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FDI in Indian economy

Why Surge in FPI in India?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: FDI and FPI

Mains level: Paper 3- Investment in India

While emerging economies have been facing the crunch of foreign capital due to the pandemic, India is witnessing the surge of FPI: a sign of investors confidence in the economy. 

Surge in FDI: Sign of trust India has built

  • In the September quarter, FDI doubled year-on-year to $28.1 billion dollars.
  • While foreign portfolio investor (FPI) inflows across emerging economies witnessed a decline due to the pandemic, India recorded a surge to $13.5 billion – a testimony to investor confidence in India’s growth story.
  • This surge in foreign funds amid the pandemic has been possible because of the continuous effort of the government, businesses, and agencies to make India a sought-after destination.

Strategies used by the government

Various steps described below signalled the government’s intention to open up the economy to investments.

Such steps include the following:-

  • Allowing NRI’s to acquire up to 100% stake in Air India.
  • 26% FDI in the digital sector.
  • Permitting 100% FDI through automatic route in the coal mining sector.
  • 100% FDI for insurance intermediaries.
  • The National Infrastructure Pipeline, a 13 trillion project to open up avenues for infrastructure investment for global investors.
  • Apart from these steps, the more recent Production Linked Incentive (PLI) scheme worth an estimated 1.5 lakh crore is also a testimony to the government’s intention to encourage entrepreneurship and investment in the country.
  • Steps to skill-train 3 lakh migrant workers the country to realign the rural youth towards industry-relevant jobs is also a step in the right direction.

Reducing dependency

  • The urgency the Indian government has shown to reduce dependency on China as a hub of the global supply chain.
  • Also, providing an enabling alternative environment has struck the right chord with the world as we see global biggies contemplating a move to India.

Consider the question “India witnessed a steady flow of foreign capital while the world was battling pandemic. What are the factors responsible for this? What are the risks associated with such capital in the economy?”

Conclusion

While persisting with its efforts to attract the capital, the government also needs to focus on improving the productivity and export competitiveness of the economy.


Back2basics: Difference between FDI and FII

  • FDI is an investment that a parent company makes in a foreign country.
  • On the contrary, FII is an investment made by an investor in the markets of a foreign nation.
  • While FIIs are short-term investments, the FDI’s are long term investment.
  • FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily.

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Foreign Policy Watch: India-United States

Building political consensus on climate change

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Geopolitics of climate change and India's role in it

With the victory of Joe Biden in the U.S. Presidential election geopolitics of the climate change is headed for a new reset. The article examines the role India could play in the changing geopolitical realities and also spells out the challenge for India.

India’s role in geopolitics of climate change

  • India is probably better prepared than in the past when India was widely seen as part of the problem on climate issues.
  • But the urgency of addressing climate change is likely to intensify for two reasons:
  • 1) The election of Biden as US President.
  • 2) The prospect of cooperation on climate change between Washington and Beijing.
  • India’s ability to influence the new geopolitics of climate change will depend a lot on its domestic political resilience in adapting to the new imperatives.
  • While a democratic India struggles to deal with the new internal conflicts centred on climate, China has crafted a new template of “coercive environmentalism”.
  • The Chinese model of coercive environmentalism is finding an echo among some Western environmentalists.
  • Whatever the merits of authoritarian environmentalism, it has little political chance of being replicated in democracies.

Cooperation on climate change between the US and China

  • Modernising liberal environmentalism is the essence of president-elect Biden’s commitment to integrating the climate question with the domestic policy agenda.
  • “Climate justice” is another important objective of Biden’s domestic environmental policy.
  • It is based on the recognition that pollution and other ecological problems have a greater impact on the poor and minorities.
  • Although coercive and liberal approaches to managing climate change are different, the US and China share some important objectives.
  • Both China and the US (along with the West) recognise the urgency of the challenge.
  • Beijing and Washington are also racing to develop new technologies that will constitute the foundations of the green economic future.
  • Both have zeroed in on industrial policy to achieve their climate objectives.
  • For Xi and Biden, gaining the leadership of the global movement for mitigating climate change is a strategic mission.
  • Washington and Beijing understand that climate politics is in the end about rearranging the global order.
  • Consequently, the new direction of Chinese and US policies (in partnership with Europe and Japan) will inevitably put pressure on other states for climate actions.

Conclusion

India’s real test on climate change is on building a new domestic consensus that can address the economic and political costs associated with an internal adjustment to the prospect of a great global reset.

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Primary and Secondary Education – RTE, Education Policy, SEQI, RMSA, Committee Reports, etc.

Debate over Coding for Kids

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not Much

Mains level: Coding in school curriculum

Various edutech startups have been in the news for the past several months over the debate on the right age for children to start learning to code.

Q.The National Education Policy, 2020 proposal for “coding activities” reads like Macaulay’s minute for English education in the early 19th century. Examine.

What is Coding?

  • Computers have their own language called programming language which tells them what to do.
  • Coding is the process of using a programming language to get a computer to behave how you want it to.
  • In a broader sense, it is the process of designing and building an executable computer program to accomplish a specific computing result or to perform a specific task.

In today’s digital age, most toddlers in their diapers, learn to swipe and click before they can speak apparently or walk. What an irony!

Coding for children

  • In the age of digital revolution, India was able to produce a huge army of coders and programmers —essentially people who could create computer software.
  • As computing devices have taken over every aspect of life, the need for good programmers and coders has been increasing relentlessly.
  • This led to a trend to teach coding and programming to young students since their school ages.
  • In recent years, platforms and companies have started to claim that kids as young as those in elementary school must begin to learn to code.

Proponents for coding

  • Leaders of technology companies around the world have pushed for coding to be included as a subject in middle or higher secondary school for students who may be interested to learn.
  • In 2018, Microsoft co-founder Bill Gates wrote in a blog post that everyone could benefit from learning the basics of computer science.
  • The idea was to make coding as simple and accessible as the new age “mother tongue” for young children.

Why should children learn to code?

  • Coding is a basic literacy in the digital age, and it is important for kids to understand and be able to work with and understand the technology around them.
  • It fosters creativity. By experimenting, children learn and strengthen their creativity. It enhances their problem-solving capability.
  • It helps children to be able to visualize abstract concepts, lets them apply math to real-world situations, and makes math fun and creative. Coding is present in many of today’s STEM programs.
  • Children who learn to code understand how to plan and organize thoughts.  This can lead to better writing skills that can be built upon as coding skills develop over time.

