Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- Challenges ahead for tech startups
Context
The startup ecosystem which has been in overdrive for the past few years — propelled by a combination of factors, but largely, by the era of cheap money — is now showing signs of weakness.
Factors that helped fuel the tech startups
- With the combination of accelerated financial inclusion (bank accounts), ease of identification (Aadhaar) and connectivity (mobile phones) it was said that it is ultimately a bet on the Indian consumer, and the economy, not on government regulations/policies.
- Low-interest rates: In the era of cheap money and negative real interest rates, uncomfortable questions over the true market size and profitability were swept under the rug.
- Growth fuelled by cash burn: High cash burn rates were the norm as both startups and investors sought growth by subsidising the customer.
What is going wrong?
- Lack of profitability: Among the startups that have gone public in recent times, Paytm’s losses stood at Rs 2,396 crore in 2021-22, while for Zomato and PB Fintech (PolicyBazaar) losses were Rs 1,222 crore and Rs 832 crore respectively.
- Drying-up of investment: Sure, investors will continue to pour money.
- Some early age start-ups will continue to be funded, as will some of the more mature ones.
- But investors are likely to be more circumspect in their dealings.
- Impact on valuation: There are also reports of startups in diverse markets, ranging from Ola to OYO, planning to raise funds at lower valuations.
- Among those who have gone public in recent times, most are trading much below their listing price.
- Tighter financial conditions, a re-rating of the market, will impact both fundraising efforts and valuations.
Lack of discretionary spending capacity
- Many numbers were given as indicators of the size of the market or TAM (the total addressable market).
- Smartphone users: One such number thrown around is the smartphone users in the country — some have pegged this at 500 million.
- UPI transactions: The transactions routed through the UPI platform — in May there were almost six billion transactions worth Rs 10 trillion.
- Bank account holders: We have the near universality of bank accounts.
- But in reality, for most of these startups, the market or even the potential market is just a fraction of this.
- There aren’t that many consumers with significant discretionary spending capacity, and those with the capacity aren’t increasing their spending as these companies would hope.
- No increase in spending: What is equally worrying is the complete absence of any increase in spending by even these consumers who would have the capacity to spend more.
- While more consumers are on-board digital payment platforms — Paytm has about 70 million monthly transacting users — these numbers suggest that when it comes to consumers with considerable discretionary spending, the size of the market shrivels considerably.
Conclusion
Tech startups are about to witness a tough time ahead. Some startups will survive this period. Many may not. And changes in the dynamics of private markets will also have a bearing on public markets.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 3- E-commerce regulation issue
Context
The proliferation of a wide range of e-commerce platforms has created convenience and increased consumer choice. However, these platforms also have given rise to several concerns as well.
What is e-commerce ?
- Electronic commerce or e-commerce is a business model that lets firms and individuals buy and sell things over the Internet.
- Propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion in 2017.
- India’s e-commerce revenue is expected to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51%, the highest in the world.
- The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034.
Advantages of e-Commerce
- The process of e-commerce enables sellers to come closer to customers that lead to increased productivity and perfect competition. The customer can also choose between different sellers and buy the most relevant products as per requirements, preferences, and budget. Moreover, customers now have access to virtual stores 24/7.
- e-Commerce also leads to significant transaction cost reduction for consumers.
- e-commerce has emerged as one of the fast-growing trade channels available for the cross-border trade of goods and services.
- It provides a wider reach and reception across the global market,with minimum investments. It enables sellers to sell to a global audience and also customers to make a global choice. Geographical boundaries and challenges are eradicated/drastically reduced.
- Through direct interaction with final customers, this e-commerce process cuts the product distribution chain to a significant extent. A direct and transparent channel between the producer or service provider and the final customer is made. This way products and services that are created to cater to the individual preferences of the target audience.
- Customers can easily locate products since e-commerce can be one store set up for all the customers’ business needs
- Ease of doing business: It makes starting, managing business easy and simple.
