Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Formalisation and its challenges
Context
A recent study by SBI has reported that the Indian economy witnessed accelerated formalisation under the distressed conditions of the pandemic and the lockdown last year. The study estimates that the share of the informal economy has fallen to a mere one-fifth of GDP — a figure comparable to many advanced economies.
Understanding informality
- ILO definition: The ILO’s globally accepted framework for definitions is as follows: Informal sector enterprises are defined as private unincorporated enterprises owned by individuals (or households) that are not constituted as separate legal entities independently of their owners.
- They are not registered under specific national legislation (such as Factories’ or Commercial Acts).
- Definition of a formal worker in India: Formal workers in India, on the other hand, are defined as those having access to at least one social security benefit such as a provident fund or healthcare benefits.
What explains the decline of informal sector in GDP
- Significance of informal sector: In 2017-18, as per the latest official statistics, India’s informal sector accounted for approximately 52 per cent of its GDP, employing 82 per cent of the total workforce.
- These ratios have broadly remained unchanged over the last decade.
- Most affected due to pandemic: As the informal (unorganised) sector bore much of the brunt of the economic contraction during 2020-21, a decline in its share in GDP is unsurprising.
- Lack of financial strength: The sector had neither the financial strength nor the technical wherewithal to face the Covid shock.
- Inadequate policy support: Additionally, policy support, mostly supply-side measures, was mainly focused on firms in the formal sector, with the informal sector left to fend for itself.
Issues with decline
- Undeniably, the informal sector’s share in GDP is likely to have shrunk due to the Covid shock.
- However, alarmingly, the purported decline in the informal sector’s share in GDP has not been accompanied by an expected reduction in its employment share.
- Data from the official annual Period Labour Force Survey (PLFS) 2017-18 and 2019-20, where the latter includes the period of the Covid shock from April to June 2020, shows that the employment share in non-agricultural informal enterprises has increased from 68 per cent in 2017-18 to 69.5 per cent in 2019-20.
- These figures do not include the agricultural sector, where employment is almost entirely in the informal sector.
- The increasing share of the formal sector in terms of GDP but declining share in employment only widens the schism (or dualism) between the two sectors.
- The increasing share of the formal sector in terms of GDP but declining share in employment only widens the schism (or dualism) between the two sectors.
Implications
- Impact on investment and growth: The lack of remunerative jobs for the vast majority of Indian consumers implies that eventually the lack of growth in demand will adversely impact investment and economic growth.
- After all, a mere 17-18 per cent of the workforce in the organised sector cannot sustain growth of the economy in the long run.
- Squeezing out informal enterprises: The increase in the formal sector’s share in GDP due to Covid-19 is a result of large, formal enterprises squeezing out informal enterprises.
- It is important to note here that the increase in formalisation is not a consequence of micro and small informal firms transitioning to formality.
Increasing productivity: A way forward to formalisation
- Promoting formalisation: Over the last five years, the economy has officially witnessed a significant drive towards formalisation.
- Multiple reasons for avoiding formalisation: It is crucial to recognise that firms exist in the informal sector for various reasons and not simply to evade regulations and taxation.
- Significance of productivity: Many own account enterprises and MSMEs cannot afford to survive in the formal sector due to their low productivity.
- It is essential to view the process of formalisation as a development strategy that requires stepping up investment in physical and human capital to boost productivity and the extension of social security benefits for all workers, not just a registration strategy on myriad portals.
Consider the question “Informal sector has been affected disproportionately in the wake of the pandemic. What are the implications of this for the economy? Suggest the way forward for the formalisation.”
Conclusion
The informal sector will come back to life as much of it represents the survival efforts of the working poor. Celebrating formalisation based on the misery and devastation of poor informal workers (and their meagre productive assets) is not just misplaced but also callous.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- A collaborative tech vision for India, UAE, ISRAEL and the US
Context
Last month’s meeting between the foreign ministers of India, the US, Israel, and the UAE has set foreign policy circles in India abuzz with talks of the potential emergence of another quadrilateral grouping or as analysts term it, a “new Quad”.
Significance of the new Quad meeting
- Collaboration in various areas: The grouping discussed technology collaboration along with the joint infrastructure projects in transportation, enhancing political and economic cooperation and maritime security matters.
- Forum for economic cooperation: They have agreed to set up an international forum for economic cooperation.
- Collaboration on technology: Amongst all the issues discussed, the technology dimension of this partnership promises a far greater potential for collaboration.
- The four countries are uniquely placed to shape an innovation-based partnership, which can conjoin the technology hubs of Silicon Valley, Dubai, Tel Aviv, and Bengaluru.
- Such potential collaboration can benefit from the existing robust cooperation between these countries.
- Collaboration in fintech: The agreement between Start-Up Nation Central, an Israeli non-profit that connects the tech ecosystem, and Dubai International Financial Centre, the UAE’s financial hub, will create regulatory sandboxes and accelerators for start-ups and provide them with market access opportunities.
