of these properties.
- Bar on Filing or Defending Civil Claims:
- The Act allows any civil court or tribunal to prohibit a declared fugitive economic offender, from filing or defending any civil claim.
- Further, any company or limited liability partnership where such a person is a majority shareholder, promoter, or a key managerial person, may also be barred from filing or defending civil claims.
- The authorities may provisionally attach properties of an accused, while the application is pending before the Special Court.
- The authorities under the PMLA, 2002 will exercise powers given to them under the Fugitive Economic Offenders Act.
- These powers will be similar to those of a civil court, including the search of persons in possession of records or proceeds of crime, the search of premises on the belief that a person is an FEO, and seizure of documents.
- It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
- On 1st May 1956, an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act, of 1947.
- In 1957, it was renamed as ‘Enforcement Directorate’.
- ED enforces the following laws:
- Foreign Exchange Management Act, 1999.
- Prevention of Money Laundering Act, 2002.
International Intellectual Property Index 2022
Context: Recently, India has improved its overall IP score from 38.4 percent to 38.6 percent, and the country is ranked 43 out of 55 countries on the International Intellectual Property Index.
- It was released annually by the US Chamber of Commerce Global Innovation Policy Centre (GIPC).
- The index was started in 2012 and the first edition compared IP environments in 11 economies.
- The Intellectual Property (IP) Index evaluates each economy's ecosystem based on 50 unique indicators that the industry believes represent economies with the most effective IP systems
- Parameters: It ranks countries based on 50 unique indicators. These indicators are divided across nine categories of protection: 1) Patents 2) copyrights 3) trademarks 4) design rights 5) trade secrets 6) commercialization of IP assets 7) enforcement 8) systemic efficiency and 9) membership and ratification of international treaties.
- Significance: The IP Index serves as a roadmap for policymakers who look to support creativity, innovation, and economic growth through a more robust IP policy.
What is Intellectual Property Right?
- It refers to creations of the mind, such as inventions, literary and artistic works, designs, and symbols, names, and images used in commerce.
- IP is protected by law, for example, patents, copyright, and trademarks, which enable people to earn recognition or financial benefit from their inventions or creations.
- The IP system aims to foster an environment in which creativity and innovation can flourish.
- Innovation and creative endeavors are indispensable elements that drive economic growth and sustain the competitive edge of the economy of any country.
International Arms Transfers
Context: Stockholm International Peace Research Institute (SIPRI) recently released Trends in International Arms Transfers 2022.
- SIPRI conducts research on arms transfers to or from particular regions, sub-regions, states, or non-state actors aimed at both increasing the fundamental understanding of the impact of arms transfers and supporting policymaking and policy implementation.
- An important aim of SIPRI's research is to contribute to greater transparency as a means of ensuring responsible international arms transfers, thereby helping to prevent violent conflict, alleviate tensions, warn about potentially destabilizing arms accumulations, and counter the misallocation of limited resources.
- SIPRI investigates international arms transfers in relation to international security and national foreign and defense policies; inter-state relations; states’ compliance with international commitments such as arms embargo or the Arms Trade Treaty and national legislation on international arms transfers; and assess arms procurement against declared defense and security policies.
- The SIPRI Arms Transfers Database is a core element of this work.
- Freely accessible online, it aims to provide valid, reliable, and consistent data about the volume and types of major weapons transferred internationally since 1950 and provides tools to identify trends and patterns in international arms transfers at the global, regional, and national levels, and relationships between arms importers and exporters.
Fall in Rice Cultivation in India
Context: While addressing a conference of states’ food ministers on ‘Food and Nutrition Security in India’, Goyal requested states to increase the sowing of rice. India has witnessed a shortfall in rice acreage while the overall crop coverage has risen.
More on the News:
- While overall crop coverage has risen since last year, that of rice is down. Deficient rainfall in Uttar Pradesh and Bihar is among the reasons. But adequate stocks and cultivation over a wider area suggest there should be no cause for worry.
- Government godowns had over 47.2 million tonnes (mt) of rice ( nearly three-and-a-half times the minimum level of stocks, to meet both “operational” (public distribution system) and “strategic reserve” (exigency) requirements for the quarter.
Why has acreage fallen?
- Farmers first sow paddy seeds in nurseries, where they are raised into young plants. These seedlings are then uprooted and replanted 25-35 days later in the main field which is usually 10 times the size of the nursery seed bed. Nursery sowing generally happens before the monsoon rains. Farmers wait for their arrival to undertake transplantation, which requires the field to be “puddled” or tilled in standing water. For the first three weeks or so after transplanting, the water depth has to be maintained at 4-5 cm, in order to control weed growth in the early stage of the crop.
- All this isn’t possible without the monsoon, which has overall been good this time. The country has received 353.7 mm of rainfall from June 1 to July 17, 12.7% more than the “normal” historical average for this period.
- Yet, a vast paddy-growing belt, from Uttar Pradesh to West Bengal, has had very little rain. Cumulative rainfall has been 55.5% below the long period average in West UP, and 70%, 45.8%, 48.9% and 45.1% respectively for East UP, Bihar, Jharkhand and Gangetic West Bengal.
Stats on Rice:
- Rice is India’s largest agricultural crop. It accounts for over 40% of the total foodgrain output in India.
- India is the world’s biggest exporter. India exports around 40% of the world’s total export.
- India is 2nd largest rice producer in the world after China.
- It is a Kharif crop which requires high temperature, (above 25°C) and high humidity with annual rainfall above 100 cm.
- In areas with less rainfall, it grows with the help of irrigation. It is the preferred staple food in Southern and North-Eastern India.
- Rice growing areas are well suited for Mixed farming (Crops + Livestock).
- Unpolished rice has high nutritional value. It is rich in Vitamin A, B and calcium. Polished rice lacks these vitamins.
- Climatic Requirements:
- In India rice is grown under widely varying conditions of altitude and climate.
- Rice cultivation in India extends from 8 to35ºN latitudes and sea level to as high as 3000 meters.
- The Rice crop needs a hot and humid climate. It is best suited to regions with high humidity, prolonged sunshine, and an assured water supply.
- It required around 150-300 cm of rainfall and deep clayey and loamy soil.
- The average temperature required throughout the life period of the crop ranges from 21 to 37º C.
- The maximum temperature which the crop can tolerate is 40º C to 42º C.
Revision of Wheat Allocation to States under the National Food Security Act (NFSA), 2013
Context: Following a revision in May, wheat allocation under NFSA has been slashed for 10 states, of which UP and Gujarat have demanded a rollback.
More on the news:
- Gujarat and Uttar Pradesh have demanded more wheat in place of rice and asked the Centre to restore their original allocations under the National Food Security Act (NFSA), 2013, or change the wheat-rice allocation ratio that was revised by the Union Food Ministry in May.
What was this revision?
- In the month of May, the Food Secretary announced that “after consulting with the states”, the Centre has reallocated some quantities by changing ratios of wheat and rice under the NFSA.
- For example, states getting wheat and rice at a 60:40 ratio will now get it at 40:60, while those getting allocations at 75:25 would now get these at 60:40. States where rice allocation has been zero will continue to get wheat.
- For small states, NE states and special category states, the allocation has not been changed.
- According to the Food Ministry, the move would save about 61 lakh tonnes of wheat over the remaining 10 months (June-March) of the current financial year.
Which states are affected by the revision?
- Wheat allocation under NFSA was revised downward for 10 states:
- Bihar, Jharkhand, Odisha, West Bengal, Delhi, Uttar Pradesh, Gujarat, Maharashtra, Madhya Pradesh and Tamil Nadu.
- These states account for about 55.14 crores (67%) of the 81.35 crore beneficiaries under the NFSA.
- Gujarat and Uttar Pradesh, which have demanded the restoration of their original allocations, are primarily wheat-consuming states.
- After the revision, the combined monthly wheat allocation of these 10 states comes down to 9.39 lakh tonnes from their current allocation of 15.36 lakh tonnes. These states will be provided additional rice equal to the cut in wheat allocation.
Why revision of allocation?
- The NFSA provides that “in case any state/UT’s allocation under NFSA is lower than their current allocation, it will be protected up to the level of average off-take under erstwhile normal TPDS during 2010-11 to 2012-13”. This additional quantity of foodgrains is called the ‘tide over’ allocation.
- A cut has been announced in the ‘tide over’ allocation of wheat for Uttarakhand, Kerala and Tamil Nadu. This adds up to about 1.13 lakh metric tonnes. After the revision, their “tide over” wheat allocation would become nil.
How wide is NFSA coverage?
- The NFSA covers 67.21% of India’s population (75% in rural India, 50% in urban). Out of 81.35 crore accepted (upper limit) beneficiaries, 79.73 crores (98.01%) have been identified as of June 2.
- There are two types of beneficiaries:
- Antyodaya Anna Yojana households (entitled to 35 kg of foodgrains per household per month) and
- Priority Households (5 kg per person per month).
- Rice is provided at Rs 3 per kg, wheat at Rs 2 per kg and coarse grains at Rs 1 per kg.
National Food Security Act (NFSA), 2013:
- The National Food Security Act (also known as the 'Right to Food Act) is an Indian Parliament Act that aims to provide subsidized food grains to roughly two-thirds of the country's 1.2 billion people. It was signed into law on September 12, 2013, with retroactive effect to July 5, 2013.
- Objective: To provide for food and nutritional security in the human life cycle approach, by ensuring access to adequate quantities of quality food at affordable prices to people to live a life with dignity.
- Coverage: 75% of the rural population and up to 50% of the urban population for receiving subsidized foodgrains under the Targeted Public Distribution System (TPDS). Overall, NFSA caters to 67% of the total population.
- Priority Households are to be covered under TPDS, according to guidelines by the State government.
- Households are covered under the existing Antyodaya Anna Yojana.
- 5 Kgs of foodgrains per person per month at Rs. 3/2/1 per Kg for rice/wheat/coarse grains.
- The existing Antyodaya Anna Yojana household will continue to receive 35 Kg of foodgrains per household per month.
- The National Food Security Act of 2013, assigns joint responsibilities to the federal and state governments.
- The National Food Security Act of 2013, mandates the centre with the responsibility of allocating and transporting food grains to designated depots in the states and UTs.
- Furthermore, the centre must provide central assistance to states/UTs for the distribution of food grains from authorized FCI godowns to the doorsteps of Fair Price Shops.
- States and union territories are responsible for identifying eligible households, issuing ration cards, distributing foodgrain entitlements through fair price shops, licensing and monitoring Fair Price Shop (FPS) dealers, establishing an effective grievance redress mechanism, and strengthening the Targeted Public Distribution System (TPDS).
Government Panel on MSP, Natural Farming and Crop Diversification
Context: The Government of India has constituted a committee, headed by Former Agriculture Secretary Sanjay Agrawal, to look into the issues of minimum support price(MSP), Natural Farming and Crop diversification.
What is the Minimum Support Price(MSP)?
- Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
- The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
- Presently, the government announces minimum support prices for 23 crops.
- 7 types of cereals: paddy, wheat, maize, bajra, jowar, ragi and barley
- 5 types of pulses: chana, arhar/tur, urad, moong and Masur
- 7 oilseeds: rapeseed-mustard, groundnut, soybean, sunflower, sesamum, safflower, nigerseed
- 4 commercial crops: cotton, sugarcane, copra, raw jute
- Determinants of MSP: While recommending price policy of various commodities under its mandate, the Commission keeps in mind the various Terms of Reference (ToR) given to CACP in 2009. Accordingly, it analyzes
- demand and supply;
- cost of production;
- price trends in the market, both domestic and international;
- inter-crop price parity;
- terms of trade between agriculture and non-agriculture;
- a minimum of 50 percent as the margin over the cost of production; and
- likely implications of MSP on consumers of that product.
- It may be noted that the cost of production is an important factor that goes as an input in the determination of MSP, but it is certainly not the only factor that determines MSP.
What is Natural Farming?
- Natural Farming is a chemical-free alias traditional farming method. It is considered an agroecology-based diversified farming system which integrates crops, trees and livestock with functional biodiversity.
- In India, Natural farming is promoted as Bharatiya Prakritik Krishi Paddhati Programme (BPKP) under the centrally sponsored scheme- Paramparagat Krishi Vikas Yojana (PKVY).
- BPKP is aimed at promoting traditional indigenous practices which reduce externally purchased inputs. It is largely based on on-farm biomass recycling with major stress on biomass mulching, use of on-farm cow dung-urine formulations; periodic soil aeration and exclusion of all synthetic chemical inputs.
- According to HLPE Report, natural farming will reduce dependency on purchased inputs and will help to ease smallholder farmers' credits burden.
What is Crop diversification?
- Crop diversification refers to the addition of new crops or cropping systems to agricultural production on a particular farm taking into account the different returns from value-added crops with complimentary marketing opportunities.
- It refers to the crops, crop sequences and management techniques used on a particular agricultural field over a period of years.
The Platform of Platforms(POP)
Context: Recently, Union Minister of Agriculture and Farmers Welfare, Shri Narendra Singh Tomar, launched the Platform of Platforms (POP) under the National Agriculture Market (e-NAM).
What is the Platform of Platforms (POP)?
- It intends to promote trade & marketing of agricultural produce wherein farmers will be facilitated to sell the produce outside their state borders.
- The platform creates a digital ecosystem for farmers who will benefit from the expertise of different platforms in different segments of the agricultural value chain.
- e-NAM integrates the platform of Service Providers as “Platform of Platforms” which includes-
- Composite Service Providers (Service Providers who provide holistic services for the trading of agricultural produce including quality analysis, trading, payment systems and logistics).
- Logistics Service Provider.
- Quality Assurance Service Provider.
- Cleaning, Grading, Sorting & Packaging Service Provider.
- Warehousing Facility Service Provider.
- Agricultural Input Service Provider.
- Technology Enabled Finance & Insurance Service Provider, Information Dissemination Portal
- The chain also consists of other services such as e-commerce, international agri-business platforms, barter, private market platforms etc.
- It enables farmers, FPOs, traders and other stakeholders to access a wide variety of goods and services across the agricultural value chain through a single window, thereby giving more options to the stakeholders.
- Moreover, selecting a good quality Goods/Service Provider saves the time and labour of the stakeholders.
- The POP can be accessed through the e-NAM mobile app which can be downloaded from Google Play Store.
- This will increase farmers’ digital access to multiple markets, buyers and service providers and bring transparency to business transactions with the aim of improving price search mechanism and quality commensurate price realisation.
- The inclusion of various service providers not only adds to the value of the e-NAM platform but also gives the users of the platform options to avail of services from different service providers.
- So far, 41 service providers from different platforms are covered under POP that facilitate various value chain services like trading, quality checks, warehousing, fintech, market information, transportation etc.
National Agriculture Market (eNAM):
- In 2016, an online trading platform named National Agriculture Market or eNAM was launched by the Government of India in order to facilitate the online trading of commodities for farmers, traders and buyers.
- eNAM is a pan-India electronic trading portal that networks the existing APMC mandis to create a unified national market for agricultural commodities.
- eNAM seeks to leverage the physical infrastructure of the mandis through an online trading portal, enabling buyers situated even outside the Mandi/ State to participate in trading at the local level.
- Small Farmers Agribusiness Consortium (SFAC) is the lead agency for implementing eNAM under the aegis of the Ministry of Agriculture and Farmers’ Welfare, Government of India.
11th Agriculture Census
Context: Context: Recently, the 11th Agriculture Census is being undertaken now after a delay due to the corona pandemic.
- Recognizing the importance of the agriculture sector in the economy, the Department of Agriculture, Cooperation & Farmers Welfare implemented the Agriculture Census Scheme from 1970-71.
- The agriculture Census in India has been conducted following the broad guidelines of the decennial World Census of Agriculture (WCA) evolved by the Food and Agriculture Organisation (FAO) of the United Nations conducted at an interval of five years.
- In the Agriculture Census, the operational holding has been taken as a statistical unit at the micro-level for data collection as operational holding is the ultimate unit for taking agriculture-related decisions.
11th Agriculture Census:
- The 11th Agriculture Census is being undertaken now after a delay due to the corona pandemic.
The fieldwork for the agricultural census will start in August 2022.
- Conducting Authority: Agriculture Census is organised by the Department of Agriculture and Farmers Welfare, Ministry of Agriculture.