- The growth in the e-commerce sector can boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term.
Issues created by the e-commerce sites
- Predatory pricing: These companies resort to predatory pricing to acquire customers even as they suffer persistent financial losses.
- SEBI is rightly revisiting the valuation norms of such companies looking to list on the stock exchange.
- Exclusionary practice: They take away choice from suppliers and consumers.
- This, in the long run, can be viewed as an exclusionary practice that eliminates other players from the market.
- Lack of level playing field: While neutrality is the fundamental basis of a marketplace and a level playing field is in the fitness of things, claims of outfits such as Flipkart or Amazon to be a marketplace for a wide variety of sellers can be questioned.
- A few select sellers, who are generally affiliated with the platform, reap the benefits of greater visibility and better terms of trade — reduced commissions and platform-funded discounts.
- Undue advantage to associated companies: The associate companies are prominent sellers on their platform.
- It is alleged that undue advantage is given while recommending or listing these products.
- Cartelisation: Online travel aggregators are often accused of cartelisation.
- Information asymmetry: The aggregators gather shopping habits, consumer preferences, and other personal data.
- The platforms are accused of using this data to create and improve their own products and services, taking away business from other sellers on their platform.
- They capitalise on this data and information about other brands to launch competing products on their marketplace.
- This information asymmetry is exploited by the aggregators to devour organisations they promise to support.
- Problems in dispute resolution mechanism: Another issue often noticed is the lack of a fair and transparent dispute resolution mechanism for sellers on these platforms.
- Delayed payments, unreasonable charges, and hidden fees are common occurrences.
- Unreasonable and one-sided contracts allow travel aggregators to have a disparity clause (in the rates) which allows them to offer rooms at a much cheaper rate but bars the hotels from doing so.
Impact of the e-commerce
- The online aggregator platforms have also damaged large segments of small and medium businesses through their dominant position and the malpractices this position allows them to indulge in.
- The ultimate loss bearer is the consumer who will have a reduced bargaining position.
Way forward
- Comprehensive rules: It is time that a set of comprehensive rules and regulations is put together.
- These regulations need to be inclusive, should eliminate the conflicts of interest inherent in current market practices, and prevent any anti-competitive practices.
- Model agreement: A model agreement that is fair and allows a level playing field between the aggregators and their business partners should be implemented.
- Learning from EU act: There is a lot to learn from the Digital Markets Act of the EU that seeks to address unfair practices by these gatekeepers.
- Need for dispute resolution mechanism: Strong and quick grievance redressal and dispute resolution mechanisms should be established.
- Punitive penalties: The rules should allow for punitive penalties for unfair practices.
- Fair competition rules: Market dominance and subsequent invoking of fair competition rules should be triggered at the level of micro-markets and for product segments.
Conclusion
The nature of our success in dealing with this change will lie in the ways in which we deal with the concerns of all players.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Kihoto Collohan Case
Mains level: Political conundrum in states over defection
As the political battle in Maharashtra moves to the Supreme Court, the role and powers of the Deputy Speaker are in focus.
In the context of the crisis, references have been made to the landmark judgment in ‘Kihoto Hollohan vs Zachillhu And Others’ (1992).
What is the ‘Kihoto Hollohan’ case?
- A constitutional challenge to the Tenth Schedule was mounted, which was settled by the apex court in ‘Kihoto Hollohan’.
- The principal question before the Supreme Court in the case was whether the powerful role given to the Speaker violated the doctrine of basic structure.
- In this judgment, the Supreme Court upheld the sweeping discretion available to the Speaker in deciding cases of disqualification of MLAs.
- The Supreme Court laid down the doctrine of basic principle in its landmark judgment in ‘Kesavananda Bharati vs State Of Kerala’ (1973).
What does the Tenth Schedule of the Constitution say?
- The Tenth Schedule was inserted in the Constitution by the Constitution (Fifty-Second Amendment) Act, 1985.
- It provides for the disqualification of Members of Parliament and state legislatures who defect.
