Note4Students
From UPSC perspective, the following things are important :
Prelims level: Ordinance Factory Board
Mains level: Paper 3- Self-sufficiency in defence manufacturing
External dependence for defence equipment could turn out to be the chink in the armour of any country, literally. As one of the major importer of defence equipment, India has been struggling to wean itself away from this vulnerability. This article discusses the recent changes announced by the finance minister in defence procurement and manufacturing policy. So, what are the changes and how will these changes benefit us? Read to know more…
Promoting self-reliance: Addressing strategic and national security concern
- Recently the Finance Minister announced measures to promote self-reliance in defence production.
- This address long-standing strategic and national security concerns about the extent of India’s external dependence for its defence-preparedness.
- For most of the past decade, India had the dubious distinction of being the world’s largest arms importer.
- India accounted for about 12% of global arms imports.
- Saudi Arabia jumped to first place in 2018 and 2019, but India still takes over 9% of global imports.
- This external dependence for weapons, spares and, in some cases, even ammunition creates vulnerabilities during military crises.
- COVID-19 has, once again, focused minds on the impact of supply chain disruptions on both civil and defence sectors.
- With its security environment, its great power ambitions and its technological capacities, India should have a robust defence manufacturing capacity.
- New Defence Procurement Procedures (DPP) 2020 are under formulation.
- We now have a Chief of Defence Staff (CDS) tasked with promoting indigenous equipment in the armed forces.
Following are some of the moves declared by the government and their significance for the country
1. Encouraging private manufacturers
- The decision i) to notify a list of weapons systems for sourcing entirely from Indian manufacturers, ii) the promise to progressively expand this list iii) a separate Budget provision for domestic capital procurement- will encourage our private defence manufacturers.
- The research capacities, technological skills and quality commitment of our private defence manufacturer are often better appreciated by foreign clients for whom they are subcontractors.
- There is a range of platforms and subsystems, developed in India and qualified in trials, some of which face hurdles to their induction by our armed forces because of foreign competition.
- These include missile systems such as Akash and Nag, the Light Combat Aircraft and the Light Combat Helicopter, artillery guns, radars, electronic warfare systems and armoured vehicles.
2. Time-bound procurement
- The government has promised i) a time-bound defence procurement process, ii) overhauling trial and testing procedures iii) establishing a professional project management unit.
- To understand the significance of the above measures consider the fact below-
- Over the past five years, the Indian government has approved over 200 defence acquisition proposals, valued at over ₹4 trillion.
- But most are still in relatively early stages of processing.
- Of course, this delay now provides the opportunity to re-examine them and to prioritise those with indigenous research and development.
- The CDS could also examine them from a tri-service angle, to avoid redundancy of capacities across the services.
3. Corporatisation of Ordnance Factory Board
- Over the decades, our ordnance factories have been the backbone of indigenous supplies to our armed forces.
- Their structure, work culture and product range now need to be responsive to technology and quality demands of modern armed forces.
- Corporatisation, including public listing of some units, ensures a more efficient interface of the manufacturer with the designer and end-user.
- The factories would be better integrated into the larger defence manufacturing ecosystem.
4. Realistic specifications of desired weapon platforms
- Our defence planners will frame “realistic” specifications for their desired weapons platforms.
- These specifications should be based on the requirements of India’s defence strategy, rather than on aspirational considerations which, the Finance Minister said, may lead to a single foreign vendor.
- It is also imperative that when we import weapon systems, we should plan for the ammunitions and spares for them to be eventually manufactured in India.
- This will ensure that we are not driven to seek urgent replenishments from abroad during crises.
- The same goes for repair, maintenance and overhaul facilities and, at the next level, the upgrade of weapons platforms.
5. FDI limit increased to 74% by automatic route
- The liberalisation of foreign direct investment in defence manufacturing, raising the limit under the automatic route to 74%, should open the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
- It would also sustain domestic industrial activity in the research, design and manufacture of systems and sub-systems.
- Our companies would now get the opportunity to directly contribute to Indian defence manufacturing.
Way forward
- The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
- A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
- DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies.
- This partnership should be with a view to achieving indigenisation over a period of time for even sophisticated platforms.
- Cost evaluation has to evolve from mechanical application of the L1 (lowest financial bid) principle to prioritising indigenous content.
- The definition of indigenisation itself needs to privilege technology over value or volume.