Criticisms of early age coding

  • A metaphor that is often used is that children are being made to ride a bicycle before they have even learnt to walk.
  • There’s a reason why in mathematics addition is taught first, then subtraction, then multiplication, and then division.
  • It is necessary to learn several elements of mathematics and logical thinking before one can code.

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Climate Change Impact on India and World – International Reports, Key Observations, etc.

Climate Change Performance Index (CCPI) 2020

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Climate Change Performance Index (CCPI)

Mains level: India's committment for climate action

India ranked high along with the European Union and the United Kingdom in the latest edition of the Climate Change Performance Index (CCPI) 2020 released by non-profit Germanwatch.

It’s a very rare feat that India has performed so better in any climate-related index. We can use this data to highlight India’s dedicated efforts for Paris Agreement.

Climate Change Performance Index (CCPI)

  • The CCPI is an independent monitoring tool for tracking countries’ climate protection performance. It has been published annually since 2005.
  • It evaluates 57 countries and the European Union, which together generate 90%+ of global greenhouse gas emissions.
  • Using standardised criteria, the CCPI looks at four categories, with 14 indicators: Greenhouse Gas Emissions (40% of the overall score), Renewable Energy (20%), Energy Use (20%), and Climate Policy (20%).
  • The CCPI’s unique climate policy section evaluates countries’ progress in implementing policies working towards achieving the Paris Agreement goals.

Global scenario

  • No country was doing enough to meet the goals of the 2015 Paris Agreement, according to the index.
  • Six G20 countries were ranked among very low performers. The United States, with a rank of 61, was the worst performer.

India’s performance

  • India, for the second time in a row, continued to remain in the top 10. The country scored 63.98 points out of 100.
  • It received high ratings on all CCPI indicators except ‘renewable energy’, where it was categorised as having a ‘medium’ performance.
  • Last year, India had been ranked at the ninth position, with an overall score of 66.02.
  • India needed to focus more on renewable energy, both, as a mitigation strategy and for its post-novel coronavirus disease (COVID-19) green recovery, the report said.

Renewable energy

  • No country was rated very high on indicators defining the ‘renewable energy’ category.
  • India has been ranked at 27th out of 57 countries under the category this time. Last year, it was ranked at 26th.
  • India’s performance has been rated as ‘medium’ for its current share of renewable energy. Its performance for the development of renewable energy supply during the last year was rated as ‘high’.

A positive sign for India

  • India’s improved policy framework has been responsible for the country’s good performance in this global index. However, the report underlined the need for long-term planning.
  • Unlike the other two ‘BASIC’ countries of China and South Africa, India is yet to announce its mitigation strategy.

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Skilling India – Skill India Mission,PMKVY, NSDC, etc.

Investing in India’s youth

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Right to Education Act, Skill India Mission

Mains level: Paper 2- Skill development of youth in India

Significant progress has been made in India on the skill development front. However, there are many challenges that are needed to be tackled through policy measures and their effective implementation. The article deals with the issue.

Progress in skill development in India

  • Evidence shows that many people develop 21st-century skills on the job, or from courses that focus on practical application of skills, rather than in schools.
  • India has laid the foundation for delivering on the vision of making quality skills development programmes available to the youth.
  • Vocational education can be a route for many to gain specific skillsets, such education formats are referred to as Technical and Vocational Education and Training (TVET).
  • The National Skill Development Policy was launched in 2009 and revamped in 2015, recognising the challenge of skilling with speed and high standards.
  • The Skill India Mission was launched soon after, with the vision for making India the “skill capital” of the world.

Key finding and recommendations of the UNESCO’s State of the Education Report for India

  • The report focuses on vocational education and training and showcases the growth of the skills development sector.
  • It also provides practical recommendations to ensure that policy is effectively implemented.
  • One of the biggest challenges for expanding the reach of TVET-related courses has been the lack of aspiration and stigma attached to jobs such as carpentry and tailoring.
  • Considerable effort, including information campaigns involving youth role models, would help in improving the image of vocational education.
  • At the same time, common myths around TVET need to be debunked.
  • Research is now proving that TVET graduates for entry level jobs can get paid as much as university graduates.
  • Moreover, students from vocational streams typically take less time to find jobs as compared to university graduates.
  • The report emphasises the need for expanding evidence-based research.
  • High-quality research based on careful data-gathering and analytics can add value to all aspects of TVET planning and delivery.

Emphasis on vocational education in NEP

  • The new National Education Policy (NEP) aims to provide vocational education to 50% of all learners by 2025.
  • Schools are encouraged to provide students access to vocational education from Grade 6 onwards and to offer courses that are aligned to the local economies and can benefit local communities.
  • For the vision of the NEP to be fulfilled, a robust coordination mechanism for inter-ministerial cooperation is necessary for bringing the skills development and vocational education systems together.

Conclusion

Effective implementation of the policies for skill development is essential for capitalising on the country’s demographic dividend.

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Wildlife Conservation Efforts

Eco-ducts or Eco-bridges and their significance

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Eco-bridges

Mains level: Road accidents and wildlife

Ramnagar Forest Division in Nainital district, Uttarakhand, recently built its first eco-bridge for reptiles and smaller mammals.

Q.Discuss how Eco-ducts or eco-bridges provide the best alternative for wildlife connectivity which is disrupted because of manmade highways. Also, discuss various challenges in building such bridges.

What are Eco-bridges?

  • Eco-ducts or eco-bridges aim to enhance wildlife connectivity that can be disrupted because of highways or logging.
  • These include canopy bridges (usually for monkeys, squirrels and other arboreal species); concrete underpasses or overpass tunnels or viaducts (usually for larger animals); and amphibian tunnels or culverts.
  • Usually, these bridges are overlaid with planting from the area to give it a contiguous look with the landscape.

Why need such bridges?

  • There are many roadkills on this route, especially of reptiles such as the monitor lizard.
  • The bridge is an awareness-building mechanism for this very congested tourist route.
  • These bridges are a way to see how we can preserve the ecosystem necessary for reptiles that feed on insects, for snakes that feed on reptiles, and for eagles that feed on snakes.

Need of the hour

  • A 2020 study by the Wildlife Institute of India (WII) noted that nearly 50,000 km of road projects have been identified for construction over the next five to six years.
  • Many highways are being upgraded to four lanes.
  • The National Tiger Conservation Authority had identified three major sites that were cutting across animal corridors.
  • These including National Highway 37 through the Kaziranga-Karbi Anglong landscape in Assam, and State Highway 33 through the Nagarhole Tiger Reserve in Karnataka.