- It describes the Speaker’s sweeping discretionary powers to make decisions on case of defection.
What did the Supreme Court rule in ‘Kihoto Hollohan’?
- The petitioners in ‘Kihoto Hollohan’ argued whether it was fair that the Speaker should have such broad powers, given that there is always a reasonable likelihood of bias.
- The majority judgment authored by Justices M N Venkatachaliah and K Jayachandra Reddy answered this question in the affirmative. It read-
- The Speakers/Chairmen hold a pivotal position in the scheme of Parliamentary democracy and are guardians of the rights and privileges of the House.
- They are expected to and do take far reaching decisions in the Parliamentary democracy.
- Vestiture of power to adjudicate questions under the Tenth Schedule in them should not be considered exceptionable.
- The provisions were “salutory and intended to strengthen the fabric of Indian Parliamentary democracy by curbing unprincipled and unethical political defections.”
What was the dissenting opinion?
- Justices Lalit Mohan Sharma and J S Verma dissented and took a different view.
- The tenure of the Speaker, who is the authority in the Tenth Schedule to decide this dispute, is dependent on the continuous support of the majority in the House.
- Therefore, he does not satisfy the requirement of such an independent adjudicatory authority.
- They advocated for an independent adjudicatory machinery for resolving disputes relating to the competence of Members of the House,
- This is envisaged as an attribute of the democratic system which is a basic feature of our Constitution.
What about the role of the Deputy Speaker?
- Article 93 of the Constitution mentions the positions of the Speaker and Deputy Speaker of the House of the People (Lok Sabha), and Article 178 contains the corresponding position for Speaker and Deputy Speaker of the Legislative Assembly of a state.
- Maharashtra has been without a Speaker since February 2021, and Deputy has been carrying out the responsibilities of the position.
- Article 95(1) says: “While the office of Speaker is vacant, the duties of the office shall be performed by the Deputy Speaker”.
- In general, the Deputy Speaker has the same powers as the Speaker when presiding over a sitting of the House.
- All references to the Speaker in the Rules are deemed to be references to the Deputy Speaker when he presides.
Try this PYQ:
Q.Which one of the following Schedules of the Constitution of India contains provisions regarding anti-defection?
(a) Second Schedule
(b) Fifth Schedule
(c) Eighth Schedule
(d) Tenth Schedule
Post your answers here.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Regulation of Gig Economy
A NITI Aayog report has identified that is expected to grow to 2.35 crore by 2029-30.
Do you know?
According to a study released by NITI Aayog, the number of gig workers in India is estimated to be 77 lakh in 2020-21. Isn’t it too low to imagine? Seems like there is huge under-reporting.
What is the Gig Economy?
- In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees.
- A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career. e.g Employee models of Uber, Ola, Swiggy etc
- In this economy, tech-enabled platforms connect the consumer to the gig worker to hire services on a short-term basis.
- Gig workers include self-employed, freelancers, independent contributors and part-time workers.
Where does gig culture exist in Indian Economy?
- Sectors such as media, real estate, legal, hospitality, technology-help, management, medicine, allied and education are already operating in gig culture.
- The gig economy can benefit workers, businesses, and consumers by making work more adaptable to the needs of the moment and demand for flexible lifestyles.
Key Drivers for Gig Economy
- Unconventional work approach by millennials: Hectic lifestyles of employees in private sectors have created a negative perception of full-time employment among millennials.
- Emergence of a start-up culture: The start-up ecosystem in India has been developing rapidly. For start-ups, hiring full-time employees leads to high fixed costs and therefore, contractual freelancers are hired for non-core activities.
- MNCs are hiring contractual employees: MNCs are adopting flexi-hiring options, especially for niche projects, to reduce operational expenses after the pandemic.
- Rise in freelancing platforms: Rise in freelancing platforms has also aided in the development of the gig economy.
- Business Models: Gig employees work on various compensation models such as fixed-fee (decided during contract initiation), time & effort, actual unit of work delivered and quality of outcome.
