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Gist of Economic Survey 2019-20

WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST For more than three-fourths of known economic history, India has been the...

26 May 2020 Gist of Economic Survey 2019-20
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			'title' => 'Gist of Economic Survey 2019-20',
			'catname' => 'Gist of Economic Survey 2019-20',
			'desc' => '<h2>WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST</h2>
<p>For more than three-fourths of known economic history, India has been the dominant economic power globally, a major wealth creator and a significant contributor to the world&rsquo;s GDP.</p>
<h3>Wealth Creation</h3>
<ul style="list-style-type: square;">
<li>The wealth created by the entrepreneur correlates strongly with:
<ul style="list-style-type: circle;">
<li>The <strong>benefits</strong> that accrue to the employees working with the firm</li>
<li><strong>Raw materials</strong> procured by the entrepreneur&rsquo;s firms and its suppliers</li>
<li><strong>Capital expenditures</strong> made by the firm</li>
<li>Foreign exchange revenue earned by the firms and its role in macroeconomic stability by enabling the country to pay for its imports</li>
<li><strong>The taxes paid by the entrepreneurs</strong> enable Government spending on creating public goods and providing welfare benefits</li>
</ul>
</li>
<li>Wealth creation happens in an economy when the right policy choices are pursued. For instance, wealth creation and economic development in several advanced economies has been guided by Adam Smith&rsquo;s philosophy of the invisible hand.</li>
<li>During much of India&rsquo;s economic dominance, the economy relied on the invisible hand of the market for wealth creation with the support of the hand of trust.</li>
<li>The invisible hand of markets, as reflected in openness in economic transactions, was combined with the hand of trust by appealing to ethical and philosophical dimensions.</li>
</ul>
<h3>Historical Context</h3>
<ul style="list-style-type: square;">
<li>Wealth creation has been recognised by various ancient treatises like Arthashashtra of Kautilya, and Thirukkural of Thiruvalluvar.</li>
<li>Kautilya postulates the role of prices in an economy. He avers that the root of wealth is economic activity and lack of it brings material distress. In the absence of fruitful economic activity, both current prosperity and future growth are in danger of destruction.</li>
<li>For Kautilya, a king can achieve the desired objectives and abundance of riches by undertaking productive economic activity. However, Kautilya advocates economic freedom by asking the King to remove all obstructions to economic activity.</li>
<li>Thiruvalluvar mentions <strong>&lsquo;Porul Paal&rsquo;</strong> or the essence of material wealth and declares, &ldquo;Make money - there is no weapon sharper than it to sever the pride of your foes.&rdquo;</li>
<li>Nevertheless, Thirukural advocates wealth creation through ethical means. He avows that wealth yields righteousness and joy, the wealth acquired capably without causing any harm.</li>
<li>A key contributor to ancient India&rsquo;s prosperity was internal and external trade. Two major highways, Uttarapatha (the Northern Road) and Dakshinapatha (the Southern Road), and its subsidiary roads connected the sub-continent. Ports along India&rsquo;s coastline traded with Egypt, Persia, China and Japan among others.</li>
<li>Much of this trade was carried out by large corporatized guilds akin to today&rsquo;s multinationals and were funded by temple-banks. Thus, commerce and the pursuit of prosperity is an intrinsic part of Indian civilizational ethos.</li>
</ul>
<h3>The Invisible Hand of Markets</h3>
<ul style="list-style-type: square;">
<li>For several decades after Independence, India deviated from its rich tradition of emphasizing wealth creation. Despite the dalliance with socialism India has embraced the market model - post-liberalization of 1991 - that represents our traditional legacy.</li>
<li>Enabling the invisible hand of markets i.e. increasing economic openness, has a huge impact in enhancing wealth. Indeed, the sectors that were liberalized grew significantly faster than those that remain closed.</li>
<li>To illustrate, the growth has been significantly greater in open sectors such as cement and steel, roads, etc. than closed sectors such as coal, railways etc.</li>
<li>This is not surprising as the market economy is based on the principle that optimal allocation of resources occurs when citizens are able to exercise free choice in the products or services they want.</li>
</ul>
<h3>Trust as a Public Good</h3>
<ul style="list-style-type: square;">
<li>Despite the importance of the invisible hand of markets, in a market economy, there is a need for the state to ensure a moral hand to support the invisible hand. Markets are liable to debase ethics in the pursuit of profits at all cost.</li>
<li>Even ancient philosophers consider trust as an important element in society and postulate that trust can be furthered by appealing to ethical and philosophical dimensions.</li>
<li>Trust can be conceptualized as a public good with the following characteristics:
<ul style="list-style-type: circle;">
<li><strong>Non-excludability</strong> - citizens can enjoy its benefits at no explicit financial cost.</li>
<li><strong>Non-rival consumption</strong> - the marginal cost of supplying this public good to an extra citizen is zero.</li>
<li><strong>Non-rejectable</strong> - collective supply for all citizens means that it cannot be rejected.</li>
</ul>
</li>
<li>Unlike other public goods, trust grows with repeated use and therefore takes time to build. Lack of trust represents an externality where decision-makers are not responsible for some of the consequences of their actions.</li>
<li>Aristotle holds that good laws make good citizens, by inculcating habits and social virtue. For Confucius, people become &ldquo;upright&rdquo; when guided by &ldquo;virtue&rdquo; and regulated by &ldquo;ritual&rdquo; rather than by orders and penalties.</li>
<li>Kautilya&rsquo;s Arthashastra (Treatise on Wealth) states four branches of knowledge that further good governance:
<ul style="list-style-type: circle;">
<li><strong>Varta</strong> (economic policy)</li>
<li><strong>Dandaneti</strong> (law and enforcement)</li>
<li><strong>Anvikshiki</strong> (philosophical and ethical framework)</li>
<li><strong>Trayi</strong> (cultural context)</li>
</ul>
</li>
<li>To sum up, the intrinsic motivation to be &ldquo;trustworthy&rdquo; can generate trust as a public good while the intrinsic motivation of uninhibited greed can debase the same public good of trust.</li>
</ul>
<h3>Implications of Lack of Trust</h3>
<ul style="list-style-type: square;">
<li>The Global Financial Crisis represented a glaring instance of the failure of trust in a market economy.</li>
<li>When a corporate intentionally misreports financial information, it harms investors by creating a negative externality of low trust for all domestic and international investors.</li>
<li>When a corporate wilfully defaults on its loans, it harms its bank and creates negative externality to all other corporates as they get lesser supply of credit because of lack of trust.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li><strong>Reducing Information Asymmetry</strong>
<ul style="list-style-type: circle;">
<li>Opportunism leading to repression of the hand of trust can be remedied through standardising enforcement systems and public databases.</li>
<li>For instance, in the case of wilful defaults pre-2014, inability to access relevant borrower data was a key driver of information asymmetry.</li>
<li>If the Indian economy had the data infrastructure such as CRILC (Central Repository of Information on Large Corporates) during the in pre-2014 credit boom, the extent of systemic NPAs may have been lower.</li>
</ul>
</li>
<li><strong>Enhancing the Quality of Supervision</strong>
<ul style="list-style-type: circle;">
<li>The government needs to support the hand of trust by being a good referee of the economy. The referee&rsquo;s job is to not just report but also detect opportunistic behaviour.</li>
<li>To illustrate, the human resource deficit among the regulators (RBI, SEBI, CCI etc.) needs to be reduced. Significant investments in technology and analytics also needs to be made.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Central Repository of Information on Large Corporates (CRILC)</strong></p>
<ul style="list-style-type: square;">
<li>CRILC was set up by RBI to collect, store and disseminate credit data to lenders.</li>
<li>Banks are required to earmark large corporate borrowers with total credit exposure of ₹5 crore.</li>
<li>With CRILC when a borrower defaults with one lender, other lenders can contractually tag their loan too as a default and therefore recall the loan.</li>
</ul>
</div>
<h2>ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS</h2>
<p>Entrepreneurship is an important strategy to fuel productivity growth and wealth creation in an economy. Entrepreneurs are seen as agents of change that accelerate innovation in the economy.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>As per the World Bank data, India ranks third in number of new firms created. In other words, India has the 3rd largest entrepreneurship ecosystem in the world.</li>
<li>However, on a per-capita basis, India has low rates of entrepreneurship in the formal economy. In contrast to other countries, a large number of India&rsquo;s enterprises operate in the informal economy.</li>
<li>The entrepreneurial intensity is significantly higher for the developed economies.</li>
<li>Entrepreneurship acts as an engine of economic growth and change in India.</li>
<li>Entrepreneurship at district level has a significant impact on wealth creation at the grassroots. A 10% increase in registration of new firms in a district yields a 1.8% increase in Gross Domestic District Product (GDDP).</li>
<li>Birth of new firms in India is heterogeneous and dispersed across districts and sectors.</li>
</ul>
<h3>Spatial Heterogeneity in Entrepreneurial Activity</h3>
<ul style="list-style-type: square;">
<li>All regions demonstrate strong growth in entrepreneurial activity over time with the exception of the Eastern states.</li>
<li>The peninsular states dominate the entry of new firms, but entrepreneurship is dispersed across India, not restricted just to a few metropolitan cities.</li>
<li>However, all regions demonstrate a strong relationship between entrepreneurship and GDDP.</li>
<li>The impact of new firm entry is greatest in the Manufacturing and Services sectors.</li>
<li><strong>Agriculture Sector</strong><br />
<ul style="list-style-type: circle;">
<li>Relative to entrepreneurial capabilities in Manufacturing, Services and Infrastructure, entrepreneurial capabilities in the Agriculture sector are not geographically localized and seem to be distributed evenly across most districts in India.</li>
<li>States in the highest quintile of relative entrepreneurial activity in the Agriculture sector are Manipur, Meghalaya, Madhya Pradesh, Assam, Tripura and Odisha.</li>
</ul>
</li>
<li><strong>Manufacturing Sector</strong><br />
<ul style="list-style-type: circle;">
<li>Entrepreneurial activity in the Manufacturing sector is highest in the regions of Gujarat, Meghalaya, Puducherry, Punjab and Rajasthan.</li>
<li>The nature of establishments in these regions attests to agglomeration economies i.e. the incumbent industrial structures for input and output markets and specialized labour in a region are strongly linked to higher entrepreneurial activity in that industry-region.</li>
<li>Spatial heterogeneity in the Manufacturing sector emphasizes the need for policy reforms that improve the ease of doing business including labour reforms, reduction in compliance burden, transparent and timely processing of approval and renewal of applications among others.</li>
</ul>
</li>
<li><strong>Services Sector</strong><br />
<ul style="list-style-type: circle;">
<li>Entrepreneurial activity in the Services sector is highest in the regions of Delhi, Mizoram, Uttar Pradesh, Kerala, Andaman and Nicobar, and Haryana.</li>
<li>The nature of establishments in these regions is not reflective of agglomeration economies and spans diverse industries such as trading, financial services, tourism and hospitality services, retailing, and even religious leagues and missions.</li>
</ul>
</li>
</ul>
<h3>Entrepreneurial Activity and Unemployment</h3>
<ul style="list-style-type: square;">
<li>Based on the data of the Periodic Labour Force Survey (PLFS):<br />
<ul style="list-style-type: circle;">
<li>Entrepreneurial activity in the agriculture and manufacturing sectors shares a negative spatial correlation with the unemployment rate across states.</li>
<li>Entrepreneurial activity in the services and infrastructure sectors shares a positive spatial correlation with unemployment rate across states.</li>
<li>To illustrate, the number of active one-person new firms in the services sector is almost five times more that in all the other three sectors combined.</li>
</ul>
</li>
</ul>
<h3>Determinants of Entrepreneurial Activity</h3>
<ul style="list-style-type: square;">
<li><strong>Social Infrastructure</strong><br />
<ul style="list-style-type: circle;">
<li>Districts with better education levels are expected to have higher entrepreneurial activity.</li>
<li>Higher education levels in a district enable the development of better human capital that relates to increased supply of ideas and entrepreneurs.</li>
<li>Higher education also increases the supply of talent available to entrepreneurs for managing and growing their companies.</li>
<li>The number of new firms formed increases with an increase in the literacy in the district. The impact is most pronounced when literacy is above 72%. This suggests that small increases in literacy levels matter less.</li>
<li>To illustrate, new firm formation is the lowest in eastern India where the literacy rate is the lowest (59.6% as per 2011 Census).</li>
</ul>
</li>
<li><strong>Physical Infrastructure</strong><br />
<ul style="list-style-type: circle;">
<li>The basic measures of physical infrastructure includes accessibility in terms of tar roads. It also includes access to other public goods like electricity, water/sanitation facilities, and telecom services that are fundamental to all businesses.</li>
<li>Proximity to large population centers likely allows the startup to expand markets and scale operations.</li>
<li>However, beyond a point, increased proximity and connectivity to local markets may create hyper-competition and discourage entrepreneurship.</li>
<li>On similar lines, beyond a point, increased levels of infrastructure development might also open up potential entrepreneurs to other opportunities and consequently, decrease the incentives to become entrepreneurs.</li>
<li>On the contrary, no such diminishing returns are apparent with increases in literacy or improving education infrastructure. Increasing literacy levels or the formation of new colleges appear to increase the number of new firms monotonically.</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Measures need to be taken to increase the literacy levels rapidly through the institution of more schools and colleges. This will spur entrepreneurship and consequently wealth creation at grassroots. Governments could also explore the privatization of education to augment education capacity at all levels of education.</li>
<li>Better connectivity of villages through tar roads will likely improve access to local markets and improve entrepreneurial activity. However, in terms of prioritization, this may not be as crucial as investments in education. Moreover, increasing the access to local markets might create other types of opportunities which might discourage entrepreneurship.</li>
<li>Policies that foster ease of doing business and flexible labour regulation foster entrepreneurial activity, especially in the manufacturing sector. As the manufacturing sector has the potential to create the maximum jobs, states must focus on enabling ease of doing business and flexible labour regulation to foster job creation.</li>
</ul>
<div class="border-bg">
<p><strong>Key Terms</strong></p>
<ul style="list-style-type: square;">
<li><strong>MCA 21:</strong> A public dataset of the Ministry of Corporate Affairs (MCA) that provides a snapshot of all active firms registered with the MCA between 1990 and 2018.</li>
<li><strong>SHRUG:</strong> An acronym for Socioeconomic High-resolution Rural-Urban Geographic Dataset on India. It comprises a set of variables that describe the extent of socio-economic development in India in terms of demographic, socioeconomic, firm and political infrastructure of every district between 1990&ndash;2018.</li>
</ul>
</div>
<h2>PRO-BUSINESS VERSUS PRO-CRONY</h2>
<p>India&rsquo;s aspiration to become a $5 trillion economy depends critically on promoting &ldquo;pro-business&rdquo; policy that unleashes the power of competitive markets to generate wealth. At the same time, it demands weaning away from &ldquo;pro-crony&rdquo; policy that favours specific private interests, especially powerful incumbents.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The liberalization of Indian economy in 1991 unleashed competitive markets which marked an increase in market dynamism. It enabled the forces of creative destruction, generating benefits that we still witness today.</li>
<li>The relationship between pro-business policy and creative destruction is mirrored in the composition of the Sensex over the years.</li>
<li>After the market reforms of 1991, Sensex has not only grown, but has grown at an accelerating pace.</li>
<li>The years following 1991 liberalization saw the rapid emergence of new firms, new ideas, new technologies and new operating processes, causing a steep revision of the Sensex.</li>
<li>New sectors like banks and financials entered the index for the first time, eroding the predominance of the manufacturing sector on the index, placing the services sector on the map for the first time, and reflecting the far reaching changes that the Indian economy was witnessing in the wake of liberalization.</li>
<li>Moreover, today&rsquo;s Sensex is not only composed of a larger number of sectors, but is also far more democratic in terms of the size of companies. Today&rsquo;s Sensex is far less concentrated than the Sensex of the 1980s and 1990s, and mirrors the far lower sectoral concentration of the Indian economy as a whole.</li>
</ul>
<h3>Creative Destruction</h3>
<ul style="list-style-type: square;">
<li>Creative destruction is a process of industrial mutation that incessantly revolutionizes the economic structure from within, destroying the old one and creating a new one.</li>
<li>Viewed from the lens of the Stock market, creative destruction has increased significantly post-liberalisation.<br />
<ul style="list-style-type: circle;">
<li>Liberalization led to a spike in the number of firms churned. Every five years, roughly one-third of the firms in the Sensex are replaced.</li>
<li>Before liberalisation, a firm was expected to stay in the Sensex for 60 years, which decreased to only 12 years after liberalization.</li>
</ul>
</li>
<li>The forces of creative destruction following liberalization in the Indian economy have led to the rise of new sectors such as financials and information technology. Nonetheless, the <strong>Herfindahl Index</strong> reveals an overall decline in concentration in both sectors.</li>
<li>However, it has only one prerequisite &ndash; a pro-business policy stance that fosters competitive, unfettered markets.</li>
</ul>
<div class="border-bg">
<p><strong>NOTE: Herfindahl Index</strong> measures the market concentration of an industry's 50 largest firms in order to determine if the industry is competitive or nearing monopoly.</p>
</div>
<h3>Benefits of Creative Destruction</h3>
<ul style="list-style-type: square;">
<li>The rising share in market capitalization has been accomplished by a rise in number of companies rather than a rise in size of incumbent, suggesting greater competition within these sectors.</li>
<li>Sectors once considered mainstays of the Indian economy are being displaced by new sectors bringing with them new technologies and products.</li>
<li>The competitive advantage of entrenched firms is being rapidly challenged by new, smaller and more agile firms.</li>
<li>The difference between the sizes of the largest and smallest firms are rapidly shrinking, and consequently monopoly power in the economy is declining and making way for more competitive markets.</li>
<li>Consumers benefit from an increased variety of goods and services, lower prices and incessant improvement in the quality of existing products.</li>
</ul>
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<h3>Pro-crony Policies</h3>
<ul style="list-style-type: square;">
<li>Pro-crony policy supports incumbent firms but does not necessarily foster competitive markets.</li>
<li>Cronyism erodes wealth and fosters inefficiencies erode wealth in the economy by inhibiting the process of creative destruction.</li>
<li>The best illustration of pro-crony policy can be given by connected firms i.e the firms whose promoters have political connections. For example, the Comptroller and Auditor General&rsquo;s audit report on the 2G spectrum allocation named a list of private companies that benefited from alleged collusion in the allocation of the 2G spectrum.</li>
<li>The connected firms are unable to systematically create value for their investors from extracting rents based on their political connections.</li>
<li>The performance of connected firms indicates the possible extent of rents extracted by these firms at society&rsquo;s expense.</li>
</ul>
<h3>Connected Firm and Rent Extraction</h3>
<ul style="list-style-type: square;">
<li>The phenomenon of rent-seeking by inefficient, connected firms, though unhealthy to the economy, is not unique to India. In fact, several global studies reinforce the relationship between such connections and rent-seeking activities when institutional checks and balances are weak.</li>
<li>Politically connected firms enjoy a myriad of benefits:<br />
<ul style="list-style-type: circle;">
<li>Markets anticipate additional sources of profit for the politically connected firm despite no change in firm fundamentals.</li>
<li>Distressed politically connected firms are significantly more likely to be bailed out by the government than their non-connected counterparts.</li>
<li>Access to bank finance is an important channel through which political connections operate.</li>
<li>When business owners come to political power, they use it to implement regulations and public policies favorable to their firms.</li>
</ul>
</li>
<li>These benefits represent direct and indirect forms of rent unduly enjoyed by the connected firm&rsquo;s shareholders at the expense of unconnected firms and society at large.</li>
<li>Additionally, pro-crony policies create various indirect costs as well by destroying value in the economy:<br />
<ul style="list-style-type: circle;">
<li>When opportunities for crony rent-seeking exist, firms shift their focus away from growth through competition and innovation towards building political relationships, thus undermining the economy&rsquo;s capacity for wealth creation.</li>
<li>Further, the rents sought by cronies are paid for by genuine businesses and citizens who are not receiving any preferential treatment.</li>
<li>Such a transfer of wealth exacerbates income inequality in the economy, as crony firms leverage their connections to extract a larger share of existing wealth instead of expanding the available wealth.</li>
</ul>
</li>
</ul>
<h3>Discretionary Allocation vis-&agrave;-vis Allocation via Auctions</h3>
<ul style="list-style-type: square;">
<li>The divergent impacts of pro-business and pro-crony policies can be understood in terms of natural resources. For this, discretionary allocation vs allocation via auctions of coal can be considered.</li>
<li>Coal is the most important indigenous source of energy for India; it meets more than half of India&rsquo;s energy requirements. India has the fifth largest coal reserves in the world behind USA, Russia, China, and Australia.</li>
<li>Prior to 1993, no specific criteria for the allocation of captive mines existed. In 1993, amendments were introduced to the Coal Mines (Nationalisation) Act 1973. It allowed private companies to carry out coal mining for captive use.</li>
<li>A screening committee was set up to consider applications made by various companies interested in captive mining and to allocate coal blocks for development.</li>
<li>In 2012, the CAG report on coal block allocations examined the effectiveness of the processes adopted in allocation of coal blocks. In 2014, the Supreme Court cancelled 214 of the 218 allocations made by the Government of India over a span of 15 years.</li>
<li>The Government acted and passed the Coal Mines (Special Provisions) Act, 2015. It ensured that future allocation of coal blocks would solely be through competitive auctions.</li>
</ul>
<h3>Related Party Transactions (RPTs) and Allocations</h3>
<ul style="list-style-type: square;">
<li>The form of coal block allocation (committee-based vs competition-based) has an impact on the value of Related Party Transactions (RPTs) engaged in by firms that are beneficiaries of the coal block allocation.</li>
<li>RPTs used for purchasing capital goods/equipment from related parties are classified as <strong>Capital Purchases</strong>. Operational expenses paid to related parties are classified as <strong>Revenue expenses</strong>. Operational income from related parties are classified as <strong>Revenue income</strong>.</li>
<li>These three RPTs show a marked increase following the receipt of a coal block through the committee-based allocation. No such increase is seen in the case of auction-based allotment.</li>
<li>Capital purchases offer an ideal mechanism to transfer wealth because they are large one-time non-recurring cash outflows that can serve as an opportune mask to hide transactions from regulators.</li>
<li>The other three main types of RPTs &ndash; Capital Sales, Loans and advances given and taken do not show any particular increase in the case of the committee-based allocation.</li>
<li>Moreover, as foreign entities are harder for the domestic enforcement authorities to track, RPTs with such entities are likely to manifest for purposes of opacity. Similarly, tax havens are characterized by opaque disclosure regulations and hence serve as an ideal sink to tunnel corporate wealth away from other stakeholders.</li>
<li>Capital purchases, revenue expenses and revenue income show a remarkable increase post the receipt of the coal block in the committee-based allotment process but not following competitive auctions.</li>
<li>One-time payments to directors like commissions, perquisites and consulting expenses increase following the discretionary allocation.</li>
</ul>
<h3>Firm Productivity and Performance</h3>
<ul style="list-style-type: square;">
<li>There has been a steady decline in the market share of firms that received committee-based allocation despite them getting a windfall gain from the discretionary allocation.</li>
<li>The gain of an almost free resource should have aided firm productivity and business fundamentals. Instead the market share has fallen over the years - suggesting a case of Dutch disease &ndash; firms that got the free resource diverted efforts towards the tunnelling of the windfall gain instead of towards productive business activity.</li>
<li>Discretionary allocation of natural resources by a committee provides avenues for rent seeking. Subsequently, firm owners divert their focus towards tunnelling away these rents rather than furthering productive economic activities.</li>
<li>A shift to market-based allocation of resources takes these avenues away, encourages productive economic activity and generates more wealth.</li>
</ul>
<div class="border-bg">
<p><strong>Dutch Disease</strong></p>
<ul style="list-style-type: square;">
<li>Dutch disease stands for the negative consequences that can arise from a spike in the value of a nation&rsquo;s currency.</li>
<li>The term was coined owing to the after impacts of the discovery of vast natural gas deposits in the North Sea (The Netherlands) in 1959.</li>
<li>The newfound wealth and massive exports of oil caused the value of the Dutch guilder (the erstwhile currency) to rise sharply, making Dutch exports of all non-oil products less competitive on the world market.</li>
<li>In simple terms, the term Dutch disease is used in economic circles to describe the paradoxical situation in which seemingly good news, such as the discovery of large oil reserves, negatively impacts a country's broader economy.</li>
</ul>
</div>
<h3>Riskless Returns: The Case of Wilful Default</h3>
<ul style="list-style-type: square;">
<li>Wilful default occurs when firms take loans, divert the proceeds out of the firm for the personal benefit of owners, default on loans and declare bankruptcy, thereby expropriating a range of stakeholders &ndash; lenders, minority shareholders, employees, regulators and state coffers.</li>
<li>The RBI defines wilful defaulter as a firm that has defaulted in meeting its repayment obligations even though it has the capacity to honour these obligations.</li>
<li>A firm could also be branded a wilful defaulter if it uses the funds for purposes other than what is sanctioned by the lender, siphons the money out to related parties or removes the assets used to secure the loan.</li>
<li>Wilful defaulters tend to be more opaque than both non-defaulters and firms that default out of genuine distress.</li>
<li>Money lent to a genuine business creates assets, which generate profit and employment. On the other hand, every rupee lent to a wilful defaulter constitutes an erosion of wealth as the firm does not invest the proceeds in profitable projects. Besides making cronies rich, it contributes nothing to the economy.</li>
<li>As of 2018, wilful defaulters owed their respective lenders nearly ₹1.4 lakh crores. The defaulters are spread across several sectors, with manufacturing firms constituting the largest share.</li>
</ul>
<h3>Implications of Wilful Default</h3>
<ul style="list-style-type: square;">
<li>To put in perspective the quantum of wealth eroded by wilful defaulter can be compared with the 2018 Union budget allocations towards citizen welfare. Had the money siphoned away by wilful defaulters stayed in the economy, the resulting wealth would have been equivalent to double the allocation towards health, education and social protection.</li>
<li>The cost of wilful default is borne by the common man. Public sector banks get their equity from taxes paid by the common man. When unscrupulous firms willfully default, it is the common man who loses. While most policy initiatives aim to redistribute wealth from the rich to the poor, wilful default achieves the opposite. Rich businesses that want to get richer use wilful default as an instrument to redistribute wealth away from the poor.</li>
<li>Wilful default increases the cost of borrowing for everyone else, including genuine businesses. It may force genuine borrowers to exit the market resulting in a market failure that slows economic growth, employment and wealth creation capacity.</li>
</ul>
<h3>Conclusion</h3>
<ul style="list-style-type: square;">
<li>Pro-business policies, for example, those that make it easy to start a business, obtain credit, and bid for natural resources help firms to function effectively and thereby enable competitive markets.</li>
<li>While pro-business policies increase competition, correct market failures, or enforce business accountability, pro-crony policies hurt markets.</li>
<li>Crony businesses may promote narrow business interests and may lobby the government to limit competition or reduce regulatory oversight. These enhance the lobbying group&rsquo;s income but undermine markets and reduce aggregate welfare.</li>
</ul>
<h2>UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE THAN IT HELPS</h2>
<p>The role of markets has been recognized globally wherein markets are allowed to enable wealth creation and thereby economic growth. But India has a regulated system and its high time that privatization and the role of the free market are analysed and incorporated in the economy.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Economic freedom enhances wealth creation by enabling efficient allocation of entrepreneurial resources and energy to productive activities, thereby promoting economic dynamism.</li>
<li>India has made significant progress in enhancing economic freedom for firms and its citizens but it still counts among the shackled economies in the world.</li>
<li>In the <strong>Index of Economic Freedom 2019,</strong> India was categorized as <strong>&lsquo;mostly unfree&rsquo;</strong>, ranking the Indian economy 129<span style="text-decoration: line-through;">th</span> among 186 countries. Likewise, in the <strong>Global Economic Freedom Index,</strong> India ranks 79<sup>th</sup> among 162 countries with 108<sup>th</sup> rank in business regulation.</li>
<li>The low rank in economic freedom makes it evident that India chains opportunities for wealth creation by shackling economic freedom for its citizens.</li>
<li>While there is a case for Government intervention when markets do not function properly, excessive intervention stifles economic freedom.</li>
<li>This is because government intervention, though well-intended, often ends up undermining the ability of the markets to support wealth creation and leads to outcomes opposite to those intended.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590492715_image2.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590492715_image2.jpg" style="display: block; margin-left: auto; margin-right: auto;" /></a></p>
<h3>Government Interventions</h3>
<ul style="list-style-type: square;">
<li>The Government can intervene in markets in two ways:<br />
<ul style="list-style-type: circle;">
<li>Direct participation - as a market maker or as a buyer or supplier of goods and services</li>
<li>Indirect participation - through regulation, taxation, subsidy or other influence</li>
</ul>
</li>
<li>Sometimes direct intervention by the government affects the dynamic interaction of supply and demand in markets and thereby determination of &lsquo;equilibrium&rsquo; market prices.</li>
<li>To illustrate, fluctuating prices of the commodities distort the demand and supply chain of the market. <strong>For example,</strong> when prices are higher, the sale gets reduced and when prices are lower, the demand gets increased.</li>
<li>In both cases, serious welfare loss results because not enough of the goods are sold. The chance to create welfare for both producers and consumers gets wasted and it leads to <strong>&lsquo;deadweight loss&rsquo;&nbsp;</strong>- income that is lost forever.</li>
<li>The Indian economy is replete with examples where the government intervenes even if there is no risk of market failure. In some instances, its intervention has created market failures.</li>
</ul>
<h3>Essential Commodities Act (ECA), 1955</h3>
<ul style="list-style-type: square;">
<li>The Act controls the production, supply and distribution of, and trade and commerce in, certain goods which are treated as essential commodities. The powers to implement the provisions of the Act are delegated to the States.</li>
<li>The major commodity groups included in the Act are<br />
<ul style="list-style-type: circle;">
<li>Petroleum and its products</li>
<li>Food stuff, including edible oil and seeds, vanaspati, pulses, sugarcane, onion, potato</li>
<li>Raw Jute and jute textiles</li>
<li>Essential drugs</li>
<li>Cattle fodder</li>
</ul>
</li>
<li>When the price of any of these essential commodities rises, the regulator can impose stock holding limits on the commodity, restrict the movement of goods, and mandate compulsory purchases under the system of levy.</li>
<li>The purported aim of the Act is to ensure the affordability of essential commodities for the poor by restricting hoarding.</li>
<li>Consequently, it becomes an overarching legislation regulating agricultural marketing and production.</li>
</ul>
<p><em>ECA Affects the Development of Agricultural Markets</em></p>
<ul style="list-style-type: square;">
<li>It reduces the effectiveness of free trade and the flow of commodities from surplus areas to markets with higher demand.</li>
<li>Agriculture is a seasonal activity and it is essential to store produce for the off-season. Due to frequent and unpredictable imposition of stock limits, ECA disincentivises investments in warehousing and storage facilities.</li>
<li>As stockholding limits apply to the entire agriculture supply chain, including wholesalers, food processing industries and retail food chains, the Act does not distinguish between firms that genuinely need to hold stocks owing to the nature of their operations, and firms that might speculatively hoard stocks.</li>
<li>ECA also affects the commodity derivative markets as traders may not be able to deliver on the exchange platform the promised quantity, owing to stock limits.</li>
<li>The Act distorts markets by increasing uncertainty and discouraging the entry of large private sector players into agricultural marketing.</li>
<li>These market distortions further aggravate the price volatility in agricultural commodities, the opposite of what it is intended for. For example, imposition of stock limits on onions in September 2019 spiked up the volatility of the retail and wholesale prices of onions.</li>
</ul>
<p><em>Other Challenges with the ECA</em></p>
<ul style="list-style-type: square;">
<li>Frequent raids under the provisions of ECA have been ineffective due to low conviction rate, corruption and increase in harassment of traders.</li>
<li>The ECA was enacted at a time when speculative hoarding and black marketing was a threat as agricultural markets were fragmented and transport infrastructure was poorly developed. With the agricultural markets in India increasingly becoming more integrated, the utility of the Act is incompatible with the development of an integrated competitive national market for food.</li>