- Investment, Indian or foreign, will be viable only if the door to defence exports is opened, with a transparent policy.
- To give private industry a level playing field for developing defence technologies, conflicts of interest, created by the role of our Defence Research and Development Organisation (DRDO) as the government’s sole adviser, developer and evaluator of technologies have to be addressed.
Consider the question, “India has been aspiring to reduce its external dependence for defence equipment but has not succeeded in doing so. Examine the challenges in the way of self-sufficiency in this area. How effective will be the recent policy changes made in meeting the goal?”
Conclusion
The government has rightly clarified that self-reliance would not be taken to overzealous extremes. The thrust for indigenous research and development will coexist with the import of cutting-edge military technologies to obviate near-term defence vulnerabilities. Of the key components of any major reform — money, method and mindset — mindset is the most critical and the most intractable. It takes a crisis to change it.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Aggregate demand
Mains level: Paper 3- Stimulus package to address demand side and supply side problems
Economic disruption caused by the corona crisis stems from both-demand side and supply side. So, the stimulus package announced was expected to address the issues on both sides. This article breaks downs the various elements of the package in demand-side as well as supply-side measures. We also know aggregate demand is not just consumption demand. So, this fact was also considered while deciding the demand-side measures.
Twin mantra of stimulus package
- 1) To ensure that human cost of the crisis is minimised, especially for those at the bottom of the pyramid.
- 2) To convert this crisis into an opportunity by implementing bold structural reforms.
- Such reforms will go beyond repairing the damage to the production capacities and enhance the overall supply response capabilities of the economy.
Impact on demand side as well as supply side
- The present crisis is far worse than both the Asian financial crisis of the late Nineties as well as the global financial crisis of 2008-09.
- It has seriously impacted both the supply and demand side of the economy.
- The government’s response has been to effectively address both these aspects.
Government’s four-fold response to address supply-side problems
1. Ensuring food security
- To ensure that the government declared agriculture and all related activities as essential services.
- This permitted the successful harvesting and efficient procurement of the critical Rabi crop.
- It also implied pumping in Rs 78,000 crore as new purchasing power in the hands of the farmers.
2. Preventing cash/liquidity crunch
- Preventing the pressing cash/liquidity crunch was necessary to avoid insolvencies and bankruptcies.
- An immediate moratorium was announced on their debt servicing obligations to commercial banks.
- This measure was reinforced for MSMEs, for whom an additional credit line of Rs 3 trillion without any fresh collateral was extended.
- MSMEs could also avail of new equity from the Rs 50,000 crore fund of funds and take advantage of the subsidiary debt facility announced by the FM.
- These measures provided succour to a large number of businesses, especially those in the services sectors like hospitality, entertainment and retail.
- The Rs 90,000 crore credit package made available to state discoms should also be included in this set of measures.
- It will prevent bankruptcies of state electricity utilities and the power producers, which would have had disastrous results.
3. Reforms in agriculture and manufacturing sector
- The third set of measures were directed to significantly improve the ecosystem for private producers, both in agriculture and manufacturing.
- Long-pending reforms to give farmers the much-needed freedom to choose their clients and for traders and exporters of agro-products to maintain necessary stocks have now been announced.
- Defence production and exports will get a new fillip with the liberalisation measures.
- Greater space will be given to private businesses in sectors in which public sector enterprises hitherto had either a monopoly or a predominant presence.
4. Credit to street vendors
- Finally, this is a measure that does not have a large fiscal footprint, but touches the lives and livelihoods of more than 50 lakh families.
- Under which street vendors all over the country have been given a credit of Rs 10,000 each for re-stocking and use as working capital.
Understanding the aggregate demand
- It is important to point out that aggregate demand is made up of- i) consumption, ii) investment iii) demand for intermediate goods.
- So, the cash-in-hand of consumers is not the only means for reversing the declining demand in the economy.
- Therefore, additional credit lines provided to MSMEs, vendors or farmers will contribute to the strengthening of aggregate demand.
Government’s response to address demand-side problems
- A significant number of measures were announced to hike consumption demand directly as well.
- Among these are:
- Rs 1.73 lakh crore for improving the incomes and welfare of the most vulnerable, including the 20 crore female Jan Dhan account holders who will receive monies directly into their bank accounts.
- Rs 50,000 additional incomes in the hands of those whose TDS and TCS were reduced by 25 per cent.