11th Agriculture Census- Key Features
- This is the first time that data collection for the agricultural census will be conducted on smartphones and tablets, so that data is available in time.
- Most States have digitized their land records and surveys, which will further accelerate the collection of agricultural census data.
- The use of digitized land records and the use of mobile apps for data collection will enable the creation of a database of operational holdings in the country.
- The UN Food and Agriculture Organization’s Food Price Index (FFPI) averaged 140.9 points in July 2022, 8.6% down from its previous month’s level and marking the steepest monthly drop since October 2008.
- It is expected that Food Inflation may ease faster than expected.
- What do we know about the Food Price Index (FFPI)?
- It is a measure of the monthly change in international prices of a basket of food commodities.
- It consists of the average of five commodity group price indices weighted by the average export shares of each of the groups over 2014-2016 (Base Year).
- It was introduced in 1996 as a public good to help in monitoring developments in the global agricultural commodity markets.
- Trends in FFPI
- FFPI hit an all-time-high of 159.7 points in March 2022, the month that followed the Russian invasion of Ukraine in February 2022.
- The latest index reading (July 2022) is the lowest since the 135.6 points of January 2022, before the still-ongoing war.
- Between March 2022 and July 2022, the FFPI has cumulatively declined by 11.8%.
- What are the Reasons for Fall in FFPI?
- Black Sea Trade Route
- The UN-backed agreement for unblocking of the Black Sea trade route provides for unobstructed shipments of Russian food and fertilisers.
- Russia alone is expected to export 40 million tonnes (mt) in 2022-23 (July-June), up from last year’s 33 mt.
- Lift of Ban on Palm Oil
- Indonesia, since late-May 2022, has lifted its ban on palm oil exports.
- Soyabean Crops
- The US, Brazil, Argentina and Paraguay are set to harvest bumper soyabean crops.
- Pandemic Effect
- The supply disruption caused by Covid-19 pandemic is also easing with the movement of migrants and increase in production of food crops.
- Cumulative rainfall during the current monsoon season from June 2022 to August 2022 has been 5.7% above the historical long-term average for this period.
- Almost all agriculturally-significant areas – barring Uttar Pradesh, Bihar, Jharkhand and West Bengal – have received good rains so far.
- Above average rainfall across the South Peninsula, Central and Northwest India has boosted acreages under most crops this kharif (monsoon) season.
- What are the Causes of Recent Food Inflation?
- It included droughts in Ukraine (2020-21) and South America (2021-22), which especially impacted sunflower and soyabean supplies, and the March-April 2022 heat wave that devastated India’s wheat crop.
- Covid-19 Pandemic
- The pandemic’s supply-side impact was felt the most in Malaysia’s oil palm plantations, where harvesting of fresh fruit bunches is done mainly by migrant labourers from Indonesia and Bangladesh.
- As Covid-19 resulted in many of them flying back and no new work permits being issued, output from the world’s second largest palm oil producer and exporter fell.
- Russo-Ukrainian War
- It led to supply disruptions from the two countries that, in 2019-20 (a non-war, non-drought year), accounted for 28.5% of the world’s wheat, 18.8% of corn, 34.4% of barley and 78.1% of sunflower oil exports.
- Export Controls
- Controls were first imposed by Russia in December 2020, prompted by domestic food inflation fears arising from record hot temperatures.
- Shortage concerns at home triggered similar actions in palm oil by Indonesia (the world’s No. 1 producer-cum-exporter) and in wheat by India during March-May 2022.
- How Global Prices of Food Affect Domestic Prices?
- The transmission of the global inflation to domestic food prices basically depends on how much of a country’s consumption/production is imported/exported.
- Such transmission is evident in edible oils and cotton, where up to 2/3rd of India’s consumption and 1/5th of its production are imported and exported, respectively.
- In the case of wheat, the heat wave from mid-March 2022 severely impacting yields, both public stocks and overall domestic availability are under pressure, even as open market prices have risen to export parity levels.
- Centre has decided to slash wheat allocations and offer more rice under its flagship free-grains scheme.
- Sugar is one commodity where retail prices haven’t gone up much, despite record exports by mills.
- The reason for it is production is also hitting a historic high.
- Way Forward
- There should be consistency in import policy as that sends appropriate market signals in advance.
- Intervening through import tariffs is better than quotas which leads to greater welfare loss. This also calls for more accurate crop forecasts using satellite, remote sensing and GIS techniques to indicate shortfall/surplus in a crop year much in advance.
- Moreover, a decade old Consumer Price Index (CPI) base year of 2011-12 that gives nearly half of the weight to food items needs to be revised and updated to reflect the change in food habits and lifestyle of the population.
- With the rising middle-class, spending on non-food items has increased and this needs to be better reflected in the CPI, thereby enabling RBI to better target the non-volatile segment (core inflation).
SELF-SUFFICIENCY IN UREA
- India is hoping to end its reliance on imported urea within the next four years by expanding output of a locally developed version of the key crop nutrient, known as nano urea
- Self-sufficiency in urea will save the government nearly ₹40,000 crore.
- Natural Urea
- Urea is a waste product in the body with no physiological function. It dissolves in the kidney and blood before it is excreted as urine. The organic compound of Urea has two different NH2 groups that are connected by the carbonyl functional group. Urea is non-toxic, which is why it dissolves in water. Apart from being colorless, it also has no smell. It is found in milk, blood, and sweat of mammals
- Urea was separated from urine by Hilaire Marin Rouelle, a French chemist back in 1773.
- Later in 1828, Friedrich Wohler, a German chemist, started its official preparation from Ammonium Cyanate.
- Conventional Artificial Urea
- Urea is a white crystalline organic chemical compound. It is the most important nitrogenous fertiliser in the country because of its high N content (46%N).
- Urea consists of Nitrogen, Carbon, and Oxygen. Formula: CH₄N₂O
- Besides its use in the crops, it is used as a cattle feed supplement to replace a part of protein requirements.
- It has also numerous industrial uses notably for production of plastic
What is the Need of becoming Self Sufficient in Urea?
- India has been importing urea for decades to meet the shortfall in the supply chain. India, being one of the largest importers of urea, its demand affects the international price of urea.
- India is the world’s largest buyer of Urea and Di- Ammonium Phosphate (DAP).
- DAP is the second most commonly used fertilisers in India after urea.
- Farmers normally apply this fertiliser just before or at the beginning of sowing, as it is high in phosphorus (P) that stimulates root development.
- Urea and DAP have been hit by a sharp rise in global fertiliser prices this year 2022 due to supply disruptions.
- Agriculture being the mainstay of nearly 70 % of our population, any shortfall in supply or increase in the price of critical input like fertilisers is bound to have an adverse impact on the overall economic performance of our rural sector.
- It is likely that the demand for urea is not going to come down in the foreseeable future, so remaining dependent on the import of urea perpetually was a very bad idea from the onset.
- In this regard, the decision to set up several brownfield urea plants in the public sector in 2016 was a very good step.
- Self-sufficiency in urea will save the government nearly Rs 40,000 crore.
- What is the Status of Fertilizers in India?
- India consumed about 500 LMT of fertilizer per year in the last 10 years.
- The Centre's fertiliser subsidy bill is set to soar by 62% over the budgeted amount to Rs 1.3 lakh crore in FY21.
- Since non-urea (MoP, DAP, complex) varieties cost higher, many farmers prefer to use more urea than actually needed.
- The government has taken a number of measures to reduce urea consumption. It introduced neem-coated urea to reduce illegal diversion of urea for non-agricultural uses. It also stepped up the promotion of organic and zero-budget farming.
- Between 2018-19 and 2020-21, India’s fertiliser imports increased almost 8% to 20.33 million tonnes from 18.84 million tonnes.
- In FY21, more than a fourth of the urea requirement was imported.
- Need of Large Quantities of Fertilisers
- The agricultural output of India has increased every year, and the country's need for fertilisers has also increased.
- Despite imports, gaps remain between requirements and availability after indigenous production targets haven't been met.
- Way Forward
- For non-urea fertilisers like DAP and Muriate of Potash (MOP), we need to take significant steps to ensure that our farmers keep getting an uninterrupted supply of required fertilisers at reasonable prices, although for the raw material of these non-urea fertilisers we have remained dependent on imports.
- The need of the hour is to streamline the subsidy distribution mechanism by universalising the Direct Benefit Transfer (DBT) in the fertiliser sector.
- Secondly, corruption prevalent in the fertiliser subsidy distribution regime needs to be curbed stringently. These steps will reduce the burden of fertiliser subsidy substantially. The only thing needed is the will to act.
- On World Biofuel Day 2022, the government of India announced a 2nd generation (2G) ethanol plant to be set up at the Indian Oil Corporation’s refinery in Haryana.
- This ethanol plant will help reduce air pollution from the Delhi and the NCR region along with generating additional income and green fuel.
- What do we know about the Ethanol Plant?
- It will boost India’s waste-to-wealth endeavours by utilising about 2 lakh tonnes of rice straw (parali) annually to generate around 3 crore litres of ethanol annually.
- This plant will also utilize maize and sugarcane waste besides paddy straw to produce ethanol.
- The project will provide direct employment to people involved in the plant operation and indirect employment will be generated in the supply chain for rice straw cutting, handling, storage, etc.
- The project will have zero liquid discharge.
- Through reduction in burning of rice straw, the project will contribute to a reduction of greenhouse gases equivalent to about 3 lakh tonnes of carbon dioxide equivalent emissions per annum, which can be understood as equivalent to replacing nearly 63,000 cars annually on the country's roads.
- What Is Ethanol?
- It is one of the principal biofuels, which is naturally produced by the fermentation of sugars by yeasts or via petrochemical processes such as ethylene hydration.
- It is a domestically produced alternative fuel most commonly made from corn. It is also made from cellulosic feedstocks, such as crop residues and wood.
- Ethanol as Fuel
- The use of ethanol as a fuel for internal combustion engines, either alone or in combination with other fuels, has been given much attention mostly because of its possible environmental and long-term economical advantages over fossil fuel.
- Ethanol can be combined with petrol in any concentration up to pure ethanol (E100).
- Anhydrous ethanol (ethanol without water) can be blended with petrol in varying quantities to reduce the consumption of petroleum fuels, as well as to reduce air pollution.
- What are India’s Other Initiatives regarding Biofuels?
- Ethanol Blending Programme
- It is aimed at reducing the country’s dependence on crude oil imports, cutting carbon emissions and boosting farmers’ incomes.
- The Government of India has advanced the target for 20% ethanol blending in petrol (also called E20) to 2025 from 2030.
- India has already achieved the target of 10% ethanol blending in petrol with the country’s ethanol production increasing to 400 crore litres.
- The National Policy on Biofuels–2018
- It provides an indicative target of 20% ethanol blending under the Ethanol Blended Petrol (EBP) Programme by 2030.
- E-100 Pilot Project
- TVS Apache two-wheelers are designed to run on E80 or pure ethanol (E100).
- Pradhan Mantri JI-VAN Yojana, 2019
- The scheme aims to create an ecosystem for setting up commercial projects and boost Research and Development in the 2G Ethanol sector.
- Repurpose Used Cooking Oil (RUCO)
- The Food Safety and Standards Authority of India (FSSAI) has launched this initiative that will enable collection and conversion of used cooking oil to biodiesel.
- Ethanol Blending Programme
- What are India’s Other Initiatives regarding Biofuels?
- Way Forward
- Ethanol From Wastes
- India has a real opportunity here to become a global leader in sustainable biofuels policy if it chooses to refocus on ethanol made from wastes.
- This would bring both strong climate and air quality benefits, since these wastes are currently often burned, contributing to smog.
- Prioritize Crop Production
- With our depleting groundwater resources, arable land constraints, erratic monsoons, and dropping crop yields due to climate change, food production must be prioritized over crops for fuel.
- Alternative Mechanism
- To achieve the key goal, that is emissions reduction, alternative mechanisms-enhanced Electric Vehicles uptake, installation of additional renewable generation capacity to allow zero-emissions recharging, etc. need to be evaluated.
- Ethanol From Wastes
Curbs on Rice Exports
- What are the restrictions that have been put on rice exports?
- There are four categories of rice exports.
- Out of these, exports in the case of two – basmati rice and parboiled non-basmati rice –are still freely allowed.
- The curbs are only for the other two: raw (white) and broken non-basmati rice.
- A notification from the Directorate General of Foreign Trade in the Ministry of Commerce and Industry imposed a blanket ban on broken rice exports.
- Thus, even within raw non-basmati, only the export of full grain consignments would be permitted on payment of 20% duty.
- How much would all this impact the country’s overall rice exports?
- The curbs announced will affect just under half of India’s rice exports in terms of quantity and over a third by value.
- Reasons for putting restrictions:
- The possibility of India’s rice production is declining significantly because of deficient monsoon rainfall in Uttar Pradesh, Bihar, Jharkhand, and Gangetic West Bengal.
- During the current Kharif cropping season from June 1 to September 9, farmers have planted 2.1 million hectares (MH) less area under rice compared to the same period last year.
- The gap was higher, nearly 4.4 MH, till the second week of August.
- Since the normal planting time for paddy is June-July, and any area covered after that would be of lower-yielding shorter-duration varieties, it is bound to reflect in output.
- Taking an average all-India rice yield of 2.7 tonnes per hectare, the hit could be in the 6-12 mt range.
- It might be even more if yields in Punjab and Haryana turn out lower due to a new virus that has caused “dwarfing” of paddy plants in many fields there.
- The other reason is, Public wheat stocks on August 1, at 26.65 mt, were the lowest in 14 years for this date.
- While the same for rice, at 40.99 mt, was quite comfortable (albeit lower than the 44.46 mt on August 1, 2021), the government is worried about their depletion in the event of a sub-par Kharif harvest.
- This is more so, given the political pressure to continue the free-foodgrains scheme (Pradhan Mantri Garib Kalyan Anna Yojana) beyond September.
- With very little wheat in government godowns, it is rice that is sustaining the public distribution system (PDS).
- The possibility of India’s rice production is declining significantly because of deficient monsoon rainfall in Uttar Pradesh, Bihar, Jharkhand, and Gangetic West Bengal.
- How important is India to the global rice trade?
- The country has a 40% share of the world’s total rice exports, with its 21 mt-plus shipments last year way ahead of Thailand’s (7.2 mt), Vietnam’s (6.6 mt), and Pakistan’s (4.8 mt).
- India, thus, matters to the global trade in rice – unlike in wheat, where it is only an occasional large exporter (see table).
- Even in 2021-22, when exports touched an all-time high of 7.23 mt, its share in world wheat shipments was hardly 5%.
- India’s wheat export ban, imposed on May 13, made news largely on account of timing – in the midst of the war in Ukraine. In a normal year, it may not have.
- Destinations of India's Rice Exports:
- More than 75% of basmati exports last year were to Iran and the Arabian Peninsula countries; the US, UK, Canada and Australia added up to another 10%.
- In non-basmati rice, almost 55% went to African countries – including Benin, Ivory Coast, Senegal, Togo, Guinea, Madagascar, Cameroon, Djibouti, Somalia and Liberia.
- Another 9.5% each was accounted for by the top two individual buyers China and Bangladesh, followed by Benin and Nepal (8-9% each).
- Much of exports to Africa and Bangladesh consist of parboiled rice, while China’s imports were predominantly broken rice that has now been banned.
- What exactly are parboiled and broken rice?
- Rice is derived from the milling of paddy grain produced by farmers.
- Paddy typically has 20-21% husk (the inedible covering of the grain) and 10-11% bran (the brown outer layer of the edible kernel).
- What remains after the removal of the husk and bran is the white raw rice that constitutes 68-69% of the paddy.
- The milled rice, in turn, has both whole and broken grains.
- Parboiling is a process where the paddy is soaked in water, steamed, and dried while retaining its outer husk.
- It results in the rice becoming harder with less breakage on milling.
- Will India’s rice exports take a massive hit?
- White rice with 5% broken from India is currently being shipped out of India at about $340 per tonne, as against $380 from Pakistan, $395 from Vietnam, and $430 from Thailand.
- A 20% tax isn’t going to render Indian rice uncompetitive.
- Moreover, it is well known that a not-too-small portion of India’s rice exports is from leaked PDS grain.