<li>The anti-hoarding provisions of ECA discourage open reporting of stock holdings, storage capacities and trading. Moreover, there is no data of the total private storage capacity available in the country.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590492741_image3.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590492741_image3.jpg" style="display: block; margin-left: auto; margin-right: auto;" /></a></p>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>Strengthening of the <strong>Price Stabilization Fund</strong> as it supplements the market forces rather than substitute them which the ECA does.</li>
<li>Supporting the development of commodity futures markets would help efficient discovery of market expected future prices, which can provide a better basis for private storage decisions and avoid &lsquo;peaks&rsquo; and &lsquo;troughs&rsquo; in prices.</li>
<li>Development of effective forecasting mechanisms, stable trade policies, and increasing integration of agricultural markets can serve the purpose of stabilising prices of agricultural markets.</li>
</ul>
<div class="border-bg">
<p><strong>Price Stabilization Fund (PSF)</strong></p>
<ul style="list-style-type: square;">
<li>PSF was established in 2014-15 to help regulate the price volatility of important agri-horticultural commodities like onion, potato and pulses.</li>
<li>It provides for maintaining a strategic buffer of the commodities for subsequent calibrated release to discourage hoarding and unscrupulous speculation.</li>
</ul>
</div>
<h3>Drug Price Control under ECA</h3>
<ul style="list-style-type: square;">
<li>The government often resorts to price controls for drugs to ensure access to essential lifesaving drugs and to avoid poor households from falling into poverty.</li>
<li>The National List of Essential Medicines (NLEM), prepared by the Ministry of Health and Family Welfare, is a list of medicines considered essential and high priority for India&rsquo;s health needs. It is based on aspects like prevalence of disease, safety and efficacy of the medicine, and affordability.</li>
<li>Prices of pharmaceutical drugs are regulated through the National Pharmaceutical Pricing Authority (NPPA) and Drug (Price Control) Order (DPCO).</li>
<li>DPCOs are issued by the Government, in the exercise of the powers under the Essential Commodities Act (ECA), 1955. The DPCO, among other things, specifies the price ceiling and the formula for calculating the ceiling price.</li>
<li>DPCOs seek to ensure that the medicines listed under National List of Essential Medicines (NLEM) are available at a reasonable price to the general public.</li>
<li>The Government of India has amended the DPCO several times. Until 2013, DPCO specified the price ceiling using the cost-based pricing method in which the ceiling price was calculated as a multiple of the cost that it took producers to promote and distribute a pharmaceutical drug.</li>
<li>In 2013, India transitioned from cost-based pricing to market-based pricing. Under the market-based pricing method, the Government determines the ceiling prices as the maximum mark-up that a retailer can charge over the reference price, which is the simple average of the prices of all the major brands. The order capped the maximum mark-up to 16% for all formulations specified in the NLEM.</li>
</ul>
<p><em>Implications</em></p>
<ul style="list-style-type: square;">
<li>The outcome of DPCO is quite opposite to what it aims to do - making drugs affordable.</li>
<li>The regulation of prices of drugs led to an increase in the price of the regulated pharmaceutical drug vis-&agrave;-vis that of an unregulated but similar drug.</li>
<li>The increase in prices is greater for more expensive formulations than for cheaper ones and for those sold in hospitals than retail shops.</li>
</ul>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>Government, being a major buyer of drugs, can intervene more effectively to provide affordable drugs by combining all its purchases and exercising its bargaining power.</li>
<li>The prevalent distorting interventions need to be replaced by market-friendly interventions like price stabilization funds, Direct Benefit Transfers (DBT) to consumers, incentives to innovations, increasing market integration and smooth flow of goods and services.</li>
</ul>
<h3>Government Intervention in Grain Markets</h3>
<ul style="list-style-type: square;">
<li>In the grain markets, the government has sought to achieve food security while ensuring remunerative prices to producers and safeguarding the interest of consumers by making supplies available at affordable prices.</li>
<li>In trying to achieve this, the state controls input prices such as those of fertilizer, water, and electricity.</li>
<li>It also sets output prices, undertakes storage and procurement through administrative machinery, and distributes cereals across the country through PDS.</li>
<li>These procurement operations largely support the MSPs that are designed to be indicative prices for producers at the beginning of the sowing season and floor prices as an insurance mechanism for farmers from any fall in prices.</li>
</ul>
<p><em>Implications</em></p>
<ul style="list-style-type: square;">
<li>The government has emerged as the single largest procurer and hoarder of foodgrains. It has virtually become a monopsonist in the domestic grain market and is a dominant player crowding out private trade. This disincentivizes the private sector to undertake long-term investments in procurement, storage and processing of these commodities.</li>
<li>MSPs are designed to be indicative prices for producers at the beginning of the sowing season and floor prices as an insurance mechanism for farmers from any fall in prices. However, the increasing trend in these prices have served to give a signal to farmers to opt for the crops which have an assured procurement system.</li>
<li>Moreover, an increase in Minimum Support Price (MSP) translates into farmers offering their produce for the open-ended procurement by the Government. MSPs have, in effect, become the maximum prices rather than the floor price &ndash; the opposite of the aim it is intended for.</li>
<li>This has also made India a high-cost foodgrain economy, given<br />
<ul style="list-style-type: circle;">
<li>The economic cost of Food Corporation of India is very high and its inefficiency increases with an increase in stocks.</li>
<li>The food subsidy burden is burgeoning which largely covers the procurement, distribution and carrying costs of FCI.</li>
</ul>
</li>
<li>Given fiscal constraints, there is always a trade-off between allocating money through subsidies and increasing investments.<br />
<ul style="list-style-type: circle;">
<li>Growth in public investments in agriculture is negatively correlated to increases in food subsidy outlay.</li>
<li>As investments are the crucial input to increase in productivity, the increasing focus on subsidies is harming the growth of the agricultural sector in the long-run.</li>
</ul>
</li>
<li>NSS 73<sup>rd</sup> round on consumer expenditure shows that the share of cereals in Monthly Per Capita Expenditure (MPCE) has fallen by about 33% in rural India and about 28% in urban India from 2004-05 to 2011-12.<br />
<ul style="list-style-type: circle;">
<li>This is in line with decreasing consumption of food and increasing expenditure on non-food items as income rises.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Food Corporation of India (FCI)</strong></p>
<ul style="list-style-type: square;">
<li>The FCI was set up in 1965 under the Food Corporations Act, 1964 with the primary duty to purchase, store, move/transport, distribute and sell foodgrains and other foodstuffs.</li>
<li>The main objectives of FCI are<br />
<ul style="list-style-type: circle;">
<li>procurement of foodgrains from farmers at Minimum Support Prices (MSP) announced by the Government;</li>
<li>distribution of foodgrains to consumers through PDS, particularly the vulnerable sections of society at affordable prices; and</li>
<li>maintenance of buffer stock of foodgrains for food security and price stability. Thus, it is mandated to serve the interests of producers and consumers alike.</li>
</ul>
</li>
<li>The burgeoning burden of food subsidy largely covers the procurement cost of FCI [difference between the MSP and the Central issue prices (CIP) of foodgrains under PDS] and distribution and carrying costs of FCI.</li>
</ul>
</div>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>India has moved from being a food scarce country to a food surplus country with a substantial increase in production and has emerged as a net exporter of cereals. The policies need to move on now to incentivize diversification and environmentally sustainable production.</li>
<li>The farmers need to be empowered through direct investment subsidies and cash transfers, which are crop neutral and do not interfere with the cropping decisions of the farmer.</li>
<li>The coverage of NFSA needs to be restricted to the bottom 20% and the issue prices for others could be linked to the procurement prices.</li>
<li>Another alternative would be giving income transfers to consumers through Direct Benefit Transfers (DBT). Internationally, there is a move towards conditional cash transfers (CCTs) aimed at tackling problems of food insecurity and poverty and for&nbsp; nudging people towards improved health and education levels.</li>
<li>At the macro level, the agricultural marketing, trade (both domestic and foreign) and distribution policies need to be aligned so that farmers receive the correct signals for diversification into remunerative and sustainable production.</li>
</ul>
<div class="border-bg">
<p><strong>Conditional Cash Transfers (CCTs)</strong></p>
<ul style="list-style-type: square;">
<li>Conditional cash transfer programmes give money to households on the condition that they comply with certain pre-defined requirements.</li>
<li>These conditions can include, for example, up-to-date vaccinations, regular visits to a healthcare facility, regular school attendance by children, and complying with health and nutrition promotion activities.</li>
<li>Current evidence suggests that conditional cash transfer programmes can be effective in increasing the use of health services and improving health outcomes.</li>
<li>Some examples of successful CCTs include<br />
<ul style="list-style-type: circle;">
<li>Brazil (Bolsa Familia): Cash transfer of $15-95 to about 25% of the identified population on conditions of attending health check ups.</li>
<li>Mexico (Oportunidades): Cash transfer of 235 pesos to about 20% of the identified population on conditions of mandatory health check ups.</li>
</ul>
</li>
</ul>
</div>
<h3>Debt Waivers</h3>
<ul style="list-style-type: square;">
<li>Government intervention in credit markets, in the form of full or partial, conditional or unconditional, debt relief has become increasingly common at the state level in India.</li>
<li>Farm loan waivers re-emerged in 2008 after it had died down in the early 1990s.</li>
</ul>
<p><em>Positive implications</em></p>
<ul style="list-style-type: square;">
<li>Borrowers seem to be suffering from the problem of <strong>&lsquo;debt overhang&rsquo;</strong>.<br />
<ul style="list-style-type: circle;">
<li>It refers to a situation where all current income gets used up in repaying the accumulated debt, leaving little incentives to invest either in physical or human capital.</li>
<li>Debt overhang leads to abandonment of beneficial investment and hence reduces social welfare.</li>
</ul>
</li>
<li>Thus, debt waiver is said to be helping the borrowers to come out of the debt trap as it cleans their balance sheet and reduces the burden of debt servicing.</li>
<li>However, debt waiver can help if awarded under exceptional circumstances and remain unanticipated.</li>
</ul>
<p><em>Negative implications</em></p>
<ul style="list-style-type: square;">
<li>Debt waivers impact the credit markets. For example, debt relief can prevent farmers from going out of farming and the consequent reduction of output but an anticipated waiver may lead to moral hazard and destroy the credit culture.</li>
<li>Loan waiver led to increased loan defaults on future loans and no improvement in wages, productivity, or consumption.</li>
<li>Debt waivers also have a contagious impact on bank loans i.e. defaults and non-performing assets rise on bank loans.</li>
<li>Loan performance of genuinely distressed borrowers improves whereas the loan performance of non-distressed beneficiaries deteriorates.</li>
<li>Debt waivers also costs the government exchequer in a significant way and that without creating any capital.</li>
</ul>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>A debt relief should be made conditional on genuine distress otherwise it fuels even greater default. Thus, an unconditional and blanket debt waiver is a bad idea.</li>
<li>A waiver can at best be an emergency medicine to be given in rare cases after a thorough diagnosis and identification of illness and not a staple diet.</li>
</ul>
<h3>Legislative Changes Required to Reduce Government Interventions</h3>
<p>India is still stuck with several forms of Government intervention that are anachronistic with today&rsquo;s economy. In several spheres of the economy, India has traversed the transition from a command and control economy to a market-driven economy.</p>
<p><em>Acts which Transformed to Market-driven Economy</em></p>
<table border="1" style="border-collapse: collapse;">
<tbody>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Act</strong></span></td>
<td style="width: 660px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Market Distortion created</strong></span></td>
<td style="width: 853px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Transformation towards Developing a Market Economy</strong></span></td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Capital Issues (Control) Act, 1947</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>The Government decided which company could raise how much capital.</li>
<li>It led to ineffective valuation of capital.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Repealed and replaced by The Securities and Exchange Board of India (SEBI) Act, 1992 as a regulator of the capital markets.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Oil and Natural Gas Commission (ONGC) Act, 1959</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>ONGC was created with the mandate to plan, promote, and develop petroleum resources</li>
<li>It created a Government monopoly in this sector</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>In 1993, the Act was repealed and ONGC was converted into a company.</li>
<li>The hydrocarbons policy has evolved to Hydrocarbon Exploration and Licensing Policy (HELP) of 2016</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Monopolies and Restrictive Trade Practices (MRTP) Act, 1969</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>To prevent concentration of economic power, control of monopolies and prohibition of unfair trade practices.</li>
<li>This restricted companies to grow and achieve a global scale.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Replaced by the Competition Act in 2002.</li>
<li>The Competition Act aims to promote competition and prohibits abuse of dominant position.</li>
<li>The focus has shifted from &lsquo;prevention of dominance&rsquo; to &lsquo;regulating abuse of dominance&rsquo;.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">The Coking Coal Mines (Nationalisation) Act, 1972 and Coal Mines (Nationalization) Act, 1973</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Government took over the management of coking and non-coking coal mines as energy became a crucial sector.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Repealed in 2018.</li>
<li>Private firms permitted to enter the commercial coal mining industry.</li>
<li>Ended the monopoly of Coal India Limited over commercial mining.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Foreign Exchange Regulation Act, 1973</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Imposed restriction on foreign equity in companies to 40%.</li>
<li>This restricted access to foreign capital and technology.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Replaced by Foreign Exchange Management Act (FEMA), 1999.</li>
<li>Under FERA, everything was prohibited unless specially permitted.</li>
<li>Under FEMA, everything was permitted unless specifically restricted.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Air Corporations Act of 1953</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Nationalised nine airlines to form Air India and Indian Airlines.</li>
<li>Intended to provide efficient, adequate, and coordinated air transport services.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Replaced by Air Corporations (Transfer of Undertaking and Repeal) Act, 1994.</li>
<li>Private operators were allowed to provide air transport services.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Sick Industrial Companies Act (SICA), 1985</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Timely detection of sick companies and speedy remedial measures by Board of Industrial and Financial Reconstruction (BIFR).</li>
<li>It put in place a debtor-friendly regime, in which defaulting borrowers could delay resolution.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul>
<li>The Act was repealed in 2004, and BIFR was dissolved in 2016 to give way to the Insolvency and Bankruptcy Code (IBC), 2016.</li>
</ul>
</td>
</tr>
</tbody>
</table>
<p>However, several areas of unnecessary and inefficient government intervention still remain. The following are some key Acts, as low-hanging fruits to begin with, which have outlived their use and need to be repealed or amended to enable functioning of competitive markets.</p>
<p><em>Acts which Need to be Repealed/Amended</em></p>
<table border="1" style="border-collapse: collapse;">
<tbody>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Act</strong></span></td>
<td style="width: 665px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Market Distortion Created</strong></span></td>
<td style="width: 801px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Need for Repeal/Amendment</strong></span></td>
</tr>
<tr style="height: 89px;">
<td style="width: 343px; height: 89px; background-color: #c7f4ff;">Factories Act, 1948</td>
<td style="width: 665px; height: 89px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Regulates occupational safety and health in factories and docks</li>
<li>Gives prosecuting powers to the Chief Inspector</li>
<li>Nudges capital away from labour</li>
</ul>
</td>
<td style="width: 801px; height: 89px; background-color: #c7f4ff;">
<ul>
<li>Proposed to be subsumed by the Occupational Safety, Health and Working Conditions Code, 2019</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Essential&nbsp;Commodities Act (ECA), 1955</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Enables the Government to regulate the production, supply and distribution of &lsquo;essential&rsquo; commodities</li>
<li>It imposes stock limits</li>
<li>Discourages large-scale private investments in agricultural market</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>These owe their origin in times of shortage and inefficient linking of markets</li>
<li>These have become an instrument of coercion and inhibit proper functioning of markets</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Food Corporation of India (FCI), 1965</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>FCI was created to safeguard the interests of farmers, maintain buffer stocks for food security and make grains accessible at reasonable prices through the public distribution system (PDS).</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>The production scenario of foodgrains has reached a comfortable level.</li>
<li>The role of FCI, with a total storage capacity of more than 80 million tonnes, must be re-examined.</li>
<li>FCI should primarily focus on creating competition in the foodgrain supply chain.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Sick Textile Undertaking (Nationalisation) Act, 1974</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>To acquire sick textile units, reorganize and rehabilitate them.</li>
<li>103 sick textile mills were nationalised and transferred to the National Textile Corporation (NTC).</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Nationalisation of these mills failed to achieve the desired objectives.</li>
<li>Land of textile units has been monetised.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Recovery of Debts due to Banks and Financial Institutions Act, 1993</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Led to establishment of Debt Recovery Tribunals (DRTs) for expeditious adjudication and recovery of debts.</li>
<li>Huge delays due to insufficient number of presiding officers.</li>
<li>Lack of sufficient judicial experience by recovery officers.</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>The IBC is now firmly in place to fix the problem of non-performing assets.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Regulates land acquisition with 80% of the land to be acquired through negotiations, with the government stepping in only for the balance 20%.</li>
<li>For Public Private Partnership projects, it is 70%.</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>This tilts the balance in favour of land owners who need to be made an equal partner in development of land.</li>
</ul>
</td>
</tr>
</tbody>
</table>
<p><em>Conclusion</em></p>
<p>The government must systematically examine areas where the Government needlessly intervenes and undermines markets. It does not mean that there should be no government intervention; appropriate and relevant interventions are welcome, majorly at the regulation level. Eliminating instances of needless interventions will enable competitive markets and thereby spur investments and economic growth.</p>
<h2>CREATING JOBS AND GROWTH BY SPECIALIZING IN EXPORTS IN NETWORK PRODUCTS</h2>
<p>Integrating &lsquo;Assemble In India for the World&rsquo; into &lsquo;Make In India&rsquo; can set a precedent in making India a global manufacturing hub. India has to take crucial and defining steps if it wants to achieve an export-led growth and create jobs for its youth.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Growth in exports provides a much-needed pathway for job creation in India. For example, in just five year period 2001-2006, labour-intensive exports enabled China to create 70 million jobs for workers with primary education.</li>
<li>On similar lines, steps can be taken by India to chart an export trajectory and create unparalleled job opportunities for its youth.</li>
<li>China&rsquo;s image as a low-cost location for final assembly of industrial products is rapidly changing due to labour shortages and increases in wages. As no other country can match China in the abundance of its labour, India must grab the space getting vacated in labour-intensive sectors.</li>
<li>This also holds significance as the US-China trade war is causing major adjustments in Global Value Chains (GVCs) and firms are now looking for alternative locations for their operations.</li>
</ul>
<h3>Current State of Trade and Exports</h3>
<ul style="list-style-type: square;">
<li>India&rsquo;s share in merchandise (goods) exports in world exports has increased from 0.6% in 1991 to 1.7% in 2018. Yet it remains paltry compared to 12.8% for China (2018).</li>
<li>Further, merchandise exports as a percentage of GDP remained consistently lower for India compared to the world average by a significant margin.</li>
<li>Imports of merchandise have grown faster (at the rate of 14.9% per annum during 1993-2018) than exports, resulting in increased trade deficits.</li>
<li>On the other hand, exports of services generally grew faster than imports, providing some cushion to the current account deficit.</li>
</ul>
<h3>Reasons for India&rsquo;s Underperformance in Exports</h3>
<ul style="list-style-type: square;">
<li><strong>Specialization versus Diversification</strong>
<ul style="list-style-type: circle;">
<li>India is far behind China in terms of <strong>specialization</strong> of markets and products. However, India has been catching up with China in terms of <strong>diversification</strong> across products and markets.</li>
<li>Overall, high diversification combined with low specialization implies that India is spreading its exports thinly over many products and partners, leading to its lacklustre performance compared to China.</li>
<li>The bottom line is that if India wants to become a major exporter, it should specialize more in the areas of its comparative advantage and achieve significant quantity expansion.</li>
</ul>
</li>
<li><strong>Low Level of Participation in Global Value Chains (GVCs)</strong>
<ul style="list-style-type: circle;">
<li>China&rsquo;s export composition shows a strong bias towards traditional labour-intensive industries and labour-intensive stages of production processes within capital intensive industries.</li>
<li>Export growth of capital intensive products from China has been mainly driven by its participation in the GVCs. China&rsquo;s export promotion policies since the 1990s have relied heavily on a strategy of integrating its domestic industries within the GVCs.</li>
<li>Making use of imported parts and components, China emerged as a major assembly hub for several capital-intensive products.</li>
<li>India&rsquo;s participation in GVCs has been low compared to the major exporting nations in East and Southeast Asia.</li>
</ul>
</li>
<li><strong>Low Market Penetration in High-Income Countries</strong>
<ul style="list-style-type: circle;">
<li>The dominance of capital intensive products in the export basket along with low participation in GVCs have resulted in a disproportionate shift in India&rsquo;s geographical direction of exports from traditional rich country markets to other destinations.</li>
<li>The high-income OECD markets accounted for 49.7% of China&rsquo;s exports in 2018 while the corresponding figure for India was 40.2%.</li>
<li>Developing countries, especially with a low level of participation in GVCs, find it extremely difficult to export capital intensive products to the quality/brand conscious markets in richer countries.</li>
</ul>
</li>
<li>Thus, China&rsquo;s remarkable export performance, compared to India, is driven by a set of interrelated factors - a high level of participation in GVCs; a high degree of specialization in labour-intensive production activities; large scale in the chosen sectors of specialization; and a high level of export penetration in traditional rich countries.</li>
</ul>
<div class="border-bg">
<p><strong>Related Information</strong></p>
<p><em>Flying Geese Model</em></p>
<ul style="list-style-type: square;">
<li>Developed by Kaname Akamatsu during the 1930s, the flying geese paradigm (FGP) is a model for the international division of labour in East Asia based on dynamic comparative advantage.</li>
<li>The paradigm/model postulated that Asian nations will catch up with the West as part of a regional hierarchy where the production of commoditized goods would continuously move from the more advanced countries to the less advanced ones.&nbsp;</li>
</ul>
</div>
<h3>Reaping Gains from Participation in Global Value Chains (GVCs)</h3>
<ul style="list-style-type: square;">
<li>A higher level of participation in GVCs implies that for any given country, the share of foreign value-added in gross exports is higher than when most inputs are sourced locally.</li>
<li>However, owing to scale and productivity effects of selling in the world markets, participation in GVCs can lead to higher absolute levels of domestic value-added and domestic job creation.</li>
<li>The scale effect creates millions of jobs and is therefore particularly suited for implementation in a labour-intensive economy such as India.</li>
<li>India can reap rich dividends by adopting policies aimed at strengthening its participation in GVCs.</li>
</ul>
<h3>Which Industries should India Specialize in for Job Creation?</h3>
<ul style="list-style-type: square;">
<li>Given our comparative advantage in labour-intensive activities and the imperative of creating employment for a growing labour force, there are two groups of industries that hold the greatest potential for export growth and job creation.</li>
<li>First, there exists a significant unexploited export potential in India&rsquo;s traditional unskilled labour-intensive industries such as textiles, clothing, footwear and toys.<br />
<ul style="list-style-type: circle;">
<li>The GVCs in these industries are controlled by <strong>&ldquo;buyer driven&rdquo; networks</strong> wherein the lead firms based in developed countries concentrate in higher value added activities such as design, branding and marketing.</li>
<li>Physical production is carried out, through subcontracting arrangements, by firms in developing countries. Examples include Wal-mart, Nike, Adidas etc.</li>
</ul>
</li>
<li>Second, India has huge potential to emerge as a major hub for final assembly in a range of products, referred to as &ldquo;network products&rdquo; (NP).<br />
<ul style="list-style-type: circle;">
<li>The GVCs in these industries are controlled by leading MNEs such as Apple, Samsung, Sony etc. within <strong>&ldquo;producer driven&rdquo; networks</strong>. In general, these products are not produced from start to finish within a given country.</li>
<li>Within the production network, each country specializes in a particular fragment of the production process; this specialization is based on the country&rsquo;s comparative advantage.</li>
<li>Labour abundant countries, like China, specialize in low skilled labour-intensive stages of production such as assembly while the richer countries specialise in capital and skill-intensive stages such as R&amp;D.</li>
</ul>
</li>
</ul>
<h3>The Current Case of Network Products</h3>
<ul style="list-style-type: square;">
<li>Examples of network products (NP) include computers, electronic and electrical equipment, telecommunication equipment, road vehicles etc.</li>
<li>On an average, NP accounts for about 42% of world manufactured exports. Asia&rsquo;s share in world exports of NP increased from about 37% in 2000 to 51% in 2018 while the shares of both Europe and America declined.</li>
<li>India&rsquo;s export of NP increased from about $2 billion in 2000 to $32 billion in 2018, however, in comparison to other Asian countries, its share is very minuscule.</li>
<li>NP exports account for a very small share (10% in 2018) in India&rsquo;s export basket. In contrast, these products account for about one half of the total national exports of China and Japan.</li>
<li>The main category of NP exported by India is road vehicles with a share of 4.9% in its total exports in 2018. Several leading automobile companies have established assembly plants in India and some of them have begun to use India as an export base within their production networks.</li>
<li>The key learning from the successful case of the Automobiles sector is that domestic firms graduate up the production value chain by first starting with low-technology operations such as assembly and then moving to manufacturing of components.</li>
</ul>
<h3>Free Trade Agreements (FTAs) and India</h3>
<ul style="list-style-type: square;">
<li>There is an apprehension that most of the FTAs that India has signed in the past have not worked in India&rsquo;s favour. The recent debate around India joining the Regional Comprehensive Economic Partnership has been aligned on the same context of cost and benefit analysis of FTAs.</li>
<li>However, an analysis shows that the overall impact on India&rsquo;s exports to the partners, with which the agreements have been signed, is 13.4% for manufactured products and 10.9% for total merchandise. The overall impact on imports is found to be lower at 12.7% for manufactured products and 8.6% for total merchandise.</li>
<li>Therefore, from the perspective of trade balance, India has gained in terms of 0.7% increase in trade surplus per year for manufactured products and of 2.3% increase in trade surplus per year for total merchandise.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>India can reap rich dividends by adopting policies aimed at strengthening its involvement in the export market for network products (NP). Assembly is highly labour intensive, which can provide jobs for the masses, while domestic production of parts and components can create high skill jobs.</li>
<li>For a country to become an attractive location for assembly activities, it is imperative that import tariff rates for intermediate inputs are zero or negligible. An enabling environment should also be created for the entry of lead firms into the country.</li>
<li>A pro-active FDI policy is also critical as MNEs are the leading vehicles for the country&rsquo;s entry into global production networks while local firms play a role as subcontractors and suppliers of intermediate inputs to MNEs.</li>
<li>Supply disruptions in a given location due to shipping delays, power failure, political disturbances, labour disputes etc. could disrupt the entire production chain. A low level of service link costs (costs related to transportation, communication etc.) is a prerequisite for countries to strengthen their participation in GVCs.</li>
</ul>
<h2>TARGETING EASE OF DOING BUSINESS IN INDIA</h2>
<p>Ease of doing business is the key to entrepreneurship, innovation and wealth creation. India has risen significantly in the World Bank&rsquo;s Doing Business rankings in recent years.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>As India leapfrogs towards a five trillion-dollar economy by 2024-25, simplifying and maintaining a business-friendly regulatory environment is essential.</li>
<li>India has made substantial gains in the Ease of Doing Business rankings from 142 in 2014 to 63 in 2019.</li>
<li>It has progressed on 7 out of the 10 parameters. The Goods and Services Tax and the Insolvency and Bankruptcy Code top the list of reforms that have propelled India&rsquo;s rise in rankings.</li>
<li>However, India continues to trail in parameters such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts.</li>
<li>To illustrate, it takes an average of 18 days (down from 30 in 2009) to set up a business in India. On the other hand, New Zealand has a seamless process of business incorporation which takes place through one agency and just takes half-a-day.</li>
<li>Similarly, it takes roughly 50 days and costs on an average 7.8% of a property&rsquo;s value to register it, and 1,445 days for a company to resolve a commercial dispute.</li>
<li>Thus, a holistic assessment and a sustained effort to ease business regulations and provide an environment for businesses to flourish is a key structural reform that India needs.</li>
</ul>
<h3>Density of Legislations</h3>
<ul style="list-style-type: square;">
<li>A major challenge most companies face is the complex architecture of the Indian governance framework including the legislation and statutory compliance requirements.</li>
<li>For example, manufacturing units have to conform with nearly 6,796 compliance items, which is a tedious task. The services sector too faces many regulatory hurdles even for routine businesses.</li>
<li>Besides, In India, only the list of licences and permissions can be obtained from a government portal or information centre.</li>
<li>On the other hand, in New Zealand, a dedicated website operated by a private agency has all detailed guides and stepwise procedures about permissions, fees and timeline to start a business. The website is also equipped with ready-to-use business plan templates.</li>
<li>The contrast reflects a difference in approach &ndash; government control versus curation/ partnership.</li>
</ul>
<h3>Construction Permits</h3>
<ul style="list-style-type: square;">
<li>Hong Kong, which tops the rankings for ease of obtaining construction permits, takes just over two months to obtain a construction permit, while Delhi takes almost four months.</li>
<li>It must be observed that India has improved the process of obtaining a construction permit, as it took 186 days in 2014, it now takes 98-113 days in 2019.</li>
</ul>
<h3>Achieving Scale of Across Business</h3>
<ul style="list-style-type: square;">
<li>Most of the manufacturing units in India have small capacities and consequently low manufacturing efficiencies which are a disadvantage in the global supply chain.</li>
<li>Compared to Bangladesh, China, and Vietnam, which have more than 80% of market value of exports by large enterprises, India has 80% by small enterprises.</li>
<li>Moreover, in India it can take 7-10 days to reach a port whereas in countries like China, Bangladesh and Vietnam it takes less than a day.</li>
<li>Countries like Bangladesh, China, Vietnam are able to progress in the value chain by increasing their competitiveness in the international market by improving their delivery time and domestic production capacity.</li>
</ul>
<h3>Trading across Borders</h3>
<ul style="list-style-type: square;">
<li>This indicator records the time and cost associated with the logistical process of exporting and importing goods.</li>
<li>Globally, transportation by ports is the most favoured followed by railways and then roads, whereas in India it is the other way round.</li>
<li>While India takes 60-68 and 88-82 hours in border and documentary compliance for exports and imports respectively, Italy takes only one hour for each. Italy tops the EoDB rankings in Trading across Borders.</li>
<li>Almost 70% of the delays (both in exports and imports) occur on account of port or border handling processes pertaining to procedural complexities, multiple documentations and involvement of multiple agencies for approval and clearances.</li>
<li>Such delays and procedural inefficiencies end up pushing the cost to trade.</li>
<li>Government has reduced procedural and documentation requirements considerably, increasing digitalization and seamlessly integrating multiple agencies onto a single digital platform.</li>
<li><strong>Authorized Economic Operators</strong> scheme is also being used to smoothen the process for registered exporters/importers.</li>