- Rs 40,000 crore additional allocation for MNREGA, which will provide jobs and succour to those returning to their villages from metros and cities.
- Rs 30,000 crore for construction workers.
- Rs 17,800 crore transferred to 12 crore farmers and Rs 13,000 crore transferred to states to finance the costs of running quarantine homes and shelters for migrant workers.
- These measures, which will directly benefit different categories of individuals, will surely raise the flagging demand — the necessary condition for triggering a fast-paced recovery in economic activity.
Consider the question “The stimulus package announced by the government in the wake of pandemic sought to address both the demand side as well as supply-side problems. Examine the various components of package and other reforms announced in the economy.”
Conclusion
Combined with the significant number of bold structural reform measures, which hold the potential to make Indian firms attain global scales and competitiveness and give the much-needed freedoms, flexibility and financial strength to our beleaguered farmers, “the package” promises to promote India’s economic recovery in the post-COVID-19 period.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Various components of the economic package
Mains level: Paper 3- Impact of pandemic on India economy.
The article broadly discusses the impact of the pandemic on the Indian economy. While the package has been declared to alleviate the economic pain, the government faces the challenge of finding the resources to plug the gaps. Though pandemic erupted from China, it successfully controlled it. This along with the its calibrated approach towards strategic progression is going to stand China in good stead.
Grappling with the “unknown unknowns”
- Several weeks before the advent of the COVID-19 pandemic, India’s Minister for External Affairs delivered a lecture.
- In the lecture, he had observed that “what defines power and determines national standing is also no longer the same. Technology, connectivity and trade are at the heart of the new contestations.”
- He did mention a point about “known unknowns”.
- But the pandemic has forced us to face the “unknown unknowns”.
- Within a few weeks, his prediction would be overtaken by a tectonic shift in the global situation thanks to a virus and a pandemic.
Impact on India’s economy
- What distinguishes the present pandemic from earlier ones is its economic impact.
- The economic impact is perhaps even more threatening than the human costs involved.
- In the case of India, all forecasts have had to be shredded.
- Job losses have been massive, specially in urban areas.
- India’s exports in the month of April, for instance, were the worst in the past 30 years.
Finding resources for the stimulus package
- Well before pandemic India had been witnessing a persistent economic downward slide.
- Prime Minister Narendra Modi’s announcement of a ₹20-lakh crore stimulus package was, hence, timely.
- Even though economists now believe that in real terms it amounts to around 2% of GDP rather than 10% .
- Finding resources for even this stimulus package will, however, not be easy.
- The Centre’s finances are not in the best of health. It has already had to resort to a second tranche of $1 billion loan from the World Bank to support COVID-19 relief measures.
- The finances of States are, to say the least, in a perilous state.
- Questions are, thus, bound to be raised as to whether adequate funds would be forthcoming for relief purposes.
China’s calibrated approach: Strategic progression
- Since its early recovery, China has followed a calibrated approach — one that stems from a policy of deliberate strategic progression conceived over the years.
- It may be worthwhile to understand the facts so as to underscore the gap that currently exists between China and India.
- In 2015, China’s President, Xi Jinping, had floated the idea of “a Community of Common Destiny of Mankind”.
- In this, he outlined China’s viewpoint on aspects such as economic globalisation and the information technology revolution.
- The Belt and Road Initiative — which encompasses policy, infrastructure, trade, financial, and people-to-people connectivity, and, implicitly also, security ties — was an adjunct to it.
- The 19th National Congress of the Communist Party of China (2017), thereafter, gave its assent, considering it essential to enable China to achieve pre-eminence status within the global order.
- Ever since, China has focused on-
- i) attaining economic and technological progress.
- ii) defining how power would be determined in the new globalised era through devising new international norms in many emerging domains such as cyber, space, artificial intelligence, etc.
- China also set about rewriting international rules, premised not so much on governing where global goods are made, but on setting standards that define production, exchange and consumption.
- China Standards 2035 plans to set new standards with regard to the Industrial Internet of Things (IoT) and define next-generation information technology and biotechnology infrastructure.
- China is hoping, to reap the “early bird” advantage, even as other industrial nations struggle to recover from the devastation caused by the COVID-19 pandemic.
- Internationalisation of Chinese standards would provide China a clear advantage by providing it an opportunity to set the standards in emerging industries such as high-end equipment manufacturing, unmanned vehicles, new materials, cybersecurity and the like.