- The ban on shipments of broken rice – inferior grain mainly used for animal feed and also as ethanol feedstock – may be part of a larger crackdown.
Context: Pokkali farmers met on the sidelines of a pokkali rice harvest festival organized in Kochi with sustainability-dominating sessions addressed by agricultural officers and farmers.
- The pokkali variety of rice is known for its saltwater resistance and flourishes in the rice paddies of the coastal Alappuzha, Ernakulam, and Thrissur districts of Kerala.
- The single-season paddy is raised in saltwater fields between June and November followed by a season of fish farming.
- The uniqueness of the rice has brought it the Geographical Indication (GI) tag and is the subject of continuing research.
- Several foreign research institutes, including the International Rice Research Institute in the Philippines, have been studying pokkali’s gene pools and have identified a portion of DNA on one of its chromosomes that is crucial for salt tolerance.
- Given its ability to thrive under harsh climatic conditions and produce a high yield, it can help in promoting climate-resilient agriculture.
- Pokkali has medicinal properties and its higher value of antioxidants and low carbohydrate content makes it preferable to those on a low-sugar diet.
- Vyttila-11 is the latest variety of pokkali developed by the Kerala Agricultural University.
- It yields about 5 tonnes per hectare.
- The crop duration is about 110 days.
Context: Recently, the Genetic Engineering Appraisal Committee (GEAC) under the Union Ministry of Environment, Forest and Climate Change recommended the “environmental release” of the transgenic hybrid mustard DMH-11 for seed production and conduct of field demonstration studies with respect to its effects, if any, on honey bees and other pollinating insects.
- Scientists at Delhi University’s Centre for Genetic Manipulation of Crop Plants (CGMCP) have developed the hybrid mustard DMH-11 by genetic modification (GM) containing two alien genes isolated from a soil bacterium called Bacillus amyloliquefaciens.
- The first gene (‘barnase’) codes for a protein that impairs pollen production and renders the plant into which it is incorporated male-sterile.
- This plant is then crossed with a fertile parental line containing, in turn, the second ‘barstar’ gene that blocks the action of the barnase gene.
- The resultant F1 progeny is both high-yielding and also capable of producing seed/ grain, thanks to the barstar gene in the second fertile line.
- The CGMCP scientists have deployed the barnase-barstar GM technology to create what they say is a robust and viable hybridization system in mustard.
- This system was used to develop DMH-11 by crossing a popular Indian mustard variety ‘Varuna’ (the barnase line) with an East European ‘Early Heera-2’ mutant (barstar).
- DMH-11 is claimed to have shown an average 28% yield increase over Varuna in contained field trials carried out by the Indian Council of Agricultural Research (ICAR).
Context: Indian Agriculture Research Institute has successfully tested two new dwarf varieties in Uttar Pradesh that give double the yield of the traditional variety of Kalanamak rice.
- Kalanamak is a traditional variety of paddy with black husk and a strong fragrance.
- It is considered a gift from Lord Buddha to the people of Sravasti when he visited the region after enlightenment.
- Grown in 11 districts of the Terai region of north-eastern Uttar Pradesh and in Nepal, the traditional variety has been prone to ‘lodging’( Lodging is a condition in which the top of the plant becomes heavy because of grain formation, the stem becomes weak, and the plant falls on the ground), a reason for its low yield.
- Its yield is barely two to 2.5 tonnes per hectare.
- Geographical Indication (GI) tag: The traditional Kalanamak rice is protected under the Geographical Indication (GI) tag system
- Addressing the problem, the Indian Agriculture Research Institute (IARI) has successfully developed two dwarf varieties of Kalanamak rice.
- They have been named:
- Pusa Narendra Kalanamak 1638 and
- Pusa Narendra Kalanamak 1652.
- The yield of the new varieties is double that of the traditional variety.
- The IARI and the Uttar Pradesh Council of Agriculture are working together to make the seeds available to farmers at the earliest.
State of Food and Agriculture Report 2022
Context: Recently, the 2022 edition of the State of Food and Agriculture report by the Food and Agriculture Organization (FAO) was released.
- It is a flagship project of FAO that is released every year.
- The report looked at how automation in our agrifood systems can contribute to achieving Sustainable Development Goals and offers recommendations to policymakers on how to maximize the benefits and minimize the risks.
- The latest report highlights that the lack of access to automation for small and marginal farmers can lead to the widening of inequalities in society.
- It is one of FAO’s most important reports and it aims at bringing to a wider audience balanced science-based assessments of important issues in the field of food and agriculture.
Highlights of the Report:
- The report tracks the number of tractors per 1000 hectares of arable land. The 2022 report talks about agriculture automation.
- The report found that the penetration of tractors is high in European and American countries but it is very low in middle and low-income countries.
- It also suggested that only 10 out of 27 services provided in the field of agricultural automation stand to make a profit. Additionally, these 10 service providers are from high-income countries.
- The report also highlighted that there is vast inequality within countries in terms of technology adoption. Certain regions have a high rate of technology adoption in comparison to other regions.
Recommendations of the Report:
- Policymakers should avoid rapid automation of agriculture in the labor-intensive sector. This is because rapid automation would reduce the demand for agricultural laborers, resulting in mass unemployment.
- Additionally, it advocates creating an enabling environment under which the policy of automation can be pushed efficiently without major disruption.
- It also calls for providing social protection to the least skilled workers so as to enable them to remain employed during the stress period.
- Automation should take place in such a way that it promotes inclusivity and sustainability instead of being discriminatory and exclusive.
- FAO is a specialized extension of the United Nations that looks into the task of alleviating hunger in the world.
- World Food Day is celebrated every year on the 16th of October. The day is celebrated to commemorate the anniversary of the founding of the FAO in 1945.
- The main task of the FAO is to ensure food security across the world and to enable every part of the world’s population to have access to food.
- Other reports published by the FAO:
- The State of the World’s Forests (SOFO)
- The State of World Fisheries and Aquaculture (SOFIA)
- The State of Agricultural Commodity Markets (SOCO)
- The State of Food Security and Nutrition in the World (SOFI).
About Agricultural Automation:
- Agriculture Automation refers to the application of technology in the process of production of crops.
- It can play a very important role in reducing the cost of input and enhancing the income of the farmers.
- Automation in agriculture includes a wide variety of technologies like harvesters, micro-irrigation techniques, use of advanced technologies like drones, etc.
- With the help of technology, the farmer can get advanced information about the quality of soil, weather conditions, the kind of crops that are supported by the soil, and the possibility of crop destruction due to bad weather conditions.
- All the factors would help the farmers in hedging the risk that may arise because of climatic factors.
Agriculture Investment Portal
Context: The Union Minister for Agriculture and Farmers Welfare has inaugurated the Agriculture Investment Portal (Krishi Nivesh Portal).
- Agri Invest is the investment portal under the Ministry of Agriculture & Farmers Welfare, India.
- The portal is a one-stop solution for all investors who are looking to invest in India in the Department Of Agriculture, Cooperation & Farmers Welfare.
- The portal highlights the steps for ease of doing business in India, the market entry strategies, and the regulatory frameworks that are involved in setting up the operations.
- This portal enacts as the dedicated Investor Facilitation Cell of the Ministry of Agriculture & Farmers Welfare has been supporting the ministry across different aspects.
- The aim of the Agri Invest:
- Boost investments in the agriculture sector of India.
- To ease the handholding process for the investors.
- Tap the potential of all the sub-sectors in Agriculture.
- To guide and assist the investors with the major infrastructure available in India.
- Support investors and companies with the schemes, policies, and incentives given by the State and the Central Government.
GI Status for Kerala’s Five Agricultural Products
Context: Five agricultural products of Kerala- Attappady Attukombu Avara, Attappady Thuvara, Onattukara Ellu, KanthalloorVattavada Veluthulli, and Kodungalloor Pottuvellari have been granted Geographical Indication (GI) status.
- Attappady Attukombu Avara:
- It is a bean cultivated in the Attappady region of Palakkad.
- It is curved like a goat’s horn as its name indicates.
- Its higher anthocyanin content compared to other dolichos beans imparts violet color in the stem and fruits.
- Anthocyanin is helpful against cardiovascular diseases along with its anti-diabetic properties.
- Other than this, calcium, protein, and fiber content are also high.
- The higher phenolic content also imparts resistance against pests and diseases making the crop suitable for organic cultivation.
- Attappady Thuvara:
- It is a red gram having seeds with a white coat.
- Compared to other red grams, its seeds are bigger and have higher seed weights.
- It is used as a vegetable and dal.
- It is rich in protein, carbohydrates, fiber, calcium, and magnesium.
- Kanthalloor-Vattavada Veluthulli:
- It is garlic.
- It is produced in areas from the Kanthalloor-Vattavada area of Devikulam block panchayat in Idukki.
- It contains a higher amount of sulfides, flavonoids, and proteins.
- It is rich in allicin, which is effective against microbial infections, blood sugar, cancer, cholesterol, heart diseases, and damage to blood vessels.
- The garlic cultivated in this area is also rich in essential oil.
- Onattukara Ellu:
- It is a sesame oil famous for its unique health benefits.
- It has a relatively higher antioxidant content which helps in fighting the free radicals that destroy the body cells.
- Also, the high content of unsaturated fat makes it beneficial for heart patients.
- Kodungalloor Pottuvellari :
- It is a snap melon cultivated in Kodungalloor and parts of Ernakulam.
- It is consumed as juice and in other forms.
- It is harvested in summer and is excellent for quenching thirst.
- It contains high amounts of Vitamin C.
- Compared to other cucurbits, nutrients such as calcium, magnesium, fiber, and fat content are also high in this.
Tandur Red Gram
Context: The Tandur red gram of Telangana has got geographical indication (GI) tag. With this, the total number of GI registrations in the country has reached 432.
- Tandur red gram is a local variety of pigeon pea which is mainly grown in the rainfed tract of the Tandur and the nearby region of Telangana.
- The specific quality traits of Tandur Red Gram have been attributed to the fertile deep black soil with huge deposits of Attapulgite clay mineral specifically in the Tandur region along with huge limestone deposits.
- It contains about 22-24% protein, which is almost three times that of the protein content in cereals.
- It has good taste, better cooking quality as well as enhanced storage quality.
- Now with the GI tag and registration, individual farmers and dal mill owners of Tandur will have to register themselves as authorized users and start branding Tandur red gram with GI tag to get better prices as the tag is an assured symbol of quality.
Open Market Sale Scheme
Context: The Food Corporation of India (FCI) will offload 30 LMT wheat from the Central pool stock to the market through various routes under the Open Market Sale Scheme (Domestic).
- FCI sells surplus stocks of wheat and rice at predetermined prices through e-auction in the open market from time to time to enhance the supply of food grains.
- The purpose of OMSS is to dispose of surplus stocks of wheat and rice held by FCI, and to regulate the prices of wheat in the open market.
- FCI conducts weekly auctions for the OMSS for wheat on the platform of the National Commodity and Derivatives Exchange Limited (NCDEX).
- NCDEX is a commodity exchange platform in India that provides a platform for trading in various agricultural and other commodities.
- About Food Corporation of India:
- The FCI is a government-owned corporation that manages the food security system in India.
- It was established in 1965 under the Food Corporation Act of 1964 with the objective of ensuring adequate availability of food grains throughout the country and maintaining price stability in the market.
- The FCI also maintains buffer stocks of food grains to ensure food security during times of scarcity or crisis.
- The FCI is also responsible for distributing food grains throughout the country for the public distribution system.
- FCI also conducts e-auctions as one of the methods to dispose of its surplus food grains.
PM KUSUM Extended
Context: The Ministry of New and Renewable Energy has taken several steps to achieve the targets under the PM-KUSUM Scheme. This includes amendments in the Scheme guidelines based on feedback received during implementation.
- PM-KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan) Scheme is aimed at ensuring energy security for farmers in India, along with honoring India’s commitment to increase the share of installed capacity of electric power from non-fossil-fuel sources to 40% by 2030 as part of Intended Nationally Determined Contributions (INDCs).
- The scheme aims to boost solar capacity to provide energy security to Indian farmers. At the same time, it aims to achieve the aim by increasing India's share of solar power generation.
- It also aims at de-dieselization of the farm sector, providing water and energy security to farmers, increasing the income of farmers, and curbing environmental pollution.
- The PM-KUSUM Scheme was launched in 2019 with 3 components:
- Component-A: For Setting up 10,000 MW of Decentralized Grid Connected Renewable Energy Power Plants on barren land. Under this component, renewable energy-based power plants (REPP) of capacity 500 kW to 2 MW will be set up by individual farmers/groups of farmers/ cooperatives/ panchayats/ Farmer Producer Organisations (FPO)/Water User associations (WUA) on barren/fallow land. These power plants can also be installed on cultivable land on stilts where crops can also be grown below the solar panels. The renewable energy power project will be installed within a five km radius of the sub-stations in order to avoid the high cost of sub-transmission lines and to reduce transmission losses. The power generated will be purchased by local DISCOM at a pre-fixed tariff
- Component-B: For Installation of 17.50 Lakh stand-alone solar agriculture pumps. Under this Component, individual farmers will be supported to install standalone solar Agriculture pumps of capacity up to 7.5 HP for replacement of existing diesel Agriculture pumps / irrigation systems in off-grid areas, where grid supply is not available. Pumps of capacity higher than 7.5 HP can also be installed, however, the financial support will be limited to a 7.5 HP capacity
- Component-C: For Solarisation of 10 Lakh Grid Connected Agriculture Pumps. Under this Component, individual farmers having grid-connected agriculture pumps will be supported to solarise pumps. The farmer will be able to use the generated solar power to meet the irrigation needs and the excess solar power will be sold to DISCOMs at a pre-fixed tariff.
- Central Finance Assistance (CFA) for Components B & C:
- Component-A: Procurement Based Incentive (PBI) @ 40 paise/kWh or Rs. 6.60 lakhs/MW/year, whichever is less, will be provided for the first five years by MNRE to DISCOMs, for buying the power from farmers/developers.
- Component-B & C:
- CFA of 30% of the benchmark cost or the tender cost, whichever is lower. State Government subsidy of 30%; the Remaining 40% by the farmer
- In North Eastern States, Sikkim, J&K, Himachal, Uttarakhand, Lakshadweep, and A&N Islands, CFA of 50%, State Government subsidy is 30%, Remaining 20% by the farmer.
- The scheme will open a stable and continuous source of income to rural landowners for a period of 25 years by utilization of their dry/uncultivable land & selling surplus solar energy to the state.
- Further, in case cultivated fields are chosen for setting up solar power projects, the farmers will continue to grow crops as the solar panels are to be set up above a minimum height.
- It would ensure that sufficient local solar/other renewable energy-based power is available for feeding rural load centers and agriculture pump-set loads, which require power mostly during the daytime.
- The scheme is expected to create job opportunities in the installation, maintenance, and operation of solar power projects.
- As these power plants will be located closer to the agriculture loads or to electrical substations in a decentralized manner, it will result in reduced transmission losses for discoms.
- The solar pumps will save the expenditure incurred on diesel for running diesel pumps and provide the farmers with a reliable source of irrigation through solar pumps apart from preventing harmful pollution from running diesel pumps.
- PM-KUSUM has a mandatory requirement for deploying domestically produced solar cells and modules under Components B and C, thus giving a fillip to domestic solar manufacturing.
Startup India Seed Fund Scheme
Context: The Ministry of Commerce and Industry has shared that under Startup India Seed Fund Scheme (SISFS), 477.25 crores has been approved to 133 incubators of which Rs. 211.63 crores has been disbursed as of on31st December 2022.
About the Startup India Seed Fund Scheme (SISFS):
- Aim: To provide financial assistance to startups for proof of concept, prototype development, product trials, market-entry, and commercialization.
- Launched by the Department for Promotion of Industry and Internal Trade (DPIIT) with an outlay of Rs. 945 Crore.
Some Eligibility Conditions:
- A startup, recognized by DPIIT, incorporated not more than 2 years ago at the time of application.
- Startups should not have received more than Rs. 10 lakh of monetary support under any other Central or State Government scheme.
- It will support an estimated 3,600 entrepreneurs through 300 incubators in the next 4 years.
- An Experts Advisory Committee (EAC), constituted by DPIIT, will be responsible for the overall execution and monitoring of the Scheme.
- Grants of up to Rs. 5 crores will be provided to the eligible incubators selected by the committee.