Some considerations

  • The span and distribution of eco-bridges should depend on animal movement patterns.
  • The bigger bridges will see sambar, spotted deer, nilgai, wild pig using them, while for tigers or leopards if the bridge is 5m or 500 m, it doesn’t bother them.
  • But some animals like the deers, which prefer closed habitats, need smaller bridges.

Some successes

  • The observation on NH 44, which intersects Kanha-Pench and Pench-Navegaon-Nagzira corridors in various sections, is a success.
  • With five animal underpasses and four minor bridges on the 6.6-km road within the forests, it’s one of India’s success stories.

Such bridges in news

  • One of the largest underpasses – 1.4km – for animal conservation in India is being built along the Madhya Pradesh-Maharashtra border.
  • Other proposals include the Chennai-Bangalore National Highway, in the Hosur-Krishnagiri segment, near reserve forests for elephant crossings, and in the Tadoba-Andhari Tiger Reserve in Chandrapur, Maharashtra.

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Tribes in News

Who are the Tharu Tribals?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Tharu tribals

Mains level: Tourism development in tribal circuits

The Uttar Pradesh government has recently embarked upon a scheme to take the unique culture of its ethnic Tharu tribe across the world.

The Terai or Tarai is a lowland region in northern India and southern Nepal that lies south of the outer foothills of the Himalayas, the Sivalik Hills, and north of the Indo-Gangetic Plain. This lowland belt is characterized by tall grasslands, scrub savannah, sal forests and clay rich swamps.

Tharu Tribals

  • The community belongs to the Terai lowlands, amid the Shivaliks of lower Himalayas. Most of them are forest dwellers and some practised agriculture.
  • The word Tharu is believed to be derived from their, meaning followers of Theravada Buddhism.
  • The Tharus live in both India and Nepal. In the Indian Terai, they live mostly in Uttarakhand, Uttar Pradesh, and Bihar.
  • According to the 2011 census, the Scheduled Tribe population in Uttar Pradesh was more than 11 lakh; this number is estimated to have crossed 20 lakh now.
  • The biggest chunk of this tribal population is made up of Tharus.
  • Members of the tribe survive on wheat, corn and vegetables are grown close to their homes. A majority still lives off the forest.

Tharu language, food, and culture

  • They speak various dialects of Tharu, a language of the Indo-Aryan subgroup, and variants of Hindi, Urdu, and Awadhi.
  • In central Nepal, they speak a variant of Bhojpuri, while in eastern Nepal, they speak a variant of Maithili.
  • Tharus worship Lord Shiva as Mahadev and call their supreme being “Narayan”, who they believe is the provider of sunshine, rain, and harvests.
  • Tharu women have stronger property rights than is allowed to women in mainstream North Indian Hindu custom.
  • Standard items on the Tharu plate are bagiya or dhikri – which is a steamed dish of rice flour that is eaten with chutney or curry – and ghonghi, an edible snail that is cooked in a curry made of coriander, chili, garlic, and onion.

What is this scheme about?

  • The UP government is working to connect Tharu villages in the districts of Balrampur, Bahraich, Lakhimpur and Pilibhit bordering Nepal, with the homestay scheme of the UP Forest Department.
  • The idea is to offer tourists an experience of living in the natural Tharu habitat, in traditional huts made of grass collected mainly from the forests.
  • Tharu homeowners will be able to charge tourists directly for the accommodation and home-cooked meals.
  • The government expects both domestic and international tourists to avail of the opportunity to obtain a taste of the special Tharu culture by staying with them, observing their lifestyle, food habits, and attire.

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Nuclear Diplomacy and Disarmament

What is Havana Syndrome?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Havana syndrome

Mains level: Threats of microwave warfare

Nearly four years after a mysterious neurological illness started to affect American diplomats in Cuba, China, and other countries, a report has found “directed” microwave radiation to be its “plausible” cause.

Q.Microwave warfare is the new nuke. Discuss.

The ‘Havana syndrome’

  • In late 2016, US diplomats in Havana reported feeling ill after hearing strange sounds and experiencing odd physical sensations in their hotel rooms or homes.
  • The symptoms included nausea, severe headaches, fatigue, dizziness, sleep problems, and hearing loss, which have since come to be known as “Havana Syndrome”.
  • Cuba had denied any knowledge of the illnesses even though the US had accused it of carrying out “sonic attacks”, leading to an increase in tensions.

Possible factor: Microwave Weapons

  • “Microwave weapons” are supposed to be a type of direct energy weapons, which aim highly focused energy in the form of sonic, laser, or microwaves, at a target.
  • People exposed to high-intensity microwave pulses have reported a clicking or buzzing sound as if seeming to be coming from within your head.
  • It can have both acute and long-term effects — without leaving signs of physical damage.
  • These weapons are considered to be the cause of the “syndrome” whose symptoms include nausea, dizziness, fatigue, and cognitive difficulties.

How did researchers deduce that?

  • The researchers have examined four possibilities to explain the symptoms — infection, chemicals, psychological factors and microwave energy.
  • The experts examined the symptoms of about 40 government employees.
  • The report concluded that directed pulsed RF (radio frequency) energy appears to be the most plausible mechanism in explaining these cases among those that the committee considered.

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Policy Wise: India’s Power Sector

How should India navigate future energy transition?

Note4Students

From UPSC perspective, the following things are important :

Prelims level: International Energy Agency

Mains level: Paper 3- India's transition to renewable and challenges it faces

The article is based on the book by Daniel Yergin, titled ” The New Map: Energy, Climate and the Clash of Nations”. The book throws some questions to countries dependent on oil and suggests the framework for their transition to renewable.

Six broad themes underlying the energy transition

  • The first is the US shale revolution, which transformed the US from a major importer of oil and gas to a significant exporter.
  • The second is the leveraging by Russia of its gas exports to compel former members of the Soviet Union to stay within its sphere of influence and to embrace China into an energy partnership.
  • The third is China’s assertion of its rights over the South China Seas — a critical maritime route for its energy imports and the Belt and Road initiative;
  • The fourth is sectarian strife (Sunni/Shia) in the Middle East which, compounded by volatile and falling oil prices, has brought the region to the edge;
  • The fifth is the Paris climate summit and its impact on public sentiment, investment decisions, corporate governance and regulatory norms.
  • Sixth is the consequential impact of the manifold and impressive advancement of clean energy technologies.