- This would enable it gain a dominant position in the global economy.
India must plan well to cope with the China challenge
- Mounting an effective challenge to China at this time would require a well-conceived and carefully calibrated plan of action by India.
- As of now, this is not evident.
- India and China will certainly emerge from the pandemic more diminished than previously, but to varying extents.
- Each country will, no doubt, suffer an economic setback.
- But while both nations would be among the very few that would still have a positive growth rate in the near future.
- Which is 1% in the case of China and 1.8% in the case of India, according to the International Monetary Fund.
- Given the size of China’s economy, it does not translate into a massive shift in India’s favour.
Consider the question “Economies across the world have been bruised by the corona pandemic. There have also been talks of India being the beneficiary of changes in the global supply chains. In light of this, examine the issues and challenges that India may face in this regard.”
Conclusion
India would more than welcome some of the entities exiting China, but there are no “green shoots” to suggest that such a shift has, or is, about to take place. Many alternatives are available to these companies and it would be excessively optimistic on our part to hold on to the belief that India is the only alternative choice for most of them.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Solar minima and maxima
Mains level: Solar minima and maxima, its impact on space weather and earth
The sun is said to have gone into a state called the ‘solar minimum’ and is about to enter the deepest period of ‘sunshine recession’ as sunspots are virtually not visibly at all.
Practice question for Mains:
Q. What are Solar minima and maxima? Discuss its impact on space weather and the Earth.
What is a solar minimum and why is it happening now?
- Sun has a cycle that lasts on average 11 years, and right now we are at the peak of that cycle.
- Every 11 years or so, sunspots fade away, bringing a period of relative calm.
- This is called the solar minimum. And it’s a regular part of the sunspot cycle.
- While intense activity such as sunspots and solar flares subside during solar minimum, that doesn’t mean the sun becomes dull. Solar activity simply changes form.
What about Solar Maximum?
- Solar minima and maxima are the two extremes of the Sun’s 11-year and 400-year activity cycle.
- At a maximum, the Sun is peppered with sunspots, solar flares erupt, and the Sun hurls billion-ton clouds of electrified gas into space.
- Sky watchers may see more auroras, and space agencies must monitor radiation storms for astronaut protection.
- Power outages, satellite malfunctions, communication disruptions, and GPS receiver malfunctions are just a few of the things that can happen during a solar maximum.
What are its effects on Earth?
a) On space weather
- The Solar wind from coronal holes will temporarily create disturbances in the Earth’s magnetosphere, called geomagnetic storms, auroras, and disruptions to communications and navigation systems.
- The space weather during solar minimum will also affect Earth’s upper atmosphere on satellites in low Earth orbit changes.
- This means that the Earth’s upper atmosphere will cool down which is generally heated and puffed up by ultraviolet radiation from the sun.
- However, the heat at the upper atmosphere of our planet helps Earth to drag debris and keep the low Earth orbit clear of manmade space junk.
- Apart from this, the solar minimum will change the space weather significantly which will lead to an increase in the number of galactic cosmic rays that reach Earth’s upper atmosphere.
- These Galactic cosmic rays are high energy particles which are a result of distant supernova explosions and other violent events in the galaxy.
b) On astronauts
- According to NASA the sun’s magnetic field weakens and provides less shielding from these cosmic rays during a solar minimum which will directly increase the threat to astronauts travelling through space.
- This may cause health risks to astronauts travelling through space as the sun’s magnetic field weakens and provides less shielding from these cosmic rays.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: WHO
Mains level: Losing credibility of WHO in COVID-19 times
India would now be playing a more prominent role at the World Health Organisation (WHO), with Union Health Minister taking charge as chairman of the WHO Executive Board at its 147th session. Dr Harsh Vardhan would succeed Dr Hiroki Nakatani of Japan.
Practice question for Mains:
Q. The World Health Organisation (WHO) had “missed the call” on the COVID-19 pandemic. Critically comment with context to the ongoing spat between the US and China.
About WHO
- The WHO is a specialized agency of the United Nations responsible for international public health.
- It is part of the U.N. Sustainable Development Group.
- The WHO Constitution, which establishes the agency’s governing structure and principles, states its main objective as ensuring “the attainment by all peoples of the highest possible level of health.”
- It is headquartered in Geneva, Switzerland, with six semi-autonomous regional offices and 150 field offices worldwide.
The WHO Executive Board
- The WHO is governed by two decision-making bodies — the World Health Assembly and the Executive Board.