- India and the US have been separately working with the two countries on multiple projects.
New Quad’s technology cooperation
- Tech-based collaboration: Given the synergies in the innovation and startup sector, it is logical that the “new Quad” works towards tech-based collaboration.
- The agenda for the new Quad’s technology cooperation can begin by selecting three technologies — quantum science, blockchain, and 3D printing.
- Collaboration in quantum technology: Israel and the US, too, have made research on quantum technology a priority by allocating $91 million and $1.2 billion respectively to this sector.
- India is also fast catching up through its National Mission on Quantum Technologies and Applications and joining hands with countries like France to work on this technology.
- Collaboration in the blockchain: in blockchain, India and the UAE can leverage the American and Israeli expertise in cyber and cryptography to craft customised applications for use in banking, fintech and trade financing.
- Collaboration in 3-D printing: In 3D printing, which promises to transform the manufacturing process radically, Israel has taken the lead in manufacturing about 40 per cent of 3D printers worldwide.
- India, in contrast, has been slow in getting onto the 3D printing bandwagon. But it can certainly benefit from the expertise of the US, Israel and the UAE.
- Opportunity for India: From the Indian perspective, such partnerships can leverage Silicon Valley’s venture capital funding, Tel Aviv’s close-knit organic linkages between start-ups, industry, and academia, and UAE’s funding and focus on innovation.
- To this mix, Bengaluru — and potentially Hyderabad — can add opportunities for scaling up and manufacturing.
- The startup community in the US, Israel and the UAE have already reached an advanced research and development stage providing an opportunity for India to build expertise and offer the scale to the development and applications of these technologies.
Way forward
- Security cooperation: The collaborative and customisation possibilities offered by these technologies and their dual-use nature offers the potential to give a technological edge to the four countries’ militaries.
- This, in turn, can add the security cooperation element to the grouping’s agenda.
- Broaden the base: If the four countries plug their innovation ecosystems in this collaboration to shortlist, fund and develop technologies, it will also help to broaden the base of cooperation for this grouping, rather than restrict it to the government-to-government domain.
- Government push will be the essential catalyst to unlock this space for cooperation through seed-funding, academic collaborations, industrial partnerships and MoUs.
- China factor: By collaborating with Russia, and domestic flagship initiatives like “Made in China 2025”, Beijing has pursued emerging technologies and successfully reduced the capability gap with Washington.
- These developments make it imperative for the US, Israel, UAE, and India to strengthen their newly established cooperation.
Conclusion
Each country with its unique advantage in the field of science and technology, innovation and start-ups can make a significant contribution to advance shared technological goals.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: India-Maldives relations
The Government of Maldives has said that it “strongly rejects attempts to spread false information” criticizing its ties with India, its “closest ally and trusted neighbor”.
The India-Out Campaign
- Maldivian protesters recently demanded the Solih administration to ‘stop selling national assets to foreigners’, implying India.
- ‘India Out’ campaign in Maldives had started sometime last year as on-ground protests in the Maldives and later widely spread across social media platforms under the same hashtag.
- It is not related to people-to-people conflict (Indian diaspora) but is discontent on close relationship between Maldivian government & India.
Causes for the anti-India sentiments
- Political instability: The anti-India sentiment is nearly a decade old and can be traced back to when Abdulla Yameen Abdul Gayoom became president in 2013. He used anti-India sentiments for his political mobilization and started tilting China.
- Controversy over helicopter gift: Two Dhruv Advanced Light Helicopters (ALF) that were given by India to the Maldives for ocean search-and-rescue operations. Opposition tried to portray this as military presence in the country.
- Confidential agreements: Most agreements being signed between the Ibrahim Solih government and India are backdoor and has not been publicly discussed in the Maldives Parliament.
- Alleged interference in domestic politics: India being a big neighbour, there are unsubstantiated perceptions & allegations on Indian Diplomats stationed in Maldives interfering in Domestic affairs.
India-Maldives Relations: A backgrounder
- India and Maldives are neighbors sharing a maritime border.
- Both nations established diplomatic relations after the independence of Maldives from British rule in 1966.
- India was one of the first nations to recognize Maldives’ independence.
- Since then, India and Maldives have developed close strategic, military, economic and cultural relations.
- Maldivians generally regard Indians and India as a friend and trusted neighbor in the field economic, social and political.
Restoration of ties
- Ibrahim Mohamed Solih who became President in 2018 has restored Maldives close ties with India.
Major irritants in ties
- Political Instability: India’s major concern has been the impact of political instability in the neighborhood on its security and development.
- Increasing radicalization: In the past decade or so, the number of Maldivians drawn towards terrorist groups like the Islamic State (IS) and Pakistan-based jihadist groups has been increasing.