<li>The turnaround time of ships in India has been on a continuous decline. This shows that achieving significant efficiency gains in the case of sea ports is possible.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Given the maze of laws, rules and regulations in the manufacturing and services sector, the scope for streamlining is clear.</li>
<li>The streamlining of the logistics process at sea-ports requires close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.</li>
<li>The simplification of the Ease of Doing Business landscape of individual sectors such as tourism or manufacturing, however, requires a more targeted approach that maps out the regulatory and process bottlenecks for each segment.</li>
</ul>
<div class="border-bg">
<p><strong>Authorised Economic Operators (AEO)</strong></p>
<ul style="list-style-type: square;">
<li>AEO is a programme under the aegis of the <strong>World Customs Organization (WCO) SAFE Framework of Standards</strong>.</li>
<li>AEO seeks to secure and facilitate global trade. It aims to enhance international supply chain security and facilitate the movement of goods.</li>
<li>Under this, an entity engaged in international trade is approved by WCO as compliant with supply chain security standards and granted AEO status. An entity with an AEO status is considered a &lsquo;secure&rsquo; trader and a reliable trading partner.</li>
<li>Benefits of AEO status include expedited clearance times, fewer examinations, improved security and communication between supply chain partners, and more.</li>
<li>AEO is a voluntary programme.</li>
</ul>
</div>
<h2>GOLDEN JUBILEE OF BANK NATIONALISATION: TAKING STOCK</h2>
<p>In 2019, India completed the 50th anniversary (Golden Jubilee) of the bank nationalization program undertaken in 1969.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>This is apt to celebrate the accomplishments. At the same time, an objective assessment of Public Sector Banks (PSBs) is apposite.</li>
<li>Currently, PSBs account for 70% of the market share in banking. Despite being dominant players, they lag considerably in performance metrics when compared to their peers.</li>
<li>Dwarfism of our banking sector is quite evident when assessed on three characteristics ; size of the economy (GDP), development of the economy (GDP per capita) and population.</li>
</ul>
<h3>Dwarfism of Our Banking Sector</h3>
<ul style="list-style-type: square;">
<li><strong>Size of the Economy</strong><br />
<ul style="list-style-type: circle;">
<li>India&rsquo;s banking sector is disproportionately underdeveloped given the size of its economy.</li>
<li>For instance, ranked at 55<sup>th</sup> in the world, State Bank of India (SBI) is the only bank from India that figures in the global top 100 banks. Due to this characteristic India is grouped with countries that are a fraction of its size like Finland and Denmark.</li>
<li>All the largest economies have proportionately large banks with China being an outlier with 18 banks in the global top 100.</li>
</ul>
</li>
<li><strong>Development of the Economy</strong><br />
<ul style="list-style-type: circle;">
<li>India as an outlier when the penetration of credit to the private sector is plotted against the GDP per capita of a country.</li>
<li>Historically, economies have always been ably supported by their banks. The U.S., Japan, and China are the best example of this.</li>
<li>The support of the U.S. banking system in making the U.S. an economic superpower is well documented. Similarly, in the eighties during the heydays of the Japanese economy, Japan had 15 of the top 25 largest banks then. In recent times, China has emerged as an economic superpower and it has been ably supported by its banks - the top four largest banks globally are all Chinese banks.</li>
<li>Thus, a large economy needs an efficient banking sector to support its growth. Yet, credit growth among PSBs has declined significantly since 2013.</li>
<li>India becoming a $5 trillion economy will require at least eight Indian banks to be large enough to belong in the top 100 globally.</li>
</ul>
</li>
</ul>
<h3>Why the Banking Sector Needs Urgent Attention?</h3>
<ul style="list-style-type: square;">
<li>Fulfilment of social goals can happen at scale through financial intermediation. Given India&rsquo;s demographics and the growth opportunities, we need a thriving banking sector which can support and unleash a multiplier effect and permanently alter India&rsquo;s growth trajectory in a positive way.</li>
<li>Conversely, inefficient PSBs can severely handicap the country's ability to exploit the unique opportunities.</li>
<li>In 2019, PSBs&rsquo; collective loss - largely due to bad loans - amounted to over ₹ 66,000 crores, an amount that could nearly double the nation&rsquo;s budgetary allocation for education.</li>
<li>PSBs account for 85% of reported bank frauds while their gross non-performing assets (NPAs) equal ₹ 7.4 lakh crores which is more than 150% of the total infrastructure spend in 2019.</li>
<li>Every rupee of taxpayer money invested in PSBs as equity by the Government loses 23 paise. In contrast, every rupee of investor money invested in New Private Banks (NPBs) - banks licensed post-liberalization - on average gained 9.6 paise.</li>
<li>The market to book ratio for PSBs is very poor in comparison to NPBs. Every rupee of taxpayer money fetches a market value of 71 paise. In stark contrast, every rupee invested in NPBs fetches a market value of ₹ 3.70.</li>
<li>The primary difference between PSBs and NPBs stems from the difference in efficiencies and the costs stemming from inefficiency of PSBs are enormous.</li>
</ul>
<div class="border-bg">
<p><strong>NOTE:</strong></p>
<p>The <strong>Market to Book ratio</strong> is a financial valuation metric used to evaluate a company&rsquo;s current market value relative to its book value.</p>
</div>
<ul style="list-style-type: square;">
<li>Banking Structure: Nationalization to Today</li>
<li>Banking in India dates back to thousands of years. Several of India's ancient texts including those in the Vedic period mention bank lending functions.</li>
<li>India's public sector banks (PSBs) are essentially legacy banks from the colonial period (since 1800s) that were subsequently nationalized.</li>
<li>India's largest PSB, State Bank of India (SBI), was founded as Bank of Calcutta in 1806, took the name Imperial Bank of India in 1921 and became state-owned in 1955.</li>
<li>The remaining PSBs in India were formed through two waves of nationalizations, one in 1969 and the other in 1980.</li>
<li>After the 1980 nationalization, PSBs had a 91% share in the national banking market with the remaining 9% held by &ldquo;old private banks&rdquo; (OPBs) that were not nationalized.</li>
<li>PSBs continue to have a significant footprint today albeit with a market share that is less than 91%. The decline in PSB market share has been largely absorbed by &ldquo;new private banks&rdquo; (NPBs), which were licensed in the early 1990s after the liberalization of licensing rules.</li>
<li>PSBs, OPBs, and NPBs are currently subject to similar banking regulations on virtually all aspects of their functioning including branching and priority sector lending.</li>
</ul>
<h3>Assessment of Nationalization</h3>
<ul style="list-style-type: square;">
<li>The allocations of banking resources to rural areas, agriculture, and priority sectors increased. The number of rural bank branches increased ten-fold. It led to an increase in credit and deposit from rural areas.</li>
<li>However, some caution is necessary in interpreting the above trends as being entirely caused by nationalisation.</li>
<li>For instance, interventions like the &lsquo;Green Revolution&rsquo; and multiple anti-poverty programmes had their own role in financial inclusion and deepening institutional credit.</li>
<li>Similarly, the policies pursued by RBI after nationalization set lending targets for priority sectors. These tools carried special force given that banks were essentially operating in a marketplace sheltered from entry.</li>
<li>Nevertheless, a significant portion of the poor remained unbanked till 2014 when the Pradhan Mantri Jan Dhan Yojana (PMJDY) got 18 million bank accounts opened in the first week of its launch.</li>
</ul>
<h3>Problems Faced by PSBs</h3>
<ul style="list-style-type: square;">
<li>PSBs enjoy <strong>less strategic and operating freedom</strong> than private banks because of majority government ownership.</li>
<li>The <strong>government exercises significant control</strong> over all aspects of PSB operations ranging from policies on recruitment and pay to investments and financing and bank governance.</li>
<li>The majority ownership of the government and its writ on bank functioning also results in an implicit promise of the bailout of bank liabilities which is an <strong>implicit cost to the taxpayer</strong>.</li>
<li>The majority ownership by the government also subjects PSB officers to <strong>scrutiny of their decisions</strong> by the central vigilance commission and the comptroller auditor general.</li>
<li>Officers of state-run banks are <strong>wary of taking risks</strong> in lending or in renegotiating bad debt due to <strong>fears of harassment under the veil of vigilance investigations</strong>.</li>
</ul>
<div class="border-bg">
<p><strong>Microfinance institutions (MFIs)</strong></p>
<ul style="list-style-type: square;">
<li>MFIs are financial companies that provide small loans to people who do not have any access to banking facilities. Their objective was poverty alleviation via inclusive growth and financial inclusion.</li>
<li>Improved access of savings, credit, and insurance facilities enable the poor to smoothen their consumption, manage their risks better, build their assets gradually, and develop their microenterprises.</li>
<li>MFIs also help poor people to manage and optimize resources over a time to develop their enterprises.</li>
</ul>
</div>
<h3>Reasons for Failure of PSBs</h3>
<ul style="list-style-type: square;">
<li>As the 2014 P. J. Nayak Committee report shows, the structural weaknesses in PSBs explain their poor performance. The committee was set up by RBI to look into the governance, management and operational issues of the public sector banks.</li>
<li>The banking crises are due to some combination of unsustainable macroeconomic policies, market failures, regulatory distortions, and government interference in the allocation of capital.</li>
<li>A plausible explanation for the NPA problems of PSBs is that in the Indian economy&rsquo;s growth phase between 2004 and 2011, PSBs grew their loan portfolios but this credit growth was of suspect quality. When the economy slowed, the banking system saw a dramatic increase in NPAs.</li>
</ul>
<h3>Ways to Enhance Efficiency of PSBs</h3>
<ul style="list-style-type: square;">
<li>The key drivers of India&rsquo;s growth prospects are (a) highly favourable demographics; (b) a modern and modernizing digital infrastructure that encompasses the &ldquo;JAM&rdquo; trinity of financial inclusion; and (c) a uniform indirect taxation system (GST). India&rsquo;s growth path depends on how quickly and productively these growth levers are deployed using a well-developed financial system.</li>
<li>The use of direct benefit transfers and growth in digital transactions has been significant. It has helped to bring both credit and deposits into the banking system across all geographies.</li>
<li>More importantly, the inclusion is backed by state-of-art digital infrastructure that generates and stores an abundance of high quality structured data. Such data are the gold mine for economic growth in the 21st century.</li>
<li>All these indicate the possibilities that exist for the Indian banking sector to grow proportionate to the scale of the Indian economy.</li>
<li>PSBs have many important ingredients in place to cater to this new demand. For example, they have local market insights and relationships based on operating histories spanning many decades. Their geographic footprint is also vast.</li>
<li>PSBs, however, need significant investments in the capabilities to exploit the coming data-rich environment in India.</li>
</ul>
<h3>Application of Low-cost Technology to Keep Assets Secure</h3>
<ul style="list-style-type: square;">
<li>Most corporate term loans are secured and lenders have recourse to pledged assets in the event of default. However, wilful defaulters have a natural incentive to misrepresent the value of collateral. They may also pledge fictitious collateral. If they pledge genuine collateral, they have an incentive to dispose of these assets without the lender&rsquo;s knowledge.</li>
<li>Geo-tagging &ndash; the process of adding geographical identification such as latitude and longitude to photos, videos or other media &ndash; can help lenders keep track of the location of assets. Geo-tagging can also help verify the value of pledged land or property.</li>
<li>GPS systems can confer even more monitoring power. GPS devices, when affixed to collateralized equipment or machinery, can alert lenders if these assets are moved out of the plant. It may serve lenders well if they could, say, disable a vehicular asset remotely if the borrower attempts to dispose of it or wilfully defaults on the loan.</li>
<li>Integrated data on collateral across all lenders can become useful in curbing double-pledging of collateral. For example, a party may pledge the same collateral to multiple lenders to obtain multiple lines of credit for the same project.</li>
<li>While these technologies are powerful, they carry an important risk, i.e., the risk of infringing upon the borrower&rsquo;s privacy and dignity. Therefore, strong and clear policy guidelines are needed on what data may be collected, how, by whom and for how long.</li>
</ul>
<h3>The Benefits of Credit Analytics</h3>
<ul style="list-style-type: square;">
<li>Analytics based on market data are quite capable of providing accurate predictions of corporate distress.</li>
<li>The data that can be employed for credit analytics is available in both structured and unstructured form.<br />
<ul style="list-style-type: circle;">
<li><strong>Data in a structured form</strong> include credit information and credit scores based on loan grants and repayments held in the credit registries or credit bureaus.</li>
<li>The <strong>unstructured micro-data</strong> is available in text, images, geo-tagged data, social network data, mobile apps, as well as other shallow or deep digital footprints of current and potential customers.</li>
</ul>
</li>
<li>Leveraging these data requires new data, analytics, and modelling skills. Likewise, banks need to invest in credit recovery infrastructure.</li>
<li>A large proportion of NPAs of Indian banks, especially PSBs, could have been prevented if data and analytics were employed in corporate lending.</li>
<li>There are several leading indicators that a robust credit analytics platform can easily pick up and provide warning signals. For instance, the systematic differences in the disclosure of related party transactions, pledging of promoter shares, and large loans to related parties.</li>
<li>Similarly, an analysis of the annual reports of the large defaulters suggests that the quality of audit disclosure in these firms was very poor. Again, this is an easily detectable characteristic that a robust credit analytics platform could easily flag.</li>
</ul>
<h3>Creation of a FinTech Hub for PSBs</h3>
<ul style="list-style-type: square;">
<li>FinTech or financial technology is forcing traditional banks to review their outdated business paradigms to come up with effective, low cost, banking solutions. PSBs have the maximum to gain from FinTech.</li>
<li>As of now, most information processing on loans happens manually which causes inefficiency, frauds and loan defaults. PSBs also face many challenges such as high operating costs and subjective decision making.</li>
<li>FinTech can radically change the way information is processed by banks. In corporate lending, for instance, a huge mass of quantitative data such as company financials and qualitative data such as company filings are machine-analysed.</li>
<li>Tools such as Machine Learning (ML), Artificial Intelligence (AI) as well as Big Data provide banks the ability to recognize patterns quickly by analysing vast datasets.</li>
<li>Using FinTech will allow banks to better screen borrowers and set interest rates that better predict ex-post loan performances.</li>
<li>Its efficiency can be further enhanced by packaging all the information held by various PSBs into a common entity. With this, economies of scale can be utilized to make the necessary investments in undertaking analytics using AI and ML.</li>
<li>An entity, called PSBN (PSB Network), shall be established on the lines of GSTN (Goods and Services Network).</li>
<li>PSBs would be able to make quicker decisions, process loan applications faster, and reduce turn-aroundtimes (TAT). These would, in turn, help PSBs to compete better with NPBs.</li>
</ul>
<h3>The Case for Employee Stakes in PSBs</h3>
<ul style="list-style-type: square;">
<li>The bank employees are paid through fixed and flat compensation contracts. Coupled with pressures from ex-post monitoring by the vigilance agencies, this induces conservatism and preference for safety over risk-taking even among senior executives.</li>
<li>A long-term solution to this problem is enabling employees to own stakes in the PSBs and thereby incentivise them to embrace risk-taking and innovation.</li>
<li>In this respect, a portion of the government stakes can be transferred to employees exhibiting good performance across all levels of the organization through Employee Stock Option Plans (ESOPs).</li>
<li>Ownership by motivated, capable employees across all levels in the organization could give such employees tangible financial rewards for value enhancement, align their incentives with what is beneficial to the PSB, and create a mind-set of enterprise ownership for employees.</li>
</ul>
<h3>The Need for Best Talent</h3>
<ul style="list-style-type: square;">
<li>Embracing disruptive innovations through disruptive processes requires a degree of risk-taking, a more flexible human capital acquisition strategies at all levels, and complementary incentive structures.</li>
<li>This pertains to the process for recruitment of bank officials. PSBs cannot, for instance, recruit professional MBAs directly from the campuses.</li>
<li>PSBs need to enable cutting-edge recruitment practices that allow lateral entry of professionals and recruitment of professionally trained talent at the entry level. For example, professionals with domain skills in technology, data science, finance, and economics.</li>
</ul>
<h2>FINANCIAL FRAGILITY IN THE NBFC SECTOR</h2>
<p>The problems faced by the Non-Banking Financial Companies (NBFCs) stems from their over-dependence on short-term wholesale funding from the Liquid Debt Mutual Funds (LDMFs). Any asset-side shock not only exacerbates the Asset Liability Management (ALM) problem but also makes investors in LDMFs jittery leading to a redemption pressure akin to a &ldquo;bank run&rdquo;.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The liquidity crunch in the shadow banking system in India took shape in the wake of defaults on loan obligations by major NBFCs - Infrastructure Leasing &amp; Financial Services (IL&amp;FS) and Dewan Housing Finance Limited (DHFL).</li>
<li>In response to the defaults, mutual funds started selling off their investments in the NBFC sector to reduce exposure to stressed NBFCs. Panic-stricken investors in debt mutual funds started pulling out their investments in these funds rapidly.</li>
<li>The redemption pressure faced by debt mutual funds is akin to a <strong>&ldquo;bank run&rdquo;</strong>, a situation when a large number of customers of a bank withdraw their deposits simultaneously over concerns of the bank's solvency.</li>
<li>Debt mutual funds, facing increasing redemptions, were hesitant to finance the NBFC sector. This, in turn, led to the difficulty of NBFCs to raise funds, which took a toll on the overall credit growth in the Indian economy and a decline in GDP growth. Thus, the redemption pressure gives rise to refinancing risk (rollover risk) for NBFCs.</li>
</ul>
<div class="border-bg">
<p><strong>Shadow Banking System</strong></p>
<ul style="list-style-type: square;">
<li>Shadow banking comprises a set of activities, markets, contracts and institutions that operate partially (or fully) outside the traditional commercial banking sector. These are either lightly regulated or not regulated at all.</li>
<li>A shadow banking system comprises entities that intermediate between end-suppliers and end-users of funds. However, they do not have explicit access to central bank liquidity and are highly levered with risky and illiquid assets.</li>
<li>There are three important segments of the shadow banking system in India - Non-Banking Housing Finance Companies (HFCs), Retail Non-Banking Financial Companies (Retail-NBFCs) and Liquid Debt Mutual Funds (LDMFs).</li>
</ul>
</div>
<h3>Conceptual Framework of Rollover Risk</h3>
<ul style="list-style-type: square;">
<li>NBFCs rely on short term financing to fund long-term investments. This reliance on short-term funding causes asset-liability management (ALM) problem because asset side shock reduces expected future cashflows for an NBFC, and thereby risk perceptions about the NBFC.</li>
<li>NBFCs raise capital in the short-term commercial paper (CP) market at a lower cost. The frequent repricing of CPs exposes NBFCs to the risk of facing higher financing costs and, in the worst case, <strong>credit rationing</strong>. Such refinancing risks are referred to as Rollover Risk.</li>
<li>When an asset-side shock reduces expected future cashflows for an NBFC, it adversely affects the ALM problem in the NBFC and thereby risk perceptions about the NBFC.</li>
<li>Such a shock amplifies the problems of NBFCs when the liability structure is <strong>over-dependent</strong> on short-term wholesale funding, which requires frequent refinancing.</li>
<li>The LDMF sector is a primary source of short-term wholesale funds in the NBFC sector. Thus, the NBFC sector is intricately connected with the LDMF sector. This interconnectedness is a channel for the transmission of <strong>systemic risk</strong> from the NBFC sector to the LDMF sector and vice-versa.</li>
<li>Shocks in the NBFC sector may lead to concerted redemptions by investors in the LDMF sector. Faced with this situation, LDMFs may withdraw funding to the NBFC sector when refinancing is due. It may lead to a liquidity crisis in the NBFC sector.</li>
<li>At the time of refinancing, the NBFCs having stronger balance sheets are successful in rolling over. NBFCs with weaker balance sheets face higher default probabilities.</li>
</ul>
<div class="border-bg">
<p><strong>Related Information</strong></p>
<ul style="list-style-type: square;">
<li><strong>Liquid Debt Mutual Funds</strong> are a category of debt mutual funds that invest in very short-term market instruments like treasury bills, government securities, and call money.</li>
<li><strong>Commercial paper</strong> is a short-term money-market security issued by large corporations to obtain funds to meet short-term debt obligations. It is not backed by collateral, only firms with excellent credit ratings are able to sell commercial paper.</li>
</ul>
</div>
<h3>Differences between HFCs and Retail-NBFCs</h3>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Housing Finance Companies (HFCs)</strong></span></td>
<td style="width: 50%; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Retail Non-Banking Financial Companies (Retail-NBFCs)</strong></span></td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">HFCs hold much longer duration assets (housing loans, developer loans, etc.).</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Retail-NBFCs, hold medium-term assets (auto, consumer durables, gold loans, etc.).</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">HFCs face a greater gap between the average maturity of their assets and liabilities.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Retail-NBFCs provide loans of shorter duration in the form of working capital loans to MSME, automobile financing loans or gold loans.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Asset side shocks cause significant deterioration in the asset-liability mismatch of the HFCs.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Asset side shocks induce less of an adverse impact on asset-liability mismatch of Retail-NBFCs.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">HFCs rely less on the short-term wholesale funding market and, thus, are less exposed to interconnectedness risk compared to Retail-NBFCs.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Due to their reliance on the short-term wholesale funding market Retail-NBFCs are more exposed to interconnectedness risk compared to HFCs.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Key drivers of Rollover Risk are <strong>ALM Risk</strong> and Financial and Operating Resilience.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Key drivers of Rollover Risk are <strong>Interconnectedness Risk</strong> and Financial and Operating Resilience.</td>
</tr>
</tbody>
</table>
<h3>Risks From Asset Liability Management (ALM) Mismatch</h3>
<ul style="list-style-type: square;">
<li>ALM risk arises in most financial institutions due to a <strong>mismatch</strong> in the <strong>duration of assets and liabilities</strong>.<strong> Liabilities are of much shorter duration than assets</strong> which tend to be of longer duration.</li>
<li>ALM risk arises if the future contractual <strong>cash inflows</strong> from loan assets are not enough to meet the future contractual <strong>cash outflows</strong> from debt obligations. ALM risk is more problematic for HFCs than the Retail-NBFC sector.</li>
<li>HFCs invest in significantly longer duration (15 to 20-year horizon) assets. HFCs&rsquo; short term liabilities (upto maturities of 3 years) are greater than their assets in these maturity buckets. Therefore, HFCs face significant rollover risk due to their ALM mismatch problem.</li>
<li>In contrast, for Retail-NBFCs, the assets are greater than their liabilities with respect to the profile of cashflows for all maturity buckets. The Rollover Risk stemming from ALM mismatch is, therefore, lower for Retail- NBFCs.</li>
</ul>
<h3>Risks From Interconnectedness</h3>
<ul style="list-style-type: square;">
<li>Interconnectedness Risk is a measure of the transmission of systemic risk between an NBFC and the LDMF sector.</li>
<li>First, if the LDMF sector holds concentrated positions of a specific stressed NBFC, it may lead to a greater redemption risk.</li>
<li>The average dependence of HFCs is lower than that of Retail-NBFCs.</li>
</ul>
<h3>Financial and Operating Resilience</h3>
<ul style="list-style-type: square;">
<li>Liquidity crunch in debt markets often leads to credit rationing. Credit rationing results when firms with robust financial and operating performance get access to credit while the less robust ones are denied credit.</li>
<li>Firms with robust financial and operating performance can withstand a prolonged period of liquidity crunch if they choose not to raise funds from debt mutual funds.</li>
<li>Measures of financial resilience of NBFCs are commercial paper (CP) as a percentage of borrowings, Capital Adequacy Ratio (CAR) and provisioning policy.</li>
<li>Measures of operating resilience are cash as a percentage of borrowings, loan quality and operating expense ratio (Opex Ratio).</li>
<li>From 2015-16 onwards, large and medium-sized Retail-NBFCs had lower operating resilience as compared to HFCs and small-sized NBFCs.</li>
</ul>
<h3>Health Score to Assess Financial Fragility</h3>
<ul style="list-style-type: square;">
<li>To estimate the financial fragility of the NBFC sector an Index called Health Score is developed. It ranges from -100 to +100 with the higher score indicating higher financial stability of the firm/sector.</li>
<li>ALM Risk and Financial and Operating Resilience are the most important constituents of the Health Score of HFCs.</li>
<li>Interconnectedness Risk between an NBFC and the LDMF sector and Financial and Operating Resilience are the most important constituents of Health Score of Retail-NBFCs.</li>
<li>The Health Score for the HFC sector exhibited a declining trend post 2014. By the end of FY2019, the health of the overall sector had worsened considerably.</li>
<li>The Health Score of the Retail-NBFC sector was consistently below par for the period 2014 till 2019.</li>
<li>Furthermore, the large Retail-NBFCs had higher Health Scores but among medium and small Retail- NBFCs, the medium size ones had a lower Health Score.</li>
<li>The Health Score can serve as a timely indicator of future performance of these firms. It can also be used by policy makers to allocate scarce capital to stressed NBFCs in an optimal way to alleviate a liquidity crisis.</li>
</ul>
<h2>PRIVATIZATION AND WEALTH CREATION</h2>
<p>The recent approval of strategic disinvestment in Bharat Petroleum Corporation Limited (BPCL) led to a huge increase in value of its shareholders&rsquo; equity. This reflected an increase in BPCL&rsquo;s overall firm value and thereby an increase in national wealth. Moreover, as stock markets reflect the current value of future cash flows of a firm, the increase in value reflected anticipated gains from consequent improvements in the efficiency of BPCL.</p>
<h3>Benefits of Privatization/Disinvestment</h3>
<ul style="list-style-type: square;">
<li>Central Public Sector Enterprises (CPSEs) are most likely to perform better in the private hands due to factors like <strong>technology up-gradation</strong> and <strong>efficient management practices</strong>. These in turn would <strong>create wealth for the economy</strong>.</li>
<li>A comparison shows that the performance of the privatized CPSE and its peers is quite similar till the year of privatization. However, post privatization, the <strong>performance of the privatized entity</strong> improves significantly when compared to the change in the peers&rsquo; performance.</li>
<li>Majority of privatized CPSEs witnessed improvement in net worth, net profit, gross revenue, net profit margin, sales growth in the post-privatization period compared to pre privatization period.</li>
<li>Moreover, disinvestment improves firms&rsquo; overall productivity and unlocks their potential to create wealth. This would have a multiplier effect on other sectors of the economy.</li>
<li>Disinvestment of CPSEs is required to bring in higher profitability, promote efficiency, increase competitiveness and to promote professionalism in management in CPSEs.</li>
<li>The focus of the strategic disinvestment needs to be exit from non-strategic business and directed towards optimizing economic potential of CPSEs.</li>
<li>This would, in turn, unlock capital for use elsewhere, especially in public infrastructure like roads, irrigation systems, railways and urban infrastructure. This would improve the efficient allocation of public resources.</li>
</ul>
<h3>Evolution of Disinvestment Policy in India</h3>
<ul style="list-style-type: square;">
<li>The 1991 liberalization reforms ushered in an increased demand for privatization/disinvestment of PSUs.</li>
<li>The government started off with disinvestment through the sale of minority stake in bundles through auction. This was followed by separate sales for each company in the following years, a method prevalent till 1999-2000.</li>
<li>The next phase began in 1999-2000 by <strong>strategic sale</strong> of substantial portions (up to 50 % or more) of Government shareholding in identified CPSEs, along with transfer of management control.</li>
<li>The next major shift in disinvestment policy was made in 2004-05 when it was decided that the government may dilute its equity and raise resources to meet the social needs of the people, a distinct departure from strategic sales.</li>
<li>Strategic Sales have got a renewed push after 2014. During the period of 2016-17 to 2018-19, on average, strategic sales accounted for around 28.2% of total proceeds from disinvestment.</li>
<li>In May 2016, the Department of Investment and Public Asset Management (DIPAM) has laid down comprehensive guidelines on Capital Restructuring of CPSEs:<br />
<ul style="list-style-type: circle;">
<li>Disinvestment through minority stake sale in listed CPSEs to achieve minimum public shareholding norms of 25%.</li>
<li>Listing of CPSEs to facilitate people&rsquo;s ownership and improve the efficiency of companies through accountability to its stakeholders.</li>
<li>Strategic Disinvestment.</li>
<li><strong>Buy-back of shares</strong> by large PSUs having huge surplus. It means a company repurchasing its own outstanding shares.</li>
<li>Merger and acquisitions among PSUs.</li>
<li>Launch of <strong>Exchange Traded funds (ETFs)</strong>, an equity instrument that tracks a particular Index. For example, CPSE ETF.</li>
<li>Monetization of select assets of CPSEs to improve their balance sheet/reduce their debts and to meet part of their capital expenditure requirements.</li>
</ul>
</li>
<li>NITI Aayog has been mandated to identify PSUs for strategic disinvestment. For this purpose, NITI Aayog has classified PSUs into <strong>high priority</strong> and <strong>low priority</strong>. The classification is based on national security, sovereign functions and public purpose. The PSUs falling under low priority are covered for strategic disinvestment.</li>
</ul>
<div class="border-bg">
<p><strong>The UK Model of Privatization</strong></p>
<ul style="list-style-type: square;">
<li>The British privatization programme started in 1980.</li>
<li><strong>Methods</strong><br />
<ul style="list-style-type: circle;">
<li>An <strong>Initial Public Offering (IPO)</strong> of all or a portion of company shares to private owners for the first time.</li>
<li>A direct sale or trade sale, which involves the sale of a company to an existing private company through negotiations or competitive bidding.</li>
<li>An employee or management buyout, which involves the sale of company shares to employees or managers.</li>
</ul>
</li>
<li>In most cases, British privatizations went hand-in-hand with reforms of regulatory structures.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Strategic disinvestment is guided by the basic economic principle that the Government should discontinue its engagement in manufacturing/producing goods and services in sectors where competitive markets have come of age.</li>
<li>The aim of any privatization or disinvestment programme should be the maximisation of the Government&rsquo;s equity stake value.</li>
<li>The Government can transfer its stake in the listed CPSEs to a separate corporate entity. This entity would be managed by an independent board and would be mandated to divest the Government stake in these CPSEs over a period of time.</li>
<li>This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs.</li>
</ul>
<h2>IS INDIA&rsquo;S GDP GROWTH OVERSTATED? NO!</h2>
<p>As investors deciding to invest in an economy care for the country&rsquo;s Growth in Gross Domestic Product (GDP), uncertainty about its magnitude can affect investment.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>To achieve the objective of becoming a $5 trillion economy by 2025, a strong investment climate is critical.</li>
<li>The level and growth of a country&rsquo;s GDP informs several critical policy initiatives as it is a barometer of the economy&rsquo;s size and health. It is also a pre-eminent driver of investment and a critical variable for decision-making by investors and policymakers.</li>
<li>Therefore, it is important that GDP is measured as accurately as possible. The recent debate about accuracy of India&rsquo;s GDP estimation following the revised estimation methodology in 2011 is extremely significant.</li>
</ul>
<h3>Change in the Base Year of the GDP Series</h3>
<ul style="list-style-type: square;">
<li>The Base Year of the <strong>GDP Series was revised from 2004-05 to 2011-12</strong> and released on 30 January 2015.</li>
<li>It was based on adaptation of the sources and methods in line with the <strong>System of National Accounts (SNA) 2008</strong>. Countries follow the SNA for the purpose of <strong>global standardization and comparability</strong>.</li>
<li>The SNA 2008 is the latest version of the international statistical standard for the national accounts, adopted by the <strong>United Nations Statistical Commission (UNSC)</strong> and is an update of the earlier 1993 SNA.</li>
<li>The SNA describes a coherent, consistent and integrated set of macroeconomic accounts in the context of a set of internationally agreed concepts, definitions, classifications and accounting rules.</li>
<li>In addition, the SNA provides an overview of economic processes, recording how production is distributed among consumers, businesses, government and foreign nations. It shows how income originating in production, modified by taxes and transfers, flows to these groups and how they allocate these flows to consumption, saving and investment.</li>
</ul>
<h3>Is GDP Misestimated?</h3>
<ul style="list-style-type: square;">
<li>The survey tried to estimate the inaccuracy, if any, in the GDP growth rate using the <strong>Difference-In-Difference (DID) methodology</strong> as implemented by other studies which calculated the misestimation.</li>
<li>After closely carrying-out <strong>cross country comparison under the DID methodology,</strong> the Survey found <strong>no evidence</strong> <strong>of misestimation of India&rsquo;s GDP growth</strong>. Cross-country data was gathered from the World Bank&rsquo;s <strong>World Development Indicators</strong>.</li>
<li>Cross-country comparisons are fraught with risks of incorrect inference. Thus, cross-country analysis has to be carefully undertaken so that correlation is distinguished from causality.</li>
</ul>
<h3>What the Economic Survey Concludes?</h3>
<ul style="list-style-type: square;">
<li>There are structural differences between the Indian economy and others. To illustrate, compared to other countries, India has very high informal sector employment and a large proportion of youth that is not in employment, education or training. Agriculture contributes disproportionately to India&rsquo;s employment whereas services contributes disproportionately to GDP.</li>