- The Board is composed of 34 members technically qualified in the field of health, with members being elected for three-year terms.
- The Health Assembly is the WHO’s decision-making body and consists of 194 Member States.
- The Board chairman’s post is held by rotation for one year by each of the WHO’s six regional groups: African Region, Region of the Americas, South-East Asia Region, European Region, Eastern Mediterranean Region, and Western Pacific Region.
Functions of the Board
- The main functions of the Board are to give effect to the decisions and policies of the Health Assembly, to advise it and generally to facilitate its work.
- The Board and the Assembly create a forum for debate on health issues and for addressing concerns raised by the Member States.
- Both the Board and the Assembly produce three kinds of documents — Resolutions and Decisions passed by the two bodies, Official Records as published in WHO Official publications, and Documents that are presented “in session” of the two bodies.
Back2Basics: India at the WHO
- India became a party to the WHO Constitution on 12 January 1948.
- The first session of the South East Asia Regional Committee was held on October 4-5, 1948 in the office of the Indian Minister of Health, and was inaugurated by Jawaharlal Nehru, the first PM.
- The first Regional Director for South-East Asia was an Indian, Dr Chandra Mani, who served between 1948-1968.
- Currently, the post has again been occupied by an Indian appointee, Dr Poonam Khetrapal Singh, who has been in office since 2014.
- Since 2019, Dr Soumya Swaminathan has been the WHO’s, Chief Scientist.
Also read:
[Burning Issue] World Health Organization (WHO) And Coronavirus Handling
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Protocol on Inland Water Transit
Mains level: India's north-east connectivity through Bangladesh
India and Bangladesh have opened a new chapter in regional connectivity by expanding the scope of inland water transport mechanism that would enable to boost trade in the region.
Note all the ports mentioned in the newscard and the image. Also, keep a tab on river systems of North east India.
What is the news?
- The Standing Committee on the Protocol and the Shipping Secretary level Talks are the institutional arrangements to discuss and make the Protocol more effective.
- During the latest discussions key decisions were taken on the extension of protocol routes, the inclusion of new routes and declaration of new Ports of Call to facilitate trade between the two countries.
New routes
The number of Indo Bangladesh Protocol (IBP) routes is being increased from 8 to 10 and new locations are also added to the existing routes: –
1) Inclusion of Sonamura- Daudkhandi stretch of Gumti river (93 Km) as IBP route:
- It will improve the connectivity of Tripura and adjoining States with Indian and Bangladesh`s economic centres and will help the hinterland of both the countries.
2) Rajshahi-Dhulian-Rajshahi Routes and its extension up to Aricha (270 km)
- It will help the augmentation of infrastructure in Bangladesh as it would reduce the transportation cost of stone chips/aggregate to northern part of Bangladesh through this route. It will also decongest the Land Custom Stations on both sides.
Ports of Call
- Port of call means an intermediate stop for a ship on its scheduled journey for cargo operation or taking on supplies or fuel.
- The following are existing Ports of Call in the two countries on Indo-Bangladesh Protocol (IBP) route:
| India |
Kolkata |
Haldia |
Pandu |
Karimganj |
Silghat |
Dhubri |
| Bangladesh |
Narayanganj |
Khulna |
Mongla |
Sirajganj |
Ashuganj |
Pangaon |
- Newly added: Two more extended Ports of Call have been added
- Inclusion of Jogigopha in India and Bahadurabad in Bangladesh as new Port of Call will provide connectivity to Meghalaya, Assam and Bhutan.
About the Protocol on Inland Water Transit
- Bangladesh and India have a long-standing and time-tested Protocol on Transit and Trade through inland waterways of both countries.
- This Protocol, which was first signed in 1972 (immediately after independence of Bangladesh), is a reflection of shared history and friendship between the two countries.
- It was last renewed in 2015 for five years with a provision for its automatic renewal for a further period of five years giving long term assurance to various stakeholders.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Scheme for formalization of Micro Food Processing Enterprises (FME)
Mains level: Food processing industry and the required reforms
The Union Cabinet has given its approval to a new Centrally Sponsored Scheme – “Scheme for Formalization of Micro food processing Enterprises (FME)” for the Unorganized Sector on All India basis.
Practice question for mains:
Q. Discuss the scope and significance of Food Processing Industries in India. Also discuss how can it benefit India becoming the global food store.