- Impact of Covid-19: Many laid-off employees are focusing on developing skills to avail freelance job opportunities and become a part of this burgeoning economy.
Why is Gig Economy preferred by workers?
- Profit through multiple work: One can work on freelancing as well as work full-time somewhere else.
- Women empowerment: It is very beneficial for womenwho work on this concept when they cannot continue their work or take a break from career due to marriage or child birth.
- Leisure and dependency: Retired peoplecan stay active after retirement as this will keep them engaged away from loneliness and depression and can earn as well on their own.
- Flexibility and diversity to the workers: It offers flexibility when workers can work according to their convenience and schedule rather than routine like in full-time jobs.
- Work from home: The travel costs and energy to travel to the workplace is reduced.
Why is Gig Economy preferred by Employers?
- Efficiency, efficacy and productivity of workers in the gig economy are much more than that of a stable full-time job.
- More rconomical for employers-when employment givers can’t afford to hire full-time workers, they hire people for specific projects and pay them.
- Start-up companies and entrepreneurs – who do not have big financial space – can grow only if they can leverage the services of contract employees or freelancers.
- In a gig economy, businesses save resources in terms of benefits, office space and training.
- Competition and efficiency among workers is improved.
Challenges faced in Gig economy
- No perks and benefits: There are no labour welfare emoluments like pension, gratuity, etc. for the workers.
- Job insecurity: Gig workers may face unfair termination. They may also attain minimum wages and less paid leave.
- No legal protection: Workers do not have the bargaining power to negotiate a fair deal with their employers.
- Unionization of workers will be difficult.
- Confidentiality of documents etc. of the workplace is not guaranteed
- Urban nature: The gig economy is not accessible for people in many rural areas where internet connectivity and electricity is unavailable.
New classification by NITI Aayog: Platform vs. Non-platform Workers
- The NITI Aayog report broadly classifies gig workers into platform and non-platform-based workers.
- The consequent platformisation of work has given rise to a new classification of labour — platform labour — falling outside of the purview of the traditional dichotomy of formal and informal labour.
- While platform workers are those whose work is based on online software applications or digital platforms.
- Non-platform gig workers are generally casual wage workers and own-account workers in the conventional sectors, working part-time or full time.
Recommendations made by NITI Aayog
- The NITI Aayog has recommended steps to provide social security, including paid leave, occupational disease and accident insurance, support during irregularity of work and pension plans for the country’s gig workforce.
- It has also recommended introducing a ‘Platform India initiative’ on the lines of the ‘Startup India initiative’.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Di-ammonium fertilisers
Mains level: Paper 3- Reducing the cost of fertiliser imports
Context
The global prices of urea, DAP, MOP, phosphoric acid, ammonia and LNG have soared by two to two-and-a-half times in the last year
Resource richness of Indian agriculture
- No country has as much area under farming as India.
- Land under cultivation: At 169.3 million hectares (mh) in 2019, its land used for crop cultivation was higher than that of the US (160.4 mh), China (135.7 mh), Russia (123.4 mh) or Brazil (63.5 mh).
- Ample water: With its perennial Himalayan rivers and average annual rainfall of nearly 1,200 mm – against Russia’s 475 mm, China’s 650 mm and the US’s 750 mm – India has no dearth of land, water and sunshine to sustain vibrant agriculture.
- But there’s one resource in which the country is short and heavily import-dependent — mineral fertilisers.
India’s important dependence
- In 2021-22, India imported 10.16 million tonnes (mt) of urea, 5.86 mt of di-ammonium phosphate (DAP) and 2.91 mt of muriate of potash (MOP).
- Import value: In value terms, imports of all fertilisers touched an all-time high of $12.77 billion last fiscal.
- In 2021-22, India also produced 25.07 mt of urea, 4.22 mt of DAP, 8.33 mt of complex fertilisers (containing nitrogen-N, phosphorus-P, potassium-K and sulphur-S in different ratios) and 5.33 mt of single super phosphate (SSP).