Questions for India

  • The ongoing transition in the energy world raises several questions for India.
  • How might they impact its objective to provide reliable, affordable, clean and universal access to energy?
  • Who will bear the costs of the transition — in particular, the costs of retrofitting industrial infrastructure and upgrading the power grids.
  • How can it prevent the “perfect storm” of high unemployment due to laid-off coal workers and stranded assets thermal power plants, slowed economic growth and environmental degradation?
  • How realistic is a green transition for an economy almost totally dependent on fossil fuels?

Three policy initiatives for the government

1) Securing favourable terms with oil suppliers

  • The government leverage its buyer strength to secure “most favoured” terms of trade for crude supplies.
  • In this regard, they bring out one development that plays to India’s advantage — the onset of “peak oil demand” (that is, demand will plateau before supply depletes).
  • However, there is no consensus on the timing of peak demand.

2) Develop own systems for photovoltaics (PVs) and batteries

  • India must develop its own world-scale, competitive, manufacturing systems for photovoltaics (PVs) and battery storage.
  • Otherwise, India will not be able to provide affordable solar units unless it accepts the further deepening of dependence on Chinese imports.
  • Currently, China manufactures 75 per cent of the world’s lithium batteries; 70 per cent of solar cells; 95 per cent of solar wafers and it controls 60 per cent of the production of poly silica.
  • China is also looking to secure a chokehold over several strategic minerals (cobalt, nickel).

3) Prepare a clean energy technology strategy

  • Technology is the answer to the energy transition.
  • That is what will bring the system to the tipping point of radical change.
  • China has placed clean energy R&D at the forefront of its “Plan 2025”.
  • The India strategy should identify relevant “breakthrough technologies”, establish the funding mechanisms and create the ecosystem for partnerships (domestic and international).

Conclusion

As an economy which is energy import-dependent, fossil-fuel-based India must balance between the rising demand for energy and an unhealthily strong linkage between this demand and environmental pollution.

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

Diversification of output to overcome the MSP trap

Note4Students

From UPSC perspective, the following things are important :

Prelims level: MSP

Mains level: Paper 3- Problems faced by the Punjab farmers and issue of MSP

The article analyses the state of agriculture in Punjab and the its dependace on the MSP regime and suggest the diversification as a solution to the MSP trap.

Punjab’s role in Green Revolution

  • India was desperately short of grains in 1965, and heavily dependent on PL 480 imports from the US against rupee payments, as the country did not have enough foreign exchange to buy wheat at global markets.
  • The entire foreign exchange reserves of the country at the time could not help it purchase more than 7 MMT of grains.
  • It is against this backdrop that the minimum support price (MSP) system was devised in 1965.

 India’s current grains management system: Issue of excess grains

  • Today, the Food Corporation of India (FCI) stocks grains touched 97 MMT in June this year against a buffer stock norm of 41.2 MMT.
  • The economic cost of that excess grain, beyond the buffer stock norm, was more than Rs 1,80,000 crore, a dead capital locked in without much purpose.
  • That’s the situation of the current grain management system based on MSP and open ended procurement.

Decline in Punjab’s economic level

  •  In 1966 Punjab had the highest per capita income.
  • Punjab’s position fell to 13th in 2018-19.
  • There are several reasons behind this deterioration, ranging from lack of industrialisation to not catching up even with respect to the modern services sector like IT, financial services.

What explains Punjab’s prosperity

  • Punjab’s agriculture is blessed with almost 99 per cent irrigation against an all-India average of little less than 50 per cent.
  • The average landholding in Punjab is 3.62 hectare (ha) as against an all-India average of 1.08 ha.
  • Punjab’s fertiliser consumption per ha is about 212 kg vis-à-vis an all-India level of 135 kg/ha.
  • The productivity levels of wheat and rice in Punjab stand at 5 tonnes/ha and 4 tonnes/ha respectively, against an all-India average of 3.5t/ha and 2.6t/ha.

Assesing Punjab’s real contribution to income and agriculture

  • In Punjab, the total farm families are just 1.09 million, a fraction of the all-India total of 146.45 million.
  •  The overall subsidy, from just power and fertilisers would amount to roughly Rs 13,275 crores.
  • That means each farm household in Punjab got a subsidy of about Rs 1.22 lakh in 2019-20.
  • This is the highest subsidy for a farm household in India.
  • Let’s not forget that the average income of the Punjab farm household is the highest in India.[2.5 time’s the India’s average].
  • But to assess the real contribution of farmers/states to agriculture and incomes, the metric is the agri-GDP per ha of gross cropped area of the state in question.
  • This is an important catch-all indicator, as it captures the impact of productivity, diversification, prices of outputs and inputs and subsidies.
  • On that indicator, unfortunately, Punjab has the 11th rank amongst major agri-states.

Way forward: Diversification of crops

  • States in south India like Andhra Pradesh, Tamil Nadu and Kerala have a much more diversified crop pattern tending towards high-value crops/livestock — poultry, dairy, fruits, vegetables, spices, fisheries.
  •  If Punjab farmers want to increase their incomes significantly, double or even triple, they need to gradually move away from MSP-based wheat and rice to high-value crops and livestock, the demand for which is increasing at three to five times that of cereals.
  • Punjab needs a package to diversify its agriculture — say a Rs 10,000 crore package spread over five years.

Conclusion

Once farmers diversify their farm output and double their incomes, they will not be stuck in the MSP trap.

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Medical Education Governance in India

Surgery as part of Ayurveda

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Sushrut Samhita

Mains level: Read the attached story

Last month, a government notification listed out specific surgical procedures that a postgraduate medical student of Ayurveda must be “practically trained to acquaint with, as well as to independently perform”.

Q.Allowing modern surgeries to Ayurveda professionals is a mixopathy and an encroachment into the jurisdiction and competencies of modern medicine. Critically analyse.

What is the notification?

  • The notification mentions 58 surgical procedures that postgraduate students must train themselves in and acquires skills to perform independently.
  • These include procedures in general surgery, urology, surgical gastroenterology, and ophthalmology.

The issue

  • The notification has invited sharp criticism from the Indian Medical Association, which questioned the competence of Ayurveda practitioners to carry out these procedures.
  • They have called the notification as an attempt at “mixopathy”.
  • The IMA has planned nationwide protests against this notification and has threatened to withdraw all non-essential and non-Covid services.