- The selected incubators will provide grants of up to Rs. 20 lakh for validation of proof of concept, or prototype development, or product trials to startups.
- Investments of up to Rs. 50 lakh will be provided to the startups for market entry, commercialization, or scaling up through convertible debentures or debt-linked instruments.
- It will help in creating a robust startup ecosystem in Tier 2 and 3 regions, as the smaller towns in India are often not provided with appropriate funding.
Millet International Initiative for Research and Awareness (MIIRA)
Context: The draft of the proposed initiative — MIIRA — was placed during the first Agriculture Deputies Meeting under the Agriculture Working Group (AWG), G20 at Indore, Madhya Pradesh on February 13-15, 2023.
- The acronym MIIRA stands for ‘Millet International Initiative for Research and Awareness’.
- According to Agriculture Ministry sources, the MIIRA will be aimed at coordinating millet research programs at the international level.
- It is in line with the UN declaring 2023 as the International Year of Millets, the proposal for which was moved by India and supported by 72 countries.
- The International Year will see several events and activities such as conferences, issuing of stamps and coins, etc. to raise awareness about millets, improve their production and quality, and attract investments. The Centre also plans to make India a global hub for millets.
- According to the sources, MIIRA will aim to connect millet research organizations across the world while also supporting research on these crops. This is significant as issues like food security and nutrition are among the key priority areas in the agriculture sector during India’s G20 Presidency. India assumed the G20 Presidency on December 1, 2022.
- Besides setting up a web platform to connect researchers and holding international research conferences, the plan is also to raise awareness for promoting the consumption of millet.
National Flagship Programmes for Fisheries
Context: Union Minister Shri Parshottam Rupala launches and inaugurates three national flagship programs. at ICAR-CIBA campus, Chennai.
- Union Minister of Fisheries, Animal Husbandry, and Dairying, Govt. of India inaugurated and launched three national flagship programs viz., Genetic Improvement Programme of Indian White Shrimp (Penaeus indicus), National Surveillance Programme on Fish Diseases, launching of aquaculture insurance product and laying a foundation stone for the Genetic Improvement Facility.
- India is the third largest fish-producing country with a fish production of 14.73 million metric tonnes and one of the largest exporters of farmed shrimps around 7 lakh tonnes.
- However, the country loses about 7200 crores annually due to diseases.
- Therefore, early detection and managing the spread of diseases are considered crucial for controlling the diseases.
- Considering the importance, the Government of India has implemented the National Surveillance Programme for Aquatic Animal Diseases (NSPAAD) since 2013 with a major emphasis on strengthening a farmer-based disease surveillance system, so that disease cases are reported at once, investigated, and scientific support is provided to the farmers.
- The results of the first phase proved the reduction in revenue losses due to diseases, and increased farmers’ income and exports.
- To continue the efforts with intensity, the Department of Fisheries, Ministry of Fisheries, Animal Husbandry and Dairying, Government of India has sanctioned the NSPAAD: Phase-II under the Pradhan Mantri Matsya Sampada Yojana program of the Govt. of India.
- The phase-II will be implemented in pan-India, and all the State Fisheries Departments along with Marine Products Export Development Authority (MPEDA) are expected to play an important role in this nationally important surveillance program.
- The farmed shrimp alone contributes about 70% of India’s seafood exports worth Rs. 42000 crores.
- However, the shrimp farming sector mostly depends on one exotic Specific Pathogen Free stock of Pacific white shrimp (Penaeus vannamei) species. It is highly risky to depend on one species for the production of 10 lakh tonnes with huge investments in farming infrastructure and the livelihoods of two lakh farm families directly and around ten lakh families indirectly associated in the ancillary sectors.
- Therefore, to break this single species dependence and to promote indigenous species vis-à-vis exotic shrimp species ICAR-CIBA has taken up the genetic improvement of program of Indian white shrimp, P. indicus as a national priority under the Make in India flagship program.
- CIBA has successfully optimized breeding protocol and demonstrated culture potential across the different geographic locations in coastal states using the indigenous feed, indicus plus (35% Protein). Recognizing the importance of this initiative, the Department of Fisheries, Govt. of India has sanctioned the “Genetic improvement program of Penaeus indicus (Indian white shrimp)-Phase-I” with an outlay of Rs.25 crores under the Pradhan Mantri Matsya Sampada Yojana (PMMSY) under the Central sector scheme to establish a National Genetic Improvement Facility for shrimp breeding. These programs will lead to “Atamanirbharata” for shrimp brood stock, which is at present imported from other countries.
- Similarly, shrimp farming is labeled as a “risky venture” and due to this, banking and insurance institutions are cautious to take up business in the shrimp sector.
- Contrary to this belief, India achieved about 430% growth in shrimp production during the last decade which alone explains the overall profitability, growth, and stability of the shrimp farming sector.
- Advances in scientific technology coupled with stringent regulations imposed on aquaculture have made this giant leap possible.
- The majority of the aquaculture farmers are small farmers, own 2-3 ponds, and face huge obstacles to raising working capital for the crop, due to a lack of access to institutional credit and insurance.
- The loss of one crop due to natural calamities or viral diseases makes the farmers fall into deep debt as they are to repay the loans taken for the crop and also raise money for the next crop season. CIBA has estimated Rs 1000 to 1500 crores as the business potential of shrimp crop insurance per year and a micro-credit requirement of over Rs. 8,000 to 10,000 crores per annum, which is now being serviced by informal creditors at higher interest rates.
- Therefore, it is very important to establish farmers’ access to insurance and institutional credit facilitated by an insurance scheme that will help the in doubling farmers income in a much faster time frame.
- ICAR-CIBA developed a Shrimp Crop Insurance product with the support of Alliance Insurance brokers which was filed with the IRDAI by Oriental Insurance Company Limited.
- The product charges a differential premium based on location and requirements of the individual farmer from 3.7 to 7.7 % of input costs and the farmer will be compensated to the tune of 80 % loss of input cost in the event of total crop loss. i.e., more than 70% crop loss.
PM MITRA Parks
Context: Ministry of Textiles has issued a notification to set up 7 Mega Integrated Textile Region and Apparel (PM MITRA) Parks with a total outlay of Rs. 4,445 crores.
- Ministry of Textiles has issued a notification to set up 7 Mega Integrated Textile Region and Apparel (PM MITRA) Parks with a total outlay of Rs. 4,445 crores.
- These are aimed at helping India to achieve the United Nations Sustainable Development Goal 9: “Build resilient infrastructure, promote sustainable industrialization and foster innovation”.
- It is hoped that the PM MITRA Parks will have world-class industrial infrastructure which would attract cutting-edge technology and boost FDI and local investment in the textiles sector.
- KEY FEATURES:
- The PM MITRA scheme is Inspired by the 5F vision of the Hon'ble Prime Minister – Farm to Fibre to Factory to Fashion to Foreign. It aspires to fulfill the vision of building an Aatmanirbhar Bharat and to position India strongly on the Global textiles map.
- PM MITRA Parks will offer an opportunity to create an integrated textiles value chain right from spinning, weaving, processing/dyeing, and printing to garment manufacturing at 1 location.
- Integrated Textile Value chain at 1 location will reduce the logistics cost of the Industry
- Intended to generate ~1 lakh direct and 2 lahks indirect employment per park Sites for PM MITRA Parks will be selected by a Challenge Method based on objective criteria Proposals of State Governments having ready availability of contiguous and encumbrance-free land parcel of 1,000+ acres along with other textiles related facilities & ecosystem are welcome
- Several states such as Tamil Nadu, Punjab, Odisha, Andhra Pradesh, Gujarat, Rajasthan, Assam, Karnataka, Madhya Pradesh, and Telangana have expressed interest.
Context: Ministry of Textiles has invited proposals for empanelment from the textile industry and industry associations related to the textile sector.
- The ‘Scheme for Capacity Building in Textile Sector (SCBTS)’ shall be known by the name “समर्थ (Samarth)”, signifying the broad objective of the scheme to skill the youth for gainful and sustainable employment in the textile sector.
- To provide demand-driven, placement-oriented National Skills Qualifications Framework (NSQF) compliant skilling programs to incentivize and supplement the efforts of the industry in creating jobs in the organized textile and related sectors, covering the entire value chain of textile, excluding Spinning and Weaving.
- To promote skilling and skill upgradation in the traditional sectors of handlooms, handicrafts, sericulture, and jute.
- To enable the provision of sustainable livelihood either by wage or self-employment to all sections of the society across the country.
- The Scheme would target to train 10.00 lakh persons (9 lakhs in organized & 1 lakh in traditional sector)
- The skilling programs would be implemented through the following Implementing Agencies:
- Textile Industry.
- Institutions/Organizations of the Ministry of Textiles/State Governments having training infrastructure and placement tie-ups with the textile industry.
- Reputed training institutions/ NGOs/ Societies/ Trusts/ Organizations/ Companies /Start-Ups / Entrepreneurs active in the textile sector having placement tie-ups with the textile industry.
- The scheme has been penetrated across 28 States and 6 Union territories and caters to all sections of society including SC, ST, and other marginalized categories.
- Out of the skilling target of 3.47 lakh beneficiaries allocated so far, 1.5 lakh beneficiaries have been provided training.
- More than 85% of the beneficiaries trained so far are women. More than 70% of the beneficiaries trained in organized sector courses have been provided placement.
Mega 5G Spectrum Auction
- Context: The government has invited applications from potential bidders for spectrum auctions planned next month, taking the first step towards rolling out 5G services in the country.
- What is spectrum?
- Devices such as cellphones and wireline telephones require signals to connect from one end to another. These signals are carried on airwaves, which must be sent at designated frequencies to avoid any kind of interference. Bands of such frequencies are called spectrums.
- Now, these spectrums are owned by Union Government. The process of renting out these auctions is called a spectrum auction.
- Which spectrum bands will be auctioned?
- A total 72,097.85 MHz of spectrum with a validity period of 20 years will be put on auction from July 26.
- The auction will be held for spectrum in the frequencies of 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 3,300 MHz and 26 GHz bands.
- A total 72,097.85 MHz of spectrum with a validity period of 20 years will be put on auction from July 26. The auction will be held for spectrum in the frequencies of 600 MHz, 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz, 3,300 MHz and 26 GHz bands.
World Competitiveness Index
- Context: In the recently released, World Competitiveness Index 2022, India has seen the sharpest growth among the Asian economies, with a six-position jump from 43rd to 37th rank.
- About World Competitiveness Index:
- It is published by Institute for Management Development (IMD) since 1989.
- It ranks 63 economies across the world and assesses the extent to which a country promotes the prosperity of its people by measuring economic well-being via hard data and survey responses from executives.
- The following four factors are taken into consideration:
- Economic performance
- Government efficiency
- Business efficiency
- India has witnessed the sharpest rise among the Asian economies, with a six-position jump from 43rd to 37th rank on, largely due to gains in economic performance.
- Globally, Denmark has topped the index followed by Switzerland and Singapore.
India's Largest Floating Solar Power Project
Context: India's largest floating solar power project has now become fully functional at Ramagundam in Telangana.
About the plant:
- India’s largest floating solar plant is now fully operational at Ramagundam in Telangana’s Peddapalli district.
- The 100-megawatt (MW) floating solar power photovoltaic project was commissioned by the National Thermal Power Corporation, the country’s foremost public-sector power generator.
- With the operationalisation of the 100-MW Solar PV Project at Ramagundam, the total commercial operation of Floating Solar Capacity in the Southern Region rose to 217 MW. Earlier, NTPC declared Commercial operation of 92 MW Floating Solar at Kayamkulam (Kerala) and 25 MW Floating Solar at Simhadri (Andhra Pradesh), Shri Anand added.
- The 100MW floating solar plant spread over 500 acres of the NTPC’s reservoir at Ramagundam is built at a cost of Rs 423 crore through Bharat Heavy Electricals Limited on an EPC (engineering, procurement and construction) contract.
- Having moved past fossil fuels to hydro-, nuclear and renewable energy sources for power generation, the NTPC has set a target of producing 60GW (gigawatts) capacity through renewable energy sources, constituting nearly 45 per cent of its overall power generation capacity, by 2032.
What are floating solar plants?
- Solar plants or solar farms can be either ground-mounted or set up on the surface of water bodies. Though these floating farms are a bit more expensive than the traditional ones mounted on land surfaces, there are advantages as well.
- At a time when large tracts of land are unavailable, floating farms do not require land to be acquired for the installation of photovoltaic panels. They are more efficient as the presence of water underneath helps them keep cool. They also reduce water evaporation, thereby saving more water for hydropower generation.
How are these panels kept floating?
- At Ramagundam, the solar modules are placed across 500 acres on floaters manufactured with high-density polyethene material that keeps floating irrespective of water-level fluctuations. The entire spread is divided into 40 blocks, each having a capacity of 2.5 MW. Each of these blocks consists of a floating platform and an array of 11,200 solar modules. The floating platform consists of an inverter, transformer, and high-tension circuit breaker.
How is the project unique?
- This project is unique because all the electrical equipment from the inverter, transformer and high-tension panel to supervisory control and data acquisition are also set up on floating Ferro-cement platforms.
- According to the NTPC, the entire floating system is anchored through special high-modulus polyethene ropes to the dead weights (concrete blocks) placed in the balancing reservoir bed. The generated power is evacuated up to the existing switch yard through 33KV underground cables.
How does it help the environment?
- The solar panels floating on the water surface will reduce the evaporation rate and thereby help water conservation.
- Also, with a minimum land requirement, mostly for associated evacuation arrangements, available land can be put to better use unlike in the case of ground-mounted solar farms, which require large land surface areas.
- At Ramagundam, approximately 32.5 lakh cubic metres per year of water evaporation can be avoided.
- The waterbody underneath the solar modules helps in maintaining their ambient temperature, thereby improving their efficiency and generation.
- Similarly, coal consumption of 1,65,000 tons can be avoided per year; carbon dioxide emissions of 2,10,000 tons per year can be avoided, according to the NTPC.
U.S. Priority Watch List for IPR – Annual Special 301 Report
Context: The Office of the United States Trade Representative (USTR), in its Special 301 report, retained India on its Priority Watch List along with six other countries- Argentina, Chile, China, Indonesia, Russia and Venezuela.
Why was India retained on the list?
- The report highlighted the main point of contention between India and the U.S related to Section 3(d) of the Indian Patent Act 1970.
- Section 3 deals with what does not qualify as an invention under the Act, and Section 3(d) prevents what is known as the “evergreening” of patents.
- Evergreening means reapplying for a patent by carrying out certain minute modifications to the existing product.
About Special 301 Report:
- The Special 301 Report identifies trading partners that do not adequately or effectively protect and enforce Intellectual Property (IP) rights or otherwise deny market access to U.S. innovators and creators that rely on the protection of their IP rights.
- The report is released annually by the United States Trade Representative (USTR).
- Trading partners that currently present the most significant concerns regarding IP rights are placed on the Priority Watch List or Watch List.
- USTR identified 33 countries for these lists in the Special 301 Report.
What is intellectual property?
- Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; symbols, names and images used in commerce.
What is Intellectual Property Right?
- Intellectual property right (IPR) is the right given to persons over the creations of their minds: inventions, literary and artistic works, symbols, names and images used in commerce. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.
What are the essential things to know regarding IPR in India?
- India is a member of the World Trade Organization. It is committed to the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS Agreement).
- India is also a member of the World Intellectual Property Organization (WIPO). WIPO is responsible for the promotion of the protection of intellectual property rights throughout the world.
- Some other important treaties or conventions that India is a part of:
- Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure.
- Paris Convention for the Protection of Industrial Property.
- Berne Convention for the Protection of Literary and Artistic Works.
What is the national IPR policy?
- The National Intellectual Property Rights (IPR) Policy 2016 was adopted in May 2016. Its motto is “Creative India; Innovative India”.
- The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce, Government of India, has been appointed as the nodal department to coordinate, guide and oversee the implementation and future development of IPRs in India.
- The IPR regime of India is in compliance with the WTO’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
MoU FOR MULTI MODAL LOGISTICS PARK
- Recently, the Government of India has signed the tripartite agreement for swift development of modern Multi Modal Logistics Parks (MMLP) under Bharatmala Pariyojna across the country.