- Import of raw material: The intermediates or raw materials for the manufacture of these fertilisers were substantially imported.
- Total value of fertiliser imports: The total value of fertiliser imports by India, inclusive of inputs used in domestic production, was a whopping $24.3 billion in 2021-22.
Two costs involved in import
- 1] Foreign exchange outgo for import: The first is foreign exchange outgo:
- Imports are mostly from the following countries:
- Urea: Imported from China, Oman, UAE and Egypt
- DAP: Imported from China, Saudi Arabia and Morocco.
- MOP: Imported from Belarus, Canada, Russia, Israel and Jordan.
- LNG: Imported from Qatar, US, UAE and Nigeria.
- Ammonia: Morocco, Jordan, Senegal and Tunisia (phosphoric acid); Saudi Arabia and Qatar.
- Rock phosphate: Jordan, Morocco, Egypt and Togo.
- 2] Fiscal cost: The second cost is fiscal.
- Fertilisers are not only imported but also sold at subsidised prices.
- The difference is paid as a subsidy by the government.
- That bill was Rs 1,53,658.11 crore or $20.6 billion in 2021-22 and projected at Rs 2,50,000 crore ($32 billion) this fiscal.
- Unsustainably high costs: Both costs are unsustainably high to bear for a mineral resource-poor country.
Suggestions
1] Reduce consumption of high-analysis fertilisers
- There is a need to cap or even reduce consumption of high-analysis fertilisers – particularly urea (46 per cent N content), DAP (18 per cent N and 46 per cent P) and MOP (60 per cent).
- Incorporate urease and inhibition compounds in urea: This can be done by incorporating urease and nitrification inhibition compounds in urea.
- These are basically chemicals that slow down the rate at which urea is hydrolysed and nitrified (which increases leaching).
- By reducing ammonia volatilisation and nitrate leaching, more nitrogen is made available to the crop, enabling farmers to harvest the same yields with a lesser number of urea bags.
- Liquid nano-urea: Together with products such as liquid “nano urea” –it is possible to achieve a 20 per cent or more drop in urea consumption from the present 34-35 mt levels.
- Liquid nano-urea with their ultra-small particle size is conducive to easier absorption by the plants than with bulk fertilisers, translating into higher nitrogen use efficiency.
2] Promote the sale of SSP and complex fertilisers
- A second route is by promoting sales of SSP (containing 16 per cent P and 11 per cent S) and complex fertilisers such as “20:20:0:13” and “10:26:26”.
- Restrict DAP use: DAP use should be restricted mainly to paddy and wheat; other crops don’t require fertilisers with 46 per cent P content.
- India can also import more rock phosphate to make SSP directly or it can be converted into “weak” phosphoric acid
- The latter, having only about 29 per cent P (compared to 52-54 per cent in normal “strong” merchant-grade phosphoric acid), is good enough for manufacturing “20:20:0:13”, “10:26:26” and other low-analysis complex fertilisers.
3] Incorporate MOP into complexes
- As regards MOP, roughly three-fourths of the imported material is now applied directly and only the balance is sold after incorporating into complexes.
- It should be the other way around.
- India, to re-emphasise, needs to wean its farmers away from all high-analysis fertilisers.
4] Use of NPKS complexes and indigenous sources
- The moment to use more NPKS complexes and SSP, is already happening.
- It requires a concerted push, alongside popularising high nutrient use-efficient water-soluble fertilisers (potassium nitrate, potassium sulphate, calcium nitrate, etc).
- Exploiting alternative indigenous sources needs to be considered (for example, potash derived from molasses-based distillery spent-wash and from seaweed extract).
5] Revise nutrient application recommendations
- Farmers need to know what is a suitable substitute for DAP and which NPK complex or organic manure can bring down their urea application from 2.5 to 1.5 bags per acre.