Surgery as a part of Ayurveda

  • It is not that Ayurveda practitioners are not trained in surgeries, or do not perform them.
  • In fact, they take pride in the fact that their methods and practices trace their origins to Sushruta, an ancient Indian sage and physician.
  • The comprehensive medical treatise Sushruta Samhita has, apart from descriptions of illnesses and cures, detailed accounts of surgical procedures and instruments.
  • There are two branches of surgery in Ayurveda — Shalya Tantra, which refers to general surgery, and Shalakya Tantra which pertains to surgeries related to the eyes, ears, nose, throat and teeth.
  • All postgraduate students of Ayurveda have to study these courses, and some go on to specialize in these and become Ayurveda surgeons.

Distinctions in surgical procedures

  • For several surgeries Ayurvedic procedures almost exactly match those of modern medicine about how or where to make a cut or incision, and how to perform the operation.
  • There are significant divergences in post-operative care, however.
  • The only thing that Ayurveda does not do is super-speciality surgeries, like neurosurgery or open-heart surgeries.
  • For most other needs, there are surgical procedures in Ayurveda. It is not very different from allopathic medicine.

Ayurvedic surgeries before the notification

  • PG education in Ayurveda is guided by the Indian Medical Central Council (Post Graduate Education) Regulations framed from time to time.
  • Currently, the regulations formulated in 2016 are in force. The latest notification of last month is an amendment to the 2016 regulations.
  • The 2016 regulations allow postgraduate students to specialise in Shalya Tantra, Shalakya Tantra, and Prasuti evam Stree Roga (Obstetrics and Gynecology), the three disciplines involving major surgical interventions.
  • Students of these three disciplines are granted MS (Master in Surgery in Ayurveda) degrees.

Arguments in favour

  • Ayurveda practitioners point out that students enrolling in Ayurveda courses have to pass the same NEET (National Eligibility-cum-Entrance Test).
  • Ayurveda institutions prescribe textbooks from modern medicine, or that they carry out surgeries with the help of practitioners of modern medicine.
  • Their course, internship and practice also run parallel to the MBBS courses.
  • Postgraduate courses require another three years of study. They also have to undergo clinical postings in the outpatient and In-patient departments at hospitals apart from getting hands-on training.
  • Medico-legal issues, surgical ethics and informed consent is also part of the course apart from teaching Sushruta’s surgical principles and practices.

So, what is new?

  • Ayurveda practitioners say the latest notification just brings clarity to the skills that an Ayurveda practitioner possesses.
  • The surgeries that have been mentioned in the notification are all that are already part of the Ayurveda course. But there is little awareness about these.
  • A patient is usually not clear whether an Ayurvedic practitioner has the necessary skill to perform one of these operations.
  • Now, they know exactly what an Ayurveda doctor is capable of. The skill sets have been defined. This will remove question marks on the ability of an Ayurveda practitioner.

What are the IMA’s objections?

  • IMA doctors insist that they are not opposed to the practitioners of the ancient system of medicine.
  • But they say the new notification somehow gives the impression that the skills or training of the Ayurveda doctor in performing modern surgeries are the same as those practising modern medicine.
  • This, they say, is misleading, and an “encroachment into the jurisdiction and competencies of modern medicine”.
  • The IMA has condemned the move calling it predatory poaching on modern medicine and its surgical disciplines.
  • The IMA has demanded that the notification, as well as the NITI Aayog, move towards ‘One Nation One System’ (of AYUSH) be withdrawn.

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Minority Issues – SC, ST, Dalits, OBC, Reservations, etc.

Caste Census and associated issues

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Census of India

Mains level: Issues with Caste Census

The Tamil Nadu government has decided to appoint a commission to formulate a methodology to collect caste-wise particulars of its population and use that to come up with a report.

Q.India’s caste system is perhaps the world’s longest surviving social hierarchy. Critically analyse.

The issue

  • The Centre conducted a ‘Socio-Economic Caste Census’ (SECC) in 2011 throughout the country, but it did not make public the caste component of the findings.
  • In Karnataka, the outcome of a similar exercise has not been disclosed to the public.

Caste details as a part of the census

  • Caste was among the details collected by enumerators during the decennial Census of India until 1931.
  • It was given up in 1941, a year in which the census operation was partially affected by World War II.
  • In his report on the 1941 exercise, then Census Commissioner of India, M.W.M. Yeatts, indicated that tabulation of caste details separately involved additional costs.
  • However, at the time of sorting the details, some provinces or States that wanted a caste record for administrative reasons were given some data on payment.

Issues with caste in the census

  • H. Hutton, the Census Commissioner in 1931, notes that on the occasion of each successive census since 1901, some criticism had been raised about taking any note of the fact of caste.
  • It has been alleged that the mere act of labelling persons as belonging to a caste tends to perpetuate the system.
  • Some argue that there is nothing wrong in recording a fact and ignoring its existence.

View after Independence

  • The 1951 census did not concern itself with questions regarding castes, races and tribes, except insofar as the necessary statistical material related to ‘special groups’.
  • It created certain other material relating to backward classes collected and made over to the Backward Classes Commission.
  • ‘Special Groups’ has been explained as referring to Scheduled Castes, Scheduled Tribes, Anglo-Indians and certain castes treated provisionally as ‘backward’ for the purposes of the census.
  • This implies that BC data were collected, but not compiled or published.

How have caste details been collected so far?

  • While SC/ST details are collected as part of the census, details of other castes are not collected by the enumerators.
  • The main method is by self-declaration to the enumerator.
  • So far, backward classes commissions in various States have been conducting their own counts to ascertain the population of backward castes.
  • The methodology may vary from State to State.

What about SECC 2011?

  • The Socio-Economic Caste Census of 2011 was a major exercise to obtain data about the socio-economic status of various communities.
  • It had two components: a survey of the rural and urban households and ranking of these households based on pre-set parameters, and a caste census.
  • However, only the details of the economic conditions of the people in rural and urban households were released. The caste data have not been released till now.
  • While a precise reason is yet to be disclosed, it is surmised that the data were considered too politically sensitive.
  • Fear of antagonizing dominant and powerful castes that may find that their projected strength in the population is not as high as claimed may be an important reason.

Legal imperative for a caste count

  • The Supreme Court has been raising questions about the basis for reservation levels being high in various States.
  • In particular, it has laid down that there should be quantifiable data to justify the presence of a caste in the backward class list, as well as evidence of its under-representation in services.
  • It has also called for periodical review of community-wise lists so that the benefits do not perpetually go in favour of a few castes.