- The objective is to centralize freight consolidation and reduce logistics cost from 14% to less than 10% of Gross Domestic Product at par with International Standards.
- The Agreement
- The tripartite agreement was signed by:
- National Highways Logistics Management Limited (NHLML): It is a Special Purpose Vehicle (SPV) of the National Highway Authority (NHAI) of the Ministry of Road Transport & Highways
- Inland Waterways Authority of India (IWAI): It is a statutory authority under the Ministry of Ports, Shipping & Waterways.
- Rail Vikas Nigam Limited (RVNL) : It is wholly owned Public Sector Enterprise under the Ministry of Railways.
- The agreement underlines the cooperation & collaboration model between the three bodies in order to achieve efficiency in logistics movement within the country.
- It will provide seamless modal shift, MMLPs will ensure that cargo is swapped/shifted from and to Waterways, Dedicated Freight Corridors & Road Transport.
- What is a Multi Modal Logistics Park (MMLP)?
- Developed under a ‘Hub & Spoke’ model, the MMLP will integrate multiple modes of freight transport through highways, railways & inland waterways.
- The Multi Modal Logistic Park project is poised to develop state-of-the-art large scale warehousing facilities for different types of commodities, to become a one stop solution for all services related to cargo movement like warehousing, custom clearance, parking, maintenance of trucks etc.
- It will have all the facilities like warehouses, railway siding, cold storage, custom clearance house, yard facility, workshops, petrol pumps, truck parking, administrative building, boarding lodging, eating joints, water treatment plant, etc.
- Technology-driven technology
- It will focus on a technology driven implementation for a state-of-the-art freight management system. Many value added services like packaging, repackaging and labelling will also be available in these projects.
- The NHLML is a Special Purpose Vehicle (SPV) of National Highway Authority (NHAI), while IWAI is a statutory authority under the Ministry of Ports, Shipping and Waterways. The RVNL is a wholly owned Public Sector Enterprise under the Ministry of Railways.
GOLD JEWELLERY EXPORTS TO UAE UP 42%
- India’s gold jewellery exports to the UAE rose by a sharp 42% in two months of a free trade pact coming into effect in May with its offer of duty free access on jewellery to the Gulf nation.
- What benefited the Growth of Jewellery Export?
- Indian exporters were facing tough competition in gold jewellery from countries like Turkey, and Indian exports were showing a decline before the FTA.
- The free trade pact came into effect in May 2022 with its offer of duty-free access on jewellery to the Gulf nation. This removal of duties has benefited exports.
- India got zero duty access to the UAE market for jewellery exports, which attracted 5% duty earlier, potentially facilitating entry of Indian products in the North Africa, West Asia and Central Asia markets.
- India in turn allowed 1% duty concession on gold imports from the UAE for up to 200 tonnes of shipments under the Comprehensive Economic Partnership Agreement (CEPA).
- Benefits of India-UAE CEPA
- Trade-in Goods
- India will benefit from preferential market access provided by the UAE, especially for all labour-intensive sectors.
- Such as Gems and Jewellery, Textiles, leather, footwear, sports goods, plastics, furniture, agricultural and wood products, engineering products, medical devices, and Automobiles.
- Trade-in Services
- Both India and UAE have offered each other market access to the broad service sectors.
- Such as ‘business services’, ‘communication services’, ‘construction and related engineering services, ‘distribution services’, ‘educational services’, ‘environmental services’, ‘financial services, ‘health-related and social services, ‘tourism and travel-related services, ‘recreational cultural and sporting services’ and ‘transport services’.
- Trade-in Pharmaceuticals
- Both sides have also agreed to a separate Annex on Pharmaceuticals to facilitate access to Indian pharmaceuticals products, especially automatic registration and marketing authorisation in 90 days for products meeting specified criteria.
- Different types of trade agreements
- It is a kind of free trade pact that covers negotiation on the trade in services and investment, and other areas of economic partnership.
- It may even consider negotiation in areas such as trade facilitation and customs cooperation, competition, and IPR.
- Partnership agreements or cooperation agreements are more comprehensive than Free Trade Agreements.
- CEPA also looks into the regulatory aspect of trade and encompasses an agreement covering the regulatory issues.
- India has signed CEPAs with South Korea and Japan.
- Free Trade Agreement (FTA)
- It is an agreement in which two or more countries agree to provide preferential trade terms, tariff concession etc. to the partner country.
- India has negotiated FTA with many countries e.g. Sri Lanka and various trading blocs as well e.g. Association of Southeast Asians Nations (ASEAN).
- Regional Comprehensive Economic Partnership (RCEP) is a Free Trade Agreement (FTA) between the ten member states of the ASEAN and the five countries (Australia, China, Japan, South Korea, and New Zealand) with which ASEAN has existing FTAs.
- Preferential Trade Agreement (PTA)
- In this type of agreement, two or more partners give preferential right of entry to certain products. This is done by reducing duties on an agreed number of tariff lines.
- Tariffs may even be reduced to zero for some products even in a PTA. India signed a PTA with Afghanistan.
- Comprehensive Economic Cooperation Agreement (CECA)
- CECA generally covers negotiation on trade tariff and TRQ (Tariff Rate Quotas) rates only. It is not as comprehensive as CEPA. India has signed CECA with Malaysia.
- Bilateral Investment Treaty (BIT)
- It is a bilateral agreement in which two countries sit together and decide the conditions for private investments by citizens and firms of the two countries.
- Trade and Investment Framework Agreement (TIFA)
- It is a trade pact between two or more countries which establishes a framework for expanding trade and resolving outstanding disputes between countries.
INDIA ENERGY EXCHANGE PROCUREMENT
- Recently, the managements of power utilities of Telangana (Discoms) were banned from participating in the day ahead market with the Indian Energy Exchange (IEX) for procuring energy.
- They were banned on the grounds of non-payment of dues to Gencos despite making payments.
- However, the ban has now been lifted following reconciliation of accounts pertaining to payments made.
- About the ban
- The National Load Dispatch Centre (NLDC) imposed a ban on bidding of Telangana (Discoms) in energy procurement without even reconciling the accounts with the Gencos concerned.
- Telangana (Discoms) have cleared ₹1,360 crore out of ₹1,381 crore dues mentioned by the agency before the imposing of the ban.
- As per the Discoms, the agency was acting beyond its mandate as per the Electricity Act, 2003, which is in force now.
- As per the 2003 Act, the agency has to monitor and maintain only the grid discipline and it is not supposed to be involved in any commercial activity such as its present unilateral decision.
- The ban was lifted officially on 19th August 2022 allowing the Discoms to go for procuring energy.
- What is the Indian Energy Exchange?
- It is the first and largest energy exchange in India providing a nationwide, automated trading platform for physical delivery of electricity, Renewable Energy Certificates and Energy Saving Certificates.
- The exchange platform enables efficient price discovery and increases the accessibility and transparency of the power market in India while also enhancing the speed and efficiency of trade execution.
- It is a publicly listed company with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
- It is approved and regulated by Central Electricity Regulatory Commission (CERC) and has been operating since 2008.
- To leverage technology and innovation to establish transparent and efficient energy marketplaces for delivering affordable, reliable energy to consumers.
- Trading Platform for
- Electricity Market
- Day-Ahead Market (DAM): It is a physical electricity trading market for deliveries for any/some/all 15-minute time blocks in 24 hours of the next day starting from midnight.
- Term-Ahead Market (TAM): The contracts under TAM cover a range for buying/selling electricity for duration up to 11 days. It enables participants to purchase electricity for the same day through intra-day contracts, for the next day through day-ahead contingency, on a daily basis for rolling seven days through daily contracts.
- Real Time Market: The market features a new auction session every 30 minutes with power to be delivered after 4 time blocks or an hour after gate closure of the auction. The price and quantum of electricity trading is determined through a double-sided closed auction bidding process.
- Cross Border Electricity Trade: The Cross border in electricity is an endeavour to expand the Indian power market towards building an integrated South Asian Power Market. The grid connected south Asian countries such as Nepal, Bhutan and Bangladesh will be able to participate in Day ahead Market and Term ahead Market on the Exchange.
- Green Market
- Green Term Ahead Market: The Green-Term Ahead Market (G-TAM) is a new market segment for trading in renewable energy following the CERC approval. The new market segment features contracts such as:
- Green-Day-ahead Contingency (DAC)
- Green-Daily and Green-Weekly.
- The matching mechanism is continuous/spot trading for Green-Intraday, Green-DAC and Green-Daily contracts whereas double sided open auction process to be implemented for Green-Weekly.
- Green Day-Ahead Market: The Green Day ahead Market allows anonymous & double-sided closed collective auction in renewable energy on the day-ahead. The Exchange invites bids for conventional and renewable products in an integrated way through separate bidding windows.
- Green Term Ahead Market: The Green-Term Ahead Market (G-TAM) is a new market segment for trading in renewable energy following the CERC approval. The new market segment features contracts such as:
- Certificate Market
- Renewable Energy Certificates (REC): Under the REC mechanism, a generator can generate electricity through renewable resources in any part of the country. For the electricity part, the generator receives the cost equivalent to that from any conventional source while the environment attribute is sold through the exchanges at the market determined price. The obligated entity from any part of the country can purchase these RECs to meet its RPO (Renewable Purchase Obligation) compliance. Obligated entities may either purchase renewable energy or can purchase RECs to meet their RPO set under the RPO of their respective States.
- Energy Saving Certificates (ESCerts)
- These are the tradable certificates under the Perform, Achieve, Trade (PAT) Scheme of the Bureau of Energy Efficiency (BEE). It is a market-based mechanism to incentivise energy efficiency in large energy-intensive industries.
NEW NORMS TO INVEST OVERSEAS
- Recently, The Ministry of Finance noticed new norms making it easier for domestic corporates to invest abroad, while making it tougher for loan defaulters and those facing a probe by investigative agencies to invest in overseas entities.
- Key Highlights of the New Rules
- Administered by RBI
- The Overseas Investment Rules and Regulations, notified under the Foreign Exchange Management Act, will be administered by the Reserve Bank of India (RBI), and shall subsume all existing norms pertaining to overseas investments as well as the acquisition and transfer of immovable property outside India.
- No Go Sectors
- A No-Objection Certificate (NOC) will be mandatory for any person who has a bank account classified as a Non-performing asset, or is labelled a wilful defaulter by any bank, or is under investigation by a financial service regulator, the Enforcement Directorate (ED) or the Central Board of Investigation (CBI).
- Further, no Indian resident will be permitted to make investments in foreign entities that are engaged in real estate business, gambling in any form and dealing with financial products linked to the Indian rupee without the central bank’s specific approval.
- Sixty Day Timeline
- However, if the lenders or the relevant regulatory body or investigative agency fail to furnish the NOC within sixty days of receiving an application, it may be presumed that they have no objection to the proposed transaction.
- The revised regulatory framework for overseas investment provides for simplification of the existing framework for overseas investment and has been aligned with the current business and economic dynamics
- Clarity on overseas direct investment and overseas portfolio investment has been brought in and “various overseas investment-related transactions that were earlier under the approval route are now under automatic route, significantly enhancing ease of doing business.
DRAFT INDIAN PORTS BILL, 2022
- Recently, the government has prepared the Draft Indian Ports Bill, 2022.
- The draft Indian Ports Bill,2022 seeks to repeal and replace the existing Indian Ports Act 1908, which is more than 110 years old, becoming imperative that the Act is revamped to reflect the present-day frameworks.
- What does the Bill Propose?
- It seeks to amend the laws relating to ports, for the prevention and containment of pollution at ports, to ensure compliance with the country’s obligation under the maritime treaties and international instruments to which India is a party
- It seeks to empower and establish State Maritime Boards for effective administration, control and management of non-major ports in India
- It aims to provide adjudicatory mechanisms for redressal of port related disputes and to establish a national council for fostering structured growth and development of the port sector.
- It will ensure optimum utilisation of the coastline of India, as may be necessary, and to provide for matters ancillary and incidental thereto, or connected therewith.
- What is the Significance of Ports for India?
- India has a 7,500 km long coastline, 14,500 km of potentially navigable waterways and strategic location on key international maritime trade routes.
- About 95% of India’s trade by volume and 65% by value is done through maritime transport facilitated by ports.
- How is the Indian Port Ecosystem?
- Ports sector in India is driven by high growth in external trade.
- The Union Government has allowed Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbour construction and maintenance projects.
- Legal Provisions
- Major Ports are under the Union list of the Indian Constitution and are administered under the Indian Ports Act 1908 and the Major Port Trust Act, 1963.
- Number of Major Ports
- There are 12 major ports and 200 non-major ports (minor ports) in the country.
- Major ports include Deendayal (erstwhile Kandla), Mumbai, JNPT, Marmugao, New Mangalore, Cochin, Chennai, Kamarajar (earlier Ennore), V O Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia).
- Major Ports vs Minor Ports
- Ports in India are classified as Major and Minor Ports according to the jurisdiction of the Central and State government as defined under the Indian Ports Act, 1908.
- All the 12 Major Ports are governed under the Major Port Trusts act, 1963 and are owned and managed by the Central Government.
- All the Minor Ports are governed under the Indian Port Act, 1908 and are owned and managed by the State Governments.
- Administration of Major Ports
- Each major port is governed by a Board of Trustees appointed by the Government of India.
- The Trusts operate on the basis of policy directives and orders from the Government of India.
- Way Forward
- The ongoing developments and committed investments (public and private) in ports need to be aided by scientific and consultative planning, with a keen focus on ever increasing safety, security and environmental issues.
New MoU Signed For Developing Multi-Modal Logistics Park At Jalna Dry Port In Maharashtra
- National Highways Logistics Management Limited (NHLML) and Jawaharlal Nehru Port Trust (JNPT) on 21st September signed a memorandum of understanding (MoU) for the development of Multi-Modal Logistics Park (MMLP) at Jalna Dry Port in Maharashtra.
- Acting as a catalyst for the development of the Marathawada region, Jalna MMLP will serve as a functional dry port of the region and steel and allied industries depending on scrap, fruits and vegetables processing units, seed industries, and cotton sector would hugely benefit from this development.
- The MMLP would connect Samruddhi Marg and Delhi-Mumbai Industrial Corridors.
- It will promote the export of agro products and also transform Jalna into the Automobile Hub of the Marathwada region.
- The MMLP at Jalna is among the 35 MMLPs already planned and is a key part of the Narendra Modi government's strategy to reduce logistics costs to less than 10 percent of GDP (gross domestic product).
- Currently, logistics account for 14 percent of GDP — making India far less competitive on the global stage.
- The MMLPs shall function as cargo consolidation and distribution hubs with value-added services for various businesses such as Grade-A warehousing and cold storage, packaging, customs and banking, and railway terminal facilities
- Over Rs 50,000 crore was allotted for setting up these MMLPs as part of the first phase of the Bharatmala Pariyojana approved in 2017.
- NHLML, a 100 percent subsidiary of NHAI, is the nodal agency for implementing the MMLP projects.
- A similar arrangement exists for Wardha Dry Port.
- Last October, JNPT signed an MoU with NHLML to set up an MMLP at the Wardha Dry Port in the Wardha district in Maharashtra.
- Jalna Dry Port:
- The first phase of the Jalna Dry Port is coming up at an investment of Rs 327 crore and once the facility is completed, it will boost Exim trade in the Marathwada region of Maharashtra.
- Jawaharlal Nehru Port Trust is developing a dry port (inland container depot) at Jalna near Aurangabad in Maharashtra.
- The dry port near Jalna is expected to operate as one of the largest major container ports of India with an upcoming container handling capacity of almost 10 million twenty-foot equivalents (TEU).
Rs 1,900 Crore Bulk Drug Park Project In Himachal's Una
- Context: Prime Minister Narendra Modi on Thursday (13 October) laid the foundation stone of the bulk drug park project in Himachal's Una.
- About the Park:
- The park will help reduce dependence on active pharmaceutical ingredients (APIs) imports and is expected to attract investment of around Rs 10,000 crore and provide employment to more than 20,000 people.
- Further, the park will also give a fillip to economic activities in the region.
- Scheme for the promotion of bulk drug parks:
- The scheme for the promotion of bulk drug parks was notified in 2020 with a financial outlay of Rs 3,000 crore.