- It calls for agriculture departments and universities not just to revisit their existing crop-wise nutrient application recommendations, but disseminating this information to farmers on a campaign mode.
Conclusion
The costs associated with the use of fertilisers are unsustainably high to bear for a mineral resource-poor country such as India. We need to act on the measures to reduce our import dependence.
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Back2Basics: High-analysis fertilisers
- Fertilizers that have more than 30% total available nutrients are called high analysis fertilizers, whereas those with less than 30% total available nutrients are called low analysis fertilizers.
- A 15-15-15 is a high analysis fertilizer; a 5-10-10 is a low analysis fertilizer, and a 10-10-10 is right on the borderline.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Partners in the Blue Pacific (PBP) initiative
Mains level: Countering projects against Chinese predatory expansion
To reinforce its Indo-Pacific strategy, the US – along with Australia, New Zealand, UK and Japan – announced a new Partners in Blue Pacific (PBP) initiative.
What is Partners in the Blue Pacific (PBP) initiative?
- The PBP is a five-nation “informal mechanism” to support Pacific islands and to boost diplomatic, economic ties in the region.
- It speaks of enhancing “prosperity, resilience, and security” in the Pacific through closer cooperation.
- It simply means that through the PBP, these counties — together and individually — will direct more resources here to counter China’s aggressive outreach.
- The initiative members have also declared that they will “elevate Pacific regionalism”, and forge stronger ties with the Pacific Islands Forum.
- The areas where PBP aims to enhance cooperation include “climate crisis, connectivity and transportation, maritime security and protection, health, prosperity, and education”.
How is China trying to transform its ties in the Pacific?
- As China signed a security pact with Solomon Islands in April, the deal flagged serious concerns about the Chinese military getting a base in the southern Pacific.
- This is very close to the US island territory of Guam, and right next to Australia and New Zealand.
- The deal, which boosted Beijing’s quest to dominate crucial shipping lanes criss-crossing the region, rattled the US and its allies.
- It also triggered urgent moves to counter China’s growing Pacific ambition amid a power vacuum fuelled by apparent lack of US attention.
What is being done by the US and its allies to counter China?
- Before launching the PBP this month, the US and its partners started the Indo-Pacific Economic Framework for Prosperity (IPEF).
- Away from the Pacific, the G7 on Monday (June 27) announced a plan — Partnership for Global Infrastructure and Investment (PGII) — to rival China’s BRI.
- It promises to raise $600 billion to fund development projects in low and middle-income countries.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Road safety issues in India
The World Bank has approved a $250 million loan to support the Government of India’s road safety programme for seven States.
Programme for Road Safety
- Under this, a single accident reporting number will be set up to better manage post-crash events.
- It will be implemented in the States of Andhra Pradesh, Gujarat, Odisha, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal.
- The $250 million variable spread loan from the International Bank for Reconstruction and Development (IBRD) has a maturity of 18 years, with a grace period of 5.5 years.
- The project will also establish a national harmonised crash database system in order to analyse accidents and use that to construct better and safer roads.
- The project will also provide incentives to States to leverage private funding through public private partnership (PPP) concessions and pilot initiatives.
Road accidents in India: Key takeaways
- The report ‘Road Accidents in India 2020’ released by the Union ministry of road transport and highways (MoRTH) provides for key stats.
- India has only 1% of the world’s vehicles but 11% of the global deaths from road accidents occur in India.
- About 450,000 accidents take place in India annually, of which 150,000 people die.
- There are 53 road accidents in the country every hour and one death every four minutes.
Why are there so many road fatalities in India alone?
- Weak enforcement of traffic laws: People hardly oblige to traffic rules and find easier to bribe policemen rather than paying hefty challans.
- Speeding issue: More accidents on the highways have been attributed to higher vehicle speeds and higher volume of traffic on these roads.
- Engineering bottlenecks: Issues such as gaps in the median on the national highways, untreated intersections, and missing crash barriers are some of the biggest engineering issues.