Background
- There are about 25 lakh unregistered food processing enterprises which constitute 98% of the sector and are unorganized and informal.
- Nearly 66 % of these units are located in rural areas and about 80% of them are family-based enterprises.
- This sector faces a number of challenges including the inability to access credit, high cost of institutional credit, lack of access to modern technology, inability to integrate with the food supply chain and compliance with the health & safety standards.
- Strengthening this segment will lead to a reduction in wastage, creation of off-farm job opportunities and aid in achieving the overarching Government objective of doubling farmers’ income.
Details of the Scheme for FME
- The Union Cabinet has sanctioned an outlay of Rs.10,000 crore.
- The expenditure will be shared by GOI and the States in the ratio of 60:40.
Salient features
- It will be a Centrally Sponsored Scheme. Expenditure to be shared by the Government of India and States at 60:40.
- 2, 00,000 micro-enterprises are to be assisted with credit linked subsidy.
- The scheme will be implemented over a 5 year period from 2020-21 to 2024-25.
- Cluster approach.
- Focus on perishables.
Support for Individual micro-units:
- Micro enterprises will get credit-linked subsidy @ 35% of the eligible project cost with a ceiling of Rs.10 lakh.
- The beneficiary contribution will be a minimum of 10% and balance from the loan.
- On-site skill training & Handholding for DPR and technical upgradation.
Implementation strategy
- The scheme will be rolled out on All India basis.
- Seed capital will be given to SHGs (@Rs. 4 lakh per SHG) for the loan to members for working capital and small tools.
- Grant will be provided to FPOs for backward/forward linkages, common infrastructure, packaging, marketing & branding.
Administrative and Implementation Mechanisms
- The Scheme would be monitored at Centre by an Inter-Ministerial Empowered Committee (IMEC) under the Chairmanship of Minister, FPI.
- A State/ UT Level Committee (SLC) chaired by the Chief Secretary will monitor and sanction/ recommend proposals for expansion of micro-units and setting up of new units by the SHGs/ FPOs/ Cooperatives.
- The States/ UTs will prepare Annual Action Plans covering various activities for implementation of the scheme, which will be approved by the Government of India.
- A third-party evaluation and mid-term review mechanism would be built in the programme.
- The State/ UT Government will notify a Nodal Department and Agency for implementation of the Scheme.
Establishment of a National Portal & MIS
- A National level portal would be set-up wherein the applicants/ individual enterprise could apply to participate in the Scheme.
- All the scheme activities would be undertaken on the National portal.
Benefits of the Scheme
- Nearly eight lakh micro-enterprises will benefit through access to information, better exposure and formalization.
- Credit linked subsidy support and hand-holding will be extended to 2,00,000 micro-enterprises for expansion and upgradation.
- It will enable them to formalize, grow and become competitive.
- The project is likely to generate nine lakh skilled and semi-skilled jobs.
- The scheme envisages increased access to credit by existing micro food processing entrepreneurs, women entrepreneurs and entrepreneurs in the Aspirational Districts.
- Better integration with organized markets.
- Increased access to common services like sorting, grading, processing, packaging, storage etc.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Emergency Credit Line Guarantee Scheme (ECLGS)
Mains level: Reviving MSME Sector of India
The Union Cabinet has given its approval for the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs and MUDRA borrowers.
Practice question for Mains :
Q. Discuss how the nationwide lockdown to control the coronavirus outbreak has led to the resurfacing of inherent bottlenecks in India’s MSME Sector.
About ECLGS
- Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs. 3 lakh crore to eligible MSMEs and interested MUDRA borrowers.
- The credit will be provided in the form of a Guaranteed Emergency Credit Line (GECL) facility.
- The Scheme would be applicable to all loans sanctioned under GECL Facility during the period from the date of announcement of the Scheme to 31.10.2020.
Aims and objectives
- The Scheme aims at mitigating the economic distress faced by MSMEs by providing them additional funding in the form of a fully guaranteed emergency credit line.
- The main objective is to provide an incentive to Member Lending Institutions (MLIs), i.e., Banks, Financial Institutions (FIs) and NBFCs to increase access to, and enable the availability of additional funding facility to MSME borrowers.
- It aims to provide a 100 per cent guarantee for any losses suffered by them due to non-repayment of the GECL funding by borrowers.
Salient features
- The entire funding provided under GECL shall be provided with a 100% credit guarantee by NCGTC to MLIs under ECLGS.