- Earlier last month, the Centre had granted ‘in-principle’ approval to the proposals for setting up three bulk drug parks in Himachal Pradesh, Gujarat, and Andhra Pradesh.
- It provides financial assistance to three states for establishing Bulk drug parks and aims to bring down the cost of manufacturing bulk drugs by creating world-class common infrastructure facilities supported by the Centre and thereby increasing the competitiveness of the domestic bulk drug industry.
- The bulk drug parks to be developed under the scheme will provide common infrastructure facilities in one place thereby creating a robust ecosystem for bulk drug manufacturing in the country and also reducing the manufacturing cost significantly.
National Logistics Policy in India
- Context: To boost the ease of doing business and enhance the liveability quotient, Prime Minister Narendra Modi launched the National Logistics Policy (NLP) on 17th September 2022 in Vigyan Bhawan, New Delhi.
- About NLP:
- The policy aims to lower the cost of logistics from the existing 13-14% and lead it to par with other developed countries.
- This will increase the competitiveness of Indian products in both the Indian home market and the international market.
- Moreover, the reduced cost will also increase efficiency efforts cutting across all sectors of the economy, which encourages value addition and enterprise.
- The National Logistics policy is a comprehensive effort to address cost and inefficiency by issues lying down an overarching interdisciplinary, cross-sectoral, and multi-jurisdictional framework for the developing entire logistics ecosystem.
- The goal of this policy is to make the logistics industry more efficient and lower its costs.
- The strategy aims to boost economic growth, provide employment opportunities, and make Indian products more competitive in the global market.
- The NLP's transformational capacities further increase when combined with previous connectivity and infrastructure improvement programs like:
- The Gati Shakti Programme's goal is to implement infrastructure connectivity, including roadways and railways projects across the nation, in a coordinated manner.
- The Sagarmala – envisions using the potential of the coastline and waterways to reduce the amount of infrastructure needed to reach their targets.
- The Bharatmala – focuses on reducing critical infrastructure gaps to increase the effectiveness of road traffic circulation across the nation.
- The above core initiatives will help create a single-window e-marketplace as a one-stop shop for relevant knowledge and information exchange that can ease logistics facilitation matters in the country.
A Push for the Semi-Conductor Industry
- Context: In a bid to make India’s $10 billion chip-making initiative more attractive to investors, the Centre on September 21, approved changes to the scheme for the development of a semiconductor and display manufacturing ecosystem in the country.
- What are Semi-Conductors?
- Semiconductors are the thumbnail-sized building blocks of almost every modern electronic device from smartphones to connected devices in the Internet of Things (IoT).
- They help give computational power to devices.
- The basic component of a semiconductor chip is a sliver of silicon, which is etched with billions of microscopic transistors and projected to specific minerals and gases, forming patterns to control the flow of current while following different computational instructions.
- The most-advanced semiconductor technology nodes available today are the 3 nanometre (nm) and the 5nm ones.
- Semiconductors having higher nanometre value are applied in automobiles, consumer electronics, and so on, while those with lower values are used in devices such as smartphones and laptops.
- Size of the Industry:
- The global semiconductor industry is currently valued at $500-$600 billion and caters to the global electronics industry currently valued at about $3 trillion.
- The chip-making process is complex and highly exact, having multiple other steps in the supply chain such as chip-designing done by companies to develop new circuitry for use in appliances, designing software for chips and patenting them through core Intellectual Property (IP) rights. It also involves making chip-fabrication machines; setting up fabs or factories; and ATMP (assembly, testing, marking and packaging).
- The chip-making industry is a highly-concentrated one, with the big players being Taiwan, South Korea and the U.S. among others.
- In fact, according to a New York Times estimate, 90% of 5nm (nanometre) chips are mass-produced in Taiwan, by the Taiwan Semiconductor Manufacturing Company (TSMC).
- Therefore, the global chip shortage, U.S.-China tensions over Taiwan, and the supply chain blockages owing to the Russia-Ukraine conflict have led major economies to enter the chip-making sector with a renewed push.
- For example, the U.S. announcement of $52.7 billion in government funding for the CHIPS and Science Act and the EU’s Chips Act will mobilize €43 billion for public and private investments.
- Changes to India's chip-making scheme:
- In December 2021, India announced its roughly $10 billion dollar production-linked incentive (PLI) scheme to encourage semiconductor and display manufacturing in the country.
- It also announced fiscal support for a design-linked initiative (DLI) scheme to drive global and domestic investment related to design software, IP rights, etc.
- According to the Electronics and IT Ministry, semiconductor demand in India would increase to $70-$80 billion by 2026 with the growing demand for digital devices and electronic products.
- The new changes announced seek to harmonize government incentives for all technology nodes of semiconductors, according to the Minister of State for Electronics and IT Rajeev Chandrasekhar.
- In the previous version of the scheme, the Centre was offering to fund 30% of the project cost for 45nm to 65nm chip production, 40% for 28nm to 45nm, and 50% or half of the funding for chips 28nm or below.
- The modified scheme provides uniform 50% fiscal support for all nodes.
- Besides, it will provide 50% of capital expenditure for other steps of the process as well (chip design and ATMP).
- Reasons for the changes:
- The new scheme was brought in after months of discussions with industry stakeholders and potential investors, so that all areas of chip-making are encouraged to create an integrated ecosystem in India, rather than manufacturing here and having to package and test chips elsewhere.
- The government said that the PLI and DLI schemes had attracted many global semiconductor players for setting up labs in India and the modified program would expedite these investments and bring in more applicants.
- Challenges ahead:
- Chip production is a resource-intensive and expensive process.
- Creating global demand may be difficult as giants like Taiwan offer viable cutting-edge chip-tech worldwide.
- Chip-making also requires gallons of ultrapure water in a single day, which experts say, could be a task for the government to provide to factories, compounded also by the drought conditions which often prevail in large parts of the country.
- Besides, an uninterrupted supply of power is central to the process, with just seconds of fluctuations or spikes causing millions in losses.
- Another task for the government is to drive up consumer demand in the semiconductor industry to not end up in a situation where these ventures remain successful only till taxpayers are forced to fund required subsidies.
The Draft Telecom Bill
- Context: In a bid to do away with British-era laws governing the telecom sector, the Department of Telecommunications (DoT) issued the draft Indian Telecommunication Bill, 2022.
- Need for Draft Telecommunications Bill :
- Through the Indian Telecommunication Bill, 2022, the Centre aims to consolidate and amend the existing laws governing the provision, development, expansion, and operation of telecommunication services, telecom networks, and infrastructure, in addition to the assignment of spectrum.
- The draft Bill, which was published by the DoT, consolidates three separate acts that govern the telecommunications sector — the Indian Telegraph Act of 1885, the Indian Wireless Telegraphy Act of 1933, and The Telegraph Wires (Unlawful Protection) Act of 1950.
- One of the key changes is the inclusion of new-age over-the-top communication services like WhatsApp, Signal, and Telegram in the definition of telecommunication services.
- As per the draft law, providers of telecommunication services will be covered under the licensing regime and will be subjected to similar rules as other telecom operators.
- This issue has been under contention for several years now with telecom service providers seeking a level-playing field with OTT apps over communication services such as voice calls, messages, etc. where operators had to incur high costs of licenses and spectrum, while OTT players rode on their infrastructure to offer free services.
- Are there other areas where the government has proposed to increase its powers?
- The Centre is also looking to amend the Telecom Regulatory Authority of India Act (TRAI Act) to dilute the sectoral watchdog’s function of being a recommendatory body.
- The current TRAI Act mandates the telecom department to seek the regulator’s views before issuing a new license to a service provider.
- The proposed Bill does away with this provision.
- It has also removed the provision that empowered TRAI to request the government to furnish information or documents necessary to make this recommendation.
- Additionally, the new Bill also proposes to remove the provision that if the DoT cannot accept TRAI’s recommendations or needs modification, it had to refer back the recommendation for reconsideration by TRAI.
- Does the proposed Telecom Bill also look to address issues being faced by the telecom industry?
- The DoT has also proposed that if a telecom entity in possession of spectrum goes through bankruptcy or insolvency, the assigned spectrum will revert to the control of the Centre.
- So far, in insolvency proceedings, there has been a lack of clarity on whether the spectrum owned by a defaulting operator belongs to the Centre, or whether banks can take control of it.
- The draft Bill also accords the Centre the powers to defer, convert into equity, write off or grant relief to any licensee under extraordinary circumstances, including financial stress, consumer interest, and maintaining competition, among other things.
- It also proposes to replace the Universal Service Obligation Fund (USOF) with the Telecommunication Development Fund (TDF).
- USOF is the pool of funds generated by the 5 percent Universal Service Levy that is charged upon all telecom fund operators on their Adjusted Gross Revenue.
- The USOF has largely been used to aid rural connectivity.
- However, with the TDF, the objective is also to boost connectivity in underserved urban areas, R&D, skill development, etc.
Global Innovation Index
Context: The Global Innovation Index (GII) 2022 was recently released. The GII helps create an environment that evaluates innovation factors continuously.
- The 15th edition of the Global Innovation Index was launched globally on September 30, 2022.
- India has climbed six positions and has scored 40th rank in the Global Innovation Index, 2022.
- India enters the top 40 for the first time and overtakes Vietnam (48th) as the top lower middle-income economy for innovation.
- The GII 2022 finds that India continues to lead the world in the ICT services exports indicator with the first rank while holding top rankings in other indicators, including Venture capital recipients’ value (6th), Finance for startups and scaleups (8th), Graduates in science and engineering (11th), Labor productivity growth (12th) and Domestic industry diversification (14th).
- Only a few economies have consistently delivered peak innovation performance:
- Switzerland, Sweden, the U.S., and the U.K. have all ranked among the top 5 in the past three years, while the Republic of Korea joins the top 5 of the GII for the first time in 2021.
- The majority of the GII top 25 most innovative economies continue to be from Europe.
- New segment – Global Innovation Tracker:
- This new segment of GII aims to provide a perspective on global innovation performance, drawing on a select set of indicators.
- GII 2021 provides detailed innovation metrics for 132 economies.
- Top three innovation economies by income group:
- High Income:
- United States of America
- United Kingdoms
- The Netherlands.
- Upper Middle Income:
- Lower Middle income:
- Low Income:
- High Income:
About the Index:
- It is released by World Intellectual Property Organization (WIPO) annually.
- Aim: To track the most recent global innovation trends against the background of an ongoing COVID-19
- pandemic, slowing productivity growth, and other evolving challenges.
- Parameters -The index is calculated as the average of two sub-indices:
- Innovation Input Sub-Index: It gauges elements of the economy that enable and facilitate innovative activities and is grouped into five pillars:
- Human capital and research
- Market sophistication
- Business Sophistication.
- Innovation Output Sub-Index: It captures the actual result of innovative activities within the economy and is divided into two pillars:
- Knowledge and technology outputs
- Creative outputs.
- Innovation Input Sub-Index: It gauges elements of the economy that enable and facilitate innovative activities and is grouped into five pillars:
Telecom Technology Development Fund (TTDF) Scheme
Context: Universal Service Obligation Fund (USOF), a body under the Department of Telecommunications, officially launched Telecom Technology Development Fund (TTDF) Scheme.
- Telecom Technology Development Fund (TTDF) Scheme is aimed at domestic companies and institutions involved in the technology design, development, and commercialization of telecommunication products and solutions, to enable affordable broadband and mobile services in rural and remote areas.
- Telecommunication technology products require significantly large funding and long gestation periods for R&D and commercialization including the additional efforts and resources for the products to move from prototype to commercial grade.
- Government is willing to support the industry to build high-impact deep-tech projects at an affordable cost to enable state-of-the-art services for rural areas in the country.
- Apart from the existing R&D funding mechanisms, an allocation of 5% of annual collections from USOF will be available for funding R&D in the Telecom sector, starting with the funds collected in the financial year 2021-22.
- The Universal Service Obligation Fund (USOF) was formed by an Act of Parliament and was established in April 2002 under the Indian Telegraph (Amendment) Act 2003.
- It aims to provide financial support for the provision of telecom services in commercially unviable rural and remote areas of the country.
- It is an attached office of the Department of Telecom and is headed by the administrator, who is appointed by the central government.
- Funding Pattern:
- USOF is a non-lapsable Fund.
- The Levy amount is credited to the Consolidated Fund of India.
- The fund is made available to USOF after due appropriation by the Parliament.
Context: Recently, an inter-ministerial meeting of the Environment, Agriculture, and Power Ministries to review the progress of biomass co-firing in thermal power plants was held in New Delhi.
- Biomass co-firing is the practice of substituting a part of the fuel with biomass at coal thermal plants.
- Biomass co-firing stands for adding biomass as a partial substitute fuel in high-efficiency coal boilers.
- Coal and biomass are combusted together in boilers that have been designed to burn coal. For this purpose, the existing coal power plant has to be partly reconstructed and retrofitted.
- Co-firing is an option to convert biomass to electricity, in an efficient and clean way, and to reduce GHG (Greenhouse Gases) emissions of the power plant.
- Biomass co-firing is a globally accepted cost-effective method for decarbonizing a coal fleet.
- India is a country where biomass is usually burnt on the field which reflects apathy toward resolving the problem of clean coal using a very simple solution that is readily available.
- The Union Ministry of Power, while presenting the Union Budget in February 2022, mandated 5-10 % co-firing at every thermal power plant in the country.
- Biomass Pellets are a popular type of biomass fuel, generally made from wood wastes, agricultural biomass, commercial grasses, and forestry residues.
- The unavailability of Biomass Pellets of agricultural residues is slowing down the implementation of the Ministry of Powers' direction to Co-Fire biomass with coal in thermal power plants.
India’s Sugar Industry
Context: In Sugar Season (Oct-Sep) 2021-22, India emerged as the world’s largest producer and consumer of sugar and the world’s 2nd largest exporter of sugar.
- India has surpassed Brazil to become both the world’s largest producer and consumer of sugar.
- During the marketing year 2021–2022, 35.8 million tonnes were produced in India.
- It is anticipated to reach 36.5 million tonnes in the marketing year 2022–2023.
- Maharashtra surpassed Uttar Pradesh in 2022 to reclaim India’s top spot for sugar production.
- The cheapest sources of energy, which account for 10% of daily caloric intake, are sugar and jaggery.
- There are about 27 million tonnes of domestic demand annually.
- In addition to producing sugar, sugarcane is also used to make ethanol.
- In India, sugarcane is mostly grown in two separate agro-climatic regions:
- The tropical sugarcane region encompasses the states of Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka, Gujarat, Madhya Pradesh, Goa, Pondicherry, and Kerala. It also includes the peninsular and coastal regions.
- The subtropical sugarcane region includes Uttar Pradesh, Bihar, Haryana, and Punjab.
- Challenges faced by the Sugar Industries include:
- Water-intensive nature of the crop, groundwater depletion, sugar price stagnation, low mechanization, problems of arrears, etc.
Context: The President of India recently launched ‘herSTART’, an initiative of the Gujarat University Startup and Entrepreneurship Council (GUSEC) aimed at supporting women-led startups.
- The platform will include a digital platform to provide resources and training modules free of cost to aspiring women entrepreneurs, a digital community for them, and a digital publication to spread their success stories.
- The Platform encompasses the herSTART Incubator, a dedicated full-fledged Startup incubator for women entrepreneurs and innovators, and the herSTART Accelerator, a round-the-year accelerator programme for high-impact women-led startups.
- Gujarat is the first state in the country to form the Garima Cell with the aim of giving new energy and direction to the higher education system of the state.
- The ‘herSTART’ platform will boost the innovation and start-up efforts of women entrepreneurs and also help them connect with various government and private enterprises.
- Employment generation: through 450 Startup projects operational in Gujarat University. Of these, 125 startups especially inspired by entrepreneurial women are giving a new direction to entrepreneurship and innovative ideas in women.
- India has moved from 81st position to 40th position in the Global Innovation Index (GII) of 2022 as a result of the Startup program.
- Reduction in the drop-out rate among the students of the tribal community due to Vanabandhu Kalyan Yojana, Eklavya Model Residential School, and Kanya Nivasi Shala.
- Real-time monitoring of the education system of more than 55,000 schools in the state by the Vidya Review Centre.
- Upgrading the infrastructure of about 20,000 schools in the state through Mission School of Excellence.