- Behavioural issue: Driver violations such as wrong-side driving, wrong lane usage by heavy vehicles, and mass violation of traffic lights, intoxication are the biggest behavioural issues.
- Lack of Golden hour treatment: Lack of rapid trauma care on highways leads to such high fatalities.
Imbibing road safety: Way forward
- Road safety education
- Better road design, maintenance and warning signage
- Crackdown on driving under influence of alcohol and drugs
- Strict enforcement of traffic rules
- Encouraging better road behaviour
- Ensuring road worthiness of a vehicle
- Better first aid and paramedic care
Do you know?
The ‘golden hour’ has been defined as ‘the time period lasting one hour following a traumatic injury during which there is the highest likelihood of preventing death by providing prompt medical care.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: Small saving schemes
Mains level: Read the attached story
Economists expect the Centre to raise the interest rates paid on small savings schemes for the July to September 2022 quarter.
Small Savings Scheme
- Small Savings Schemes are a set of savings instruments managed by the central government with an aim to encourage citizens to save regularly irrespective of their age.
- They are popular as they provide returns higher than bank fixed deposits, sovereign guarantee and tax benefits.
How is it managed?
- Since 2016, the Finance Ministry has been reviewing the interest rates on small savings schemes on a quarterly basis.
- All deposits received under various schemes are pooled in the National Small Savings Fund.
- The money in the fund is used by the Centre to finance its fiscal deficit.
What are the different saving schemes?
The schemes can be grouped under three heads –
- Post office deposits
- Savings certificates and
- Social security schemes
(1) Post Office Deposits
- Under this we have the savings deposit, recurring deposit and time deposits with 1, 2, 3 and 5 year maturities and the monthly income account.
- The savings account currently pays an interest of 4% per annum and can be opened individually or jointly with an initial investment of Rs 500.
- The recurring deposit that pays 5.8% a year compounded quarterly matures after 60 months from the date of opening.
- It allows investors to save on a monthly basis with a minimum deposit of Rs 100 per month.
- Investments under the 5-year time deposit up to Rs 1.5 lakh further qualifies for benefit under section 80C of Income Tax Act.
(2) Savings Certificates
- Under this, we have the National Savings Certificate and the Kisan Vikas Patra.
- The National Savings Certificate pays interest at a rate of 6.8% per annum upon maturity after 5 years. The interest that is earned is reinvested into the scheme every year automatically.
- The NSC also qualifies for tax saving under Section 80C of the income tax act.
- The Kisan Vikas Patra, which is open to everyone, doubles your one-time investment at the end of 124 months signifying a return of 6.9% compounded annually.
- The minimum investment amount is Rs 1000 while there is no upper limit.
(3) Social security schemes
- In the third head of social security schemes, there is Public Provident Fund, Sukanya Samriddhi Account and Senior Citizens Savings Scheme.
a. Public Provident Fund
- The Public Provident Fund is a popular saving option for long term goals like retirement.
- It pays 7.1% a year and qualifies for tax benefit under Section 80C of the Income Tax Act.
- Upon maturity of the account after 15 years, it can be extended indefinitely in blocks of 5 years.
- The accumulated amount and interest earned are exempt from tax at the time of withdrawal.
b. Sukanya Samriddhi Account
- The Sukanya Samriddhi Account was launched in 2015 under the Beti Bachao Beti Padhao campaign exclusively for a girl child.
- The account can be opened in the name of a girl child below the age of 10 years.
- The scheme guarantees a return of 7.6% per annum and is eligible for tax benefit under Section 80C of the Income Tax Act.
- The tenure of the deposit is 21 years from the date of opening of the account and a maximum of Rs 1.5 lakh can be invested in a year.
c. Senior Citizen Savings Account
- And finally, the 5-year Senior Citizen Savings Account can be opened by anyone who is over 60 years to age.
- It carries an interest of 7.4% per annum payable quarterly and qualifies for Section 80C tax benefit.