<li>All these variables undoubtedly affect GDP, but in indirect ways that cannot be easily measured or observed. Besides, institutional and legal structures are inherently different across countries, which affect countries in ways that cannot be measured directly.</li>
<li>The pattern of GDP growth in India is far more complex than what a few indicators of economic activity can predict, and therefore, asserting a mis-estimation based on these indicators alone is inappropriate.</li>
<li>At the same time, more work is needed to fully understand the determinants of India&rsquo;s growth rate over time. India has made impressive improvements in several social development indicators, such as access to nutrition and electricity, that might explain the higher growth rate in Indian GDP in the post-change period.</li>
<li>There is also a need to invest in ramping up India&rsquo;s statistical infrastructure. In this context, the setting up of the 28-member <strong>Standing Committee on Economic Statistics (SCES)</strong> headed by India&rsquo;s former Chief Statistician is important.</li>
</ul>
<div class="border-bg">
<p><strong>Difference-in-difference Method</strong></p>
<ul style="list-style-type: square;">
<li>It is a statistical technique that compares the changes in outcomes over time between the treatment group and the control group that is affected by the specific intervention such as a passage of law, enactment of policy, or large-scale program implementation.</li>
<li>It is typically used to mitigate the possibility of any extraneous factors affecting the estimated impact of an intervention.</li>
</ul>
</div>
<h2>THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA</h2>
<p>Economics affects the common lives of people in tangible ways but this fact often remains unnoticed. A plate of food is something that people encounter every day. Thus, Thalinomics: The economics of a plate of food in India can become a prudent way to make economics relate to the common people.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>As food is a necessity, a rapid rise in the price of a Thali has the most direct and conspicuous effect on the common man. Food and beverages constitute around 46% in the Consumer Price Index-Combined.</li>
<li>Thalinomics is an attempt to quantify what a common person pays for a Thali across India.</li>
<li>After 2015-16, the average household gained ₹10887 on average per year from the moderation in prices in the case of vegetarian Thali. Similarly, an average household that consumes two non-vegetarian Thalis gained around ₹11787 on average per year during the same period.</li>
</ul>
<h3>Affordability of Thali</h3>
<ul style="list-style-type: square;">
<li>The price of a Thali indicates the cost of consuming a healthy plate of food but knowing whether prices are increasing or decreasing is not sufficient to infer whether the common person is better-off or worse-off.</li>
<li>Hence, it is also important to see how the earnings of the individual have changed during the same period of time compared to the prices of a Thali.</li>
<li>After comparing the wages with Thali prices, it was found that the affordability of Thalis has increased over the years.</li>
<li>In terms of vegetarian Thali, it was found that an individual who would have spent around 70% of his/her daily wage on two Thalis in 2006- 07 is able to afford the same number of Thalis from around 50% of his daily wage in 2019-20.</li>
<li>Similarly, the affordability of non-vegetarian Thalis has also increased with the share of wages required decreasing from around 93% to around 79% between 2006-07 and 2019-20.</li>
<li>Many reform measures were introduced during the period of analysis to enhance the productivity of the agricultural sector as well as efficiency and effectiveness of agricultural markets for better and more transparent price discovery.</li>
</ul>
<table border="1" style="border-collapse: collapse;">
<tbody>
<tr style="height: 35px;">
<td style="width: 1809px; height: 10px; text-align: center; background-color: #0e92b3;" colspan="3"><span style="color: #ffffff;"><strong>Initiatives for Enhancing Productivity of Agriculture and Efficiency of Agricultural Markets</strong></span></td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;"><strong>Sl. No.</strong></td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;"><strong>Name of Scheme</strong></td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;"><strong>Description</strong></td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">01</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Covers three sub-schemes i.e. Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS) and Pilot of Private Procurement &amp; Stockist Scheme (PDPS).</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">02</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) - Per Drop More Crop</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Focuses on enhancing water use efficiency through the expansion of cultivable area under assured irrigation, improve on-farm water use efficiency, enhance the adoption of precision-irrigation, enhance recharge of aquifers and introduce sustainable water conservation practices.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">03</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Pradhan Mantri Fasal Bima Yojana (PMFBY)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">To provide better insurance coverage for agricultural crops and thereby mitigate risk.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">04</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Soil Health Card</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Provides farmers information on the nutrient status of their soil along with recommendation on appropriate dosage of nutrients to be used for their soil conditions.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">05</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">e-National Agricultural Market (e-NAM)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">An online trading platform for agricultural commodities for transparent price discovery.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">06</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">National Food Security Mission (NFSM)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Seeks to increase the production of rice, wheat, pulses and coarse cereals.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">07</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">National Food Security Act (NFSA)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">The Act legally entitles 67% of the population (75% in rural areas and 50% in urban areas) to receive highly subsidized food grains.</td>
</tr>
</tbody>
</table>
<h3>Conclusion</h3>
<ul style="list-style-type: square;">
<li>Food is not just an end in itself but also an essential ingredient in the growth of human capital and therefore important for national wealth creation.</li>
<li>Food security is essential to achieve &lsquo;Zero Hunger&rsquo; which has been agreed upon by nations of the world as a Sustainable Development Goal (SDG). This goal (SDG 2) is directly related to other SDGs such as Goal 1 (No poverty), Goal 4 (Quality Education), Goal 5 (Gender equality), Goal 12 (Responsible consumption and production), Goal 13 (Climate Action) and Goal 15 (Life on Land).</li>
</ul>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/gist-of-economic-survey/gist-of-economic-survey-2019-20/gist-of-economic-survey-2019-2020'
		],
		(int) 1 => [
			'title' => 'Katkari Tribe',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p><strong>Katkari tribal youth</strong> from Shahpur in<strong> Maharashtra</strong> are making a name by <strong>selling Giloy and other products online</strong> during lockdown.</p>
<ul style="list-style-type: square;">
<li>They received help under the <a href="/daily-updates/daily-news-analysis/van-dhan-internship-programme" target="_blank" rel="noopener"><strong>Pradhan Mantri Van Dhan Yojana (PMVDY)</strong></a> run by the <strong>Tribal Cooperative Marketing Development Federation of India</strong> (TRIFED).<br />
<ul style="list-style-type: circle;">
<li>TRIFED is a national level apex organisation functioning under the administrative control of the Ministry of Tribal Affairs.</li>
</ul>
</li>
<li><strong>Giloy</strong> <em>(Tinospora Cordifolia)</em> is an Ayurvedic herb that has been used and advocated in Indian medicine for ages..</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Katkari is one of <strong>the 75 <a href="/daily-updates/daily-news-analysis/particularly-vulnerable-tribal-groups" target="_blank" rel="noopener">Particularly Vulnerable Tribal Groups (PVTGs)</a>.</strong></li>
<li>Katkaris are <strong>located</strong> primarily in Raigad and in parts of Palghar, Ratnagiri and Thane districts of Maharashtra as well as in some places of Gujarat.</li>
<li>Katkaris were historically forest dwellers.<br />
<ul style="list-style-type: circle;">
<li>The name<strong> Katkari is derived from a forest-based activity &ndash;</strong> the making and bartering or sale of Catechu from the Khair tree <em>(Acacia Katechu)</em>.</li>
<li><strong>Catechu</strong> is an extract of acacia trees used variously as a food additive, dye, etc. It is extracted by boiling the wood in water and evaporating the resulting brew.</li>
</ul>
</li>
<li>The British administration had classified them under<strong> the Criminal Tribes Act, 1871.</strong><br />
<ul style="list-style-type: circle;">
<li>The Act described certain groups of people as &lsquo;habitually criminal&rsquo;. The stigma associated with the Act continues.</li>
</ul>
</li>
</ul>
<h3>Pradhan Mantri Van Dhan Yojana</h3>
<ul style="list-style-type: square;">
<li>Pradhan Mantri Van Dhan Yojana (PMVDY) is a <strong>retail marketing led value addition plan for Minor Forest Produce (MFP),</strong> meant for forest-based tribes to optimize the tribal income, locally. <br />
<ul style="list-style-type: circle;">
<li>MFP <strong>means all non-timber forest produce of plant origin</strong> and includes <strong>bamboo, canes, fodder, leaves, gums, waxes, dyes, resins and many forms of food including nuts, wild fruits, honey, lac, tusser etc.</strong></li>
<li>It provides both <strong>subsistence and cash income</strong> for people who live in or near forests. They form a major portion of their food, fruits, medicines and other consumption items and also provide cash income through sales.</li>
</ul>
</li>
<li>Under the program, MFP-based tribal groups / enterprises of around 300 members are formed for collection, value addition, packaging &amp; marketing of Minor Forest Produces (MFPs).<br />
<ul style="list-style-type: circle;">
<li>These tribal enterprises are in the form of <strong>Van Dhan Self Help Groups (SHGs)</strong> which is a group of 15-20 members and such 15 SHG groups will further be federated into a larger group of <strong>Van Dhan Vikas Kendras (VDVKs)</strong> of around 300 members.</li>
</ul>
</li>
<li>TRIFED supports the VDVKs through providing them with model business plans, processing plans &amp; tentative list of equipment for carrying out the value addition work of MFPs.</li>
</ul>
<p><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1626550" target="_blank" rel="noopener"><strong>Source:PIB</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/katkari-tribe'
		],
		(int) 2 => [
			'title' => 'Increased Chinese Transgression',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, there has been a marked increase in the number of <strong>Chinese transgressions</strong> across the disputed India-China border in Ladakh.</p>
<ul style="list-style-type: square;">
<li>In Ladakh, a<strong> surge of 75%</strong> have been observed in <strong>2019</strong> compared to 2018 and the <strong>first four months of 2020</strong> have also witnessed an<strong> increase</strong> compared to 2019.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Chinese Transgression:</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>border</strong> between India and China is<strong> not fully demarcated</strong> and the <a href="/daily-updates/daily-news-analysis/india-china-3" target="_blank" rel="noopener"><strong>Line of Actual Control</strong></a> (LAC) is neither clarified nor confirmed by the two countries.</li>
<li>This leads to different perceptions of the LAC for the two sides while soldiers from either side try to patrol the area.</li>
<li><strong>Observation Methods:</strong> Use of surveillance equipment, face-offs by patrols, reliable indications by locals, or evidence left by the Chinese in the form of wrappers, biscuit packets etc. in an unmanned area.</li>
<li>Official data shows that <strong>80%</strong> of Chinese transgressions across the LAC since 2015 have taken place in<strong> four locations</strong> of which <strong>three are in eastern Ladakh</strong> in the western sector.<br />
<ul style="list-style-type: disc;">
<li>These areas of eastern Ladakh are <strong>Pangong Tso, Trig Heights and Burtse.</strong></li>
<li>The fourth area is the <strong>Dichu Area/Madan Ridge area</strong> (Arunachal Pradesh) of the Eastern sector.</li>
</ul>
</li>
<li><strong>Implications of Increased Number of Transgressions:</strong><br />
<ul style="list-style-type: disc;">
<li>It is an indicator of<strong> increased Chinese assertiveness.</strong></li>
<li>Even if there are no major incidents, it should not be taken lightly.</li>
<li>So far, there has been <strong>no major standoff</strong> between the two sides after the 73-day <a href="/loksabha-rajyasabha-discussions/india-s-world-pm-modi-s-visit-to-bhutan" target="_blank" rel="noopener"><strong>Doklam standoff</strong></a> on Sikkim-Bhutan border in 2017.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Different Sectors of India-China Border</strong></p>
<ul style="list-style-type: square;">
<li>India and China share a boundary that stretches<strong> 3,488 km</strong> from <strong>Ladakh to Arunachal Pradesh.</strong></li>
<li>The <a href="/to-the-points/Paper2/disputed-territories-of-india" target="_blank" rel="noopener"><strong>border dispute</strong></a> still stands <strong>unresolved.</strong></li>
<li>It is <strong>divided into three sectors:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Western Sector:</strong> It falls in the Union Territory (UT) of Ladakh and is 1597 km long.<br />
<ul style="list-style-type: disc;">
<li>It witnesses the highest <strong>transgressions between</strong> the two sides.</li>
</ul>
</li>
<li><strong>Middle Sector:</strong> It falls in Uttarakhand and Himachal Pradesh and is 545 km long.<br />
<ul style="list-style-type: disc;">
<li>It is the<strong> least disputed</strong> sector between the two countries.</li>
</ul>
</li>
<li><strong>Eastern Sector:</strong> It falls in the states of Sikkim and Arunachal Pradesh and is 1346 km long.</li>
</ul>
</li>
</ul>
</div>
<h3>Concerns</h3>
<ul style="list-style-type: square;">
<li>India is worried about the <a href="/daily-updates/daily-news-analysis/face-off-between-india-and-china" target="_blank" rel="noopener"><strong>tensions at Naku La in Sikkim and at Galwan river and Pangong Tso in Ladakh.</strong></a></li>
<li>The increased transgressions lead to <strong>more tensions</strong> between both countries which are already struggling to contain the <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong></a> <a href="/daily-updates/daily-news-analysis/covid-19-now-pandemic-who" target="_blank" rel="noopener">pandemic</a>.</li>
<li><a href="/daily-updates/daily-news-analysis/india-nepal-on-kailash-mansarovar-link-road" target="_blank" rel="noopener"><strong>Nepal&rsquo;s recent behaviour on the Mansarovar Link Road</strong></a> raising the <a href="/daily-updates/daily-news-editorials/indo-nepal-territorial-dispute" target="_blank" rel="noopener"><strong>border map issue</strong></a> also raises Indian concerns.</li>
<li>The <strong>constant accusations</strong> on each other also cause tensions and disrupt the peace on borders.<br />
<ul style="list-style-type: circle;">
<li>Recently, Chinese media accused India of building defence facilities in the <strong>Galwan Valley region</strong> of the contested <a href="/daily-updates/daily-news-analysis/aksai-chin" target="_blank" rel="noopener"><strong>Aksai Chin</strong></a> <strong>area.</strong></li>
</ul>
</li>
<li>India and China are both <strong>nuclear-armed countries</strong> with<strong> strong militaries</strong> and the constant border conflicts are not a desirable thing.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>In the <a href="/loksabha-rajyasabha-discussions/the-big-picture-india-china-ties-marching-on" target="_blank" rel="noopener"><strong>Wuhan</strong></a> <strong>and <a href="/daily-updates/daily-news-analysis/india-china-2nd-informal-summit-mamallapuram-summit" target="_blank" rel="noopener">Mahabalipuram</a> summits,</strong> both China and India had <strong>reaffirmed</strong> that they will make efforts to <strong>ensure peace and tranquility in the border</strong> areas.</li>
<li>On 1<sup>st</sup> April, 2020 <a href="/daily-updates/daily-news-analysis/india-china-70-years-of-diplomatic-relations" target="_blank" rel="noopener"><strong>India and China completed their 70 years of diplomatic relations.</strong></a></li>
<li>Both countries have <strong>resolved border issues peacefully in the past</strong> four decades which gives the <strong>hope</strong> that the tensions will subside soon.</li>
<li><strong>Establishment of peace</strong> between the two big powers of such an<strong> important geopolitical region</strong> is essential for their own<strong> growth and development</strong> as well as for<strong> maintenance of global peace.</strong></li>
</ul>
<p><a href="https://indianexpress.com/article/explained/chinese-transgressions-ladakh-line-of-actual-control-6421855/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/increased-chinese-transgression'
		],
		(int) 3 => [
			'title' => 'India-Nepal Border Dispute',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, Nepal has released a<strong> new political map that claims Kalapani, Limpiyadhura and Lipulekh of Uttarakhand as part of Nepal&rsquo;s territory.</strong> The area of <strong>Susta (West Champaran district, Bihar)</strong> can also be noted in the new map.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>India rejected the new map of Nepal</strong> saying that Nepal's new map involves artificial enlargement of territories, which is <strong>not based on historical facts and evidence.</strong> <br />
<ul style="list-style-type: circle;">
<li>Nepal&rsquo;s act is an unilateral act and is contrary to the bilateral understanding to resolve the outstanding boundary issues through diplomatic dialogue.</li>
</ul>
</li>
<li>India has urged the Government of Nepal <strong>to refrain from such an unjustified cartographic assertion</strong> and <strong>respect India&rsquo;s sovereignty and territorial integrity.</strong></li>
<li>India has also asked Nepal <strong>to return to dialogue.</strong></li>
<li>Nepal&rsquo;s move came after India&rsquo; Defence Minister recently <a href="/daily-updates/daily-news-analysis/india-nepal-on-kailash-mansarovar-link-road" target="_blank" rel="noopener"><strong>inaugurated a motorable link road</strong></a> that connects <strong>India and China,</strong> significantly reducing the time of Kailash Mansarovar Yatra.<br />
<ul style="list-style-type: circle;">
<li>The road passes through territory at the Lipulekh pass that Nepal claims as its own territory.</li>
<li>Earlier, Nepal had protested strongly against India, when India published <a href="/daily-updates/daily-news-analysis/kalapani-territory" target="_blank" rel="noopener"><strong>a new map which showed the region of Kalapani as part of the Indian territory.</strong></a></li>
<li>Nepal had also expressed <strong>displeasure on the 2015 agreement between India and China</strong> for using the Lipulekh pass for trade, without consulting Nepal.</li>
</ul>
</li>
</ul>
<h3>Border Dispute Between India and Nepal</h3>
<ul style="list-style-type: square;">
<li>Currently, India and Nepal have border disputes over <strong>Kalapani - Limpiyadhura - Lipulekh trijunction between India-Nepal and China</strong> and<strong> Susta area (West Champaran district, Bihar).</strong></li>
<li><strong>Kalapani Region:</strong> <br />
<ul style="list-style-type: circle;">
<li>Kalapani is a valley that is administered by India as a part of the Pithoragarh district of Uttarakhand. It is situated on the Kailash Mansarovar route.<br />
<ul style="list-style-type: disc;">
<li>Kalapani is advantageously located at a height of over 20,000 ft and serves as an observation post for that area.</li>
</ul>
</li>
<li>The <a href="/daily-updates/daily-news-analysis/india-nepal-on-kailash-mansarovar-link-road" target="_blank" rel="noopener"><strong>Kali River</strong></a> in the<strong> Kalapani region</strong> demarcates the border between India and Nepal.<br />
<ul style="list-style-type: disc;">
<li>The <strong>Treaty of Sugauli</strong> signed by the<strong> Kingdom of Nepal and British India</strong> (after <strong>Anglo-Nepalese War</strong>) in <strong>1816</strong> located the Kali River as Nepal's western boundary with India.</li>
</ul>
</li>
<li>The discrepancy in locating the <strong>source of the Kali river</strong> led to boundary disputes between India and Nepal, with each country producing maps supporting their own claims.</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590235590_image1.png" target="_blank" rel="noopener"><img width="639" height="408" class="content-img" style="display: block; margin-left: auto; margin-right: auto;" src="http://www.drishtiias.com/images/uploads/1590235590_image1.png" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Susta Region:</strong> <br />
<ul style="list-style-type: circle;">
<li>The <strong>change of course by the Gandak river</strong> is the main reason for disputes in the Susta area.</li>
<li>Susta is located on the bank of the<strong> Gandak river.</strong><br />
<ul style="list-style-type: disc;">
<li>It is called Narayani river in Nepal.</li>
<li>It joins Ganga near Patna, Bihar.</li>
</ul>
</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590235616_image3.png" target="_blank" rel="noopener"><img width="639" class="content-img" style="display: block; margin-left: auto; margin-right: auto;" src="http://www.drishtiias.com/images/uploads/1590235616_image3.png" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Nepal&rsquo;s Stand:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Kali river originates from a stream at Limpiyadhura, north-west of Lipu Lekh.</strong> Thus Kalapani, and Limpiyadhura, and Lipu Lekh, fall to the east of the river and are part of Nepal&rsquo;s Dharchula district.</li>
<li>Lipulekh was deleted from the country&rsquo;s map by the kings to get favours from India.</li>
<li style="box-sizing: border-box;">The territory of <strong style="box-sizing: border-box; font-weight: bold;">Kalapani was offered to India by King Mahendra</strong> after the 1962 India-China war who wanted to help India&rsquo;s security concerns due to perceived lingering Chinese threats.
<ul style="list-style-type: disc;">
<li style="box-sizing: border-box;">Kalapani was <strong style="box-sizing: border-box; font-weight: bold;">not a part of Nepal-India dispute.</strong> It was Nepal&rsquo;s territory that the king had allowed India to use temporarily</li>
</ul>
</li>
<li>The new map is in fact a document that was in circulation in Nepal till the 1950s.</li>
</ul>
</li>
<li><strong>India&rsquo;s Stand:</strong> <br />
<ul style="list-style-type: circle;">
<li>Kali river originates in springs well below the<strong> Lipu-lekh pass, </strong>and <strong>the Sugauli Treaty does not demarcate the area north of these streams.</strong></li>
<li>The administrative and revenue <strong>records of the nineteenth century also show that Kalapani was on the Indian side,</strong> and counted as part of Pithoragarh district of Uttarakhand.</li>
</ul>
</li>
<li><strong>Efforts to Solve Border Dispute:</strong><br />
<ul style="list-style-type: circle;">
<li>In the 1980s, the two sides set up the<strong> Joint Technical Level Boundary Working Group</strong> to delineate the boundary. <br />
<ul style="list-style-type: disc;">
<li>The group demarcated everything except Kalapani and Susta area.</li>
</ul>
</li>
<li>Officially, <strong>Nepal brought the issue of Kalapani before India in 1998.</strong> Both sides agreed to demarcate the outstanding areas (including Kalpani) by 2002 at the prime ministerial level talk held in 2000. But that has not happened yet.</li>
</ul>
</li>
<li><strong>Issues Involved:</strong><br />
<ul style="list-style-type: circle;">
<li>Nepal's <strong>deliberate effort to make the Lipu-Lekh Pass a disputed tri-junction</strong> (between India-China and Nepal) in which Nepal has an equal share.</li>
<li>India perceives <strong>Nepal to be tilting towards China</strong> under the leadership of Prime Minister K P Oli and his Nepal Communist Party.</li>
<li>Despite the open border between both countries and the people to people contact, <strong>the levels of distrust in Nepal about India have only increased.</strong></li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Given the <strong>importance of ties with Nepal,</strong> often romanticised as one of &ldquo;roti-beti&rdquo; (food and marriage), India must not delay dealing with the matter, and at a time<strong> when it already has a faceoff with China in Ladakh and Sikkim.</strong></li>
<li>Since the free movement of people is permitted across the border, Nepal enjoys immense strategic relevance from India&rsquo;s national security point of view, as terrorists often use Nepal to enter India.<br />
<ul style="list-style-type: circle;">
<li>Therefore,<strong> stable and friendly relations with Nepal</strong> is one of prerequisites which India can&rsquo;t afford to overlook.</li>
</ul>
</li>
<li>India should also try to convey to Nepal&rsquo;s leadership about the congenial and friendly environment that 6 to 8 million Nepali citizens living in India enjoy.
<ul style="list-style-type: circle;">
<li>Therefore, Any thoughtless erosion of this centuries old togetherness may prove difficult for both countries.</li>
</ul>
</li>
<li>The existing bilateral treaties between India and Nepal have not taken the shifting of Himalayan rivers into consideration. A primary reason for this is the lack of an approach where ecological concerns and needs of rivers are often discussed.<br />
<ul style="list-style-type: circle;">
<li>Therefore, India and Nepal should try to resolve the boundary dispute by taking into account all shared environmental characteristics.</li>
</ul>
</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/nepals-new-political-map-claims-indias-territories/article31632033.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/india-nepal-border-dispute'
		],
		(int) 4 => [
			'title' => 'Open Skies Treaty',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the United States of America (USA) has announced that it will exit the <strong>Open Skies Treaty (OST)</strong> due to continuous violation of the treaty by Russia and changes in the security environment.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>It is expected to formally pull out of Open Skies in six months.</li>
<li><strong>USA&rsquo;s Stand:</strong> The USA has blamed Russia for restricting US flyovers in neighbour Georgia and its military enclave in Kaliningrad (Russia). <br />
<ul style="list-style-type: circle;">
<li>Russia misused its flights over the US and Europe to identify critical infrastructure for potential attack in a time of war.</li>
<li>Russia intends to annex the Crimean peninsula and has designated an Open Skies refueling airfield in the region.</li>
<li>Yet, the USA has expressed willingness to make a new agreement.</li>
</ul>
</li>
<li><strong>Russia&rsquo;s Stand:</strong> Russia has denied the allegations and warned that the withdrawal will affect the interests of all of 35 participating countries.<br />
<ul style="list-style-type: circle;">
<li>However, Russia intended to fully follow all the rights and obligations under the treaty as long as the treaty is in force.</li>
</ul>
</li>
<li>It can be noted that the USA has used the treaty more intensively than Russia. <br />
<ul style="list-style-type: circle;">
<li>Between 2002 and 2016, the U.S. flew 196 flights over Russia compared to the 71 flights flown by Russia.</li>
</ul>
</li>
<li>This move by the USA has further deepened doubts on extension of the <a href="/daily-updates/daily-news-analysis/new-start-treaty" target="_blank" rel="noopener"><strong>New START treaty</strong></a>, which expires in February, 2021.</li>
<li>Throughout its term, the Trump administration has been skeptical of arms control agreements. In 2019, the U.S. and Russia walked away from the <strong><a href="/daily-updates/daily-news-analysis/important-facts-for-prelims-2nd-february-2019" target="_blank" rel="noopener">1987 Intermediate-Range Nuclear Forces Treaty.</a></strong></li>
</ul>
<div class="border-bg">
<p><strong>Open Skies Treaty</strong></p>
<ul style="list-style-type: square;">
<li>It was signed in 1992 and came into effect in 2002.</li>
<li>It is an agreement that allows its 34 signatories countries to monitor arm development by conducting<strong> surveillance flights (unarmed)</strong> over each other&rsquo;s territories.</li>
<li>Therefore, the<strong> treaty established an aerial surveillance system</strong> for its participants.</li>
<li>Both US and Russia are signatories of the treaty.</li>
<li>India is not a member of this treaty.</li>
</ul>
<p><strong>Intermediate-Range Nuclear Forces Treaty</strong></p>
<ul style="list-style-type: square;">
<li>It was a nuclear arms-control accord reached by the United States and the Soviet Union <strong>in 1987</strong> in which the two nations agreed to eliminate<strong> their stocks of intermediate-range and shorter-range (or &ldquo;medium-range&rdquo;)</strong> land-based missiles (which could carry nuclear warheads).</li>
<li>It also covered all land-based missiles, including those carrying nuclear warheads but <strong>did not cover sea-launched missiles.</strong></li>
<li>The United States withdrew from the Treaty on 2<sup>nd</sup> August 2019.</li>
</ul>
<p><strong>New START Treaty</strong></p>
<ul style="list-style-type: square;">
<li>The new <strong>Strategic Arms Reduction Treaty (START)</strong> is a treaty between the United States of America and the Russian Federation on measures for the further reduction and limitation of strategic offensive arms.</li>
<li>It entered into force on 5<sup>th</sup> February, 2011.</li>
<li>It is a successor to the START framework of 1991 (at the end of the Cold War) that limited both sides to 1,600 strategic delivery vehicles and 6,000 warheads.</li>
<li>The USA has been worried that extending New Start would negatively impact an arms deal with China and Russia.</li>
<li>It is concerned that China&rsquo;s nuclear stockpile could be doubled if the New Start Treaty continued as is, without including China.</li>
<li>The New Start Treaty also suffered from verification inadequacies and that the U.S. intended to <strong>establish a new arms control regime which would include China.</strong></li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/international/will-exit-open-skies-treaty-announces-us/article31653173.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/open-skies-treaty'
		],
		(int) 5 => [
			'title' => 'MGNREGA and Migrant Crisis',
			'catname' => 'News Editorials',
			'desc' => '<div class="border">
<p>This article is based on &ldquo;<a href="https://indianexpress.com/article/opinion/columns/india-lockdown-rural-distress-coronavirus-a-moment-to-revive-mgnrega-6421558/" target="_blank" rel="noopener"><strong>Additional allocation for MGNREGA must be supplemented with steps to make it more effective</strong></a>&rdquo; published in The Indian Express on 22/05/2020. It talks about the importance of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, 2005) during the economic crisis emanating from Covid-19 pandemic.</p>
</div>
<p>The virtual shutdown of all economic activities due to <a href="/daily-updates/daily-news-editorials/covid-19-and-india-1" target="_blank" rel="noopener"><strong>Covid-19 pandemic</strong></a> has resulted in a massive loss of livelihoods. Nearly 400-million workforce in the unorganised sector has been one of the worst affected sections of society.</p>
<p>Further, a significant part of this workforce has reverse migrated from cities to rural areas. In order to address this migrant crisis, the government has allocated an additional fund of Rs 40,000 crore for <a href="/daily-updates/daily-news-analysis/sub-group-of-chief-ministers-on-coordination-between-mgnrega-and-agriculture" target="_blank" rel="noopener"><strong>MGNREGA</strong></a>, as part of the stimulus package under <a href="/daily-updates/daily-news-analysis/atmanirbhar-bharat-and-economic-stimulus" target="_blank" rel="noopener"><strong>Atma Nirbhar Bharat Abhiyan.</strong></a></p>
<p>With nearly eight crore migrant workers returning to their villages and an additional allocation of funds could be a moment for the true revival of MGNREGA. However, in order to utilise the true potential of this scheme, there is a need to address the underlying challenges of MGNREGA.</p>
<h3>Key Features of MGNREGA</h3>
<ul style="list-style-type: square;">
<li>MGNREGA is one of the <strong>largest work guarantee programmes in the world.</strong></li>
<li><strong>Objective:</strong> The primary objective of the scheme is to guarantee 100 days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work.</li>
<li><strong>Legal Right to Work:</strong> Unlike earlier employment guarantee schemes, the act aims at addressing the causes of chronic poverty through a rights-based framework.<br />
<ul style="list-style-type: circle;">
<li>At least one-third of beneficiaries have to be women.</li>
<li>Wages must be paid according to the statutory minimum wages specified for agricultural labourers in the state under the <a href="/daily-updates/daily-news-editorials/labour-laws-and-covid-19" target="_blank" rel="noopener"><strong>Minimum Wages Act, 1948.</strong></a></li>
</ul>
</li>
<li><strong>Demand-Driven Scheme:</strong> The most important part of MGNREGA&rsquo;s design is its legally-backed guarantee for any rural adult to get work within 15 days of demanding it, failing which an &lsquo;unemployment allowance&rsquo; must be given.<br />
<ul style="list-style-type: circle;">
<li>This demand-driven scheme enables the self-selection of workers.</li>
</ul>
</li>
<li><strong>Decentralised planning:</strong> There is an emphasis on strengthening the process of decentralisation by giving a significant role in <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/panchayati-raj-institution-pri" target="_blank" rel="noopener"><strong>Panchayati Raj Institutions (PRIs)</strong></a> in planning and implementing these works.<br />
<ul style="list-style-type: circle;">
<li>The act mandates Gram sabhas to recommend the works that are to be undertaken and at least 50% of the works must be executed by them.</li>
</ul>
</li>
</ul>
<h3>Underlying Challenges</h3>
<ul style="list-style-type: square;">
<li><strong>Inadequate Financing:</strong> This year&rsquo;s allocation is the highest allocation for MGNREGA in any year since the passage of the law. <br />
<ul style="list-style-type: circle;">
<li>However, the allocation amounts to 0.47% of the GDP continues to be much lower than the World Bank recommendations of 1.7% of GDP for the optimal functioning of the programme.</li>
<li>Due to lack of funds, state governments find it difficult to meet the demand for employment under MGNREGA.</li>
</ul>
</li>
<li><strong>Delay in Payment of wages:</strong> Most states have failed to disburse wages within 15 days as mandated by MGNREGA. In addition, workers are not compensated for a delay in payment of wages.<br />
<ul style="list-style-type: circle;">
<li>This has turned the scheme into a supply-based programme and subsequently, workers had begun to lose interest in working under it.</li>
</ul>
</li>
<li><strong>Ineffective Role of PRI:</strong> With very little autonomy, gram panchayats are not able to implement this act in an effective and efficient manner.</li>
<li><strong>Large Number of Incomplete works:</strong> There has been a delay in the completion of works under MGNREGA and inspection of projects has been irregular. Also, there is an issue of quality of work and asset creation under MGNREGA.</li>
<li><strong>Fabrication of Job cards:</strong> There are several issues related to the existence of fake job cards, the inclusion of fictitious names, missing entries and delays in making entries in job cards.</li>
</ul>
<h3>Way Forward</h3>
<p><strong>Short-Term Measures</strong></p>
<ul style="list-style-type: square;">
<li>State governments must ensure that public work gets started in every village. Workers turning up at the worksite should be provided work immediately, without much delay.</li>
<li>Local bodies must proactively reach out to returned and quarantined migrant workers and help those in need to get job cards.</li>
<li>Adequate facilities such as soap, water, and masks for workers must be provided free of cost, at the worksite.</li>
<li>At this time, there is a need to speed up the payments to MGNREGA workers. Preferably, cash needs to reach the workers easily and efficiently.</li>
</ul>
<p><strong>Long-Term Measures</strong></p>
<ul style="list-style-type: square;">
<li>The pandemic has demonstrated the importance of decentralised governance. <br />
<ul style="list-style-type: circle;">
<li>Gram panchayats need to be provided with adequate resources, powers, and responsibilities to sanction works, provide work on demand, and authorise wage payments to ensure there are no delays in payments.</li>
</ul>
</li>
<li>MGNREGA should be converged with other schemes of the government. For example, Green India initiative, Swachh Bharat Abhiyan etc.</li>
<li>Social Auditing creates accountability of performance, especially towards immediate stakeholders. Hence, there is a need to to create awareness regarding government policies and measures in rural areas.</li>