Caste data for reservations

  • Legislators argue that knowing the precise number of the population of each caste would help tailor the reservation policy to ensure equitable representation of all of them.
  • While obtaining relevant and accurate data may be the major gain from a caste census, the possibility that it will lead to heartburn among some sections and spawn demands for larger or separate quotas.

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Parliament – Sessions, Procedures, Motions, Committees etc

New Parliament Building

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Parliament house architecture

Mains level: Need for new parliament building

PM would on December 10 lay the foundation stone for the new Parliament building, which would be a symbol of “Atmanirbhar Bharat” and a “temple of democracy” for Independent India.

Try this MCQ first:

Q.The architecture of the present Parliament House of India is inspired from:

a) Ekattarso Mahadeva Temple

b) Virupaksa Temple

c) Dilwara Temples

d) Brihaddeswara Temple

The new Parliament Building

  • The building, to be constructed by Tata Projects Ltd. would have a built-up area of 64,500 square metres over four floors and would be built adjacent to the existing building over 22 months.
  • Artisans and sculptors from across the country would contribute to the new building, showcasing the diversity and making it a symbol of “Atmanirbhar Bharat”.
  • The building would have modern equipment, be earthquake-safe and accommodate up to 1,224 MPs during joint sessions in the Lok Sabha chamber.
  • The Lok Sabha and the Rajya Sabha chambers themselves would accommodate 888 and 384 MPs respectively.

Issues with the old building

  • The existing British-built Parliament building, built in the 1920s, was designed for the Imperial Legislative Council and not for a bicameral Parliament.
  • The building has been modified over the years, including in 1956 when two floors were added.
  • While the number of Lok Sabha seats has remained 545 based on delimitation carried out on the basis of the 1971 Census, it is likely to increase after 2026 as the number of seats has been frozen till then.
  • The sources said the Lok Sabha and the Rajya Sabha halls are packed and would not be able to accommodate additional seats when the number of seats goes up.

Back2Basics: Parliament House (Sansad Bhavan)

  • The Sansad Bhavan is the seat of the Parliament of India. It houses the Lok Sabha and the Rajya Sabha which represent lower and upper houses respectively in India’s bicameral parliament.
  • The existing building draws inspiration from Ekattarso Mahadeva Temple (in M.P.) and was built under the British empire for its Imperial Legislative Council in 1927.
  • The opening ceremony, which then housed the Imperial Legislative Council, was performed on 18 January 1927 by Lord Irwin, Viceroy of India.
  • Following the end of British rule in India, it was taken over by Constituent Assembly of India which was succeeded by the parliament of India once Constitution of India came into force in 1950.
  • In the 2010s, a proposal was introduced to revamp Central Vista and re-build or relocate a number of administrative buildings which initiated a program expecting completion in 2024.

Architectural details:

  • Originally called the House of Parliament, it was designed by the British architects’ Edwin Lutyens and Herbert Baker in 1912-1913.
  • It was held as part of their wider mandate to construct a new administrative capital city for British India.
  • The perimeter of the building is circular, with 144 columns on the outside.
  • The building is surrounded by large gardens and the perimeter is fenced off by sandstone railings (jali).
  • Construction of the House began in 1921 and it was completed in 1927.

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Coal and Mining Sector

Rat Hole Mining in Meghalaya

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not Much

Mains level: Hazards of rat-hole mining

Rat-hole coal mining had sucked the life out of a village in Meghalaya’s East Jaintia Hills district.

Q.Despite a ban, rat-hole mining continues to prevail as an important practice in Meghalaya. What are the issues associated with it? Discuss. (150W)

Rat Hole Mining

  • It is a primitive and hazardous method of mining for coal, with tunnels that are only 3-4 feet in diameter (hence, rat-hole), leading to pits ranging from 5-100 sq. mt deep.
  • It involves digging of very small tunnels in which workers, more often children, enter and extract coal.
  • Although the coal is of bad quality, people see it as a treasure chest.
  • In backward regions, where there is the loss of livelihood, lack of employment opportunities and under-education, people see rat-hole mines as an opportunity to earn daily bread.
  • A major portion of these employees are children, who are preferred because of their thin body shape and ease to access depths.

Despite a ban

The National Green Tribunal banned rat-hole mining in Meghalaya in 2014 on a petition that said acidic discharge from the mines was polluting the Kopili River. But the practice continues unabated.

Threats of such mining

  • Water from rivers and streams in the mining area has become unfit for drinking and irrigation and is toxic to plants and animals.
  • Layers of rock above the coal removed during mining contain traces of iron, manganese and aluminium that get dissolved from mining sites through the acid run-off or are washed into streams as sediment.
  • There are several mishaps where workers get trapped to death due to the sudden collapse of such mines.

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GI(Geographical Indicator) Tags

Himachal wants GI status for five products

Note4Students

From UPSC perspective, the following things are important :

Prelims level: GI tags in news

Mains level: Importance of GI tags

The Himachal Pradesh government is trying to obtain GIs for five products from the state – Karsog Kulth, Thangi of Pangi, Chamba Metal Crafts, Chamba Chukh, and Rajmah of Bharmour.

Read more about GIs at:

GI(Geographical Indicator) Tags

Which are the five HP products?

  • Karsog Kulth: Kulthi or Kulth (horse gram) is a legume grown as a kharif crop in Himachal Pradesh. Kulth grown in the Karsog area of Mandi district is believed to be particularly rich in amino acids.
  • Pangi ki Thangi: It is a type of hazelnut which grows in Pangi valley located in the northwestern edge of Himachal. It is known for its unique flavour and sweetness.
  • Chamba metal crafts: These include items such as metal idols and brass utensils which, historically, were made by skilled artisans in the courts of kings of Chamba. There are efforts to revive the trade, and a plate made from a brass-like alloy and having carvings of gods and goddesses is still popular.
  • Chamba Chukh: It’s a chutney made from green and red chillies grown in Chamba, and prepared in traditional and unique ways. The practice has largely declined in rural households of Chamba, but survives to some extent at the small-scale industrial level.
  • Bharmouri Rajmah: It’s more specifically called the Kugtalu Rajmah, since it grows in the area around Kugti Pass in the Bharmour region of Chamba district. It is rich in proteins and has a unique flavor.

How many registered GIs does Himachal currently have?

