Day: August 20, 2021

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

Liberalizing Trade in Agriculture Machinery

| Economics | Mains Paper 3: Agriculture and related issues,Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 3- Significance of mechnisation of agriculture

Context

On July 15, the Centre issued a notification moving power tillers (PT) and their components from the “free” to “restricted” category indicating a clear intent to provide protection to the domestic industry.

How heterodox opening policies affects farming

Heterodox opening policies, being open on the export side while being closed on the import side, have long-term unintended consequences.

  • Productivity loss: One impact of heterodox policies is subpar mechanisation and productivity loss in agriculture.
  • India’s mechanisation coverage is around 40-45 per cent, compared to 90 per cent in developed countries.
  • At present, only Punjab, Haryana and western UP have mechanisation rates between 70 and 80 per cent whereas in eastern and southern states it is between 35 and 45 per cent, with even smaller coverage in North-Eastern states.
  • Comparatively high tariffs on agricultural machinery, placement under restricted trade hits the cog in the wheel of mechanisation.
  • Uncertainty and lower trade: A shift to restricted category and frequently changing tariffs engenders uncertainty and lowers trade.
  • Disincentivise innovation: Such policies also disincentivises domestic machine manufacturers to invest and innovate — the perils of protection.

What India can learn from Bangladesh on farm mechanisation

  • Starting lower, Bangladesh overtook India in mechanisation by 2006.
  • A perfect example of orthodox opening in the late 1980s, Bangladesh removed import bans on Power Tiller and other machinery like diesel engines.
  • By 1995, PT were made duty free and credit support was provided for purchases.
  • Studies have credited PT in increasing the rice yield in Bangladeh, which grew 2.1 per cent annually from 1990, compared to 1.6 per cent between 1960 and 1989.

Way forward

If productivity in agriculture and incomes of farmers were to go up significantly, Indian agriculture must hit the mechanisation frontier.

  • Liberal and Stable trade policies: Liberal and stable trade policies will increase access, competition will expand varieties and bring down the prices.
  • New trade economics teaches us that farmers would be successful in trading or accessing markets only when highly productive, which beckons large scale and intensive mechanisation.
  • Credit support: Bangladesh also shows the role of complementary policies such as credit support.
  • Once the farmers achieve sufficiently high productivity, they can access markets and even integrate with global value chains (GVC) if allowed by policy as intended in the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.

Conclusion

Liberal trade in machinery presents an opportunity to access distant and international markets. The key is to be both ways open.

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Foreign Policy Watch: India-Middle East

The Abraham Accords as India’s West Asia bridge

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Not much

Mains level: Paper 2- Implications of Abrahams Accord for India

Context

The recent visit by the Indian Air Force chief, to Israel offers a window to study how India is taking advantage of the Abraham Accords deal signed between Israel and a consortium of Arab States led by the United Arab Emirates (UAE) in 2020.

Increasing defence cooperation between India and West Asia region

  • India’s trajectory towards an increased strategic footprint in West Asia has been in development for some time now.
  • Starting from the relatively low-key staging visit to Saudi Arabia conducted by the IAF in 2015.
  • India hosted visiting Iranian naval warships in 2018.
  • India takes an active part in the defence of the critical waterways in and around the Persian Gulf, the Arabian Sea and the extended Indian Ocean Region (IOR).
  • An Indian contingent of the Indian Air Force (IAF) will visit Israel in October to take part in multilateral military exercises.
  • India also conducted the ‘Zayed Talwar’ naval exercises with the UAE off the coast of Abu Dhabi, further deepening the fast-developing strategic cooperation between the two countries.
  • In December 2020, Indian Army chief visited the UAE and Saudi Arabia, becoming the first chief of the Indian Army to do so.
  • In 2017, India signed a deal with Oman, the home to Duqm Port  for access to the facility, including dry dock use by the Indian Navy.

How Abraham Accords accelerated India’s engagement with West Asia region?

  • No need for balancing act: The signing of the Accords has removed a significant strategic obstacle for India — delicate balancing act India has had to play out between the Arab Gulf and Israel over the decades.
  • India had welcomed the Accords, highlighting its support for mechanisms that offer peace and stability in the region.
  • From the UAE’s perspective, Accords were to make sure the emirate along with its international centres of trade such as Dubai and Abu Dhabi do not become targets between Jerusalem and Tehran.
  • However, not all Arab States have been on board with the geopolitical shifts the Accords have pushed through.
  • Saudi Arabia has maintained a distance from this arrangement.

India’s West Asia construct and relations with Iran

  • Iran, as part of India’s ‘West Asia’ construct, will also play a significant part in India’s outreach in the months to come as the crisis in Afghanistan deepens.
  • Connectivity projects such as Chabahar Port and Chabahar-Zahedan rail project (project discussions are still on) amongst others remain critical.
  • Recently,  strategic cooperation revitalised despite multiple obstacles in the bilateral relations, led by U.S. sanctions against Tehran and the general tensions between Israel, the Gulf and Iran via proxy battles in theatres such as Yemen, Syria and beyond.