- Tenor of the loan under Scheme shall be four years with a moratorium period of one year on the principal amount.
- No Guarantee Fee shall be charged by NCGTC from the Member Lending Institutions (MLIs) under the Scheme.
- Interest rates under the Scheme shall be capped at 9.25% for banks and FIs, and at 14% for NBFCs.
Benefits of the scheme
- The scheme aims to mitigate the distress caused by COVID-19 and the consequent lockdown, which has severely impacted manufacturing and other activities in the MSME sector.
- The scheme is expected to provide credit to the sector at a low cost, thereby enabling MSMEs to meet their operational liabilities and restart their businesses.
- By supporting MSMEs to continue functioning during the current unprecedented situation, the Scheme is also expected to have a positive impact on the economy and support its revival.
Must read
[Burning Issues] Fiscal Push for MSME Sector of India (Part I)
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Pradhan Mantri Matsya Sampada Yojana
Mains level: Fisheries sector of India
The Union Cabinet has approved the “Pradhan Mantri Matsya Sampada Yojana”.
Practice question for Mains:
Q. Only after the Indian Independence, has fisheries together with agriculture been recognized as an important sector. Examine the scope & challenges of aquaculture in India.
About the PMMSY
- The PMMSY aims to bring about the Blue Revolution through sustainable and responsible development of the fisheries sector in India.
- With the scheme, highest ever investment of Rs. 20050 crores are being made in the fisheries sector.
- It will be implemented over a period of 5 years from FY 2020-21 to FY 2024-25 in all States/Union Territories.
Aims and objectives of PMMSY
- Harnessing of fisheries potential in a sustainable, responsible, inclusive and equitable manner
- Enhancing of fish production and productivity through expansion, intensification, diversification and productive utilization of land and water
- Modernizing and strengthening of the value chain – post-harvest management and quality improvement
- Doubling fishers and fish farmers incomes and generation of employment
- Enhancing contribution to Agriculture GVA and exports
- Social, physical and economic security for fishers and fish farmers
- Robust fisheries management and regulatory framework
Implementation strategy
The PMMSY will be implemented as an umbrella scheme with two separate components namely:
(a) Central Sector Scheme and
(b) Centrally Sponsored Scheme
- Majority of the activities under the Scheme would be implemented with the active participation of States/UTs.
- A well-structured implementation framework would be established for the effective planning and implementation of PMMSY.
- For optimal outcomes, ‘Cluster or area-based approach’ would be followed with requisite forward and backward linkages and end to end solutions.
Back2Basics: Fisheries sector of India
- Fisheries and aquaculture are an important source of food, nutrition, employment and income in India.
- The sector provides livelihood to more than 20 million fishers and fish farmers at the primary level and twice the number along the value chain.
- The Gross Value Added (GVA) of the fisheries sector in the national economy during 2018-19 stood at 1.24% of the total National GVA and 7.28% share of Agricultural GVA.
- The sector has immense potential to double the fishers and fish farmers’ incomes as envisioned by government and usher in economic prosperity.
- Fisheries sector in India has shown impressive growth with an average annual growth rate of 10.88% during the year from 2014-15 to 2018-19.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Rajiv Gandhi Kisan Nyaya Yojana
Mains level: Various income support mechanisms for farmer
The Rajiv Gandhi Kisan Nyaya Yojana has been approved by the Chhattisgarh state govt. on 19th death anniversary of the former Prime Minister, yesterday.
Practice question for Mains:
Q. Various income support mechanisms for farmers are more of a populist measure with no impact on ground zero. Critically examine.
Rajiv Gandhi Kisan Nyaya Yojana
- It is a new income support programme under which Farmers in Chhattisgarh would get up to ₹13,000 an acre a year.
- Rice and maize farmers would get ₹10,000 an acre while sugarcane farmers would get ₹13,000. The money would be distributed in four instalments.
- In the first instalment, ₹1,500 crores would be distributed among 18 lakh farmers, more than 80% of the small and marginal.
- The scheme would cover rice, maize and sugarcane farmers to begin with, and would expand to other crops later.
Benefits of the scheme
- This will help farmers through the agricultural cycle and hopefully help with extension activities.
- The injection of cash among the rural population would generate a demand that shielded Chhattisgarh from the economic slowdown last year.
- This will reduce distress migration, and enhance food security for the State.
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