India Mobile Congress
Context: The 6th edition of Asia’s largest telecom festival, India Mobile Congress 2022 concluded with grand success.
- Brand India Mobile Congress (IMC) under the Company Mobipro Innovation Pvt. Ltd. is the largest telecom, media, and technology forum in Asia, jointly organized by the Department of Telecommunications (DoT) and Cellular Operators Association of India (COAI).
- IMC has, since its inception, established itself as a leading forum for bringing together industry, government, academia, and other ecosystem players to discuss. deliberate, demonstrate and display the latest in the world of TMT and ICT.
- Not only is the India Mobile Congress the biggest technology event in Asia, but it is also the biggest networking event in India in the technology space.
- IMC also includes India’s biggest technology exhibition and is a bedrock of technology demos with thought leadership participation from across the globe, and grows from strength to strength every year.
- At the India Mobile Congress in Delhi, Prime Minister announced the 5G services will be rolled out in a phased manner. In the first phase, the 5G services are launched in thirteen cities.
Purse Seine Nets
Context: Recently, fishermen of Tamil Nadu protested against the blanket ban on purse seine nets and demanded to regulate it in order to protect the interest of small and traditional fishermen.
- A purse seine is a non-selective fishing method that captures everything that it surrounds.
- A purse seine net is a large net used in an entire area.
- The seine floats along the top line with a lead line threaded through rings along the bottom.
- Once a school of fish is located, a skiff encircles them.
- The lead line is then pulled in, pursing the net closed on the bottom, preventing fish from escaping.
- Other types of fishing nets include:
- Gill nets: They are set up to be a wall with holes in them. Fish unknowingly swim into it and get stuck.
- Bull trawling: In bull trawling or pair trawling, a net is tied between two mechanized boats and it is dragged for some kilometers to catch fish.
- Bottom trawler: This involves weighing a net down to the seafloor and then dragging it across the bottom to scoop up fish.
Nobel Prize in Economic Sciences 2022
Context: The Royal Swedish Academy of Sciences has decided to award the 2022 Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel to Ben S. Bernanke, Douglas W. Diamond, and Philip H. Dybvig “for research on banks and financial crises.
- Modern banking research clarifies why we have banks, how to make them less vulnerable to crises and how bank collapses exacerbate financial crises.
- The foundations of this research were laid by Ben Bernanke, Douglas Diamond, and Philip Dybvig in the early 1980s.
- Their analyses have been of great practical importance in regulating financial markets and dealing with financial crises.
- For the economy to function, savings must be channeled to investments.
- However, there is a conflict here: savers want instant access to their money in case of unexpected outlays, while businesses and homeowners need to know they will not be forced to repay their loans prematurely.
- In their theory, Diamond and Dybvig show how banks offer an optimal solution to this problem.
- By acting as intermediaries that accept deposits from many savers, banks can allow depositors to access their money when they wish, while also offering long-term loans to borrowers.
- However, their analysis also showed how the combination of these two activities makes banks vulnerable to rumors about their imminent collapse.
- If a large number of savers simultaneously run to the bank to withdraw their money, the rumor may become a self-fulfilling prophecy – a bank run occurs and the bank collapses.
- These dangerous dynamics can be prevented through the government providing deposit insurance and acting as a lender of last resort to banks.
- Diamond demonstrated how banks perform another societally important function.
- As intermediaries between many savers and borrowers, banks are better suited to assessing borrowers’ creditworthiness and ensuring that loans are used for good investments.
- Ben Bernanke analyzed the Great Depression of the 1930s, the worst economic crisis in modern history.
- Among other things, he showed how bank runs were a decisive factor in the crisis becoming so deep and prolonged.
- When the banks collapsed, valuable information about borrowers was lost and could not be recreated quickly. Society’s ability to channel savings to productive investments was thus severely diminished.
- “The laureates’ insights have improved our ability to avoid both serious crises and expensive bailouts,” says Tore Ellingsen, Chair of the Committee for the Prize in Economic Sciences.
National Highways Infra Trust (NHAI InvIT)
Context: According to the Union Minister for Road Transport and Highways, National Highways Infra Trust (NHAI InvIT) is looking to raise an additional ₹3,800 crores and around Rs, 1,500 crore was being garnered through an issue of non-convertible debentures (NCDs) with a long-dated maturity of 24 years.
About Infrastructure Investment Trusts (InvIT):
- InvITs are instruments that work like mutual funds.
- They are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time.
- Part of this cash flow would be distributed as dividends back to investors.
- InvITs are listed on exchanges just like stocks — through IPOs.
- The InvITs listed on the stock exchange are IRB InvIT Fund and India Grid Trust.
- InvITs are regulated by the Securities and Exchange Board of India (SEBI) (Infrastructure Investment Trusts) Regulations, 2014.
- Real Estate Investment Trusts (REITs) are similar to InvITs but they are present only in the Real estate sector.
About NHAI InvIT:
- The infrastructure investment trust is sponsored by the National Highway Authority of India (NHAI) to support the Government of India’s National Monetization Pipeline.
- It will have a minimum investment amount of Rs.10,000 and will be open to institutional investors, non-institutional investors, high-net-worth individuals, and retail investors including the common man.
- NHAI launched its InvIT to facilitate the monetization of roads and also to attract foreign and domestic institutional investors to invest in the roads sector.
- The advantages of an InvIT instrument are that it has stable and predictable cash flows and experienced professionals manage the InvIT and operate and maintain the roads.
Context: Indian goods exports declined in October 2022 for the first time since February 2021.
- India’s goods exports in October 2022 shrank below $30 billion after about 20 months and reports reveal that the goods exports dropped about 16.7% as compared to October 2021 and 16% from September 2022.
- Most of the sectors such as pharmaceuticals and chemicals; engineering goods; gems and jewellery; textiles and handlooms are severely affected.
- Further, the imports increased at 5.7% year-on-year which has widened India’s trade deficit by over 50% to $26.9 billion.
- October 2022 is said to be the fourth straight month of a $25 billion-plus goods trade deficit.
- Also, a slight reduction in petroleum imports and a 10.3% shrinking of non-oil, non-gold imports from September 2022 reflects a slowdown in domestic demand.
- The government has acknowledged the decline in exports and it attributed this decline to a seasonal Deepavali effect wherein production drops on account of holidays and leaves and imports increase due to festive demand.
- Officials also suggest that there is no need to worry as India has a very low share of global trade which can only grow.
- However, according to experts, export growth cannot be achieved automatically as in a shrinking global market, export rivals such as Vietnam cannot be expected to wait out the slump.
- But in India, the new Foreign Trade Policy which was to replace the current policy of 2015 was deferred again till April 2023 for reasons that included waiting out the current global turmoil.
- Experts urge policymakers and officials to follow a proactive approach in addressing various challenges encountered.
Context: Ministry of Power has announced a Scheme for the Procurement of Aggregate Power of 4500 MW on a competitive basis for five years on a Finance, Own, and Operate (FOO) basis under B (v) of SHAKTI Policy.
- Ministry of Power has launched a scheme for procurement of aggregate power of 4500 MW for 5 years under SHAKTI Policy to help states that are facing power shortages and help generation plants increase their capacities.
- SHAKTI is an acronym for Scheme for Harnessing and Allocating Koyala Transparently in India.
- It was launched in 2018 to provide coal to stressed power units that lack the coal supply.
- It seeks to provide coal linkages to power plants that lack fuel supply agreements (FSAs) through coal auctions.
- Need for such policy:
- SHAKTI is a policy designated by the government for the allocation of coal among thermal power plants in a transparent and objective manner.
- It aims to transfer the benefits of linkage coal to the end consumers.
- The scheme is supposed to be beneficial not just for the infrastructure sector, but also for the public sector banks which have huge loans unpaid at the end of the power companies.
- The companies, which did not have coal linkages before the introduction of the Shakti Scheme, would benefit when they would get domestic fuel supplies through auction at competitive rates.
- The scheme also aims to reduce the dependence on imported coal and promote domestic industries.
Wet Leasing of Aircraft
Context: In efforts to boost international air traffic, the civil aviation ministry has allowed Indian airlines to take wide-body planes on wet leases for up to one year.
- Wet leasing means renting the plane along with the operating crew and engineers, while dry leasing refers to taking only the aircraft on rent.
- The technical term for wet leasing is ACMI which stands for aircraft, crew, maintenance, and insurance.
- These are the aspects of the operation that the wet lease airline takes care of, while the airline client will still be responsible for paying for direct operating costs such as catering and fuel as well as fees such as airport fees, ground handling charges, and navigation fees.
- Operations of an aircraft on wet lease are not encouraged by the Directorate General of Civil Aviation (DGCA) as the crew is often not approved by Indian authorities. Also, wet leasing is generally a short-term arrangement, as it is more expensive than a dry lease.
Context: Union Minister for Civil Aviation Shri Jyotiraditya Scindia recently launched Digi Yatra from the Indira Gandhi International Airport, New Delhi for three airports in the country, namely New Delhi, Varanasi, and Bengaluru.
- The Ministry of Civil Aviation is adding a Digital experience for Air Travellers through the DigiYatra Platform.
- The 'DigiYatra' is an industry-led initiative coordinated by the Ministry in line with Prime Minister Shri Narendra Modi's Digital India vision to transform the nation into a digitally empowered society.
- Digi Yatra – Digital processing of passengers at the airports.
- Passengers will be automatically processed based on the facial recognition system at checkpoints like; Entry point checks, Entry into Security checks, and Aircraft Boarding.
- Additionally, this will also facilitate self-Bag Drop and Check-in, using facial recognition to identify pax and data recall.
- Digi Yatra will facilitate paperless travel and avoid identity checks at multiple points.
PM Adi Adarsh Gram Yojana
Context: Ministry Of Tribal Affairs has revamped the existing Scheme of ‘Special Central Assistance to Pradhan Mantri Adi Adarsha Gram Yojana.
- Ministry of Tribal Affairs has revamped the existing Scheme of ‘Special Central Assistance to Tribal Sub-Scheme (SCA to TSS) with the nomenclature ‘Pradhan Mantri Adi Adarsh Gram Yojna (PMAAGY)’, for implementation during 2021-22 to 2025-26, which aims at transforming villages with significant tribal population into the model village (Adarsh Gram)covering the population of about 4.22 crore (About 40% of the total Tribal Population).
- It is envisaged to cover 36,428 villages having at least 50% tribal population and 500 STs across States / UTs with notified STs.
- The main objective of this scheme is to achieve integrated socio-economic development of selected villages through a convergence approach.
- It includes preparing Village Development Plan based on the needs, potential, and aspirations.
- It also includes maximizing the coverage of individual/family benefit schemes of the Central / State Governments and improving the infrastructure in vital sectors like health, education, connectivity, and livelihood.
- The scheme envisions mitigating gaps prominently in 8 sectors of development viz. Road connectivity (Internal and Intervillage /block), Telecom connectivity (Mobile /internet), Schools, Anganwadi Centres, Health Sub-Centre, Drinking water facilities, Drainage, and solid waste management.
- A sum of ₹20.38 lakh per village as ‘Gap-filling’ has been provisioned for approved activities including administrative expenses under PMAAGY.
- Besides States / UTs are encouraged for convergence of resources as Central / State Scheduled Tribe Component (STC) funds and other financial resources available with them for saturation of gaps in the villages identified under PMAAGY.
India Internet Governance Forum (IGF)
Context: The India Internet Governance Forum (IGF), a multi-stakeholder platform, conducted a three-day hybrid event from December 9 to December 11, 2022.
- The Internet Governance Forum (IGF) is a multistakeholder platform bringing together representatives from various groups, considering all to be at par to discuss public policy issues related to the Internet.
- India, with more than 1.4 billion citizens, 1.2 billion mobile users, and 800 million Internet users, demonstrates the growing Internet culture in the country.
- E-Governance and National Security becomes of paramount importance in India, especially with enhanced cyberspace.
- India IGF (IIGF) will provide the ability to facilitate discussions between intergovernmental organizations, private companies, technical communities, academic communities, and civil society organizations that are involved in Internet governance-related public policy issues.
- This policy dialogue is carried out on a co-equal basis through open and inclusive processes.
- This mode of engagement is referred to as the multistakeholder model of Internet Governance, which has been one of the key reasons for the Internet’s success.
Amrit Bharat Station scheme
Context: Ministry of Railways has formulated a new policy for the modernization of stations named the “Amrit Bharat Station” scheme.
- Amrit Bharat Station scheme envisages the development of stations on a continuous basis with a long-term vision.
- It is based on Master Planning for the long term and implementation of the elements of the Master Plan as per the needs and patronage of the station.
- Broad objectives:
- The scheme aims at the preparation of Master Plans of the Railway stations and the implementation of the Master Plan in phases to enhance the facilities including and beyond the Minimum Essential Amenities (MEA) and aiming for the creation of Roof Plazas and city centers at the station in the long run.
- The scheme shall aim to meet the needs of the stakeholders, and station usage studies as far as possible based on the availability of funds and inter-se priority.
- The scheme shall cater to the introduction of new amenities as well as the upgradation and replacement of existing amenities.
- This scheme will also cover the stations where detailed techno-economic feasibility studies have been conducted or are being conducted but the work for construction of Roof Plazas has not been taken up yet, ensuring the phasing of the Master Plan being suitably implemented and relocation of structures and utilities being given more emphasis in the phasing plans.
City Finance Rankings
Context: Recently, The Ministry of Housing and Urban Affairs has launched two key initiatives – City Finance Rankings, 2022, and City Beauty Competition.
City Finance Rankings 2022:
- To evaluate, recognize and reward urban local bodies (ULBs) on basis of their strength across 15 indicators and 3 financial parameters: resource mobilization, expenditure performance, and fiscal governance systems.
- Evaluation will be done on the basis of the quality of current financial health and improvement with time in financial performance.
- Cities will be ranked at the national level on the basis of their scores under the following four population categories:
- Above 4 million.
- Between 1-4 million.
- 100K to 1 million.
- Less than 100,000.
- The top 3 cities in each population category will be rewarded.
- It will help ULBs to identify areas in their financial performance where they can make improvements and able to deliver quality infrastructure and services to its citizens.
- Rankings will motivate city/state officials and decision-makers, to implement municipal finance reforms.
City Beauty Competition:
- To encourage and recognize transformational efforts made by cities and wards in India to create beautiful, innovative, and inclusive public spaces.
- Wards and public places of cities would be judged against five pillars:
- Aesthetics and
- Most beautiful public places in cities would be awarded first at the State level and then will be shortlisted for an award at the National level.
- It will encourage urban local bodies to improve their basic infrastructure and make urban spaces beautiful, sustainable and inclusive.
- Participation in the City Beauty Competition is voluntary.
“Broadcast Infrastructure Network Development (BIND)” Scheme
Context: The Cabinet on 4th January 2023 approved the “Broadcast Infrastructure Network Development (BIND)” Scheme with an outlay of Rs. 2539.61 Cr for modernization, degradation, and expansion of All India Radio and Doordarshan for the five-year period ending 2025-26.
- The plan includes priority projects of AIR and Doordarshan with a focus on expansion and strengthening of the FM radio Network and Mobile TV Production facilities amounting to Rs. 950 Cr which are to be completed on fast-track mode.
- The plan aims at major upgradation to create better infrastructure and widen the public broadcaster’s reach in LWE, border, and strategic areas.
- The development of high-quality content for both domestic and international audiences, and the availability of diverse content by upgrading the capacity of the DTH platform to accommodate more channels will expand the choice available to the audience.
- The plan also aims at the expansion of the FM network primarily in tier-II & tier-III cities with a focus on LWE and aspirational districts.
- Amongst the twin verticals of Prasar Bharati, AIR serves its listeners in the country through 501 AIR Broadcasting Centers with 653 AIR Transmitters (122 Medium Wave, 7 Short Wave, and 524 FM Transmitters) giving World Services, Neighbourhood Services, 43 Vividh Bharati Channels, 25 Rainbow Channels, and 4 FM Gold Channels.
- Doordarshan serves its viewers with 66 Doordarshan Kendra producing 36 DD Channels, disseminating through various delivery platforms such as Cable, DTH, IPTV “NewsOnAIR” mobile app, various YouTube Channels, and with its international channel DD India having a global presence in 190+ countries on various platforms.