Conclusion

India’s strategic play in West Asia will be reflective of its economic growth, and by association, an increasingly important place in the global order.

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Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

What India’s informal sector needs right now

op-ed snap | Economics | Mains Paper 3: Indian Economy
Note4Students

From UPSC perspective, the following things are important :

Prelims level: MGNREGA

Mains level: Paper 3- Issues of informal sector

Context

Informal sector workers suffered far more from the national lockdown in 2020 than their formal sector counterparts.

Significance of informal sector

  • India’s large informal sector, which employs around 80 per cent of the labour force and produces about 50 per cent of GDP.
  • Of the 384 million employed in the informal sector, half work in agriculture, living mostly in rural India, and the other half are in non-agricultural sectors.
  • Of those, about half live in rural India and the remaining in urban areas.
  • Ignoring problems in the informal sector can be costly as it can lead to job and wage losses, higher inflation and even risk the livelihood of migrant workers.

Impact of pandemic on informal sector workers

  • Informal sector workers suffered far more from the national lockdown in 2020 than their formal sector counterparts.
  • Such disruptions can be inflationary too.
  • India was one of the few countries with high inflation throughout pandemic-stricken 2020.
  • The 40 per cent in the informal non-agricultural sector is the most affected by the pandemic.
  • These workers are most vulnerable as they have borne the brunt of the economic disruption that the pandemic has unleashed.

Impact on the informal sector

  • Nominal GDP growth has been a good indicator of the formal sector corporate sales.
  • But during the pandemic and also during events like demonetisation, formal corporate sales have exceeded nominal GDP growth.
  • This means that some demand, which was previously supplied by the informal sector, began to be supplied by the formal sector.
  • Several surveys over this time also show a rise in urban unemployment and self-employment, with the latter category seeing the highest earnings loss.

Way forward

  • Formalisation on the back of policy changes: While traditionally associated with efficiency gains, if it comes at the cost of putting small informal firms out of business.
  • Formalisation that comes only on the back of external pressure or leads to deep distress in the informal sector, may not be sustainable.
  • By contrast, formalisation that happens on the back of policy changes that help small and informal firms grow over time into medium or larger formal sector firms is more sustainable.
  • Social welfare scheme: We need protection for informal sector workers via social welfare schemes so that the disruption they are facing does not lead to a permanent fall in demand.
  • There is a case for remaining generous with programmes such as the rural MGNREGA scheme for longer.
  • India doesn’t have an MGNREGA equivalent urban social welfare scheme.
  • Reforms: Steps to promote reforms that are needed to help small businesses grow are critical.
  • For example, lowering the regulatory burden associated with growing firms.

Conclusion

Bringing the informal sector to the forefront of policy decisions can lead to a significant payoff for the entire economy for years to come.

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

Is a caste census desirable?

| Indian Society | Mains Paper 1: Salient features of Indian Society
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Caste Census

Mains level: Need for and issues with Caste Census

With the 2021 Census coming up, several political parties have demanded a nationwide caste census.

What is Caste Census?

  • Every Census in independent India from 1951 to 2011 has published data on Scheduled Castes and Scheduled Tribes, but not on other castes.
  • Before that, every Census until 1931 had data on caste.
  • However, in 1941, caste-based data was collected but not published.
  • In the absence of such a census, there is no proper estimate for the population of OBCs, various groups within the OBCs, and others.
  • The Mandal Commission estimated the OBC population at 52%, some other estimates have been based on National Sample Survey data.
  • Some political parties make their own estimates in states and Lok Sabha and Assembly seats during elections.

Arguments for caste census

A caste census is not merely geared to the reservation issue.

  • Enumerating the marginalized: A caste census would actually bring to the particular the number of people who are at the margins, or who are deprived, or the kind of occupations they pursue, or the kind of hold that institutions like caste have on them.
  • Data for Policymaking: This information is absolutely necessary for any democratic policymaking.
  • Judicial backing: The courts in India have often emphatically said that it is important to have adequate data with regard to the reservation.
  • Caste offers privilege: Caste is not only a source of disadvantage; it is also a very important source of privilege and advantage in our society.
  • Caste doesn’t marginalize: We need to do away with the idea of caste being applicable to only disadvantaged people, poor people, people who are somehow lacking.
  • Rids away caste rigidities: Counting of caste doesn’t necessarily perpetuate caste or the caste system. Myths of caste elitisms can be debunked through a caste census.