</ul>
<p>MGNREGA is a bottom-up, people-centred, demand-driven, self-selecting and rights-based programme. Thus, MGNREGA remains crucial for integrated resource management and livelihoods generation perspective.</p>
<p><a href="http://www.drishtiias.com/images/uploads/1590232365_image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590232365_image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #fff5eb;">
<p><span style="color: #000080;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>MGNREGA remains crucial for integrated resource management and livelihoods generation perspective. Comment.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/K-Ve_G7tckE" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p><span style="font-weight: 400;">This editorial is based on <a href="https://www.thehindu.com/opinion/editorial/keeping-the-peace-the-hindu-editorial-on-india-china-border-tension/article31643986.ece" target="_blank" rel="noopener"><strong>&rdquo;</strong></a></span><a href="https://www.thehindu.com/opinion/editorial/keeping-the-peace-the-hindu-editorial-on-india-china-border-tension/article31643986.ece" target="_blank" rel="noopener"><strong>Keeping the peace: On India-China border tension</strong></a><span style="font-weight: 400;"><a href="https://www.thehindu.com/opinion/editorial/keeping-the-peace-the-hindu-editorial-on-india-china-border-tension/article31643986.ece" target="_blank" rel="noopener"><strong>&rdquo;</strong></a> which was published in The Hindu on May 22<sup>nd</sup>, 2020. Now watch this on our Youtube channel.</span></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-editorials/mgnrega-and-migrant-crisis'
		],
		(int) 6 => [
			'title' => 'Covid-19 Halts Global Vaccination Programme',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>As per the report released by the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/world-health-organization-who" target="_blank" rel="noopener"><strong>World Health Organisation (WHO)</strong></a> and partners, <strong>nearly 80 million children under the age of 1 are at risk of contracting deadly but vaccine preventable diseases</strong> such as <a href="/daily-updates/daily-news-analysis/measles-2" target="_blank" rel="noopener"><strong>measles</strong></a>, <strong><a href="/daily-updates/daily-news-analysis/world-polio-day" target="_blank" rel="noopener">polio</a></strong> and diphtheria.</p>
<ul style="list-style-type: square;">
<li>This is so because many countries have <strong>postponed their vaccine campaigns due to <a href="/daily-updates/daily-news-editorials/covid-19-and-india-1" target="_blank" rel="noopener">Covid-19</a>.</strong></li>
<li>The report has come <strong>ahead of the Global Vaccine Summit on 4<sup>th</sup> June,</strong> at which world leaders are expected to come together to help maintain immunization programmes and mitigate the impact of the pandemic in lower-income countries.<br />
<ul style="list-style-type: circle;">
<li>The Summit will provide <strong>an opportunity for the international community to pledge its support for Gavi&rsquo;s five-year strategy (2021-2025)</strong> which is aimed at immunizing 300 million children and saving up to 8 million lives.</li>
</ul>
</li>
<li>The <a href="/important-institutions/drishti-specials-important-institutions-international-institution/unicef-1" target="_blank" rel="noopener"><strong>United Nations Children's Fund (UNICEF)</strong></a>, the Sabin Vaccine Institute (Washington, USA), and <a href="/daily-updates/daily-news-analysis/pneumococcal-conjugate-vaccine" target="_blank" rel="noopener"><strong>Global Alliance for Vaccines and Immunizations (Gavi)</strong></a>, are the partner organisations.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Data:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>More than half (53%) of the 129 countries</strong> where data were available reported <strong>moderate-to-severe disruptions, or a total suspension of vaccination services</strong> during March-April 2020.</li>
</ul>
</li>
<li><strong>Reasons for the disruption:</strong><br />
<ul style="list-style-type: circle;">
<li>Vaccination, which is typically done in mass campaigns, has been stopped due to <strong>fear of breaking social distancing guidelines</strong> needed to stop the spread of Covid-19.</li>
<li><strong>Health workers</strong> who provide vaccinations have also been<strong> diverted to help with the response to the pandemic.</strong></li>
<li>Also, there has been a<strong> significant delay in planned vaccine deliveries</strong> due to lockdown measures and reduction in the number of available flights. <br />
<ul style="list-style-type: disc;">
<li>More than 40 of Africa's 54 nations have closed their borders, though some allow cargo and emergency transport.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Concerns:</strong><br />
<ul style="list-style-type: circle;">
<li>Disruption to immunization programs from the Covid-19 pandemic threatens to undo decades of progress against vaccine-preventable diseases like Measles, Polio and Diphtheria.</li>
<li>According to the experts, children need routine immunizations before the age of 2.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Immunization</strong></p>
<ul style="list-style-type: square;">
<li>It is the process whereby a person is made immune or resistant to an infectious disease, typically by the administration of a vaccine.</li>
<li><strong>Functioning:</strong><br />
<ul style="list-style-type: circle;">
<li>A vaccine usually consists of two parts and is usually given through an injection. The first part is the<strong> antigen,</strong> which is a piece of disease one&rsquo;s body must learn to recognise. The second part is the <strong>adjuvant,</strong> which sends a danger signal to the body and helps the immune system to respond strongly against the antigen.</li>
<li>In simple terms, vaccines work by exposing a person to a safer version of a disease. While the body responds to the vaccine, it builds <strong>an adaptive immune system,</strong> which helps the body to fight off the actual infection in the future.</li>
</ul>
</li>
<li>According to the WHO, vaccination prevents between<strong> two-three million deaths each year,</strong> a figure that will rise by another 1.5 million if vaccine coverage improves.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>There is an urgent need to focus upon the <strong>Global Vaccine Action Plan 2011-2020</strong> that is a framework to prevent millions of deaths by 2020 through more equitable access to existing vaccines for people in all communities.</li>
<li>It is equally important for the countries to give importance to the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/united-nations-1" target="_blank" rel="noopener">United Nations</a> <strong><a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener">Sustainable Development Goal</a></strong>&nbsp;<strong>3</strong> i.e. Good Health and Well being.</li>
<li>There is a need for an immediate action plan to restart the vaccination programmes through better health infrastructure and medical equipment during the corona crisis.</li>
<li>Countries should start efforts at individual level e.g. India can expedite the vaccination programmes under the <a href="/daily-updates/daily-news-analysis/mission-indradhanush-1" target="_blank" rel="noopener"><strong>Mission Indardhanush.</strong></a></li>
</ul>
<p><strong><a href="https://health.economictimes.indiatimes.com/news/industry/pandemic-halts-vaccination-for-nearly-80-million-children/75907136" target="_blank" rel="noopener">Source: ET</a></strong></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/covid-19-halts-global-vaccination-programme'
		],
		(int) 7 => [
			'title' => 'Plan for Calamity Cess on GST',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>The Central Government is considering imposing a <strong>calamity cess</strong> on <a href="/daily-updates/daily-news-analysis/fall-in-goods-and-services-tax-gst-collections" target="_blank" rel="noopener"><strong>Goods and Services Tax (GST)</strong></a>, similar to the one introduced by Kerala in 2019, to deal with the economic crisis triggered by the <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>coronavirus</strong></a> pandemic.</p>
<ul style="list-style-type: square;">
<li>The Central government is planning to raise additional revenue by imposing cess on GST, excluding goods and services in the 5% slab.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Kerala introduced a <strong>disaster relief cess</strong> following the monsoon floods of 2018. It imposed a 1% calamity cess on GST for a period of two years applicable from 1<sup>st</sup> August, 2019.</li>
<li>It is the only state to have levied such a cess using the <strong>Constitutional provision, Section (4) (f) of Article 279 A.</strong><br />
<ul style="list-style-type: circle;">
<li>Article 279A (4)(f) allows the Union and State to raise additional resources during any natural calamity or disaster.<br />
<ul style="list-style-type: disc;">
<li>The article was inserted through the <strong>101<sup>st</sup> Constitutional Amendment Act, 2016.</strong></li>
</ul>
</li>
<li>Article 279A (4)(f) specifies that the <a href="/daily-updates/daily-news-analysis/gst-council-meet" target="_blank" rel="noopener"><strong>GST Council</strong></a> shall make recommendations to the Union and the States on &ldquo;any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster&rdquo;.</li>
</ul>
</li>
<li>The <strong>GST (Compensation to States) Act, 2017</strong> also provides for the imposition of cess up to the rate of 15% ad valorem (based on estimated value) on some supplies.<br />
<ul style="list-style-type: circle;">
<li>The Act provides for compensation to states for any loss in revenue due to the implementation of GST.</li>
</ul>
</li>
<li><strong>Issues involved:</strong> <br />
<ul style="list-style-type: circle;">
<li>As the manufacturing industry is already facing a huge crisis due to Covid-19 lockdown, imposing cess on GST would not be a good idea.<br />
<ul style="list-style-type: disc;">
<li>Imposition of cess will increase the cost of products, which may decrease the demand.</li>
</ul>
</li>
<li>The states are already not able to collect the GST due to closure of many economic activities.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Cess</strong></p>
<ul style="list-style-type: square;">
<li>Cess is a <strong>form of tax levied over and above the base tax liability of a taxpayer.</strong> It can be <strong>levied on both indirect and direct taxes.</strong></li>
<li>A cess is usually imposed additionally when the state or the central government looks to<strong> raise funds for specific purposes.</strong> For example, for education, for disaster relief, for cleaning rivers etc. <br />
<ul style="list-style-type: circle;">
<li>An example of cess is <strong>Swachh Bharat Cess,</strong> which was introduced in 2015 to fund a national campaign for clearing the roads, streets and the infrastructure of India.</li>
</ul>
</li>
<li>It is <strong>not a permanent source of revenue for the government,</strong> and it is discontinued when the purpose of levying it is fulfilled.</li>
</ul>
<p><strong>Difference between tax and cess</strong></p>
<ul style="list-style-type: square;">
<li>Cess is different from taxes such as income tax, GST, and excise duty etc.<strong> as it is charged over and above the existing taxes.</strong></li>
<li>Cess has to be <strong>used for the purpose for which it was collected.</strong> <br />
<ul style="list-style-type: circle;">
<li>If the cess collected in a particular year goes unspent, it cannot be allocated for other purposes. The amount gets carried over to the next year and can only be used for the cause it was meant for.</li>
</ul>
</li>
<li>The <strong>central government does not need to share the cess with the state government,</strong> unlike some other taxes.</li>
<li>The <strong>procedure for introducing, modifying and abolishing cess is comparatively simpler</strong> than getting the provisions done for introducing, modifying and abolishing taxes, which usually means a change in the law.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Additional cess on GST can be imposed after 6-7 months, when the economic condition in the country normalises.</li>
<li>Till then, the states can rely on other monetary instruments, such as<strong> borrowing,</strong> increase in <a href="/daily-updates/daily-news-analysis/wma-borrowings-of-states" target="_blank" rel="noopener"><strong>Ways and Means Advances (WMA)</strong></a>,<strong> overdraft,</strong> etc, to raise their income.</li>
<li>They can also<strong> consider levying a cess on &ldquo;sin goods&rdquo;.</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Sin goods</strong> are<strong> goods</strong> which are considered harmful to society and individuals.</li>
<li>Example of <strong>sin goods:</strong> Alcohol and Tobacco, Candies, Drugs, Soft drinks, Fast foods, etc.</li>
</ul>
</li>
</ul>
<p><a href="https://indianexpress.com/article/india/calamity-cess-coronavirus-crisis-gst-tax-6423103/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/plan-for-calamity-cess-on-gst'
		],
		(int) 8 => [
			'title' => 'ReStart Programme for MSMEs',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently the Chief Minister of <strong>Andhra Pradesh</strong> has launched a new programme <strong>&lsquo;ReStart&rsquo;</strong> to support the<strong> Micro, Small and Medium Enterprise (MSME) sector</strong> in the State.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>The Package:</strong> The government will spend ₹1,100 crore on revival of the sector which is expected to benefit 98,000 units that provide employment to more than 10 lakh people.</li>
<li><strong>Special Fund:</strong> A special fund of ₹200 crore to provide input capital loan to the firms at low interest rates.</li>
<li><strong>Waiving Off Power Charges:</strong> The minimum power demand charges of the MSMEs for the months of April, May and June, amounting to ₹188 crore to be waived off.</li>
<li><strong>Mandatory Purchasing by Government:</strong> The government will purchase around 360 products from the MSMEs, and payments towards it would be cleared in 45 days.<br />
<ul style="list-style-type: circle;">
<li>Of the total purchases, almost 25% would be done from the micro and small enterprises, 4% from the SC/ST community enterprises, and 3% from women entrepreneurs.</li>
</ul>
</li>
<li><strong>Capacity Development:</strong> Skills required by the industries (MSMEs) to be imparted through Skill Development Colleges.</li>
</ul>
<h3>Importance of MSMEs for Indian Economy</h3>
<ul style="list-style-type: square;">
<li><strong>Employment:</strong> It is the second largest employment generating sector after agriculture. It provides employment to around 120 million persons in India.</li>
<li><strong>Contribution to GDP:</strong> With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.<br />
<ul style="list-style-type: circle;">
<li>The MSME ministry has set a target to up its contribution to GDP to 50% by 2025 as India becomes a $5 trillion economy.</li>
</ul>
</li>
<li><strong>Exports:</strong> It contributes around 45% of the overall exports from India.</li>
<li><strong>Inclusive growth:</strong> MSMEs promote inclusive growth by providing employment opportunities in rural areas especially to people belonging to weaker sections of the society.<br />
<ul style="list-style-type: circle;">
<li>For example: Khadi and Village industries require low per capita investment and employ a large number of women in rural areas.</li>
</ul>
</li>
<li><strong>Financial inclusion:</strong> Small industries and retail businesses in tier-II and tier-III cities create opportunities for people to use banking services and products.</li>
<li><strong>Promote innovation:</strong> It provides opportunity for budding entrepreneurs to build creative products boosting business competition and fuels growth.</li>
</ul>
<h3>Problems Faced by MSMEs in India</h3>
<ul style="list-style-type: square;">
<li><strong>Too Small to get Registered:</strong> Being out of the formal network, these MSMEs do not have to maintain accounts, pay taxes or adhere to regulatory norms etc., which brings down their costs. But in a time of crisis, it also constrains a government&rsquo;s ability to help them.</li>
<li><strong>Lack of Financing:</strong> According to a 2018 report by the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/world-bank-group" target="_blank" rel="noopener"><strong>International Finance Corporation (part of the World Bank)</strong></a>, the formal banking system supplies less than one-third (or about Rs 11 lakh crore) of the MSME credit need that it can potentially fund.</li>
<li><strong>Delays in Payments to MSMEs:</strong> MSMEs face delays in payment from their buyers which also includes the government. It also faces delays in GST refunds.</li>
</ul>
<div class="border-bg">
<p><strong>Revised definition for MSME</strong></p>
<ul style="list-style-type: square;">
<li>Under the new MSME Classification MSMEs will now be defined in a composite manner, taking <strong>both investments</strong> as well as <strong>turnover into account.</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Micro:</strong> Any firm with <strong>investment up to Rs 1 crore and turnover under Rs 5 crore.</strong></li>
<li><strong>Small:</strong> Any firm with <strong>investment up to Rs 10 crore and turnover upto Rs 50 crore.</strong></li>
<li><strong>Medium:</strong> Any firm with <strong>investment up to Rs 20 crore and turnover under Rs 100 crore.</strong></li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Along with the<a href="/daily-updates/daily-news-analysis/atmanirbhar-bharat-and-economic-stimulus" target="_blank" rel="noopener"><strong> Atma Nirbhar Bharat Abhiyan package</strong></a> of the Central Government, the ReStart Programme will further provide much needed relief to the people engaged in this sector. Other States may also follow in the true spirit of cooperative and competitive federalism in order to support the backbone of Indian Economy.</li>
<li>Further, the government can provide tax relief, give swifter refunds, and provide liquidity to rural India to boost demand for MSME products.</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/andhra-pradesh/state-launches-restart-to-revive-msme-sector/article31653729.ece" target="_blank" rel="noopener">Source: TH</a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/restart-programme-for-msmes'
		],
		(int) 9 => [
			'title' => 'RBI Cuts Repo Rate',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>The <strong><a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener">Reserve Bank of India </a></strong>has <strong>extended the moratorium on loan repayments by three more months</strong> in view of <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong></a>. Further,<strong> a 40 basis points (bps) cut to both the repo and reverse repo rates</strong> has been announced.</p>
<ul style="list-style-type: square;">
<li>The decision has been taken by the<strong> RBI&rsquo;s <a href="/daily-updates/daily-news-analysis/repo-rate-unchanged-1" target="_blank" rel="noopener">Monetary Policy Committee</a></strong> which met ahead of its scheduled meeting in early June.</li>
<li>The latest moves are expected to ease the financial burden on businesses due to the extended lockdown.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Repo Rate and Reverse Repo Rate:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Decision:</strong> The <strong>repo rate</strong> is presently at<strong> 4%,</strong> while the<strong> reverse repo rate</strong> stands at<strong> 3.35%.</strong></li>
<li><strong>Impact:</strong> This will make funds cheaper for banks, thus aiding them to bring down loan lending rates. <strong>Repo rate</strong> is the rate at which a country&rsquo;s central bank (RBI) lends money to commercial banks.<br />
<ul style="list-style-type: disc;">
<li>The cut in reverse repo rate will prompt banks to lend more rather than keeping their funds with the RBI. <strong>Reverse repo</strong> rate is the rate at which the central bank of a country borrows money from commercial banks within the country.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Extension of Moratorium on Loan Repayments by Another 3 Months:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Decision:</strong> The lending institutions have been permitted to extend the moratorium (suspension) on term loan instalments by <strong>another three months,</strong> i.e., from 1st June, 2020 to 31<sup>st</sup> August, 2020.<br />
<ul style="list-style-type: disc;">
<li>A<strong> term loan</strong> is a loan from a bank for a specific amount that has a specified repayment schedule and either a fixed or floating interest rate.</li>
</ul>
</li>
<li><strong>Impact:</strong> This is expected to help borrowers, especially companies, which have halted production and are facing cash flow problems, to get more time to restart their units.</li>
<li>Earlier, the <a href="/daily-updates/daily-news-analysis/rbi-s-covid-19-economic-relief-package" target="_blank" rel="noopener"><strong>RBI announced the moratorium for a three-month period</strong></a> &mdash; 1<sup>st</sup> March to 25<sup>th</sup> May.</li>
<li><strong>All Conditions Unchanged:</strong> All conditions related to the extension remain unchanged, that is, the loan will not be classified by the lender as a<strong> &lsquo;non-performing asset&rsquo;</strong> and there will not be any impact on the creditworthiness of any individual/firm.<br />
<ul style="list-style-type: disc;">
<li>A <strong>Non Performing Asset (NPA)</strong> is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Conversion of Interest Charges into a Term Loan:</strong> <br />
<ul style="list-style-type: circle;">
<li>The RBI has allowed borrowers and banks to convert the interest charges during the moratorium period (from 1<sup>st</sup> March to 31<sup>st</sup> August) into a term loan which can be repaid by March 2021.</li>
<li>This is expected to reduce the burden on borrowers who have gone for moratorium.</li>
</ul>
</li>
<li><strong>Group Exposure Limit Raised:</strong> <br />
<ul style="list-style-type: circle;">
<li>The group exposure limit of banks has been <strong>increased from 25% to 30% of the capital base</strong> for a temporary period till 30<sup>th</sup> June, 2021.</li>
<li>Group exposure limit determines the maximum amount a bank can lend to one business house. Under the existing guidelines on the Large Exposures Framework, the exposure of a bank to a group of connected counterparties should not be higher than 25% of its capital base.</li>
<li>The decision was taken to facilitate flow of resources to the companies as many of them were unable to raise funds from capital markets and are predominantly dependent on funding from banks.</li>
</ul>
</li>
<li><strong>For Boosting Foreign Trade:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>A Rs. 15,000 crore line of credit for a period of 90 days would be extended to the Exim Bank</strong> to boost the foreign trade. Export-Import (Exim) Bank is the premier export finance institution of the country.</li>
<li>The <strong>maximum permissible period</strong> of pre-shipment and post-shipment export <strong>credit sanctioned by banks has been increased from the existing one year to 15 months</strong> (for loan disbursements made up to 31<sup>st</sup> July, 2020).<br />
<ul style="list-style-type: disc;">
<li>This was done to help exporters support their production and realisation cycles. Simply put, any exporter who has taken credit from a bank can repay it in 15 months instead of one year.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Views on GDP and Inflation:</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>RBI refrained from providing a Gross Domestic Product (GDP)</strong> growth forecast for the year, or likely trajectory for inflation.</li>
<li>GDP growth will <strong>slip into negative territory</strong> this year, blaming it on the collapse in demand due to a fall in private consumption following the Covid-19 lockdown.</li>
<li>The central bank has, however, pointed to the likelihood of <strong>some pick-up in growth impulses beginning the second half of 2020-21.</strong></li>
</ul>
</li>
</ul>
<h3>Criticism</h3>
<ul style="list-style-type: square;">
<li>Some believe that the latest cut <strong>may be no more than a sentiment booster</strong> as economic activity is at its nadir (worst) and there are not many investment proposals that may benefit from the lower interest rate. Existing borrowers may be the only beneficiaries of the rate cut at this point in time.</li>
<li>The smaller<strong> Non-Banking Financial Companies (NBFCs) and corporates</strong> may remain stressed, despite liquidity being provided.</li>
<li>Bankers <strong>expect a spurt in Non-Performing Assets</strong> down the road as nearly six months of non-payment of debt would likely affect credit culture.</li>
<li>RBI <a href="/daily-updates/daily-news-analysis/banks-seek-another-moratorium" target="_blank" rel="noopener"><strong>did not permit a one time restructuring of existing loans</strong></a> to the seriously affected sectors such as real estate, hotels etc. as demanded by banks.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>The stress in the economy will continue. The government can provide subvention on existing loans.</li>
<li>The banks are unwilling to take risks in the current scenario. Thus, there is a need to remove risk averseness in the financial system.</li>
</ul>
<p><a href="https://www.thehindu.com/business/Economy/rbi-cuts-repo-rate-again-down-to-4/article31652475.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/rbi-cuts-repo-rate'
		],
		(int) 10 => [
			'title' => 'G-7 Summit',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the President of the USA made an announcement to host the 46<sup>th</sup> <a href="/important-institutions/drishti-specials-important-institutions-international-institution/g-7" target="_blank" rel="noopener"><strong>G7</strong></a> summit in-person instead of remotely by videoconference.</p>
<ul style="list-style-type: square;">
<li>Originally, the annual <strong><a href="/daily-updates/daily-news-analysis/g7-summit" target="_blank" rel="noopener">G7</a></strong> summit was scheduled to be held on June 10 to June 12, 2020 in <strong>Camp David, United States</strong>.</li>
</ul>
<h3>Group of Seven (G-7)</h3>
<p><a href="http://www.drishtiias.com/images/uploads/1590146688_Images.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590146688_Images.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Description:</strong><br />
<ul style="list-style-type: circle;">
<li>G-7 is a bloc of industrialized democracies i.e. <strong>France, Germany, Italy, the United Kingdom, Japan, the United States, and Canada.</strong><br />
<ul style="list-style-type: disc;">
<li>The world's biggest population and second-biggest economy, China has relatively low levels of wealth per head of population. Thus it is not considered as an advanced economy like other G7 members. <strong>Hence China is not a member of G7.</strong></li>
</ul>
</li>
<li>It is an <strong>intergovernmental organisation</strong> that was formed in 1975.</li>
<li>The bloc meets<strong> annually</strong> to discuss issues of common interest like global economic governance, international security and energy policy.</li>
<li>The G7 was known as the &lsquo;G8&rsquo; for several years after the original seven were joined by Russia in 1997. <br />
<ul style="list-style-type: disc;">
<li>The Group returned to being called G7 after Russia was expelled as a member in 2014 following the latter&rsquo;s annexation of the Crimea region of Ukraine..</li>
</ul>
</li>
</ul>
</li>
<li><strong>Summit Participation:</strong><br />
<ul style="list-style-type: circle;">
<li>Summits are held annually and hosted on a<strong> rotation basis by the group's members.</strong></li>
<li>The host country not only holds the G7 presidency but also sets the agenda for the year.</li>
<li>The groundwork for the Summit, including matters to be discussed and follow-up meetings, is done by the<strong> sherpas,</strong> who are generally personal representatives or members of diplomatic staff such as ambassadors.</li>
<li>The leaders of important international organizations like European Union, IMF, World Bank and the United Nations are also invited.</li>
</ul>
</li>
<li><strong>Challenges and Concerns:</strong><br />
<ul style="list-style-type: circle;">
<li>Internally the G7 has a number of disagreements, e.g. clash of the USA with other members over taxes on imports and action on climate change.</li>
<li>The organisation has also been criticised for <strong>not reflecting the current state of global politics or economics.</strong></li>
<li>There are <strong>no G7 members from Africa, Latin America or the southern hemisphere.</strong></li>
<li>It is also facing a challenge from fast-growing emerging economies, like India and Brazil are not members of the G7.</li>
</ul>
</li>
</ul>
<h3>India and G-7</h3>
<ul style="list-style-type: square;">
<li>The participation of India at the <strong>45<sup>th</sup> summit in Biarritz, France,</strong> is a reflection of deepening strategic partnership and recognition of India as a major economic power.</li>
<li>While India has found the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/european-union" target="_blank" rel="noopener"><strong>European Union</strong></a> a difficult jurisdiction to navigate diplomatically, a better relationship between India and European Union is emerging as a policy priority under G-7.</li>
<li>India&rsquo;s ability to safeguard its core sovereign concerns such as trade, <a href="/loksabha-rajyasabha-discussions/in-depth-jammu-and-kashmir" target="_blank" rel="noopener"><strong>Kashmir issue</strong></a> and <a href="/daily-updates/daily-news-editorials/india-and-russia-ties-in-transition" target="_blank" rel="noopener"><strong>India&rsquo;s relations with Russia</strong></a> and Iran can be discussed with G7 members.</li>
<li>India raised issues on <a href="/daily-updates/daily-news-editorials/climate-change-and-development-in-india" target="_blank" rel="noopener"><strong>climate change</strong></a> and at meetings which signaled India&rsquo;s growing willingness to lead on issues that are points of contention for countries like China and the USA.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>G-7 must <strong>focus on the key international issues</strong> like terrorism, climate change, trade and internal conflicts between the countries.</li>
<li>As a platform it must reflect the solutions for the pressing issues and global concerns like elimination of poverty and diseases.</li>
<li>It should <strong>support the economies at the global level</strong> and help to establish the <strong>equal levels for each country.</strong></li>
</ul>
<p><a href="https://www.thehindu.com/news/international/trump-suggests-holding-in-person-g7-summit/article31644326.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/g-7-summit'
		],
		(int) 11 => [
			'title' => 'Year End Review 2019: Ministry of Commerce & Industry',
			'catname' => 'Paper 2',
			'desc' => '<h3>World Bank&rsquo;s Ease of Doing Business Report 2020</h3>
<ul style="list-style-type: square;">
<li>India has made a remarkable jump in the <a href="/daily-updates/daily-news-analysis/ease-of-doing-business-2020" target="_blank" rel="noopener"><strong>World Bank&rsquo;s Ease of Doing Business Report 2020</strong></a>. It is ranked 63<sup>rd</sup> among 190 countries improving by 14 ranks from its rank of 77 in 2019.</li>
<li>The 2020 edition of the Report acknowledges India as one of the top 10 improvers, third time in a row, with an improvement of 67 ranks in 3 years. It is also the highest jump by any large country since 2011.</li>
<li>The World Bank will now include Kolkata and Bengaluru, besides Delhi and Mumbai, for preparing ease of doing business reports, in order to provide a holistic picture of the business environment of the country.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590145118_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590145118_image1.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<h3>Essential Features of India's Performance</h3>
<ul style="list-style-type: square;">
<li>India&rsquo;s ranking improved basically on four parameters:<br />
<ul style="list-style-type: circle;">
<li><strong>Starting a Business-</strong> India made starting a business easier by fully integrating multiple application forms into a general incorporation form,</li>
<li><strong>Dealing with Construction Permits-</strong> For example, building a warehouse cost around 4% of the warehouse value as compared to 5.7% in the previous year,</li>
<li><strong>Trading across Borders-</strong> with a single electronic platform- improved electronic submission methods for documents and upgrades to port infrastructure, import and export process became easier, and</li>
<li><strong>Resolving Insolvency-</strong> Recovery rate under resolving insolvency has improved significantly from 26.5% to 71.6%. Also, the time taken for resolving insolvency has also come down significantly from 4.3 years to 1.6 years.</li>
</ul>
</li>
</ul>
<h3>Global Innovation Index (GII)</h3>
<ul style="list-style-type: square;">
<li>In the past 4 years India&rsquo;s rank in the GII has improved from the 81<sup>st</sup> rank in 2015 to the present 52<sup>nd</sup> rank in GII 2019 report.</li>
<li>India became the first developing country to launch the <a href="/daily-updates/daily-news-analysis/global-innovation-index-2019" target="_blank" rel="noopener"><strong>Global Innovation Index (GII)</strong> </a>in association with <a href="/important-institutions/drishti-specials-important-institutions-international-institution/important-institutions-international-world-intellectual-property-organisation-wipo" target="_blank" rel="noopener"><strong>World Intellectual Property Organisation (WIPO)</strong> </a>and <strong>Confederation of India (CII).</strong><br />
<ul style="list-style-type: circle;">
<li>India&rsquo;s rankings have been consistently increasing over the last few years and are among the top in the world in innovation drivers such as <strong>Information and Communication Technology (ICT), services exports, graduates in science and engineering, the quality of universities, gross capital formation</strong> (a measure of economy-wide investments) and <strong>creative goods exports.</strong></li>
<li>India stands out in the <strong>world&rsquo;s top science and technology clusters,</strong> with <strong>Bengaluru, Mumbai,</strong> and <strong>New Delhi</strong> featuring among the top 100 global clusters.</li>
<li>India continues to be the <strong>most innovative economy</strong> in central and southern Asia (a distinction held since 2011).</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590145147_image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590145147_image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<div class="border-bg">
<p><strong>Global Performance</strong></p>
<ul style="list-style-type: square;">
<li>Switzerland tops the GII index followed by Sweden, United States of America, Netherlands, United Kingdom, Finland, Denmark, Singapore, Germany and Israel.</li>
<li>The theme of <strong>GII- 2019 (12<sup>th</sup> edition)</strong> is<strong> &ldquo;Creating Healthy Lives - The Future of Medical Innovation&rdquo;</strong> which aims to explore the role of medical innovation as it shapes the future of healthcare.</li>
</ul>
</div>
<h3>Steps Taken for Export Promotion</h3>
<p>In order to promote export the Department of Commerce has undertaken various measures:</p>
<ul style="list-style-type: square;">
<li><strong>&lsquo;NIRVIK&rsquo;</strong> scheme: Export Credit Guarantee Corporation (ECGC) has introduced a new Export Credit Insurance Scheme (ECIS) called<a href="/daily-updates/daily-news-analysis/nirvik-scheme" target="_blank" rel="noopener"><strong> &lsquo;NIRVIK&rsquo;</strong></a> for exporters in which increased insurance cover for export credit has been extended by banks from existing average of 60% to 90% for both Principal and Interest.</li>
</ul>
<div class="border-bg">
<p><strong>Export Credit Guarantee Corporation of India</strong></p>
<ul style="list-style-type: square;">
<li><strong>Export Credit Guarantee Corporation</strong> Ltd<strong> (ECGC)</strong> is wholly owned by the Ministry of Commerce and Industry.</li>
<li>The Government of India had initially set up the Export Risks Insurance Corporation in 1957.</li>
<li>After the introduction of insurance covers to banks during the period 1962-64, the name was changed to Export Credit &amp; Guarantee Corporation Ltd in 1964.<br />
<ul style="list-style-type: circle;">
<li>It was changed to ECGC Ltd in August 2014.</li>
</ul>
</li>
<li>Its<strong> objective</strong> was to promote exports from the country by providing credit risk insurance and related services for exports.</li>
</ul>
</div>
<ul style="list-style-type: square;">
<li><strong>Transport and Marketing Assistance (TMA) scheme:</strong> An online portal for filing applications under <a href="/daily-updates/daily-news-analysis/transport-and-marketing-assistance-tma-scheme" target="_blank" rel="noopener"><strong>&lsquo;Transport and Marketing Assistance (TMA)'</strong></a> scheme for Specified Agriculture Products has been launched.<br />
<ul style="list-style-type: circle;">
<li>It is a scheme for <strong>providing financial assistance</strong> for transport and marketing of agriculture products to boost exports of such commodities to certain countries in Europe and North America.</li>
<li>To <strong>mitigate disadvantage</strong> of higher cost of transportation of export of specified agriculture products due to trans-shipment.</li>
<li>To <strong>promote brand recognition</strong> for Indian agricultural products in the specified overseas markets.</li>
</ul>
</li>
<li><strong>Origin Management System:</strong> It gives a single access point for all exporters, for all Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs) and for all agencies. India has 15 FTAs/PTAs and 7 lakh &lsquo;Certificates of Origin&rsquo; are issued annually.