- Inclination towards terror: Radicalism in the island nation has increased the possibility of Pakistan based terror groups using remote Maldivian islands as a launch pad for terror attacks against India and Indian interests.
- Chinese affinity: China’s strategic footprint in India’s neighborhood has increased. The Maldives has emerged as an important ‘pearl’ in China’s “String of Pearls” construct in South Asia.
Recent gestures by India
[1] 2014 Malé drinking-water crisis
- In the wake of a drinking water crisis in Malé in December 2014, following collapse of the island’s only water treatment plant, Maldives urged India for immediate help.
- India came to rescue by sending its heavy lift transporters like C-17 Globemaster III, Il-76 carrying bottled water.
[2] 2020 Covid-19 crisis
- During the COVID-19 crisis of 2020, India extended help to Maldives in the form of financial, material and logistical support.
- Also, the IAF airlifted 6.2 tonnes of essential medicines and hospital consumables to Maldives, as part of ‘Operation Sanjeevani’.
[3] Greater Male Connectivity Project
- India has recently announced the signing of a $500-million infrastructure project for the construction of the Greater Malé Connectivity Project (GMCP).
- This infrastructure project, the largest-ever by India in the Maldives, involves the construction of a 6.74-km-long bridge and causeway link.
Why is Maldives significant for India?
- Increasing maritime cooperation: As maritime economic activity in the Indian Ocean has risen dramatically in recent decades, the geopolitical competition too in the Indian Ocean has intensified.
- Toll Gate in Indian Ocean: It is situated at the hub of commercial sea-lanes running through the Indian Ocean. More than 97% of India’s international trade by volume and 75% by value passes through the region.
- Naval cooperation: Maldives is an important partner in India’s role as the net security provider in the Indian Ocean Region.
- Important SAARC member: Besides, Maldives is a member of the South Asian Association for Regional Cooperation (SAARC) and the South Asia Subregional Economic Cooperation (SASEC).
- People To People Contact: There is a significant population of Maldivian students in India. They are aided by a liberal visa-free regime extended by India. There is also medical tourism.
- Major destination for Tourists: Tourism is the mainstay of the Maldivian economy. The country is now a major tourist destination for some Indians and a job destination for others.
Conclusion
- There is a significant Indian diaspora in the Maldives. Innumerable Indians work across the hospitality, education, and health-care sectors of the Maldives economy.
- India must use its Diaspora more extensively for strengthening its relations.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Universal Service Obligation Fund (USOF)
Mains level: Not Much
The Union Cabinet has approved the provisioning of mobile services in over 7,000 uncovered villages through the Universal Service Obligation Fund (USOF).
What do you mean by Universal Service?
- In the modern world, universal service refers to having a phone and affordable phone service in every home.
- It means, providing telecommunication service with access to a defined minimum service of specified quality to all users everywhere at an affordable price.
- In 1837, the concept was rolled on by Rowland Hill, a British educator and tax reformer, which included uniform rates across the UK and prepayment by sender via postage stamps.
What is USOF?
- The Universal Service Obligation Fund (USOF) was formed by an Act of Parliament, was established in April 2002 under the Indian Telegraph (Amendment) Act 2003.
- It aims to provide financial support for the provision of telecom services in commercially unviable rural and remote areas of the country.
- It is an attached office of the Department of Telecom, and is headed by the administrator, who is appointed by the central government.
Scope of the USOF
- Initially, the USOF was established with the fundamental objective of providing access to ‘basic’ telecom services to people in rural and remote areas at affordable and reasonable prices.
- Subsequently, the scope was widened.
- Now it aims to provide subsidy support for enabling access to all types of telecom services, including mobile services, broadband connectivity and the creation of infrastructure in rural and remote areas.
Funding of the USOF
- The resources for the implementation of USO are raised by way of collecting a Universal Service Levy (USL), which is 5 percent of the Adjusted Gross Revenue (AGR) of Telecom Service Providers.
Nature of the fund
- USOF is a non-lapsable Fund.
- The Levy amount is credited to the Consolidated Fund of India.
- The fund is made available to USOF after due appropriation by the Parliament.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Langtang Microhydro Electricity Project
Mains level: NA
Langtang Microhydro Electricity Project, Nepal’s first hydropower from a glacial lake has become functional recently.
Langtang Microhydro Electricity Project
- The Project was built three years after the 2015 earthquake-avalanche that devastated the valley, with help from the Hong Kong-based Kadoorie Charitable Foundation.
- It has a weir and spillway at the moraine, and the water is taken through a fibre glass-insulated penstock pipe to a powerhouse that generates 100kW of electricity.
- It seeks to provide 24 hours of electricity to 120 households and tourist lodges in Kyanjin and Langtang.
Uniqueness of the project
- The project is the first-of-its-kind in Nepal to power a village and holds promise for other remote Himalayan valleys where the risk posed by expanding glacial lakes can be mitigated.
- At the same time, it provides electricity to tourism-dependent families.
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