  • They are eight in number.
  • It includes four handicrafts (Kullu Shawl, Chamba Rumal, Kinnauri Shawl and Kangra Paintings).
  • There are three agricultural products (Kangra Tea, Basmati and Himachali Kala Zeera) and one manufactured product (Himachali Chulli Oil).
  • Kullu Shawl and Kangra Tea were the first to be registered in 2005-06.
  • Basmati has been registered jointly from seven states of North India, including Himachal Pradesh.
  • Chulli (apricot) oil and kala jeera (cumin), mainly associated with Kinnaur and known for their medicinal properties, were the last to be registered in 2018-19.

How does a GI tag help?

  • A GI tag provides a better market for these products and prevents misuse of the name.
  • A GI registration is given to an area, not a trader, but once a product gets the registration, traders dealing in the product can apply for selling it with the GI logo.
  • Authorised traders are each assigned a unique GI number. For example, Kullu shawl has 135 authorised traders. A shawl made in Ludhiana cannot be sold as a Kullu shawl.
  • If any unauthorised trader, even from Kullu, tries to sell a shawl under the name of Kullu shawl, he or she can be prosecuted under The Geographical Indications of Goods (Registration and Protection) Act, 1999.
  • GIs are also expected to boost or revive the items whose production has declined, as is being aimed in the case of Chamba Chukh and metal crafts.

Back2Basics: Geographical Indication (GI)

  • The World Intellectual Property Organisation defines a GI as “a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin”.
  • GIs are typically used for agricultural products, foodstuffs, handicrafts, industrial products, wines and spirit drinks.
  • Internationally, GIs are covered as an element of intellectual property rights under the Paris Convention for the Protection of Industrial Property.
  • They are also covered under the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.
  • Presently, there are 370 registered GIs in India.

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Modern Indian History-Events and Personalities

Places in news: Temple architecture of Hampi

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Vijayanagara architecture

Mains level: Vijayanagara architecture

Tourists can no longer get too close to the iconic stone chariot in front of the Vijaya Vittala Temple due to a protective ring by the Archaeological Survey of India (ASI).

Try this question from CSP 2019:

Q.Building ‘Kalyaana Mandapas’ was a notable feature in the temple construction in the kingdom of

(a) Chalukya

(b) Chandela

(c) Rashtrakuta

(d) Vijayanagara

The Vijayanagara Capital: Hampi

  • Hampi or Hampe, also referred to as the Group of Monuments at Hampi, is a UNESCO World Heritage Site located in east-central Karnataka.
  • Hampi was the capital of the Vijayanagara Empire in the 14th century.
  • The old city of Hampi was a prosperous, wealthy and grand city near the Tungabhadra River, with numerous temples, farms and trading markets.
  • By 1500 CE, Hampi-Vijayanagara was the world’s second-largest medieval-era city after Beijing, and probably India’s richest at that time, attracting traders from Persia and Portugal.
  • The Vijayanagara Empire was defeated by a coalition of sultanates; its capital was conquered, pillaged and destroyed by sultanate armies in 1565, after which Hampi remained in ruins.

Major attractions

  • The Krishna temple complex, Narasimha, Ganesa, Hemakuta group of temples, Achyutaraya temple complex, Vitthala temple complex, Pattabhirama temple complex, Lotus Mahal complex, can be highlighted.
  • Suburban townships (puras) surrounded the large temple complexes contains subsidiary shrines, bazaars, residential areas and tanks applying the unique hydraulic technologies.
  • The Vitthla temple is the most exquisitely ornate structure on the site and represents the culmination of Vijayanagara temple architecture.
  • It is a fully developed temple with associated buildings like Kalyana Mandapa and Utsava Mandapa within a cloistered enclosure pierced with three entrance Gopurams.
  • In addition to the typical spaces present in contemporary temples, it boasts of a Garuda shrine fashioned as a granite ratha and a grand bazaar street.

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Climate Change Impact on India and World – International Reports, Key Observations, etc.

Species in news: Red Sea Turtles

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Red Sea Turtles

Mains level: Impact of climate changes

Turtle populations in the Red Sea could be turning overwhelmingly female because of a rise in sea temperatures caused due to anthropogenic climate change, a new study has showed.

Try this PYQ:

Q.Consider the following fauna of India:

  1. Gharial
  2. Leatherback turtle
  3. Swamp deer

Which of the above is/are endangered?

(a) 1 and 2 only

(b) 3 only

(c) 1, 2 and 3

(d) None

Red Sea Turtles

  • There are seven extant species worldwide, five of which can be found in the Red Sea: the green turtle, the hawksbill turtle, the loggerhead turtle, the olive ridley turtle and the leatherback turtle.
  • In order to maintain a 50:50 ratio of male and female in the population, a temperature of 29.2 degrees Celsius is pivotal.
  • Above this, hatchlings would be predominantly female.
  • The sand temperatures at four of the sites exceeded 29.2 degrees; leading the team to the conclusion that ‘feminization’ of the population could be already happening.

Their significance

  • Marine turtles—as all top predators—have a prominent role in maintaining balanced and healthy ecosystems, in particular seagrass beds and coral reefs.
  • They also help in transporting nutrients towards naturally nutrient-poor ecosystems (the nesting beaches), and providing food and transportation for other marine species (e.g., barnacles and commensal crabs).
  • Marine turtles also play an important role in the economy of the tourism industry.

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Monetary Policy Committee Notifications

RBI keeps repo rate unchanged

Note4Students

From UPSC perspective, the following things are important :

Prelims level: MPC

Mains level: Paper 3- Tackling inflation while maintaining the availability of easy money

The MPC decided on Friday to leave the Repo rate unchanged at 4%. However, the RBI faces a dilemma over the excess liquidity in the economy while tackling inflation.

Limits of monetary  policy

  • Even though our economy slumped into a recession in the first half of 2020-21, there seems little further RBI can do with monetary policy to spur growth.
  • Its monetary decision to leave its main policy rate unchanged at 4%, the rate at which it lends money to banks, thus seems appropriate.
  • This is because retail inflation has hovered above its 6% upper tolerance limit for much of this year.
  • It is the first time its 2016-adopted price-stability framework looks poised for failure.
  • Meanwhile, it has announced wider coverage of an earlier scheme by which banks buy bonds issued by firms in specific stressed sectors–a way to ease credit.

Poor credit demand

  • Supply-side measures have their limits of efficacy, with aggregate demand observed to be in a bad way and investments restrained by uncertainty.
  • Therefore, RBI’s focus had to shift to the inflationary effects of excess liquidity detected in the economy.
  • Oddly, this doesn’t seem to have happened.
  • With over 6 trillion still being parked daily by banks with RBI at its reverse repo window, a reflection of poor credit demand.