<ul style="list-style-type: circle;">
<li>The platform will be made live for FTAs as per the concurrence of the concerned partner countries. This process is electronic, paperless and transparent with real time tracking of FTA utilisation at product level and country level. It will also lead to reduced transaction cost and time.</li>
</ul>
</li>
<li><strong>Remission of Duties or Taxes on Export Product (RoDTEP):</strong> <a href="/daily-updates/daily-news-analysis/remission-of-duties-or-taxes-on-export-product" target="_blank" rel="noopener"><strong>RoDTEP</strong></a> is a new scheme to replace existing <strong>Merchandise Exports from India (MEIS)</strong> scheme.
<ul style="list-style-type: circle;">
<li>Apart from boosting the export sector of our country, RoDTEP will coordinate with the World Trade Organization (WTO) to reduce the post-production transaction costs for exporters.</li>
<li>The implementation of the scheme thereby must provide a production-oriented process along with WTO, which in turn can boost the production of SMEs, MSMEs.</li>
<li><strong>Merchandise Export from India Scheme (MEIS)</strong> was not WTO rules compliant. It was introduced in the <a href="/daily-updates/daily-news-analysis/draft-export-policy-unveiled" target="_blank" rel="noopener"><strong>Foreign Trade Policy (FTP) 2015-20</strong></a>.
<ul style="list-style-type: disc;">
<li>The objective was to offset infrastructural inefficiencies and associated costs involved in exporting goods/products which are produced /manufactured in India including products produced/manufactured by MSME Sector.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Logistics Sector:</strong> National Logistics Policy, 2019 is being prepared with the aim to bring down the total logistics cost from 14% to 9% of the country's GDP.
<ul style="list-style-type: circle;">
<li>The policy aims to boost business competitiveness, drive economic growth and make India a global logistics hub.
<ul style="list-style-type: disc;">
<li>As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to more than 22 million people and improving the sector will facilitate 10 % decrease in indirect logistics cost leading to the growth of 5 to 8% in exports.</li>
</ul>
</li>
<li><strong>Multi-Modal Transportation of Goods Bill, 2019</strong> aims at facilitating the movement of goods for exports, imports and domestic trade. It will help to fix accountability and liabilities for violation of its provisions.
<ul style="list-style-type: disc;">
<li>Multimodal transportation includes a combination of more than one mode of movement, such as rail, road or sea, for end-to-end deliveries of goods.</li>
</ul>
</li>
<li><strong>Skilling for Logistics Sector:</strong> 34 Qualification Packs (QPs) for skill development of manpower engaged in Logistics Sector have been developed and finalised in collaboration with Logistics Skill Council. This is the first time that such qualification packs have been developed.
<ul style="list-style-type: disc;">
<li><strong>Qualification Packs (QPs):</strong> These are occupational standards that describe what individuals need to do, know and understand in order to carry out a particular job role or function.</li>
<li>They are performance standards that individuals must achieve when carrying out functions in the workplace, together with specifications of the underpinning knowledge and understanding</li>
</ul>
</li>
</ul>
</li>
<li><a href="/to-the-points/paper3/agriculture-export-policy-2018-1" target="_blank" rel="noopener"><strong>Agriculture Export Policy</strong></a>: The Agriculture Export Policy has been approved to establish linkage between Farmers Producer Organisation (FPO) and the exporters, a portal has been created by Agricultural &amp; Processed Food Products Export Development Authority (APEDA).</li>
</ul>
<div class="border-bg">
<p><strong>Agricultural and Processed Food Products Export Development Authority (APEDA)</strong></p>
<ul style="list-style-type: square;">
<li>APEDA is a non-trading, <strong>statutory body</strong> established by the Government of India under the Agricultural and Processed Food Products Export Development Authority Act passed by the Parliament in December, 1985.</li>
<li>APEDA has marked its presence in almost all agro potential states of India and has been providing services to the agri-export community through its head office in New Delhi, five Regional offices and 13 Virtual offices.</li>
<li>In 2017, APEDA launched a mobile app- &ldquo;Farmer Connect&rdquo; to allow farmers to apply online to facilitate their farm registration, tracking the status of application &amp; approvals by State Government and Lab sampling by authorized Laboratories.</li>
</ul>
</div>
<ul style="list-style-type: square;">
<li><strong>Steel Import Monitoring System (SIMS):</strong> The <a href="/daily-updates/daily-news-analysis/steel-import-monitoring-system" target="_blank" rel="noopener"><strong>SIMS</strong></a> will facilitate the Steel Industry by providing advance information about steel imports to all stakeholders including Government, steel industry and steel importers for effective policy interventions.
<ul style="list-style-type: circle;">
<li>Importers of specified steel products will register in advance on the web portal of SIMS providing necessary information. The registration will be online and automatic and no human intervention is required.</li>
<li>This was launched in the background of <strong>India becoming a favourite dumping ground</strong> for steelmakers from not just China but also from Japan and South Korea, which threatened the domestic steel industry of the country.</li>
</ul>
</li>
<li><strong>Trade Facilitation Measures:</strong>
<ul style="list-style-type: circle;">
<li><strong>India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA):</strong> It will enable trade promotion between the two countries.</li>
<li><strong>Border Haats:</strong> Besides the four operational Border Haats across India-Bangladesh border in Tripura and Meghalaya, construction of three Border Haats in Meghalaya, out of six already identified locations (two in Tripura and four in Meghalaya) has been completed. It will Improve trade with Bangladesh.-</li>
</ul>
</li>
<li><strong>Merger of Council of Trade and Development and Board of Trade:</strong>
<ul style="list-style-type: circle;">
<li>This common platform, consisting of representatives from industry, export promotion councils, Government of India and State Governments and representatives from Banking and Finance Sector is playing a critical role in addressing export related concerns, with a focus on addressing these on a priority basis.
<ul style="list-style-type: disc;">
<li>The new board would provide a platform to states and union territories for articulating their perspectives on trade policy and help states to develop and pursue export strategies in line with the national foreign trade policy.</li>
<li>Besides, the forum would advise the government on policy measures for preparation and implementation of short and long term plans.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Special Economic Zone (Amendment) Bill, 2019:</strong> This will enable any entity to set up a unit in the Special Economic Zone (SEZs), including Trusts. This will help boost investments and create new export and job opportunities.
<ul style="list-style-type: circle;">
<li><strong>Better facilities for employees:</strong> SEZ units allowed to create facilities/amenities like cr&egrave;che, gymnasium, cafeteria for their exclusive use as a measure towards ease of doing business.</li>
</ul>
</li>
<li><strong>Promoting Foreign Direct Investment:</strong>
<ul style="list-style-type: circle;">
<li>100% FDI has been allowed under the automatic route for coal mining activities including associated processing infrastructure.</li>
<li>100% FDI under automatic route has also been allowed in contract manufacturing. Providing more flexibility and ease of operations to <strong>Single Brand Retail Trading (SBRT)</strong> entities.
<ul style="list-style-type: disc;">
<li>All procurements made from India shall be counted towards local sourcing, whether goods are sold in India or exported. Online retail trading permitted up to two years prior to opening brick and mortar stores.</li>
</ul>
</li>
</ul>
</li>
<li><strong>National Institute of Design (Amendment) Act, 2019:</strong> It conferred <a href="/prs-capsule/prs-capsule-august-2019#30" target="_blank" rel="noopener"><strong>Institute of National Importance status</strong></a> to the four new National Institute of Design (NIDs). The four new NIDs at Andhra Pradesh, Madhya Pradesh, Assam and Haryana to be declared as Institutions of National Importance on the lines of NID, Ahmedabad.</li>
<li><strong>National Traders' Welfare Board:</strong> It is an institutional mechanism that will identify measures for the welfare of traders and their employees, improve their access to funds and recommend <strong>social security benefits</strong> for them including insurance and pension.
<ul style="list-style-type: circle;">
<li>The National Traders&rsquo; Welfare Board, constituted by the Department for Promotion of Industry and Internal Trade, will be headed by a non-official chairperson and its 15 members will be nominated by the Centre.</li>
</ul>
</li>
<li><strong>India&rsquo;s stand on mega-regional economic agreement:</strong>
<ul style="list-style-type: circle;">
<li>In order to ensure interests of the Indian industry and farmers in Free Trade Agreements (FTAs), India successfully laid out its stand in <a href="/daily-updates/daily-news-editorials/india-exits-rcep" target="_blank" rel="noopener"><strong>Regional Comprehensive Economic Partnership (RCEP)</strong></a> India&rsquo;s key concerns were not addressed.
<ul style="list-style-type: disc;">
<li>India took a strong stance to protect the interest of domestic producers. This decision will help vulnerable sectors including farmers and the dairy sector as well as small manufacturers, who would have been threatened by RCEP rules.</li>
</ul>
</li>
<li>India has also secured agreement for review of <a href="/important-institutions/drishti-specials-important-institutions-international-institution/regional-comprehensive-economic-partnership-1" target="_blank" rel="noopener"><strong>ASEAN FTA (ASEAN-India Free Trade Area-AIFTA)</strong></a> after repeated follow up. This will help in removing rules that affect Indian producers and exporters and will also promote Indian exports and Make in India.</li>
</ul>
</li>
</ul>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/to-the-points/Paper2/year-end-review-2019-ministry-of-commerce-industry'
		],
		(int) 12 => [
			'title' => 'International Tea Day',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the <strong>first International Tea Day</strong> was observed on 21<sup>st</sup> May after it was designated by the United Nations General Assembly in December 2019.</p>
<ul style="list-style-type: square;">
<li>The UN General Assembly called on the <strong>Food and Agricultural Organisation (FAO is an agency of the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/united-nations-1" target="_blank" rel="noopener">United Nations</a>)</strong> to lead the observance of the day.</li>
<li>May 21 was chosen because the <strong>season of tea production begins in May</strong> in most of the tea producing countries.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Tea is a beverage made from the<strong> Camellia sinesis plant.</strong> It is the world&rsquo;s most consumed drink, after water.</li>
<li><strong>Origin:</strong> It is believed that tea originated in <strong>northeast India, north Myanmar and southwest China,</strong> but the exact place where the plant first grew is not known. There is evidence that tea was consumed in China 5,000 years ago.</li>
<li><strong>Economy:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Tea production and processing</strong> constitutes a main source of livelihoods and subsistence for millions in developing and least developed countries.</li>
<li>It is a labour-intensive sector, providing jobs, especially in remote and economically disadvantaged areas.</li>
<li>Tea can play a <strong>significant role in rural development, poverty reduction and food security</strong> in developing countries, being one of the most important <strong>cash crops.</strong></li>
</ul>
</li>
<li><strong>Sustainable Development:</strong> Tea production and processing contributes towards various <a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener"><strong>sustainable development goals</strong></a>:<br />
<ul style="list-style-type: circle;">
<li>Reduction of extreme poverty (Goal 1).</li>
<li>Fight against hunger (Goal 2).</li>
<li>Empowerment of women (Goal 5).</li>
<li>Sustainable use of terrestrial ecosystems (Goal 15).</li>
</ul>
</li>
<li><strong>Plantation condition:</strong><br />
<ul style="list-style-type: circle;">
<li>Tea is a<strong> tropical</strong> and <strong>sub-tropical plant</strong> and grows well in moderately hot and humid climates.</li>
<li>The ideal temperature for its growth is 20&deg;-30&deg;C and temperatures above 35&deg;C and below 10&deg;C are harmful for the bush.</li>
<li>It requires 150-300 cm annual rainfall which should be well distributed throughout the year.</li>
<li>The most suitable soil for tea cultivation is<strong> slightly acidic soil (without calcium)</strong> with porous sub-soil which permits a free percolation of water.</li>
</ul>
</li>
<li><strong>Climate Change:</strong> <br />
<ul style="list-style-type: circle;">
<li>Changes in temperature and rainfall patterns, with more floods and droughts, are already affecting yields, tea product quality and prices, lowering incomes and threatening rural livelihoods.</li>
<li>In parallel, there is a growing recognition of the need to contribute to <a href="/daily-updates/daily-news-editorials/climate-change-and-land-1" target="_blank" rel="noopener"><strong>climate change</strong></a> mitigation, by reducing carbon emissions from tea production and processing.</li>
</ul>
</li>
<li>FAO has designated 4 tea cultivation sites in <strong>China, Korea</strong> and <strong>Japan</strong> as <strong>Globally Important Agricultural Heritage Systems.</strong> <br />
<ul style="list-style-type: circle;">
<li>Pu&rsquo;er Traditional Tea Agrosystem (China)</li>
<li>Fuzhou Jasmine and Tea Culture System (China)</li>
<li>Traditional Tea-grass Integrated System (Japan)</li>
<li>Traditional Hadong Tea Agrosystem, Hwagae-myeon (Republic of Korea)</li>
</ul>
</li>
</ul>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/M8tSwibr5_w" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<div class="border-bg">
<p><strong>Globally Important Agricultural Heritage Systems</strong></p>
<ul style="list-style-type: square;">
<li>Globally Important Agricultural Heritage Systems (GIAHS) was started by the FAO to safeguard and support the <strong>world's agricultural heritage systems.</strong></li>
<li>GIAHS are outstanding landscapes of aesthetic beauty that combine agricultural biodiversity, resilient ecosystems and a valuable cultural heritage.</li>
<li><strong>Three recognised GIAHS sites in India:</strong><br />
<ul style="list-style-type: circle;">
<li>Kuttanad Below Sea Level Farming System of <strong>Kerala.</strong></li>
<li>Koraput Traditional Agriculture of <strong>Odisha.</strong></li>
<li>Pampore Saffron Heritage of<strong> Kashmir.</strong></li>
</ul>
</li>
</ul>
</div>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/international-tea-day'
		],
		(int) 13 => [
			'title' => 'Ecologically Sensitive Areas in Western Ghats',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the Union Minister of Environment, Forest and Climate Change interacted with Chief Ministers of six states through a video conference to discuss issues relating to notification of<strong> Ecologically Sensitive Area (ESA) pertaining to Western Ghats.</strong></p>
<ul style="list-style-type: square;">
<li>These six states include <strong>Kerala, Karnataka, Goa, Maharashtra, Gujarat and Tamil Nadu.</strong></li>
</ul>
<h3>Background</h3>
<ul style="list-style-type: square;">
<li>The government had constituted a High Level Working Group under the <strong>Chairmanship of</strong> <strong>Dr. Kasturirangan to conserve and protect the biodiversity of Western Ghats</strong> while allowing for sustainable and inclusive development of the region.</li>
<li>The Committee had recommended that identified geographical areas falling in the six States of Kerala, Karnataka, Goa, Maharashtra, Gujarat and Tamil Nadu may be declared as <strong>Ecologically Sensitive Areas.</strong> <br />
<ul style="list-style-type: circle;">
<li>The Committee recommended to bring just <strong>37% of the Western Ghats</strong> under the Ecologically Sensitive Area (ESA) zones &mdash; <strong>down from the 64%</strong> suggested by the <strong>Gadgil Committee report.</strong></li>
<li>The <a href="/daily-updates/daily-news-analysis/green-tribunal-steps-in-to-conserve-ghats" target="_blank" rel="noopener"><strong>Western Ghats Ecology Expert Panel, also known as the Gadgil Committee</strong></a> was an environmental research commission appointed by the government in 2011.</li>
</ul>
</li>
<li>A <strong>draft notification</strong> related to the same was issued in <strong>2018</strong> mentioning the areas to be notified in the ESA.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>All the involved States recognised a <strong>need to protect the Western Ghats.</strong> However, the states expressed their concerns related to <strong>the allowed activities and extent of area</strong> mentioned in the draft notification.</li>
<li>Further, it has been also decided that <strong>state specific issues</strong> will be discussed and <strong>resolved through the consensus.</strong></li>
</ul>
<div class="border-bg">
<p><strong>Eco-Sensitive Areas</strong></p>
<ul style="list-style-type: square;">
<li>Eco-Sensitive Areas (ESAs)are located within <strong>10 kms</strong> around Protected Areas, National Parks and Wildlife Sanctuaries.</li>
<li>ESAs are notified by the <strong>Ministry of Environment, Forest and Climate Change (MoEFCC) </strong>under<strong> Environment Protection Act 1986.</strong></li>
<li>The basic aim is to regulate certain activities around National Parks and Wildlife Sanctuaries so as to minimise the negative impacts of such activities on the fragile ecosystem encompassing the protected areas.</li>
</ul>
<p><strong>Western Ghats Ecology Expert Panel</strong></p>
<ul style="list-style-type: square;">
<li>A committee headed by ecologist Madhav Gadgil also known as the Western Ghats Ecology Expert Panel (WGEEP) in 2011 recommended that all of the Western Ghats be declared as the Ecological Sensitive Areas (ESA) with <strong>only limited development allowed in graded zones.</strong></li>
<li>The panel had classified the Western Ghats into <strong>Ecologically Sensitive Areas (ESA) 1, 2 and 3 of which ESA-1 is high priority,</strong> almost all developmental activities (mining, thermal power plants etc) were restricted in it.</li>
<li>It specified that the system of governance of the environment should be a <strong>bottom to top approach (right from Gram sabhas)</strong> rather than a top to bottom approach.</li>
<li>It also recommended the constitution of a <strong>Western Ghats Ecology Authority (WGEA),</strong> as a statutory authority under the Ministry of Environment and Forests, with the powers under Section 3 of the Environment (Protection) Act, 1986.</li>
<li>The report was criticized for being <strong>more environment-friendly</strong> and not in tune with the ground realities.</li>
</ul>
<p><strong>Kasturirangan Committee</strong></p>
<ul style="list-style-type: square;">
<li>The Kasturirangan Commission sought to <strong>balance the development and environment</strong> protection in contrast to the system proposed by the Gadgil report.The committees major recommendations were:<br />
<ul style="list-style-type: circle;">
<li>Instead of the total area of Western Ghats, <strong>only 37%</strong> of the total area to be brought under ESA.</li>
<li>Complete ban on mining, quarrying and sand mining in ESA.</li>
<li>No thermal power projects to be allowed and hydropower projects be allowed only after detailed study.</li>
<li>Red industries i.e. which are highly polluting to be strictly banned.</li>
<li>The report recommended exclusion of inhabited regions and plantations from the purview of ESAs making it a pro farmer approach.</li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>It is a <strong>Development vs Conservation debate. Hence,</strong> a proper analysis based on scientific study followed by consensus among various stakeholders by addressing respective concerns is required urgently.</li>
<li>Holistic view of threats and demands on the forest land, products and services, devising strategies to address these with clearly stated objectives for the authorities involved must be taken.</li>
<li>Any further delay in the implementation will only accentuate degrading of the most prized natural resource of the country.</li>
</ul>
<p><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1625885" target="_blank" rel="noopener"><strong>Source:PIB</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/ecologically-sensitive-areas-in-western-ghats'
		],
		(int) 14 => [
			'title' => 'International Day for Biological Diversity',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>The International Day for Biological Diversity is<strong> observed on 22<sup>nd</sup> May</strong> every year to increase <strong>understanding and awareness of biodiversity issues.</strong></p>
<h3><a href="http://www.drishtiias.com/images/uploads/1590136096_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590136096_image1.png" width="554" caption="false" style="display: block; margin-left: auto; margin-right: auto;" height="191" /></a></h3>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The theme for the year 2020 is<strong> &ldquo;Our solutions are in nature&rdquo;.</strong> <br />
<ul style="list-style-type: circle;">
<li>The theme highlights that Biodiversity remains the answer to a number of sustainable development challenges. From nature-based solutions to climate, to food and water security, and sustainable livelihoods, biodiversity remains the basis for a sustainable future.</li>
</ul>
</li>
<li>The year 2020 is a reflection, opportunity and solutions for biodiversity issues. The year will witness: <br />
<ul style="list-style-type: circle;">
<li>The final period for the <a href="/daily-updates/daily-news-analysis/sixth-national-report-to-the-convention-of-biological-diversity" target="_blank" rel="noopener"><strong>2011-2020 Strategic Plan on Biodiversity</strong></a> and its 20 Aichi Biodiversity Targets.</li>
<li>The end of the<strong> 2011-2020 United Nations Decade on Biodiversity,</strong> and start of other new pivotal biodiversity related decades for the period 2021-2030: the <strong>UN Decade of Ocean Science for Sustainable Development</strong> and the <strong>UN Decade on Ecosystem Restoration.</strong></li>
<li>The<strong> UN Biodiversity Summit</strong> (15<sup>th</sup> Conference of the Parties: COP-15) which will highlight the urgency of actions in support of a post-2020 global biodiversity framework that contributes to the <a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener"><strong>2030 Agenda for Sustainable Development</strong></a> and places the global community on a path towards realizing the <strong>2050 Vision for Biodiversity.</strong><br />
<ul style="list-style-type: disc;">
<li><strong>Sustainable Goal 15</strong> aims to &ldquo;Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss&rdquo;.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Note</strong></p>
<ul style="list-style-type: square;">
<li>22<sup>nd</sup> March: <strong><a href="/daily-updates/daily-news-analysis/world-water-day-1" target="_blank" rel="noopener">World Water Day</a></strong></li>
<li>22<sup>nd</sup> April: <a href="/daily-updates/daily-news-analysis/earth-day-1" target="_blank" rel="noopener"><strong>Earth Day</strong></a></li>
<li>22<sup>nd</sup> May :<strong> World Biodiversity Day</strong></li>
<li>Recently the<a href="/daily-updates/daily-news-analysis/earth-hour" target="_blank" rel="noopener"><strong> Earth Hour</strong></a> was observed on 28<sup>th</sup> March, 2020. It encourages people to switch off the lights from 8.30 pm to 9.30 pm as per their local time.</li>
</ul>
</div>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/international-day-for-biological-diversity'
		],
		(int) 15 => [
			'title' => 'Odisha Promotes Contract Farming',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the Odisha government has promulgated an ordinance allowing investors and farmers to enter into an agreement for <strong>contract farming.</strong></p>
<ul style="list-style-type: square;">
<li>The contract farming has been allowed in view of the continuing <strong>uncertainties</strong> due to the <a href="/daily-updates/daily-news-editorials/covid-19-and-india-s-preparedness" target="_blank" rel="noopener"><strong>Covid-19 pandemic</strong></a>.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Aim:</strong><br />
<ul style="list-style-type: circle;">
<li>The ordinance aims to facilitate both farmers and sponsors to develop<strong> mutually beneficial and efficient</strong> contract farming systems.</li>
<li>It is also expected to improve the production and marketing of agricultural produce and livestock while promoting farmers&rsquo; interest.</li>
</ul>
</li>
<li><strong>Participants in the Contract Farming Agreement:</strong><br />
<ul style="list-style-type: circle;">
<li>The agreement will be entered into between the contract farming sponsor (the one who offers to participate in any component) or entire value chain including pre production, and the contract farming producer (i.e. farmers who agree to produce the crop or rear the livestock).</li>
</ul>
</li>
<li><strong>Involved Loans and Advances:</strong><br />
<ul style="list-style-type: circle;">
<li>The loans and advances given by the sponsor to the producer can be recovered from the sale proceeds of the produce.</li>
<li>It cannot be realised by way of sale or mortgage or lease of the land in respect of which the agreement has been entered into.</li>
</ul>
</li>
<li><strong>No transfer of Land Rights:</strong><br />
<ul style="list-style-type: circle;">
<li>It also states that notwithstanding anything contained in the agreement, no title, rights, ownership or possession of land or premises or other such property will be transferred or alienated or vest in the sponsor or its successor or its agent.</li>
</ul>
</li>
<li><strong>Contract Farming and Services Committee:</strong><br />
<ul style="list-style-type: circle;">
<li>It also mentions the constitution of a <strong>&ldquo;Contract Farming and Services (Promotion and Facilitation) Committee&rdquo;</strong> to review the performance of the contract farming and to make suggestions to the government for its promotion and efficient performance.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Contract Farming</strong></p>
<ul style="list-style-type: square;">
<li><strong>Description:</strong><br />
<ul style="list-style-type: circle;">
<li>Contract farming signifies an agricultural production (including livestock and poultry) based on a <strong>pre-harvest agreement</strong> between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations).</li>
<li>The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement.</li>
<li>Under contract farming, the <strong>producer</strong> can <strong>reduce the risk</strong> of fluctuating <strong>market price and demand.</strong> The <strong>buyer</strong> can reduce the<strong> risk of non-availability of quality produce.</strong></li>
</ul>
</li>
<li><strong>Regulations:</strong><br />
<ul style="list-style-type: circle;">
<li>In India, contract farming is regulated under the<strong> Indian Contract Act, 1872.</strong></li>
<li>In addition, the Model APMC (Agricultural Produce Market Committee) Act, 2003 provides specific provisions for contract farming, like compulsory registration of contract farming sponsors and dispute settlement.</li>
<li>Since<strong> agriculture is a state list</strong> subject, therefore contract farming is <strong>not uniform.</strong><br />
<ul style="list-style-type: disc;">
<li>The <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/niti-aayog-national-institution-for-transforming-india" target="_blank" rel="noopener"><strong>NITI Aayog</strong> </a>observed that market fees and other levies are paid to the <a href="/daily-updates/daily-news-editorials/agriculture-produce-to-agriculture-marketing" target="_blank" rel="noopener"><strong>APMC</strong></a> for contract framing when no services such as market facilities and infrastructure are rendered by them.</li>
<li>Thus, it has been recommended that contract farming should be out of the ambit of APMCs. Instead, an <strong>independent regulatory authority</strong> must be brought in to disengage contract farming stakeholders from the existing APMCs.</li>
</ul>
</li>
<li>Therefore, the Ministry of Agriculture came out with a<strong> draft Model Contract Farming Act, 2018.</strong> <br />
<ul style="list-style-type: disc;">
<li>The draft Model Act seeks to create a regulatory and policy framework for contract farming. Based on this draft Model Act, legislatures of states can enact a law on contract farming.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Advantages:</strong><br />
<ul style="list-style-type: circle;">
<li>Contract farming addresses the problem of <strong>low investment</strong> in agriculture and ensures a supply of quality inputs, technical guidance and management support for farmers.</li>
<li>It provides an <strong>assured market and a pre-agreed sale price for produce,</strong> makes it easier for farmers to<strong> access cheaper institutional credit.</strong></li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>The contract farming seeks to provide alternative marketing channels and better price realisation to farmers. It has been observed that if the market price rises higher than the contracted price, the farmers are tempted to sell the produce to someone else for a higher price. On the other hand, if market prices were to fall below the contracted rate, the buyer often fails to honour the commitment.</li>
<li>It is also necessary to remember that for <strong>growers agriculture is a livelihood issue</strong> and for <strong>processors and aggregators it is business.</strong> Hence the Government should play the <strong>role of a facilitator</strong> to promote as well as to develop a healthy system of <strong>farmer-corporate relationship for mutual benefit and development of the agriculture sector in India.</strong></li>
</ul>
<p><a href="https://www.thehindu.com/news/national/other-states/covid-19-impact-odisha-promotes-contract-farming-system/article31644389.ece" target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/odisha-promotes-contract-farming'
		],
		(int) 16 => [
			'title' => 'Self Reliance in Defence Manufacturing',
			'catname' => 'News Editorials',
			'desc' => '<div class="border">
<p>This article is based on<a href="https://www.thehindu.com/opinion/lead/grasping-the-defence-self-reliance-nettle/article31635965.ece?homepage=true" target="_blank" rel="noopener"><strong> &ldquo;Grasping the defence self-reliance nettle&rdquo;</strong></a> from The Hindu published on 21/05/20. It talks about the challenges and the way forward for Defence manufacturing in India.</p>
</div>
<p>The superpower ambition, growing complexity of security challenges in India&rsquo;s neighbourhood and economic power (India poised to become a $5 trillion-dollar economy by 2025), to safeguard these interests, India requires strong defence capabilities.</p>
<p>In pursuit of this, for most of the past decade, India has been one of the world&rsquo;s largest arms importers (accounting for about 12% of global arms imports). However, with 60-70% import-dependence for weapons, spares and ammunition create vulnerabilities during military crises.</p>
<p>In order to promote self-reliance in defence production, the government has announced several measures under <a href="/daily-updates/daily-news-analysis/atmanirbhar-bharat-and-economic-stimulus" target="_blank" rel="noopener"><strong>Atma Nirbhar Abhiyan</strong></a>. Though these steps are in the right direction, there are long-overdue reforms to make India truly self-reliant in defence manufacturing.</p>
<h3>Indigenous Defence Manufacturing: Challenges</h3>
<ul style="list-style-type: square;">
<li><strong>Too Much Delay:</strong> In the past five years, the Indian government has approved over 200 defence acquisition proposals with the transfer of technology provision, valued around Rs 4 trillion, but most are still in relatively early stages of processing.</li>
<li><strong>Public Sector Driven:</strong> India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.<br />
<ul style="list-style-type: circle;">
<li>All four of these companies are public sector enterprises and account for the bulk of the domestic armament demand.</li>
<li>Governments usually have tended to privilege Defence Public Sector Units (DPSUs) over the private sector, despite &lsquo;Make in India&rsquo;.</li>
</ul>
</li>
<li><strong>Lack of Critical Technologies:</strong> Poor design capability in critical technologies, inadequate investment in R&amp;D and inability to manufacture major subsystems and components hamper the indigenous manufacturing. <br />
<ul style="list-style-type: circle;">
<li>The relationship between the R&amp;D establishment, production agencies (public or private) and the end-user are extremely weak.</li>
</ul>
</li>
<li><strong>Long Gestation Period:</strong> The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. <br />
<ul style="list-style-type: circle;">
<li>For a factory to reach optimum levels of capacity utilisation, it could take anywhere between five to 10 to even 15 years and by the time a unit commences production, any of the following developments can take place:<br />
<ul style="list-style-type: disc;">
<li>There could be changes in the threat assessment/ strategy involving a complete change in priorities. For instance, buying a new advanced radar system may acquire a higher priority instead of adding more tanks or armoured vehicles.</li>
<li>Newer technologies could make products outdated unable to match with what the enemy may have acquired.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Poor Manufacturing Environment:</strong> Also, issues related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.<br />
<ul style="list-style-type: circle;">
<li>Due to this, India hasn&rsquo;t been able to attract FDI in defence.</li>
</ul>
</li>
<li><strong>Lack of Coordination:</strong> Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India's capability of defence manufacturing.</li>
</ul>
<h3>Steps To Be Taken</h3>
<ul style="list-style-type: square;">
<li><strong>Newly Appointed CDS:</strong> The <a href="/daily-updates/daily-news-editorials/chief-of-defence-staff-4" target="_blank" rel="noopener"><strong>Chief of Defence Staff (CDS)</strong></a> could examine the defence acquisitions from a tri-service angle, this may avoid delays and speed up the defence procurement process.</li>
<li><strong>Mandatory Transfer of Technology for Subsystems:</strong> It is imperative that when India imports any weapon systems, there should be a plan for the ammunition and spares to be eventually manufactured in India so that we are not driven to seek urgent replenishments from abroad during crises. <br />
<ul style="list-style-type: circle;">
<li>The same goes for repair, maintenance and overhaul facilities for the upgrading of the weapons platforms.</li>
</ul>
</li>
<li><strong>Modernising Ordnance Factories Board:</strong> Over the decades, ordnance factories have been the backbone of indigenous supplies to India&rsquo;s armed forces, from weapons systems to spares, ammunition and auxiliaries.<br />
<ul style="list-style-type: circle;">
<li>Their structure, work culture and the product range now need to be responsive to technology and quality demands of modern armed forces.</li>
</ul>
</li>
<li><strong>Overhauling of Existing Regulations and Practices:</strong> A long-term integrated perspective plan of the requirements of the armed forces should give the industry a clear picture of future requirements. <br />
<ul style="list-style-type: circle;">
<li><strong>The next Defence Procurement Procedure</strong> should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies, with a view to achieving indigenisation over a period of time for even sophisticated platforms.</li>
</ul>
</li>
<li><strong>Promoting Defence Exports:</strong> Investment, Indian or foreign, will be viable when the door to defence exports is promoted with a transparent policy.</li>
<li><strong>Resolving Conflict of Interest:</strong> The role of<strong> Defence Research and Development Organisation (DRDO)</strong> as the government&rsquo;s sole adviser, developer and evaluator of technologies creates a conflict of interest for entry of private players.<br />
<ul style="list-style-type: circle;">