Context: The Prime Minister recently launched the 'Hakku Patra' (land title deed) distribution drive by distributing title deeds (hakku patra) to about fifty thousand beneficiaries of newly declared revenue villages in Kalaburagi, Karnataka.
- The word ‘Hakku’ means “the right”, and ‘Patra’ means a “paper” or “document”.
- It is a legal document that states an individual's rightful inheritance of property.
- It is issued to the nation's underprivileged section, including scheduled castes, scheduled tribes, urban slum dwellers, handicapped, and other disadvantaged populations.
- In most cases, the land on which the Hakku Patra is issued is government-owned with a specific set of conditions attached.
- Hakku Patra distribution drive:
- It is a part of the Ambedkar Rural Housing Scheme of Karnataka.
- Under this, the government offers free registration of Hakku Patra land in the beneficiary's name.
- Any house built on the Hakku Patra land should be used as the beneficiary’s house and not for rental purposes.
Context: Ganga Vilas Cruise- the first longest river cruise from Varanasi to Dibrugarh, Assam launched for promotion of river cruises.
- It is one of the world’s longest river cruises to be undertaken on a 51-day journey.
- The Ganga Vilas luxury cruise, left Kolkata to reach Ramnagar Port in Varanasi.
- The Ganga Vilas cruise has been “built with a unique design and a futuristic vision”. It will cover “prominent destinations that lie along Kolkata’s River Hooghly to Varanasi’s River Ganges.”
- The luxury triple-deck cruise will travel on the world’s longest waterway from Varanasi to Dibrugarh in Assam.
- The cruise will be managed by private operators, the Inland Waterways Authority of India (IWAI), under the Ministry of Shipping, Ports, and Waterways (MoPSW) has supported the project.
- It will explore forty historic sites on the banks of the river Ganga including, Mahabodhi temple, Hazarduari Palace, Katra Masjid, Bodh Gaya, Chandanagar church, Char Bangla Temple, and more.
- Besides connecting National Waterway 1 (NW-1) which includes Ganga and National Waterway 2 (NW-2) on Brahmaputra, the cruise will cross 27 river systems.
- The Ganga – Bhagirathi-Hooghly River system between Haldia (Sagar) and Allahabad (1620 km) was declared as NW-1 in 1986.
- The 51 days cruise is planned with visits to 50 tourist spots including World Heritage Sites, National Parks, River Ghats, and major cities like Patna in Bihar, Sahibganj in Jharkhand, Kolkata in West Bengal, Dhaka in Bangladesh, and Guwahati in Assam.
- The sector would generate employment opportunities in the hinterland.
- The project will boost river cruise tourism and bring about a new age of tourism for India. The cruise has been curated to showcase the best of India to the world.
- The journey will give foreign tourists an opportunity to embark upon an experiential voyage and indulge in the art, culture, history, and spirituality of India and Bangladesh.
Global Quality Infrastructure Index
Context: India’s accreditation system ranked 5th globally; overall quality infrastructure system is in the Top 10.
- India’s national accreditation system under the Quality Council of India (QCI) has been ranked 5th in the world in the recent Global Quality Infrastructure Index (GQII) 2021.
- The GQII ranks the 184 economies in the world on the basis of quality infrastructure (QI).
- India’s overall QI system ranking continues to be in the Top 10 at the 10th position, with the standardization system (under BIS) at 9th and the metrology system (under NPL-CSIR) at the 21st position in the world.
- This is the sign of a New India in the Amrit Kaal with a quality-first approach.
- India’s accreditation system is the youngest among the three QI pillars in India, and we have jumped to global fifth within a year in these rankings.
- QCI is committed to making ‘Made in India’ a globally trusted brand on the foundations of quality and credibility.
- QI is the technical backbone for international trade, with metrology, standardization, accreditation, and conformity assessment services providing reliability and trust between trading partners.
- In India, the National Physical Laboratory under the Council of Scientific & Industrial Research (NPL-CSIR) is the national metrology institute, the Bureau of Indian Standards (BIS) is the national standards body, and the constituent national accreditation boards under the Quality Council of India support are the custodians of the national accreditation system.
- The GQII measures the relative development of countries’ QI. A formula calculates a score for each country based on its position in the sub-rankings for metrology, standards, and accreditation.
- Geographically, the top 25 QI systems are mainly located in Europe, North America, and Asia-Pacific, with some exceptions, such as India (10th), Brazil (13th), Australia (14th), Turkey (16th), Mexico (18th) and South Africa (20th).
Context: Sagar Parikrama Phase III was launched from Hazira Port, Surat, by the Ministry of Fisheries, Animal Husbandry, and Dairying.
- The Ministry of Fisheries, Animal Husbandry, and Dairying will inaugurate the ‘Sagar Parikrama’ to know the problems of Coastal Fisher folk.
- It is a navigation journey to be conducted in all coastal states/UTs through a pre-decided sea route to demonstrate solidarity with all fisherfolk, fish farmers, and concerned stakeholders.
- It is envisioned as a part of ‘Azadi Ka Amrit Mahotsava’ saluting our great freedom fighters, sailors, and fishers.
- The Parikrama will start from Mandvi, Gujarat in the Ist phase and will be organized in other districts of Gujarat and other States/UTs in subsequent phases.
- It will focus on the sustainable balance between the utilization of marine fisheries resources for the food security of the nation and livelihoods of coastal fisher communities and the protection of marine ecosystems.
- Oceans are vital to the economies, security, and livelihoods of Indian coastal states.
- The Country has a coastline of 8118km, covering 9 maritime States/4UTs and providing livelihood support to millions of coastal fisher folk.
What is the Scenario of the Fisheries Sector in India?
- India is the second major producer of fish through aquaculture in the world.
- India is the 4th largest exporter of fish in the world as it contributes 7.7% to global fish production.
- Currently, this sector provides livelihood to more than 2.8 crore people within the country. Nevertheless, this is a sector with untapped potential.
International Centre of Excellence for Dams
Context: The Central Water Commission (CWC) has signed a Memorandum of Agreement (MoA) with IIT, Roorkee(IITR) to develop the International Centre of Excellence for Dams (ICED) under externally funded Dam Rehabilitation and Improvement Project (DRIP) Phase II and Phase III.
- The Central Water Commission (CWC), Department of Water Resources, River Development & Ganga Rejuvenation, Ministry of Jal Shakti entered into a Memorandum of Agreement for Development of International Centre of Excellence for Dams (ICED) under externally funded Dam Rehabilitation and Improvement Project Phase II and Phase III.
- This MoA will remain valid for ten years or till the duration of the DRIP Phase-II and Phase-II Scheme, whichever is earlier, from the date of signing.
- ICED, Roorkee will provide specialized technical support in investigations, modeling, research and innovations, and technical support services to the Indian and overseas dam owners.
- The Centre will work for agreed dam safety areas to support and provide solutions to various emerging challenges faced in dam safety through scientific research and the latest technological innovations.
- It will also carry out applied research, education, and technology transfer in dam safety management at local, regional, national, and international levels.
- The Centre will presently start with a focus on the two key areas: (a) Reservoir Sedimentation and (b) Seismic Hazard Mapping and Analysis in the initial years. The new areas shall be added as per the need that arises from the implementation of the Dam Safety Act in the near future. In the long run, the Centre shall aim to deal with the complete life cycle of the dams.
- IITR will aim to reach a level of self-sufficiency within ten years by generating income streams through the knowledge and capabilities developed on dam safety and rehabilitation, reservoir sedimentation and seismic hazard mapping and analysis.
- Envisioned as a world-class state-of-the-art center, and the first of its kind to provide leadership, best practices, research, support, and training in dam engineering, the ICED will help in adapting the advances in dam engineering across the world and developing technologies relevant to Indian conditions
- At the MoA signing ceremony, Secretary (WR, RD&GR) expressed that ICED will give the right impetus to the Government of India Mission “Atmannirbhar Bharat” and will also provide a window of opportunity for disseminating knowledge and expertise in the dam safety area to many underdeveloped and developing nations in future.
Status of dams in India:
- In terms of large dams, India ranks third globally after China and the United States of America, with 5334 large dams in operation. There are also several thousand smaller dams.
- Indian dams and reservoirs play an important role in economic and agricultural growth by storing approximately 300 billion cubic meters of water annually.
- However, 80% of the existing dams are more than 25 years old, with some dams that are 100 years old.
- These dams require maintenance and capacity building.
Khanan Prahari App
Context: The government has launched a mobile app Khanan Prahari and a web app Coal Mine Surveillance and Management System (CMSMS) for reporting unauthorized coal mining activities.
- The Government of India has launched one mobile app namely “KhananPrahari” and one web app Coal Mine Surveillance and Management System (CMSMS) for reporting unauthorized coal mining activities so that monitoring and taking suitable action on it can be done by the concerned Law & Order enforcing authority.
- The CMSMS has been developed to curb illegal mining and take transparent action as an e-Governance initiative of GoI on the use of Space Technology.
- The objective of the development and launching of this CMSMS application was to detect citizens' participation against illegal mining by receipt of citizen complaints through a mobile app – KhananPrahari and to monitor and take action on any kind of illegal coal mining activity being carried out within the leasehold boundaries of any Coal Mining Project in the Coalfield Areas.
- It is a Mobile App of the Ministry of Coal for Reporting Illegal Coal Mining and a tool for reporting any illegal coal mining incident through geo-tagged photographs as well as textual information by any citizen from the place of incidence. The State-wise details of the number of cases reported till January 2023 are enclosed as Annexure.
- The following measures are taken to reduce illegal coal mining operations in the country:-
- Concrete walls have been erected on the mouth of the abandoned mines to prevent access and illegal activities in these areas.
- Surprise raids/checks are being conducted jointly by security personnel and law and order authorities of the concerned State Government.
- Dumping of the overburden is being done on the outcrop zones.
- Installation of checkposts at vulnerable points.
- Training of existing security/CISF personnel, refresher training, and basic training of new recruits in security discipline for strengthening the security setup;
- Maintaining close liaison with the State authorities.
- A committee/task force has been constituted at different levels (block level, sub-divisional level, district level, state level) in some subsidiaries of CIL to monitor different aspects of illegal mining.
Pradhan Mantri Mudra Yojana
Context: As per the results of a large sample survey conducted by the Ministry of Labour and Employment (MoLE) Pradhan Mantri Mudra Yojana (PMMY), has helped in generating 1.12 crore net additional employment during a period of approximately 3 years (i.e. from 2015 to 2018).
- As per data uploaded by Member Lending Institutions (MLIs) on the Mudra portal, as of 27.01.2023, more than 38.58 crore loans have been extended since the inception of the Scheme in April 2015.
- Out of this, over 26.35 crore loans have been extended to Women Entrepreneurs (68%) and 19.84 crore loans to SC/ST/OBC category of borrowers (51%).
- The Ministry of Labour and Employment (MoLE) had conducted a large sample survey at the national level to assess employment generation under PMMY.
- As per the survey results, PMMY helped in generating 1.12 crore net additional employment in the country during a period of approximately 3 years (i.e. from 2015 to 2018).
About Pradhan Mantri Mudra Yojana:
- Pradhan Mantri MUDRA Yojana (PMMY) is a scheme launched by the Hon’ble Prime Minister on April 8, 2015, for providing loans of up to 10 lahks to non-corporate, non-farm small/micro enterprises.
- These loans are classified as MUDRA loans under PMMY. These loans are given by Commercial Banks, RRBs, Small Finance Banks, MFIs, and NBFCs. The borrower can approach any of the lending institutions mentioned above or can apply online through this portal www.udyamimitra.in.
- Under the aegis of PMMY, MUDRA has created three products namely 'Shishu', 'Kishore', and 'Tarun' to signify the stage of growth/development and funding needs of the beneficiary micro unit/entrepreneur and also provide a reference point for the next phase of graduation/growth.
- S/he can avail of loans for income-generating activities in the manufacturing, trading, and services sector and also for activities allied to agriculture (fishing, dairy, and food processing, etc.) across 3 loan products, viz:
- Shishu: covering loans up to Rs 50,000.
- Kishor: covering loans above Rs 50,000 and up to Rs 5 lakh.
- Tarun: covering loans above Rs 5 lakh and up to Rs 10 lakh.
SWAMIH Investment Fund
Context: The Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund I has raised Rs 15,530 crore so far.
- The Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund I has raised Rs 15,530 crore so far to provide priority debt financing for the completion of stressed, brownfield, and Real Estate Regulatory Authority (RERA)-registered residential projects that fall in the affordable, mid-income housing category.
- SWAMIH has so far provided final approval to about 130 projects with sanctions worth over Rs 12,000 crore.
- The Fund is sponsored by the Ministry of Finance, Government of India, and is managed by SBICAP Ventures Ltd., a State Bank Group company.
- Since the Fund considers first-time developers, established developers with troubled projects, developers with a poor track record of stalled projects, customer complaints and NPA accounts, and even projects where there are litigation issues, it is considered as the lender of last resort for distressed projects.
- The Fund’s presence in a project often acts as a catalyst for better collections and sales primarily in projects that were delayed for years.
- According to the Finance Ministry, SWAMIH Fund has one of the largest domestic real estate private equity teams focused only on funding and monitoring the completion of stressed housing projects.
Impact of the scheme:
- SWAMIH has so far provided final approval to about 130 projects with sanctions worth over Rs 12,000 crore.
- Due to strong controls, the Fund has been able to complete construction in 26 projects and generate returns for its investors.
- It aims to complete over 81,000 homes in the next three years across 30 tier 1 and 2 cities.
- Once these homes are constructed and completed, a large amount of capital locked up in these projects will be released. For instance, it has successfully unlocked liquidity of more than Rs 35,000 crore till now.
- Besides, it will provide employment to construction workers as well as a boost to allied industries such as steel and cement.
- Further, it will improve portfolios of banks and NBFCs, and significantly improve the economic sentiment in the nation.
Context: Recently, a function was held to commemorate the success of “SWAYATT”, an initiative to promote ‘Start-ups, Women and Youth Advantage Through e-Transactions'(SWAYATT) on Government E-Marketplace (GeM) in New Delhi.
- The initiative was launched in February 2019 under the Ministry of Commerce and Industry.
- It brings together the key stakeholders within the Indian entrepreneurial ecosystem to the Government e-Marketplace the national procurement portal.
- Progress So Far:
- Increased Business Opportunities: More than 8.5 lakh Micro and Small Enterprises (MSEs) have been registered on the GeM portal and have been able to get business of over Rs. 1.87 lakh crore spread across 68 lakh+ orders.
- Empowerment of Women: More than 1.45 lakh women MSEs have fulfilled 7.32 lakh orders worth 15,922 Crore.
- Empowering SC/STs: Approximately 43000 SC/ ST MSEs have delivered 1.35 lakh+ orders worth 2,592 Crore on the GeM portal so far.
- Market to Farmers: 105 Farmer Producer Organisations (FPOs) can now sell more than 200 Agri products directly to the Government through GeM.
What is Government e-Marketplace?
- GeM is an Online Market platform that was set up in 2016 to facilitate the procurement of goods and services by government ministries, departments, public sector undertakings (PSU), etc.
- It has been envisaged as the National Procurement Portal of India.
- It has been developed by the Directorate General of Supplies and Disposals (Ministry of Commerce and Industry) with technical support from the National E-governance Division (Ministry of Electronic and Information Technology).
- It functions under the Directorate General of Supplies and Disposals (DGS&D), Ministry of Commerce and Industry.
- GeM is a completely paperless, cashless, and system-driven e-marketplace that enables procurement of common-use goods and services with minimal human interface.
Sagar Manthan Dashboard
Context: Recently, the Ministry of Ports, Shipping and Waterways (MoPSW) launched the Sagar Manthan dashboard.
- It is the Real-time Performance Monitoring Dashboard of MoPSW that will monitor and track the progress of their projects.
- This new digital platform has integrated all the data related to the Ministry and other subsidiaries.
- Data visualization
- Real-time monitoring
- Improved communication
- Data-driven decision making
- Increased accountability.
- The dashboard is a positive development towards the Digital India vision.
- It will ensure the timely completion of projects, informed decision-making, increased efficiency & effectiveness of projects
- It will also promote risk management, resource allocation, and progress reporting.
- The launch of the ‘Sagar Manthan’ Dashboard is a development towards digitalization and transparency in the maritime transport sector which will help in the growth of the maritime sector in India.