Arguments against caste census

  • 50% breach: It is argued that a Socio-Economic Caste Census is the only way to make a case to breach the 50% cap on reservation and rationalize the reservation matrix in the country.
  • Rising assertiveness: More the State ignores out caste, the more is the tendency to preserve caste, protect it. This has been observed in many states.
  • Chaos: Data gathering itself is a big problem because it can become very, very invasive. But we need to actually balance it with enabling people and asserting citizen equality.
  • Social friction: Caste identification can lead to friction amongst various classes.

Breaching the 50% cap

  • Judicial Substantiation: The 50% cap, as introduced by the court, has not really been argued through.
  • Questioning the sacrosanctity: Some feel that nothing sacrosanct about the 50% limit − it can be exceeded, if necessary, but a clear argument should be given for why this is being done.

Inefficacy of reservations

  • Fractional benefits: The way reservation is practiced has invariably led to elites among castes and communities.
  • Domination: These elites within the castes have tended to exercise their dominance over their very communities and not let them exercise the kind of freedoms, or search for equality, which any democratic polity deserves.
  • Welfare isn’t reservation: The state has helped privileged communities far more, even though this help has not taken the explicit form of programs like reservation.

Why is a caste census always controversial?

  • Data manipulation: This is a manifestation of the principle that those in power control data and information.
  • Censoring of data: We have had instances where this data has been collected but has not been made public.
  • Relative deprivation: Since a caste census is a necessity, it is not a happy thing, it is not a great achievement, it is just something that the State has to do circumstantially.
  • Vote bank politics: Vested interests of particular state governments in hunt for vote banks are also visible these days.

SECC has the solution

  • We have got locked into a mindset where we think only those communities which want welfare benefits from the state must be enumerated.
  • Many have argued that a Socio-Economic Caste Census would be the best way to rationalize reservation based on data and make a strong case for breaching this gap.
  • Earlier governments argued that counting caste will perpetuate it.

Conclusion

  • Favoring one caste becomes a disfavor for others. This is an undeniable fact of Indian society.
  • It seems that the caste census will happen unless something extraordinary happens in our polity.
  • There are also important questions of demands coming up because of mismatches between the numbers that we come out with and the share in resources that different communities have.
  • This is a kind of nightmare that all governments fear. So, they would much rather leave things vague.
  • The Backward Classes are more than 50% of the population. And this dispensation knows that it cannot afford to lose the support of the Backward Classes.

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Foreign Policy Watch: India-Middle East

Abraham Accords as India’s West Asia bridge

IOCR | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Abraham Accord

Mains level: India's West-Asia plan

The recent visit by the Indian Air Force chief to Israel offers a window to study how New Delhi is taking advantage of the Abraham Accords deal signed between Israel and a consortium of Arab States.

Try this question:

What are Abraham Accords? Discuss how the Israel-Gulf synergy could impact India’s relations with Israel.

What are Abraham Accords?

  • The Israel–UAE normalization agreement is officially called the Abraham Accords Peace Agreement.
  • It was initially agreed to in a joint statement by the United States, Israel and the United Arab Emirates (UAE) on August 13, 2020.
  • The UAE thus became the third Arab country, after Egypt in 1979 and Jordan in 1994, to agree to formally normalize its relationship with Israel as well as the first Persian Gulf country to do so.
  • Concurrently, Israel agreed to suspend plans for annexing parts of the West Bank. The agreement normalized what had long been informal but robust foreign relations between the two countries.

Do you know?

Abraham was the first of the Hebrew patriarchs and a figure revered by the three great monotheistic religions—Judaism, Christianity, and Islam.

New friendships

  • For common enemy: Externally, Israel, the UAE and Bahrain share the common threat perception of Iran.
  • Upholding modern values: They are relatively more modern societies that share the overarching and immediate priority of post-pandemic economic resuscitation.
  • Extended cooperation: They have lost no time to set up logistics such as Internet connectivity and direct flights to pave the way for more active economic engagement.

India and the Gulf

  • Now India has stronger, multifaceted and growing socioeconomic engagements with Israel and the Gulf countries.
  • With over eight million Indian diasporas in the Gulf remitting annually nearly $50 billion, annual merchandise trade of over $150 billion.
  • It sources nearly two-thirds of India’s hydrocarbon imports, major investments, etc. Hence it is natural to ask how the new regional dynamic would affect India.
  • India has acquired a large and rewarding regional footprint, particularly as the preferred source of manpower, food products, pharmaceuticals, gem and jewellery, light engineering items, etc.
  • Indians are also the biggest stakeholders in Dubai’s real estate, tourism, and Free Economic Zones.
  • In the evolving scenario, there may be scope for a profitable trilateral synergy, but India cannot take its preponderance as a given.