<li>Thus, the role of DRDO should be revised, in order to give private industry a level playing field for developing defence technologies.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Defence Sector Reforms Under Atma Nirbhar Abhiyan</strong></p>
<ul style="list-style-type: square;">
<li><strong>Revision of FDI Limit:</strong> The FDI limit in defence manufacturing under automatic route is raised from 49% to 74%.</li>
<li><strong>Project Management Unit (PMU):</strong> The government is expected to begin time-bound defence procurement and faster decision making by setting up a Project Management Unit (for contract management purposes).</li>
<li><strong>Reduction in Defence Import Bill:</strong> The government will notify a list of weapons/platforms banned for imports and thus such items can only be purchased from the domestic market.<br />
<ul style="list-style-type: circle;">
<li><strong>Separate budget provision</strong> for domestic capital procurement.</li>
</ul>
</li>
<li><strong>Corporatisation of the Ordnance Factory Board:</strong> It will include a public listing of some units, ensuring a more efficient interface of the manufacturer with the designer and end-user.</li>
</ul>
</div>
<h3>Conclusion</h3>
<p>Self-reliance in defence manufacturing is a crucial component of effective defence capability and to maintain national sovereignty and achieve military superiority. The attainment of this will ensure strategic independence, cost-effective defence equipment and may lead to saving on defence import bill, which can subsequently finance the physical and social infrastructure.</p>
<p><a href="/admin/articles/edit/&lt;iframe%20width=&quot;560&quot; height=&quot;315&quot; src=&quot;https:/www.youtube.com/embed/eZuoNjQZdj0&quot; frameborder=&quot;0&quot; allow=&quot;accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture&quot; allowfullscreen&gt;&lt;/iframe&gt;" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590125626_image1.png" style="display: block; margin-left: auto; margin-right: auto;" caption="false" width="564" height="695" /></a></p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #eaf7e9;">
<p><span style="color: #333399;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>&ldquo;Self-reliance in defence manufacturing is a crucial component of effective defence capability and to maintain national sovereignty and achieve military superiority.&rdquo; Analyse the statement in the context of defence manufacturing in India.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/eZuoNjQZdj0" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>This editorial is based on <strong><a href="https://www.thehindu.com/opinion/lead/grasping-the-defence-self-reliance-nettle/article31635965.ece?homepage=true" target="_blank" rel="noopener">&ldquo;Grasping the defence self-reliance nettle&rdquo;</a></strong> from The Hindu published on May 21st, 2020. Now watch this on our Youtube channel.</p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-editorials/self-reliance-in-defence-manufacturing'
		],
		(int) 17 => [
			'title' => 'Banks Seek Another Moratorium',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>The banking sector is pushing for a moratorium on loan repayments by another <strong>three months to 31<sup>st</sup> August,</strong> easing of <strong>bad loan (Non-Performing Assets) recognition norms</strong> from 90 days to 180 days and <strong>one-time restructuring of loans</strong> as relief measures to tackle the impact of <a href="/daily-updates/daily-news-analysis/21-days-lockdown" target="_blank" rel="noopener"><strong>lockdown</strong></a> and the slowdown in the economy due to <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong> </a><a href="/daily-updates/daily-news-analysis/covid-19-now-pandemic-who" target="_blank" rel="noopener">pandemic</a>.</p>
<ul style="list-style-type: square;">
<li>These demands were raised at the recent meetings of the <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener"><strong>Reserve Bank of India</strong></a> (RBI) top officials with the chiefs of banks and <a href="/daily-updates/daily-news-editorials/A%20nuanced%20understanding%20of%20the%20NBFC%20sector" target="_blank" rel="noopener"><strong>Non-Banking Financial Companies</strong></a> (NBFCs).</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Background:</strong><br />
<ul style="list-style-type: circle;">
<li>On 27<sup>th</sup> March, 2020, the RBI announced a <a href="/daily-updates/daily-news-analysis/rbi-s-covid-19-economic-relief-package" target="_blank" rel="noopener"><strong>three-month moratorium</strong></a> (1<sup>st</sup> March to 31<sup>st</sup> May) on loan and <strong>card repayments</strong> and <strong>slashed its main policy rate, <a href="/daily-updates/daily-news-analysis/repo-rate-unchanged" target="_blank" rel="noopener">Repo rate</a></strong> by 75 basis points and <a href="/daily-updates/daily-news-analysis/rbi-keeps-policy-rates-unchanged" target="_blank" rel="noopener"><strong>Cash Reserve Ratio</strong></a> (CRR) of banks by 100 basis points to stabilize the financial markets and reduce the pain on borrowers.</li>
<li>The RBI had stipulated banks should create a <strong>10% provisioning on all loans</strong> that are overdue but not yet a <a href="/daily-updates/daily-news-editorials/lessons-from-npa-crisis" target="_blank" rel="noopener"><strong>non-performing asset</strong></a> (NPA) and where moratorium has been approved.</li>
<li>While the provisioning could be adjusted against the provisioning for slippages into NPAs during fiscal 2021, it becomes important to see how the <strong>banking sector manages asset quality</strong> in the near term post the moratorium period.</li>
</ul>
</li>
<li><strong>Use of Moratorium Provision :</strong><br />
<ul style="list-style-type: circle;">
<li>In the <strong>retail</strong> segment, higher instances of moratorium utilisation were observed in <strong>agri loans, micro-credit, commercial vehicle loans and other unsecured retail products like credit cards.</strong></li>
<li>Several<strong> borrowers</strong> opting for moratorium had sufficient account balances indicating that borrowers want to be more liquid.</li>
</ul>
</li>
<li><strong>Reasons Behind Demands:</strong><br />
<ul style="list-style-type: circle;">
<li>Extension of moratorium is <strong>required</strong> as <strong>factories are unlikely to start production</strong> in May due to curbs in many important industrial belts, supply chains remain broken and job losses have increased.</li>
<li>It will imply companies<strong> need not pay till 31<sup>st</sup> August,</strong> and it also implies almost minimal possibility of companies being able to pay their interest liabilities then in September,<strong> failing which the account might be classified NPA</strong> as per existing norms.<br />
<ul style="list-style-type: disc;">
<li>Currently, loans in which the borrower fails to pay principal and/or interest charges within 90 days are classified as NPAs and provisioning is made accordingly.</li>
</ul>
</li>
<li>Banks want the NPA recognition limit to be raised to 180 days to limit the surge in NPAs.</li>
<li>Restructuring of loans will help in easing the interest burden on borrowers.</li>
<li>Also, bankers are not sure whether RBI will change its <strong>&lsquo;June 7 circular&rsquo;</strong> concept on stressed assets and restructuring.<br />
<ul style="list-style-type: disc;">
<li><strong>RBI&rsquo;s <a href="/daily-updates/daily-news-analysis/rbis-debt-resolution-norms" target="_blank" rel="noopener">Prudential Framework for Resolution of Stressed Assets</a> June 7 circular,</strong> mandates banks to recognize stress and initiate a review of default within 30 days. The June 7 circular is stringent and gives little flexibility to banks.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Negative Impact:</strong><br />
<ul style="list-style-type: circle;">
<li>Extension means a <strong>delay in payment and borrowers will have to shell out the installments and interest charges</strong> later.</li>
<li>Banks are already facing sluggish credit offtake and a spike in non-performing assets due to the lockdown and the contraction in the economy.</li>
<li>According to <strong>Crisil</strong> ratings, NPAs are set to rise by 150-200 basis points this fiscal (2020-21).</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Banks and NBFCs have raised these demands as <strong>moratorium alone is not sufficient</strong> to come out of the crisis.</li>
<li>The RBI needs to give <strong>operational flexibility to banks</strong> for a<strong> comprehensive restructuring of the existing loans</strong> and also a reclassification of 90-day norm.</li>
</ul>
<p><a href="https://indianexpress.com/article/business/banking-and-finance/as-lockdown-extends-banks-seek-another-3-month-moratorium-from-rbi-6420047/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/banks-seek-another-moratorium'
		],
		(int) 18 => [
			'title' => 'India Resumes Purchase of Malaysian Palm Oil',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, India has <strong>resumed purchases of Malaysian palm oil after</strong> a gap of four-month following a diplomatic row between the two countries.</p>
<h3>Background</h3>
<ul style="list-style-type: square;">
<li>The former Prime Minister had criticised India's <a href="/to-the-points/Paper2/citizenship-amendment-act-2019" target="_blank" rel="noopener"><strong>Citizenship Amendment Act (CAA)</strong></a> which was considered as an interference in the internal matter of India.</li>
<li>Subsequently, the <a href="/loksabha-rajyasabha-discussions/the-big-picture-india-s-trade-diplomacy-with-malaysia-turkey" target="_blank" rel="noopener"><strong>diplomatic row</strong></a> emerged between the two countries.</li>
<li>Following the incident, India <strong>imposed a ban on imports of palm oil</strong> from Malaysia.</li>
<li>The renewed purchases come amid improving trade relations between India and Malaysia after the formation of a new government in Malaysia.
<ul style="list-style-type: circle;">
<li>India's total palm oil imports from Malaysia for the first four months of 2020<strong> fell by more than 50% from the same period in 2019.</strong></li>
</ul>
</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>India's Palm Oil import:</strong> <br />
<ul style="list-style-type: circle;">
<li>India is the <strong>world&rsquo;s biggest buyer of edible oils.</strong></li>
<li>India buys<strong> more than two-thirds</strong> of its total edible oil imports as<strong> palm oil.</strong></li>
</ul>
</li>
<li><strong>Malaysian Import over Indonesia:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Malaysia</strong> is the<strong> world's second</strong> largest producer of palm oil <strong>after Indonesia.</strong></li>
<li>Malaysia's palm oil inventories <strong>production has surged</strong> and <a href="/daily-updates/daily-news-analysis/21-days-lockdown" target="_blank" rel="noopener"><strong>coronavirus lockdowns</strong></a> led to a slump in demand.</li>
<li>Thus, Malaysian palm oil is available at a <strong>discount price</strong> compared to supplies from Indonesia. On the other hand, Indonesia has also raised its <strong>palm oil export levy.</strong></li>
<li>Additionally, Malaysia has also signed a deal to <strong>buy 100,000 tonnes of Indian rice.</strong></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>India-Malaysia Relation</strong></p>
<ul style="list-style-type: square;">
<li>India established diplomatic relations with Malaysia in 1957.</li>
<li><strong>Economic Relation:</strong> India and Malaysia have signed <strong>Comprehensive Economic Cooperation Agreement (CECA).</strong> CECA is a kind of<a href="/summary-of-important-reports/a-note-on-free-trade-agreements-and-their-costs" target="_blank" rel="noopener"><strong> Free Trade Agreement (FTA)</strong></a>.<br />
<ul style="list-style-type: circle;">
<li>India has also signed the Free Trade Agreement (FTA) in services and investments with the 10-member <a href="/daily-updates/daily-news-analysis/asean-summit-2" target="_blank" rel="noopener"><strong>Association of Southeast Asian Nations (ASEAN)</strong></a>. <br />
<ul style="list-style-type: disc;">
<li>Malaysia is the third largest trading partner in ASEAN.</li>
</ul>
</li>
<li>Bilateral trade between India and Malaysia is significantly biased in favour of Malaysia.</li>
</ul>
</li>
<li><strong>Defence &amp; Security Cooperation:</strong> Joint military exercises <strong>&ldquo;Harimau Shakti&rdquo;</strong> are held annually between the two countries.</li>
<li><strong>Traditional medicine:</strong> India and Malaysia have signed a MoU on cooperation in the field of Traditional Medicine in October 2010. <br />
<ul style="list-style-type: circle;">
<li>The Government of Malaysia has been working to popularize <a href="/daily-updates/daily-news-analysis/national-commission-for-indian-system-of-medicine-bill-2018" target="_blank" rel="noopener">AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy) systems</a> in Malaysia.</li>
<li>AYUSH systems are practiced in Malaysia.</li>
</ul>
</li>
</ul>
</div>
<p><a href="http://www.drishtiias.com/images/uploads/1590060002_image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590060002_image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="450" caption="false" /></a></p>
<p><a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/india-resumes-purchases-of-malaysian-palm-oil-traders/articleshow/75821854.cms" target="_blank" rel="noopener"><strong>Source: ET</strong></a></p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/india-resumes-purchase-of-malaysian-palm-oil'
		],
		(int) 19 => [
			'title' => 'Preventive Methods for Alzheimers',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Researchers at the <strong>Indian Institute of Technology-Guwahati</strong> (IIT-G) have found methods for preventing the accumulation of <strong>neurotoxic molecules</strong> in the brain, which leads to<strong> Alzheimer&rsquo;s</strong> disease.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The cause of Alzheimer&rsquo;s is the <strong>accumulation of amyloid-beta peptides</strong> (neurotoxic molecules) in the brain.<br />
<ul style="list-style-type: circle;">
<li><strong>Peptide</strong> is similar to the plaque that blocks arteries and affects blood supply, leading to cardiovascular diseases.</li>
<li><strong>Peptide aggregation/accumulation</strong> means their formation of one over the other, <strong>deforming the cortex of the brain</strong> which leads to Alzheimer&rsquo;s.</li>
<li>The peptide molecules need to have a <strong>certain structure to aggregate.</strong></li>
</ul>
</li>
<li><strong>Preventive Methods:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Use of Trojan Peptides:</strong><br />
<ul style="list-style-type: disc;">
<li>In this approach, the purpose is to design a <strong>deceitful peptide</strong> with <strong>&ldquo;negative syncretical points&rdquo;</strong> for checking the plaque formation.</li>
<li><strong>Trojan peptide</strong> (deceitful peptide) has the same structure as the peptide in the body but its <strong>function is contrary to aggregation.</strong></li>
<li>It adopts a similar <strong>approach of deceit</strong> to impede the aggregation of the amyloid peptide, and reduce poisoning of nerve cells that leads to memory loss.</li>
<li>The degeneration of poisoned cells can be delayed by intravenous injection of the trojan peptide, which in turn, can delay the onset of disease by 10 years.</li>
</ul>
</li>
<li><strong>Application of a low-voltage electric field:</strong><br />
<ul style="list-style-type: disc;">
<li>The electric field can <strong>prevent amyloid plaques from aggregating.</strong></li>
<li>The use of an external electric or magnetic field <strong>modulates peptide molecules</strong> to pull back the possibility of Alzheimer&rsquo;s to a certain extent.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Earlier Discoveries:</strong><br />
<ul style="list-style-type: circle;">
<li>In <strong>July 2019,</strong> an Indian-American scientist at the <strong>University of New Mexico</strong> developed an <a href="/daily-updates/daily-news-analysis/vaccine-for-alzheimers-disease" target="_blank" rel="noopener"><strong>early version vaccine</strong></a> for Alzheimer&rsquo;s disease.<br />
<ul style="list-style-type: disc;">
<li>Vaccine intervention could <strong>rescue memory impairments and prevent neurons from dying</strong> by reducing tau tangles.</li>
</ul>
</li>
<li>In <strong>November 2019, China</strong> approved the <strong>world&rsquo;s first multi-targeting</strong> and <strong>carbohydrate-based</strong> drug <a href="/daily-updates/daily-news-analysis/world-s-first-drug-for-alzheimer-s-disease" target="_blank" rel="noopener"><strong>GV-971</strong></a> for Alzheimer&rsquo;s.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Alzheimer&rsquo;s Disease</strong></p>
<ul style="list-style-type: square;">
<li>It is a <strong>neurological disorder</strong> which causes brain cells to <strong>degenerate and die.</strong> This leads to loss of memory, problems with words in speaking or writing, poor judgment, changes in mood and personality, confusion with time or place, etc.<br />
<ul style="list-style-type: circle;">
<li>At the <strong>first stage,</strong> these symptoms are <strong>mild</strong> but they become <strong>more severe with time.</strong></li>
</ul>
</li>
<li>Alzheimer&rsquo;s is the <strong>most common cause of dementia</strong> among older adults.<br />
<ul style="list-style-type: circle;">
<li><strong>Dementia</strong> is a group of brain disorders that cause the loss of intellectual and social skills.</li>
</ul>
</li>
<li>Alzheimer&rsquo;s is caused by the <strong>build-up of proteins</strong> known as <strong>tau tangles or plaques</strong> within the brain and is also known as the <strong>third type of diabetes.</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Tau</strong> is a protein that when it occurs in tangled formations in the brain of Alzheimer patients, disrupts the ability of neurons to communicate with one another in the brain.</li>
</ul>
</li>
<li>Alzheimer&rsquo;s is an<strong> incurable disease,</strong> as the death of brain cells cannot be reversed.</li>
<li><strong>Women have a higher risk</strong> of having Alzheimer&rsquo;s disease than men.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li><strong>Around 100 potential drugs</strong> for the treatment of Alzheimer&rsquo;s disease<strong> failed</strong> between 1998 and 2011 and now these developments are a <strong>big step</strong> in the direction.</li>
<li>The cure is important for<strong> India</strong> because it<strong> stands at the third position after China and the USA</strong> in the number of Alzheimer&rsquo;s patients. Along with cure, India also needs to clearly define public health strategy with a significant focus on research into degenerative diseases and investment in the training of healthcare personnel.</li>
</ul>
<p><a href="https://www.thehindu.com/sci-tech/health/iit-guwahati-takes-trojan-horse-route-to-fight-alzheimers-disease/article31634337.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
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		'title' => 'Gist of Economic Survey 2019-20',
		'catname' => 'Gist of Economic Survey 2019-20',
		'desc' => '<h2>WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST</h2>
<p>For more than three-fourths of known economic history, India has been the dominant economic power globally, a major wealth creator and a significant contributor to the world&rsquo;s GDP.</p>
<h3>Wealth Creation</h3>
<ul style="list-style-type: square;">
<li>The wealth created by the entrepreneur correlates strongly with:
<ul style="list-style-type: circle;">
<li>The <strong>benefits</strong> that accrue to the employees working with the firm</li>
<li><strong>Raw materials</strong> procured by the entrepreneur&rsquo;s firms and its suppliers</li>
<li><strong>Capital expenditures</strong> made by the firm</li>
<li>Foreign exchange revenue earned by the firms and its role in macroeconomic stability by enabling the country to pay for its imports</li>
<li><strong>The taxes paid by the entrepreneurs</strong> enable Government spending on creating public goods and providing welfare benefits</li>
</ul>
</li>
<li>Wealth creation happens in an economy when the right policy choices are pursued. For instance, wealth creation and economic development in several advanced economies has been guided by Adam Smith&rsquo;s philosophy of the invisible hand.</li>
<li>During much of India&rsquo;s economic dominance, the economy relied on the invisible hand of the market for wealth creation with the support of the hand of trust.</li>
<li>The invisible hand of markets, as reflected in openness in economic transactions, was combined with the hand of trust by appealing to ethical and philosophical dimensions.</li>
</ul>
<h3>Historical Context</h3>
<ul style="list-style-type: square;">
<li>Wealth creation has been recognised by various ancient treatises like Arthashashtra of Kautilya, and Thirukkural of Thiruvalluvar.</li>
<li>Kautilya postulates the role of prices in an economy. He avers that the root of wealth is economic activity and lack of it brings material distress. In the absence of fruitful economic activity, both current prosperity and future growth are in danger of destruction.</li>
<li>For Kautilya, a king can achieve the desired objectives and abundance of riches by undertaking productive economic activity. However, Kautilya advocates economic freedom by asking the King to remove all obstructions to economic activity.</li>
<li>Thiruvalluvar mentions <strong>&lsquo;Porul Paal&rsquo;</strong> or the essence of material wealth and declares, &ldquo;Make money - there is no weapon sharper than it to sever the pride of your foes.&rdquo;</li>
<li>Nevertheless, Thirukural advocates wealth creation through ethical means. He avows that wealth yields righteousness and joy, the wealth acquired capably without causing any harm.</li>
<li>A key contributor to ancient India&rsquo;s prosperity was internal and external trade. Two major highways, Uttarapatha (the Northern Road) and Dakshinapatha (the Southern Road), and its subsidiary roads connected the sub-continent. Ports along India&rsquo;s coastline traded with Egypt, Persia, China and Japan among others.</li>
<li>Much of this trade was carried out by large corporatized guilds akin to today&rsquo;s multinationals and were funded by temple-banks. Thus, commerce and the pursuit of prosperity is an intrinsic part of Indian civilizational ethos.</li>
</ul>
<h3>The Invisible Hand of Markets</h3>
<ul style="list-style-type: square;">
<li>For several decades after Independence, India deviated from its rich tradition of emphasizing wealth creation. Despite the dalliance with socialism India has embraced the market model - post-liberalization of 1991 - that represents our traditional legacy.</li>
<li>Enabling the invisible hand of markets i.e. increasing economic openness, has a huge impact in enhancing wealth. Indeed, the sectors that were liberalized grew significantly faster than those that remain closed.</li>
<li>To illustrate, the growth has been significantly greater in open sectors such as cement and steel, roads, etc. than closed sectors such as coal, railways etc.</li>
<li>This is not surprising as the market economy is based on the principle that optimal allocation of resources occurs when citizens are able to exercise free choice in the products or services they want.</li>
</ul>
<h3>Trust as a Public Good</h3>
<ul style="list-style-type: square;">
<li>Despite the importance of the invisible hand of markets, in a market economy, there is a need for the state to ensure a moral hand to support the invisible hand. Markets are liable to debase ethics in the pursuit of profits at all cost.</li>
<li>Even ancient philosophers consider trust as an important element in society and postulate that trust can be furthered by appealing to ethical and philosophical dimensions.</li>
<li>Trust can be conceptualized as a public good with the following characteristics:
<ul style="list-style-type: circle;">
<li><strong>Non-excludability</strong> - citizens can enjoy its benefits at no explicit financial cost.</li>
<li><strong>Non-rival consumption</strong> - the marginal cost of supplying this public good to an extra citizen is zero.</li>
<li><strong>Non-rejectable</strong> - collective supply for all citizens means that it cannot be rejected.</li>
</ul>
</li>
<li>Unlike other public goods, trust grows with repeated use and therefore takes time to build. Lack of trust represents an externality where decision-makers are not responsible for some of the consequences of their actions.</li>
<li>Aristotle holds that good laws make good citizens, by inculcating habits and social virtue. For Confucius, people become &ldquo;upright&rdquo; when guided by &ldquo;virtue&rdquo; and regulated by &ldquo;ritual&rdquo; rather than by orders and penalties.</li>
<li>Kautilya&rsquo;s Arthashastra (Treatise on Wealth) states four branches of knowledge that further good governance:
<ul style="list-style-type: circle;">
<li><strong>Varta</strong> (economic policy)</li>
<li><strong>Dandaneti</strong> (law and enforcement)</li>
<li><strong>Anvikshiki</strong> (philosophical and ethical framework)</li>
<li><strong>Trayi</strong> (cultural context)</li>
</ul>
</li>
<li>To sum up, the intrinsic motivation to be &ldquo;trustworthy&rdquo; can generate trust as a public good while the intrinsic motivation of uninhibited greed can debase the same public good of trust.</li>
</ul>
<h3>Implications of Lack of Trust</h3>
<ul style="list-style-type: square;">
<li>The Global Financial Crisis represented a glaring instance of the failure of trust in a market economy.</li>
<li>When a corporate intentionally misreports financial information, it harms investors by creating a negative externality of low trust for all domestic and international investors.</li>
<li>When a corporate wilfully defaults on its loans, it harms its bank and creates negative externality to all other corporates as they get lesser supply of credit because of lack of trust.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li><strong>Reducing Information Asymmetry</strong>
<ul style="list-style-type: circle;">
<li>Opportunism leading to repression of the hand of trust can be remedied through standardising enforcement systems and public databases.</li>
<li>For instance, in the case of wilful defaults pre-2014, inability to access relevant borrower data was a key driver of information asymmetry.</li>
<li>If the Indian economy had the data infrastructure such as CRILC (Central Repository of Information on Large Corporates) during the in pre-2014 credit boom, the extent of systemic NPAs may have been lower.</li>
</ul>
</li>
<li><strong>Enhancing the Quality of Supervision</strong>
<ul style="list-style-type: circle;">
<li>The government needs to support the hand of trust by being a good referee of the economy. The referee&rsquo;s job is to not just report but also detect opportunistic behaviour.</li>
<li>To illustrate, the human resource deficit among the regulators (RBI, SEBI, CCI etc.) needs to be reduced. Significant investments in technology and analytics also needs to be made.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Central Repository of Information on Large Corporates (CRILC)</strong></p>
<ul style="list-style-type: square;">
<li>CRILC was set up by RBI to collect, store and disseminate credit data to lenders.</li>
<li>Banks are required to earmark large corporate borrowers with total credit exposure of ₹5 crore.</li>
<li>With CRILC when a borrower defaults with one lender, other lenders can contractually tag their loan too as a default and therefore recall the loan.</li>
</ul>
</div>
<h2>ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS</h2>
<p>Entrepreneurship is an important strategy to fuel productivity growth and wealth creation in an economy. Entrepreneurs are seen as agents of change that accelerate innovation in the economy.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>As per the World Bank data, India ranks third in number of new firms created. In other words, India has the 3rd largest entrepreneurship ecosystem in the world.</li>
<li>However, on a per-capita basis, India has low rates of entrepreneurship in the formal economy. In contrast to other countries, a large number of India&rsquo;s enterprises operate in the informal economy.</li>
<li>The entrepreneurial intensity is significantly higher for the developed economies.</li>
<li>Entrepreneurship acts as an engine of economic growth and change in India.</li>
<li>Entrepreneurship at district level has a significant impact on wealth creation at the grassroots. A 10% increase in registration of new firms in a district yields a 1.8% increase in Gross Domestic District Product (GDDP).</li>
<li>Birth of new firms in India is heterogeneous and dispersed across districts and sectors.</li>
</ul>
<h3>Spatial Heterogeneity in Entrepreneurial Activity</h3>
<ul style="list-style-type: square;">
<li>All regions demonstrate strong growth in entrepreneurial activity over time with the exception of the Eastern states.</li>
<li>The peninsular states dominate the entry of new firms, but entrepreneurship is dispersed across India, not restricted just to a few metropolitan cities.</li>
<li>However, all regions demonstrate a strong relationship between entrepreneurship and GDDP.</li>
<li>The impact of new firm entry is greatest in the Manufacturing and Services sectors.</li>
<li><strong>Agriculture Sector</strong><br />
<ul style="list-style-type: circle;">
<li>Relative to entrepreneurial capabilities in Manufacturing, Services and Infrastructure, entrepreneurial capabilities in the Agriculture sector are not geographically localized and seem to be distributed evenly across most districts in India.</li>
<li>States in the highest quintile of relative entrepreneurial activity in the Agriculture sector are Manipur, Meghalaya, Madhya Pradesh, Assam, Tripura and Odisha.</li>
</ul>
</li>
<li><strong>Manufacturing Sector</strong><br />
<ul style="list-style-type: circle;">
<li>Entrepreneurial activity in the Manufacturing sector is highest in the regions of Gujarat, Meghalaya, Puducherry, Punjab and Rajasthan.</li>
<li>The nature of establishments in these regions attests to agglomeration economies i.e. the incumbent industrial structures for input and output markets and specialized labour in a region are strongly linked to higher entrepreneurial activity in that industry-region.</li>
<li>Spatial heterogeneity in the Manufacturing sector emphasizes the need for policy reforms that improve the ease of doing business including labour reforms, reduction in compliance burden, transparent and timely processing of approval and renewal of applications among others.</li>
</ul>
</li>
<li><strong>Services Sector</strong><br />
<ul style="list-style-type: circle;">
<li>Entrepreneurial activity in the Services sector is highest in the regions of Delhi, Mizoram, Uttar Pradesh, Kerala, Andaman and Nicobar, and Haryana.</li>
<li>The nature of establishments in these regions is not reflective of agglomeration economies and spans diverse industries such as trading, financial services, tourism and hospitality services, retailing, and even religious leagues and missions.</li>
</ul>
</li>
</ul>
<h3>Entrepreneurial Activity and Unemployment</h3>
<ul style="list-style-type: square;">
<li>Based on the data of the Periodic Labour Force Survey (PLFS):<br />
<ul style="list-style-type: circle;">
<li>Entrepreneurial activity in the agriculture and manufacturing sectors shares a negative spatial correlation with the unemployment rate across states.</li>
<li>Entrepreneurial activity in the services and infrastructure sectors shares a positive spatial correlation with unemployment rate across states.</li>
<li>To illustrate, the number of active one-person new firms in the services sector is almost five times more that in all the other three sectors combined.</li>
</ul>
</li>
</ul>
<h3>Determinants of Entrepreneurial Activity</h3>
<ul style="list-style-type: square;">
<li><strong>Social Infrastructure</strong><br />
<ul style="list-style-type: circle;">
<li>Districts with better education levels are expected to have higher entrepreneurial activity.</li>
<li>Higher education levels in a district enable the development of better human capital that relates to increased supply of ideas and entrepreneurs.</li>
<li>Higher education also increases the supply of talent available to entrepreneurs for managing and growing their companies.</li>
<li>The number of new firms formed increases with an increase in the literacy in the district. The impact is most pronounced when literacy is above 72%. This suggests that small increases in literacy levels matter less.</li>
<li>To illustrate, new firm formation is the lowest in eastern India where the literacy rate is the lowest (59.6% as per 2011 Census).</li>
</ul>
</li>
<li><strong>Physical Infrastructure</strong><br />
<ul style="list-style-type: circle;">
<li>The basic measures of physical infrastructure includes accessibility in terms of tar roads. It also includes access to other public goods like electricity, water/sanitation facilities, and telecom services that are fundamental to all businesses.</li>
<li>Proximity to large population centers likely allows the startup to expand markets and scale operations.</li>
<li>However, beyond a point, increased proximity and connectivity to local markets may create hyper-competition and discourage entrepreneurship.</li>
<li>On similar lines, beyond a point, increased levels of infrastructure development might also open up potential entrepreneurs to other opportunities and consequently, decrease the incentives to become entrepreneurs.</li>
<li>On the contrary, no such diminishing returns are apparent with increases in literacy or improving education infrastructure. Increasing literacy levels or the formation of new colleges appear to increase the number of new firms monotonically.</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Measures need to be taken to increase the literacy levels rapidly through the institution of more schools and colleges. This will spur entrepreneurship and consequently wealth creation at grassroots. Governments could also explore the privatization of education to augment education capacity at all levels of education.</li>
<li>Better connectivity of villages through tar roads will likely improve access to local markets and improve entrepreneurial activity. However, in terms of prioritization, this may not be as crucial as investments in education. Moreover, increasing the access to local markets might create other types of opportunities which might discourage entrepreneurship.</li>
<li>Policies that foster ease of doing business and flexible labour regulation foster entrepreneurial activity, especially in the manufacturing sector. As the manufacturing sector has the potential to create the maximum jobs, states must focus on enabling ease of doing business and flexible labour regulation to foster job creation.</li>
</ul>
<div class="border-bg">
<p><strong>Key Terms</strong></p>
<ul style="list-style-type: square;">
<li><strong>MCA 21:</strong> A public dataset of the Ministry of Corporate Affairs (MCA) that provides a snapshot of all active firms registered with the MCA between 1990 and 2018.</li>
<li><strong>SHRUG:</strong> An acronym for Socioeconomic High-resolution Rural-Urban Geographic Dataset on India. It comprises a set of variables that describe the extent of socio-economic development in India in terms of demographic, socioeconomic, firm and political infrastructure of every district between 1990&ndash;2018.</li>
</ul>
</div>
<h2>PRO-BUSINESS VERSUS PRO-CRONY</h2>
<p>India&rsquo;s aspiration to become a $5 trillion economy depends critically on promoting &ldquo;pro-business&rdquo; policy that unleashes the power of competitive markets to generate wealth. At the same time, it demands weaning away from &ldquo;pro-crony&rdquo; policy that favours specific private interests, especially powerful incumbents.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The liberalization of Indian economy in 1991 unleashed competitive markets which marked an increase in market dynamism. It enabled the forces of creative destruction, generating benefits that we still witness today.</li>
<li>The relationship between pro-business policy and creative destruction is mirrored in the composition of the Sensex over the years.</li>
<li>After the market reforms of 1991, Sensex has not only grown, but has grown at an accelerating pace.</li>
<li>The years following 1991 liberalization saw the rapid emergence of new firms, new ideas, new technologies and new operating processes, causing a steep revision of the Sensex.</li>
<li>New sectors like banks and financials entered the index for the first time, eroding the predominance of the manufacturing sector on the index, placing the services sector on the map for the first time, and reflecting the far reaching changes that the Indian economy was witnessing in the wake of liberalization.</li>
<li>Moreover, today&rsquo;s Sensex is not only composed of a larger number of sectors, but is also far more democratic in terms of the size of companies. Today&rsquo;s Sensex is far less concentrated than the Sensex of the 1980s and 1990s, and mirrors the far lower sectoral concentration of the Indian economy as a whole.</li>