- These time-tested and safe modes of investments don’t offer quick returns, but are safer when compared to market-linked schemes.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: PGI-D
Mains level: Not Much
The Ministry of Education has released the Performance Grading Index for Districts (PGI-D) for 2019 which studied 83 indicators grouped in six categories.
What is PGI-D?
- The 83-indicator-based PGI for District (PGI-D) has been designed to grade the performance of all districts in school education.
- The data is filled by districts through an online portal.
- The indicator-wise PGI score shows the areas where a district needs to improve.
- The PGI-D structure comprises a total weightage of 600 points across 83 indicators.
- They are grouped under 6 categories, viz., Outcomes, Effective Classroom Transaction, Infrastructure Facilities & Students’ Entitlements, School Safety & Child Protection, Digital Learning, and Governance Process.
- These categories are outcomes, effective classroom transaction, infrastructure facilities and student’s entitlements, school safety and child protection, digital learning and governance process.
How does the grading scale works?
- The PGI-D grades the districts into 10 grades with the highest achievable grade being ‘Daksh’, which is for districts scoring more than 90% of the total points in that category or overall.
- ‘Utkarsh’ category is for districts with score between 81-90%, followed by ‘Ati-Uttam’ (71-80%), ‘Uttam’ (61-70%), ‘Prachesta-I’ (51-60%), ‘Prachesta-II’ (41-50%) and ‘Pracheshta III’ (31-40%).
- The lowest grade in PGI-D is called ‘Akanshi-3’ which is for scores up to 10% of the total points.
Performance of the states
- Rajasthan’s Sikar is the top performer, followed by Jhunjhunu and Jaipur.
- The other States whose districts have performed best are Punjab with 14 districts in ‘Ati-uttam’ grade (scoring 71-80% on a scale of 100).
- It followed by Gujarat and Kerala with each having 13 districts in this category.
- However, there are 12 States and UTs which do not have even a single district in the ‘Ati-uttam’ and ‘Uttam’ categories and these include seven of the eight States from the North East region.
Significance
- The PGI-D will reflect the relative performance of all the districts on a uniform scale which encourages them to perform better.
- It is expected to help the state education departments to identify gaps at the district level and improve their performance in a decentralized manner.
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Note4Students
From UPSC perspective, the following things are important :
Prelims level: G7, G12, G20
Mains level: Read the attached story
The Jammu and Kashmir administration has constituted a committee to coordinate with the delegates of G-20 countries scheduled to participate in a meeting to be held in the Union Territory (UT) next year.
Why such move?
- The participation of the delegates from G-20 countries will be a major boost to the efforts of the Centre to project the situation in J&K as normal.
- This is especially after J&K’s special constitutional position was ended in 2019.
What is G-20?
- Formed in 1999, the G20 is an international forum of the governments and central bank governors from 20 major economies.
- Collectively, the G20 economies account for around 85 percent of the Gross World Product (GWP), 80 percent of world trade.
- To tackle the problems or address issues that plague the world, the heads of governments of the G20 nations periodically participate in summits.
- In addition to it, the group also hosts separate meetings of the finance ministers and foreign ministers.
- The G20 has no permanent staff of its own and its chairmanship rotates annually between nations divided into regional groupings.
Aims and objectives
- The Group was formed with the aim of studying, reviewing, and promoting high-level discussion of policy issues pertaining to the promotion of international financial stability.
- The forum aims to pre-empt the balance of payments problems and turmoil on financial markets by improved coordination of monetary, fiscal, and financial policies.
- It seeks to address issues that go beyond the responsibilities of any one organization.
Members of G20
The members of the G20 consist of 19 individual countries plus the European Union (EU).
- The 19 member countries of the forum are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and the United States.
- The European Union is represented by the European Commission and by the European Central Bank.
Its significance
- G20 is a major international grouping that brings together 19 of the world’s major economies and the European Union.
- Its members account for more than 80% of global GDP, 75% of trade and 60% of population.
India and G20
- India has been a member of the G20 since its inception in 1999.
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