Dilemma RBI faces in maintaining low interest rate

  • Plus, India has seen a large sum of dollars coming into India.
  • To keep the rupee’s global value stable and Indian exports competitive, RBI has been buying those dollars, thus raising our foreign exchange reserves and pumping more liquidity into the domestic arena.
  • Sterilizing the inflationary effect of this usually requires bonds to be sold, which increases their market supply and pressures yields up-a dilution of its stance on easy money.
  • This poses a dilemma that RBI may soon have to grapple with.
  • RBI’s core task as a central bank, of watching both the external and internal stability of the currency under its charge, may get more complex than ever if capital inflows stay high, global investors see an opportunity in ‘carry trade’ profits, and price trends don’t go by its expectations.

Conclusion

If India’s broad policy frame is being pushed by our covid crisis towards a major reset, with the Centre’s fisc granted a freer run and its debt burden to be partially inflated away over the years, then that would call for another debate.

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

The many layers to agricultural discontent

Note4Students

From UPSC perspective, the following things are important :

Prelims level: APMC Act

Mains level: Paper 3- Farmers protest against Farms Acts

Farmers protest against the Farm laws is based on the multiple reasons. The article analyses these concerns of the protesting farmers.

Three farm laws and response to it

  • Three Farm Bills were passed by the Central government in September 2020.
  • In the process, the regulatory role the state played hitherto with regard to these issues was watered down to a great extent.
  • Apart from complex challenges that rural India confronts today, there is a substantial body of studies that demonstrates how the vagaries of the market and the role of the middlemen reinforce agrarian distress in India.
  • However, organised farmers’ bodies are not in sync with the reasoning of the government.

Role of the states

  • There is a debate around the constitutional provisions with regard to the respective domains of the State and the Union with regard to agricultural marketing,
  • However, issues affecting the farming community have a far greater bearing on the States relative to the Centre.
  • Ideally, given its immediacy, the States are the apt agencies to respond to a host of concerns faced by the farming community, which includes agricultural marketing.
  • While enacting the Farm Bills, the Centre extended little consideration to the sensitivity of the States.

Role of APMC

  • In Punjab and Haryana, tweaking the APMC system and its resultant bearing on Minimum Support Price (MSP) is seen by the farmers as a threat to an assured sale of their produce at a price.
  • MSP system provides a cushion, wherein the farmer can anticipate the cost of opting for these crops and tap the necessary supports through channels he has been familiar with.
  • Farmers are apprehensive of the vagaries of a competitive market where he would eventually be beholden to the large players including monopolies.
  • There is widespread apprehension that the measures proposed by the Farm Acts in addition to the existing agrarian distress, are only going to make the lot of the farmer even more precarious.
  • All across the country, the farming community is prone to sympathise with the demand to scrap the new laws, as they have little to offer to them in a positive sense.

Conclusion

Those with large holdings and produce for the market — are spearheading the present stand-off against the Farm Bills, as it affects them very deeply. But farming distress is shared in common by the different strata within the farming community, even though it has a differential impact on them.

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

Perils of profits based economic recovery

Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Analysis of economic recovery post-Covid

The economies across the world are showing recovery driven by profits. However, one cannot neglect the implication of such recovery for the long term growth given the pressure such recovery has been exerting on the labour markets. The article deals with this issue.

3 Ways to look at GDP

  • The first is what they tell us about the past.
  • Here, the news has generally been better-than-expected.
  • The US and India saw a much stronger recovery last quarter than previously envisioned.
  • The second is sectoral, production side-agriculture, manufacturing, services- and the functional, expenditure side consumption, investment, net exports.
  • But there’s a third way — the income side.
  • Value addition must ultimately accrue to the different factors of production.
  • On the income side, therefore, GDP is simply the sum of profits, wages and indirect taxes.

Profit-driven growth and impact on employment

  • The economic recovery in many parts of the world is driven disproportionately by capital than labour.
  • In India, the net profits of listed companies grew 25 per cent (in real terms) last quarter. This despite revenues shrinking.
  • Revenue shrank because firms aggressively cut costs, including employee compensation.
  • This implies that if listed company profits are growing 25 per cent, and yet GDP contracted 7.5 per cent, it reveals (by construction) significant pressure on profits of unlisted SMEs, wages and employment.
  • Labour market pressures are evident in India too.
  • Household demand for MGNREGA remains very elevated, suggesting significant labour market slack.
  • The employment rate in some labour market surveys still reveal about 14 million fewer employed compared to February, and nominal wage growth across a universe of 4,000 listed firms has slowed from about 10 per cent to 3 per cent over the last six quarters.

Why this matters

  • It may be rational for any one firm to boost profits by cutting employee compensation.
  • But if every firm pursued that strategy, that simply reduces future aggregate demand and profitability for all firms.
  • This is quintessential fallacy of composition that Keynes enumerated.
  • Weak demand, in turn, disincentivises re-hiring, reinforcing the risks of settling into a sub-optimal equilibrium.

Need to remain vigilant about labour market

  • Remaining vigilant about labour markets is particularly important for India.
  • Private consumption was increasingly financed by households running down savings and taking on debt pre-COVID-19.
  • Consequently, if job-market pressures induce households into perceiving this shock as a quasi-permanent hit on incomes, households will be incentivised to save, not spend in the future.

Way forward for fiscal consolidation

  • While economic momentum is expected to slow as pent-up demand wears off, the level of output will progressively reach pre-COVID levels as the economy normalises.
  • The question is what will drive growth after that?
  • India’s fiscal response has been restrained thus far, with the Centre’s total spending similar to last year and state capex under pressure.
  • It’s therefore important for the Centre to step up spending in the remaining months.
  • More importantly, public investment, and a large infrastructure push, must be the leitmotif of the next budget.
  • This will be crucial to boost demand, create jobs, crowd-in private investment and improve the economy’s external competitiveness.
  • If higher infrastructure spending is financed by higher asset sales, the headline fiscal deficit (which matters for bond markets and interest rates) can be slowly reduced, even as the underlying fiscal impulse (which matters for growth and jobs) remains positive.
  • This is the only way to undertake fiscal consolidation without incurring a fiscal drag.
  • Monetary policy has led the charge in 2020. But with inflation continuing to remain sticky and elevated, the RBI has fewer degrees of freedom going forward.

Conclusion

The stronger-than-expected GDP print is very encouraging. But this is the start of a long journey back. Much, therefore, remains to be done. The excitement around the vaccine shouldn’t obscure this fundamental premise.

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