The Israel-GCC synergy

  • Culture: Even the Israeli Arabs may find career opportunities to bridge the cultural divide. Israel is known as the start-up nation and its stakeholders could easily fit in the various duty-free incubators in the UAE.
  • Tourism: Tourism, real estate and financial service sectors on both sides have suffered due to the pandemic and hope for a positive spin-off from the peer-to-peer interactions.
  • Defense: Israel has niche strengths in defence, security and surveillance equipment, arid farming, solar power, horticultural products, high-tech, gem and jewellery, and pharmaceuticals.
  • Technology: Further, Israel has the potential to supply skilled and semi-skilled manpower to the GCC states, particularly from the Sephardim and Mizrahim ethnicities, many of whom speak Arabic.

The Iran link

  • Iran, as part of India’s ‘West Asia’ construct, will also play a significant part in India’s outreach in the months to come as the crisis in Afghanistan deepens.
  • The fact that New Delhi used Iranian airspace and facilities when evacuating its diplomatic staff from Kandahar in July showcases a level of strategic commonality.
  • Keeping this in mind, connectivity projects such as Chabahar Port and Chabahar-Zahedan rail project (project discussions are still on) amongst others remain critical.

Conclusion

  • India’s strategic play in West Asia will be reflective of its economic growth, and by association, an increasingly important place in the global order.

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Sugar Industry – FRP, SAP, Rangarajan Committee, EBP, MIEQ, etc.

Sugarcane Pricing in India

| Economics | Mains Paper 3: Issues Related To Farm Subsidies & Msp
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Sugarcane pricing mechanism

Mains level: Not Much

Earlier this month, the Supreme Court issued notices to States and major sugar producers to develop a mechanism to ensure that farmers are paid on time.

Who determines Sugarcane prices?

Sugarcane prices are determined by the Centre as well as States.

  1. The Centre announces Fair and Remunerative Prices which are determined on the recommendation of the Commission for Agricultural Costs and Prices (CACP) and are announced by the Cabinet Committee on Economic Affairs, which is chaired by Prime Minister.
  2. The State Advised Prices (SAP) are announced by key sugarcane producing states which are generally higher than FRP.

Minimum Selling Price (MSP) for Sugar

  • The price of sugar is market-driven & depends on the demand & supply of sugar.
  • However, with a view to protecting the interests of farmers, the concept of MSP of sugar has been introduced since 2018.
  • MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.

Basis of price determination

  • With the amendment of the Sugarcane (Control) Order, 1966, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the Fair and Remunerative Price (FRP)’ of sugarcane in 2009-10.
  • The cane price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
  • This is done in consultation with the State Governments and after taking feedback from associations of the sugar industry.

Try this PYQ:

Q.The Fair and Remunerative Price (FRP) of sugarcane is approved by the:

(a) Cabinet Committee on Economic Affairs

(b) Commission for Agricultural Costs and Prices

(c) Directorate of Marketing and Inspection, Ministry of Agriculture

(d) Agricultural Produce Market Committee

 

Post your answers here.

What is FRP?

  • FRP is fixed under a sugarcane control order, 1966.
  • It is the minimum price that sugar mills are supposed to pay to the farmers.
  • However, states determine their own State Agreed Price (SAP) which is generally higher than the FRP.

Factors considered for FRP:

  • The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:

a) cost of production of sugarcane;

b) return to the growers from alternative crops and the general trend of prices of agricultural commodities;

c) availability of sugar to consumers at a fair price;

d) price at which sugar produced from sugarcane is sold by sugar producers;

e) recovery of sugar from sugarcane;

f) the realization made from the sale of by-products viz. molasses, bagasse, and press mud or their imputed value;

g) reasonable margins for the growers of sugarcane on account of risk and profits.

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Tourism Sector

Places in news: Cattle Island on Hirakud Reservoir

Places in news | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.
Note4Students

From UPSC perspective, the following things are important :

Prelims level: Cattle Island

Mains level: Not Much

The Odisha Forest and Environment Department is all set to begin ‘Island Odyssey’ and ‘Hirakud Cruise’ ecotourism packages for tourists to islands inside the reservoir.

Cattle Island

  • ‘Cattle island’, one of three islands in the Hirakud reservoir, has been selected as a sight-seeing destination.
  • When large numbers of people were displaced from their villages when the Hirakud dam was constructed on the Mahanadi river in 1950s, villagers could not take their cattle with them.
  • They left their cattle behind in deserted villages.
  • As the area started to submerge following the dam’s construction, the cattle moved up to Bhujapahad, an elevated place in the Telia Panchayat under Lakhanpur block of Jharsuguda district.
  • Subsequently named ‘Cattle island’, it’s surrounded by a vast sheet of water.

Other islands

  • Then there is an “island of bats”, also within the reservoir, just 1 km away from the Debrigarh ecotourism project.
  • It is the habitat of hundreds of bats.
  • Tourists also get a magnificent view of the sunset from the reservoir. ‘Sunset island’ is one of the three stops on the unique boat ride.

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