</ul>
<h3>Creative Destruction</h3>
<ul style="list-style-type: square;">
<li>Creative destruction is a process of industrial mutation that incessantly revolutionizes the economic structure from within, destroying the old one and creating a new one.</li>
<li>Viewed from the lens of the Stock market, creative destruction has increased significantly post-liberalisation.<br />
<ul style="list-style-type: circle;">
<li>Liberalization led to a spike in the number of firms churned. Every five years, roughly one-third of the firms in the Sensex are replaced.</li>
<li>Before liberalisation, a firm was expected to stay in the Sensex for 60 years, which decreased to only 12 years after liberalization.</li>
</ul>
</li>
<li>The forces of creative destruction following liberalization in the Indian economy have led to the rise of new sectors such as financials and information technology. Nonetheless, the <strong>Herfindahl Index</strong> reveals an overall decline in concentration in both sectors.</li>
<li>However, it has only one prerequisite &ndash; a pro-business policy stance that fosters competitive, unfettered markets.</li>
</ul>
<div class="border-bg">
<p><strong>NOTE: Herfindahl Index</strong> measures the market concentration of an industry's 50 largest firms in order to determine if the industry is competitive or nearing monopoly.</p>
</div>
<h3>Benefits of Creative Destruction</h3>
<ul style="list-style-type: square;">
<li>The rising share in market capitalization has been accomplished by a rise in number of companies rather than a rise in size of incumbent, suggesting greater competition within these sectors.</li>
<li>Sectors once considered mainstays of the Indian economy are being displaced by new sectors bringing with them new technologies and products.</li>
<li>The competitive advantage of entrenched firms is being rapidly challenged by new, smaller and more agile firms.</li>
<li>The difference between the sizes of the largest and smallest firms are rapidly shrinking, and consequently monopoly power in the economy is declining and making way for more competitive markets.</li>
<li>Consumers benefit from an increased variety of goods and services, lower prices and incessant improvement in the quality of existing products.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590492656_image1.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590492656_image1.jpg" style="display: block; margin-left: auto; margin-right: auto;" /></a></p>
<h3>Pro-crony Policies</h3>
<ul style="list-style-type: square;">
<li>Pro-crony policy supports incumbent firms but does not necessarily foster competitive markets.</li>
<li>Cronyism erodes wealth and fosters inefficiencies erode wealth in the economy by inhibiting the process of creative destruction.</li>
<li>The best illustration of pro-crony policy can be given by connected firms i.e the firms whose promoters have political connections. For example, the Comptroller and Auditor General&rsquo;s audit report on the 2G spectrum allocation named a list of private companies that benefited from alleged collusion in the allocation of the 2G spectrum.</li>
<li>The connected firms are unable to systematically create value for their investors from extracting rents based on their political connections.</li>
<li>The performance of connected firms indicates the possible extent of rents extracted by these firms at society&rsquo;s expense.</li>
</ul>
<h3>Connected Firm and Rent Extraction</h3>
<ul style="list-style-type: square;">
<li>The phenomenon of rent-seeking by inefficient, connected firms, though unhealthy to the economy, is not unique to India. In fact, several global studies reinforce the relationship between such connections and rent-seeking activities when institutional checks and balances are weak.</li>
<li>Politically connected firms enjoy a myriad of benefits:<br />
<ul style="list-style-type: circle;">
<li>Markets anticipate additional sources of profit for the politically connected firm despite no change in firm fundamentals.</li>
<li>Distressed politically connected firms are significantly more likely to be bailed out by the government than their non-connected counterparts.</li>
<li>Access to bank finance is an important channel through which political connections operate.</li>
<li>When business owners come to political power, they use it to implement regulations and public policies favorable to their firms.</li>
</ul>
</li>
<li>These benefits represent direct and indirect forms of rent unduly enjoyed by the connected firm&rsquo;s shareholders at the expense of unconnected firms and society at large.</li>
<li>Additionally, pro-crony policies create various indirect costs as well by destroying value in the economy:<br />
<ul style="list-style-type: circle;">
<li>When opportunities for crony rent-seeking exist, firms shift their focus away from growth through competition and innovation towards building political relationships, thus undermining the economy&rsquo;s capacity for wealth creation.</li>
<li>Further, the rents sought by cronies are paid for by genuine businesses and citizens who are not receiving any preferential treatment.</li>
<li>Such a transfer of wealth exacerbates income inequality in the economy, as crony firms leverage their connections to extract a larger share of existing wealth instead of expanding the available wealth.</li>
</ul>
</li>
</ul>
<h3>Discretionary Allocation vis-&agrave;-vis Allocation via Auctions</h3>
<ul style="list-style-type: square;">
<li>The divergent impacts of pro-business and pro-crony policies can be understood in terms of natural resources. For this, discretionary allocation vs allocation via auctions of coal can be considered.</li>
<li>Coal is the most important indigenous source of energy for India; it meets more than half of India&rsquo;s energy requirements. India has the fifth largest coal reserves in the world behind USA, Russia, China, and Australia.</li>
<li>Prior to 1993, no specific criteria for the allocation of captive mines existed. In 1993, amendments were introduced to the Coal Mines (Nationalisation) Act 1973. It allowed private companies to carry out coal mining for captive use.</li>
<li>A screening committee was set up to consider applications made by various companies interested in captive mining and to allocate coal blocks for development.</li>
<li>In 2012, the CAG report on coal block allocations examined the effectiveness of the processes adopted in allocation of coal blocks. In 2014, the Supreme Court cancelled 214 of the 218 allocations made by the Government of India over a span of 15 years.</li>
<li>The Government acted and passed the Coal Mines (Special Provisions) Act, 2015. It ensured that future allocation of coal blocks would solely be through competitive auctions.</li>
</ul>
<h3>Related Party Transactions (RPTs) and Allocations</h3>
<ul style="list-style-type: square;">
<li>The form of coal block allocation (committee-based vs competition-based) has an impact on the value of Related Party Transactions (RPTs) engaged in by firms that are beneficiaries of the coal block allocation.</li>
<li>RPTs used for purchasing capital goods/equipment from related parties are classified as <strong>Capital Purchases</strong>. Operational expenses paid to related parties are classified as <strong>Revenue expenses</strong>. Operational income from related parties are classified as <strong>Revenue income</strong>.</li>
<li>These three RPTs show a marked increase following the receipt of a coal block through the committee-based allocation. No such increase is seen in the case of auction-based allotment.</li>
<li>Capital purchases offer an ideal mechanism to transfer wealth because they are large one-time non-recurring cash outflows that can serve as an opportune mask to hide transactions from regulators.</li>
<li>The other three main types of RPTs &ndash; Capital Sales, Loans and advances given and taken do not show any particular increase in the case of the committee-based allocation.</li>
<li>Moreover, as foreign entities are harder for the domestic enforcement authorities to track, RPTs with such entities are likely to manifest for purposes of opacity. Similarly, tax havens are characterized by opaque disclosure regulations and hence serve as an ideal sink to tunnel corporate wealth away from other stakeholders.</li>
<li>Capital purchases, revenue expenses and revenue income show a remarkable increase post the receipt of the coal block in the committee-based allotment process but not following competitive auctions.</li>
<li>One-time payments to directors like commissions, perquisites and consulting expenses increase following the discretionary allocation.</li>
</ul>
<h3>Firm Productivity and Performance</h3>
<ul style="list-style-type: square;">
<li>There has been a steady decline in the market share of firms that received committee-based allocation despite them getting a windfall gain from the discretionary allocation.</li>
<li>The gain of an almost free resource should have aided firm productivity and business fundamentals. Instead the market share has fallen over the years - suggesting a case of Dutch disease &ndash; firms that got the free resource diverted efforts towards the tunnelling of the windfall gain instead of towards productive business activity.</li>
<li>Discretionary allocation of natural resources by a committee provides avenues for rent seeking. Subsequently, firm owners divert their focus towards tunnelling away these rents rather than furthering productive economic activities.</li>
<li>A shift to market-based allocation of resources takes these avenues away, encourages productive economic activity and generates more wealth.</li>
</ul>
<div class="border-bg">
<p><strong>Dutch Disease</strong></p>
<ul style="list-style-type: square;">
<li>Dutch disease stands for the negative consequences that can arise from a spike in the value of a nation&rsquo;s currency.</li>
<li>The term was coined owing to the after impacts of the discovery of vast natural gas deposits in the North Sea (The Netherlands) in 1959.</li>
<li>The newfound wealth and massive exports of oil caused the value of the Dutch guilder (the erstwhile currency) to rise sharply, making Dutch exports of all non-oil products less competitive on the world market.</li>
<li>In simple terms, the term Dutch disease is used in economic circles to describe the paradoxical situation in which seemingly good news, such as the discovery of large oil reserves, negatively impacts a country's broader economy.</li>
</ul>
</div>
<h3>Riskless Returns: The Case of Wilful Default</h3>
<ul style="list-style-type: square;">
<li>Wilful default occurs when firms take loans, divert the proceeds out of the firm for the personal benefit of owners, default on loans and declare bankruptcy, thereby expropriating a range of stakeholders &ndash; lenders, minority shareholders, employees, regulators and state coffers.</li>
<li>The RBI defines wilful defaulter as a firm that has defaulted in meeting its repayment obligations even though it has the capacity to honour these obligations.</li>
<li>A firm could also be branded a wilful defaulter if it uses the funds for purposes other than what is sanctioned by the lender, siphons the money out to related parties or removes the assets used to secure the loan.</li>
<li>Wilful defaulters tend to be more opaque than both non-defaulters and firms that default out of genuine distress.</li>
<li>Money lent to a genuine business creates assets, which generate profit and employment. On the other hand, every rupee lent to a wilful defaulter constitutes an erosion of wealth as the firm does not invest the proceeds in profitable projects. Besides making cronies rich, it contributes nothing to the economy.</li>
<li>As of 2018, wilful defaulters owed their respective lenders nearly ₹1.4 lakh crores. The defaulters are spread across several sectors, with manufacturing firms constituting the largest share.</li>
</ul>
<h3>Implications of Wilful Default</h3>
<ul style="list-style-type: square;">
<li>To put in perspective the quantum of wealth eroded by wilful defaulter can be compared with the 2018 Union budget allocations towards citizen welfare. Had the money siphoned away by wilful defaulters stayed in the economy, the resulting wealth would have been equivalent to double the allocation towards health, education and social protection.</li>
<li>The cost of wilful default is borne by the common man. Public sector banks get their equity from taxes paid by the common man. When unscrupulous firms willfully default, it is the common man who loses. While most policy initiatives aim to redistribute wealth from the rich to the poor, wilful default achieves the opposite. Rich businesses that want to get richer use wilful default as an instrument to redistribute wealth away from the poor.</li>
<li>Wilful default increases the cost of borrowing for everyone else, including genuine businesses. It may force genuine borrowers to exit the market resulting in a market failure that slows economic growth, employment and wealth creation capacity.</li>
</ul>
<h3>Conclusion</h3>
<ul style="list-style-type: square;">
<li>Pro-business policies, for example, those that make it easy to start a business, obtain credit, and bid for natural resources help firms to function effectively and thereby enable competitive markets.</li>
<li>While pro-business policies increase competition, correct market failures, or enforce business accountability, pro-crony policies hurt markets.</li>
<li>Crony businesses may promote narrow business interests and may lobby the government to limit competition or reduce regulatory oversight. These enhance the lobbying group&rsquo;s income but undermine markets and reduce aggregate welfare.</li>
</ul>
<h2>UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE THAN IT HELPS</h2>
<p>The role of markets has been recognized globally wherein markets are allowed to enable wealth creation and thereby economic growth. But India has a regulated system and its high time that privatization and the role of the free market are analysed and incorporated in the economy.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Economic freedom enhances wealth creation by enabling efficient allocation of entrepreneurial resources and energy to productive activities, thereby promoting economic dynamism.</li>
<li>India has made significant progress in enhancing economic freedom for firms and its citizens but it still counts among the shackled economies in the world.</li>
<li>In the <strong>Index of Economic Freedom 2019,</strong> India was categorized as <strong>&lsquo;mostly unfree&rsquo;</strong>, ranking the Indian economy 129<span style="text-decoration: line-through;">th</span> among 186 countries. Likewise, in the <strong>Global Economic Freedom Index,</strong> India ranks 79<sup>th</sup> among 162 countries with 108<sup>th</sup> rank in business regulation.</li>
<li>The low rank in economic freedom makes it evident that India chains opportunities for wealth creation by shackling economic freedom for its citizens.</li>
<li>While there is a case for Government intervention when markets do not function properly, excessive intervention stifles economic freedom.</li>
<li>This is because government intervention, though well-intended, often ends up undermining the ability of the markets to support wealth creation and leads to outcomes opposite to those intended.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590492715_image2.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590492715_image2.jpg" style="display: block; margin-left: auto; margin-right: auto;" /></a></p>
<h3>Government Interventions</h3>
<ul style="list-style-type: square;">
<li>The Government can intervene in markets in two ways:<br />
<ul style="list-style-type: circle;">
<li>Direct participation - as a market maker or as a buyer or supplier of goods and services</li>
<li>Indirect participation - through regulation, taxation, subsidy or other influence</li>
</ul>
</li>
<li>Sometimes direct intervention by the government affects the dynamic interaction of supply and demand in markets and thereby determination of &lsquo;equilibrium&rsquo; market prices.</li>
<li>To illustrate, fluctuating prices of the commodities distort the demand and supply chain of the market. <strong>For example,</strong> when prices are higher, the sale gets reduced and when prices are lower, the demand gets increased.</li>
<li>In both cases, serious welfare loss results because not enough of the goods are sold. The chance to create welfare for both producers and consumers gets wasted and it leads to <strong>&lsquo;deadweight loss&rsquo;&nbsp;</strong>- income that is lost forever.</li>
<li>The Indian economy is replete with examples where the government intervenes even if there is no risk of market failure. In some instances, its intervention has created market failures.</li>
</ul>
<h3>Essential Commodities Act (ECA), 1955</h3>
<ul style="list-style-type: square;">
<li>The Act controls the production, supply and distribution of, and trade and commerce in, certain goods which are treated as essential commodities. The powers to implement the provisions of the Act are delegated to the States.</li>
<li>The major commodity groups included in the Act are<br />
<ul style="list-style-type: circle;">
<li>Petroleum and its products</li>
<li>Food stuff, including edible oil and seeds, vanaspati, pulses, sugarcane, onion, potato</li>
<li>Raw Jute and jute textiles</li>
<li>Essential drugs</li>
<li>Cattle fodder</li>
</ul>
</li>
<li>When the price of any of these essential commodities rises, the regulator can impose stock holding limits on the commodity, restrict the movement of goods, and mandate compulsory purchases under the system of levy.</li>
<li>The purported aim of the Act is to ensure the affordability of essential commodities for the poor by restricting hoarding.</li>
<li>Consequently, it becomes an overarching legislation regulating agricultural marketing and production.</li>
</ul>
<p><em>ECA Affects the Development of Agricultural Markets</em></p>
<ul style="list-style-type: square;">
<li>It reduces the effectiveness of free trade and the flow of commodities from surplus areas to markets with higher demand.</li>
<li>Agriculture is a seasonal activity and it is essential to store produce for the off-season. Due to frequent and unpredictable imposition of stock limits, ECA disincentivises investments in warehousing and storage facilities.</li>
<li>As stockholding limits apply to the entire agriculture supply chain, including wholesalers, food processing industries and retail food chains, the Act does not distinguish between firms that genuinely need to hold stocks owing to the nature of their operations, and firms that might speculatively hoard stocks.</li>
<li>ECA also affects the commodity derivative markets as traders may not be able to deliver on the exchange platform the promised quantity, owing to stock limits.</li>
<li>The Act distorts markets by increasing uncertainty and discouraging the entry of large private sector players into agricultural marketing.</li>
<li>These market distortions further aggravate the price volatility in agricultural commodities, the opposite of what it is intended for. For example, imposition of stock limits on onions in September 2019 spiked up the volatility of the retail and wholesale prices of onions.</li>
</ul>
<p><em>Other Challenges with the ECA</em></p>
<ul style="list-style-type: square;">
<li>Frequent raids under the provisions of ECA have been ineffective due to low conviction rate, corruption and increase in harassment of traders.</li>
<li>The ECA was enacted at a time when speculative hoarding and black marketing was a threat as agricultural markets were fragmented and transport infrastructure was poorly developed. With the agricultural markets in India increasingly becoming more integrated, the utility of the Act is incompatible with the development of an integrated competitive national market for food.</li>
<li>The anti-hoarding provisions of ECA discourage open reporting of stock holdings, storage capacities and trading. Moreover, there is no data of the total private storage capacity available in the country.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590492741_image3.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590492741_image3.jpg" style="display: block; margin-left: auto; margin-right: auto;" /></a></p>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>Strengthening of the <strong>Price Stabilization Fund</strong> as it supplements the market forces rather than substitute them which the ECA does.</li>
<li>Supporting the development of commodity futures markets would help efficient discovery of market expected future prices, which can provide a better basis for private storage decisions and avoid &lsquo;peaks&rsquo; and &lsquo;troughs&rsquo; in prices.</li>
<li>Development of effective forecasting mechanisms, stable trade policies, and increasing integration of agricultural markets can serve the purpose of stabilising prices of agricultural markets.</li>
</ul>
<div class="border-bg">
<p><strong>Price Stabilization Fund (PSF)</strong></p>
<ul style="list-style-type: square;">
<li>PSF was established in 2014-15 to help regulate the price volatility of important agri-horticultural commodities like onion, potato and pulses.</li>
<li>It provides for maintaining a strategic buffer of the commodities for subsequent calibrated release to discourage hoarding and unscrupulous speculation.</li>
</ul>
</div>
<h3>Drug Price Control under ECA</h3>
<ul style="list-style-type: square;">
<li>The government often resorts to price controls for drugs to ensure access to essential lifesaving drugs and to avoid poor households from falling into poverty.</li>
<li>The National List of Essential Medicines (NLEM), prepared by the Ministry of Health and Family Welfare, is a list of medicines considered essential and high priority for India&rsquo;s health needs. It is based on aspects like prevalence of disease, safety and efficacy of the medicine, and affordability.</li>
<li>Prices of pharmaceutical drugs are regulated through the National Pharmaceutical Pricing Authority (NPPA) and Drug (Price Control) Order (DPCO).</li>
<li>DPCOs are issued by the Government, in the exercise of the powers under the Essential Commodities Act (ECA), 1955. The DPCO, among other things, specifies the price ceiling and the formula for calculating the ceiling price.</li>
<li>DPCOs seek to ensure that the medicines listed under National List of Essential Medicines (NLEM) are available at a reasonable price to the general public.</li>
<li>The Government of India has amended the DPCO several times. Until 2013, DPCO specified the price ceiling using the cost-based pricing method in which the ceiling price was calculated as a multiple of the cost that it took producers to promote and distribute a pharmaceutical drug.</li>
<li>In 2013, India transitioned from cost-based pricing to market-based pricing. Under the market-based pricing method, the Government determines the ceiling prices as the maximum mark-up that a retailer can charge over the reference price, which is the simple average of the prices of all the major brands. The order capped the maximum mark-up to 16% for all formulations specified in the NLEM.</li>
</ul>
<p><em>Implications</em></p>
<ul style="list-style-type: square;">
<li>The outcome of DPCO is quite opposite to what it aims to do - making drugs affordable.</li>
<li>The regulation of prices of drugs led to an increase in the price of the regulated pharmaceutical drug vis-&agrave;-vis that of an unregulated but similar drug.</li>
<li>The increase in prices is greater for more expensive formulations than for cheaper ones and for those sold in hospitals than retail shops.</li>
</ul>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>Government, being a major buyer of drugs, can intervene more effectively to provide affordable drugs by combining all its purchases and exercising its bargaining power.</li>
<li>The prevalent distorting interventions need to be replaced by market-friendly interventions like price stabilization funds, Direct Benefit Transfers (DBT) to consumers, incentives to innovations, increasing market integration and smooth flow of goods and services.</li>
</ul>
<h3>Government Intervention in Grain Markets</h3>
<ul style="list-style-type: square;">
<li>In the grain markets, the government has sought to achieve food security while ensuring remunerative prices to producers and safeguarding the interest of consumers by making supplies available at affordable prices.</li>
<li>In trying to achieve this, the state controls input prices such as those of fertilizer, water, and electricity.</li>
<li>It also sets output prices, undertakes storage and procurement through administrative machinery, and distributes cereals across the country through PDS.</li>
<li>These procurement operations largely support the MSPs that are designed to be indicative prices for producers at the beginning of the sowing season and floor prices as an insurance mechanism for farmers from any fall in prices.</li>
</ul>
<p><em>Implications</em></p>
<ul style="list-style-type: square;">
<li>The government has emerged as the single largest procurer and hoarder of foodgrains. It has virtually become a monopsonist in the domestic grain market and is a dominant player crowding out private trade. This disincentivizes the private sector to undertake long-term investments in procurement, storage and processing of these commodities.</li>
<li>MSPs are designed to be indicative prices for producers at the beginning of the sowing season and floor prices as an insurance mechanism for farmers from any fall in prices. However, the increasing trend in these prices have served to give a signal to farmers to opt for the crops which have an assured procurement system.</li>
<li>Moreover, an increase in Minimum Support Price (MSP) translates into farmers offering their produce for the open-ended procurement by the Government. MSPs have, in effect, become the maximum prices rather than the floor price &ndash; the opposite of the aim it is intended for.</li>
<li>This has also made India a high-cost foodgrain economy, given<br />
<ul style="list-style-type: circle;">
<li>The economic cost of Food Corporation of India is very high and its inefficiency increases with an increase in stocks.</li>
<li>The food subsidy burden is burgeoning which largely covers the procurement, distribution and carrying costs of FCI.</li>
</ul>
</li>
<li>Given fiscal constraints, there is always a trade-off between allocating money through subsidies and increasing investments.<br />
<ul style="list-style-type: circle;">
<li>Growth in public investments in agriculture is negatively correlated to increases in food subsidy outlay.</li>
<li>As investments are the crucial input to increase in productivity, the increasing focus on subsidies is harming the growth of the agricultural sector in the long-run.</li>
</ul>
</li>
<li>NSS 73<sup>rd</sup> round on consumer expenditure shows that the share of cereals in Monthly Per Capita Expenditure (MPCE) has fallen by about 33% in rural India and about 28% in urban India from 2004-05 to 2011-12.<br />
<ul style="list-style-type: circle;">
<li>This is in line with decreasing consumption of food and increasing expenditure on non-food items as income rises.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Food Corporation of India (FCI)</strong></p>
<ul style="list-style-type: square;">
<li>The FCI was set up in 1965 under the Food Corporations Act, 1964 with the primary duty to purchase, store, move/transport, distribute and sell foodgrains and other foodstuffs.</li>
<li>The main objectives of FCI are<br />
<ul style="list-style-type: circle;">
<li>procurement of foodgrains from farmers at Minimum Support Prices (MSP) announced by the Government;</li>
<li>distribution of foodgrains to consumers through PDS, particularly the vulnerable sections of society at affordable prices; and</li>
<li>maintenance of buffer stock of foodgrains for food security and price stability. Thus, it is mandated to serve the interests of producers and consumers alike.</li>
</ul>
</li>
<li>The burgeoning burden of food subsidy largely covers the procurement cost of FCI [difference between the MSP and the Central issue prices (CIP) of foodgrains under PDS] and distribution and carrying costs of FCI.</li>
</ul>
</div>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>India has moved from being a food scarce country to a food surplus country with a substantial increase in production and has emerged as a net exporter of cereals. The policies need to move on now to incentivize diversification and environmentally sustainable production.</li>
<li>The farmers need to be empowered through direct investment subsidies and cash transfers, which are crop neutral and do not interfere with the cropping decisions of the farmer.</li>
<li>The coverage of NFSA needs to be restricted to the bottom 20% and the issue prices for others could be linked to the procurement prices.</li>
<li>Another alternative would be giving income transfers to consumers through Direct Benefit Transfers (DBT). Internationally, there is a move towards conditional cash transfers (CCTs) aimed at tackling problems of food insecurity and poverty and for&nbsp; nudging people towards improved health and education levels.</li>
<li>At the macro level, the agricultural marketing, trade (both domestic and foreign) and distribution policies need to be aligned so that farmers receive the correct signals for diversification into remunerative and sustainable production.</li>
</ul>
<div class="border-bg">
<p><strong>Conditional Cash Transfers (CCTs)</strong></p>
<ul style="list-style-type: square;">
<li>Conditional cash transfer programmes give money to households on the condition that they comply with certain pre-defined requirements.</li>
<li>These conditions can include, for example, up-to-date vaccinations, regular visits to a healthcare facility, regular school attendance by children, and complying with health and nutrition promotion activities.</li>
<li>Current evidence suggests that conditional cash transfer programmes can be effective in increasing the use of health services and improving health outcomes.</li>
<li>Some examples of successful CCTs include<br />
<ul style="list-style-type: circle;">
<li>Brazil (Bolsa Familia): Cash transfer of $15-95 to about 25% of the identified population on conditions of attending health check ups.</li>
<li>Mexico (Oportunidades): Cash transfer of 235 pesos to about 20% of the identified population on conditions of mandatory health check ups.</li>
</ul>
</li>
</ul>
</div>
<h3>Debt Waivers</h3>
<ul style="list-style-type: square;">
<li>Government intervention in credit markets, in the form of full or partial, conditional or unconditional, debt relief has become increasingly common at the state level in India.</li>
<li>Farm loan waivers re-emerged in 2008 after it had died down in the early 1990s.</li>
</ul>
<p><em>Positive implications</em></p>
<ul style="list-style-type: square;">
<li>Borrowers seem to be suffering from the problem of <strong>&lsquo;debt overhang&rsquo;</strong>.<br />
<ul style="list-style-type: circle;">
<li>It refers to a situation where all current income gets used up in repaying the accumulated debt, leaving little incentives to invest either in physical or human capital.</li>
<li>Debt overhang leads to abandonment of beneficial investment and hence reduces social welfare.</li>
</ul>
</li>
<li>Thus, debt waiver is said to be helping the borrowers to come out of the debt trap as it cleans their balance sheet and reduces the burden of debt servicing.</li>
<li>However, debt waiver can help if awarded under exceptional circumstances and remain unanticipated.</li>
</ul>
<p><em>Negative implications</em></p>
<ul style="list-style-type: square;">
<li>Debt waivers impact the credit markets. For example, debt relief can prevent farmers from going out of farming and the consequent reduction of output but an anticipated waiver may lead to moral hazard and destroy the credit culture.</li>
<li>Loan waiver led to increased loan defaults on future loans and no improvement in wages, productivity, or consumption.</li>
<li>Debt waivers also have a contagious impact on bank loans i.e. defaults and non-performing assets rise on bank loans.</li>
<li>Loan performance of genuinely distressed borrowers improves whereas the loan performance of non-distressed beneficiaries deteriorates.</li>
<li>Debt waivers also costs the government exchequer in a significant way and that without creating any capital.</li>
</ul>
<p><em>Way Forward</em></p>
<ul style="list-style-type: square;">
<li>A debt relief should be made conditional on genuine distress otherwise it fuels even greater default. Thus, an unconditional and blanket debt waiver is a bad idea.</li>
<li>A waiver can at best be an emergency medicine to be given in rare cases after a thorough diagnosis and identification of illness and not a staple diet.</li>
</ul>
<h3>Legislative Changes Required to Reduce Government Interventions</h3>
<p>India is still stuck with several forms of Government intervention that are anachronistic with today&rsquo;s economy. In several spheres of the economy, India has traversed the transition from a command and control economy to a market-driven economy.</p>
<p><em>Acts which Transformed to Market-driven Economy</em></p>
<table border="1" style="border-collapse: collapse;">
<tbody>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Act</strong></span></td>
<td style="width: 660px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Market Distortion created</strong></span></td>
<td style="width: 853px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Transformation towards Developing a Market Economy</strong></span></td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Capital Issues (Control) Act, 1947</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>The Government decided which company could raise how much capital.</li>
<li>It led to ineffective valuation of capital.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Repealed and replaced by The Securities and Exchange Board of India (SEBI) Act, 1992 as a regulator of the capital markets.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Oil and Natural Gas Commission (ONGC) Act, 1959</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>ONGC was created with the mandate to plan, promote, and develop petroleum resources</li>
<li>It created a Government monopoly in this sector</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>In 1993, the Act was repealed and ONGC was converted into a company.</li>
<li>The hydrocarbons policy has evolved to Hydrocarbon Exploration and Licensing Policy (HELP) of 2016</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Monopolies and Restrictive Trade Practices (MRTP) Act, 1969</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>To prevent concentration of economic power, control of monopolies and prohibition of unfair trade practices.</li>
<li>This restricted companies to grow and achieve a global scale.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Replaced by the Competition Act in 2002.</li>
<li>The Competition Act aims to promote competition and prohibits abuse of dominant position.</li>
<li>The focus has shifted from &lsquo;prevention of dominance&rsquo; to &lsquo;regulating abuse of dominance&rsquo;.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">The Coking Coal Mines (Nationalisation) Act, 1972 and Coal Mines (Nationalization) Act, 1973</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Government took over the management of coking and non-coking coal mines as energy became a crucial sector.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Repealed in 2018.</li>
<li>Private firms permitted to enter the commercial coal mining industry.</li>
<li>Ended the monopoly of Coal India Limited over commercial mining.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Foreign Exchange Regulation Act, 1973</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Imposed restriction on foreign equity in companies to 40%.</li>
<li>This restricted access to foreign capital and technology.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Replaced by Foreign Exchange Management Act (FEMA), 1999.</li>
<li>Under FERA, everything was prohibited unless specially permitted.</li>
<li>Under FEMA, everything was permitted unless specifically restricted.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Air Corporations Act of 1953</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Nationalised nine airlines to form Air India and Indian Airlines.</li>
<li>Intended to provide efficient, adequate, and coordinated air transport services.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Replaced by Air Corporations (Transfer of Undertaking and Repeal) Act, 1994.</li>
<li>Private operators were allowed to provide air transport services.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 297px; height: 19px; background-color: #c7f4ff;">Sick Industrial Companies Act (SICA), 1985</td>
<td style="width: 660px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Timely detection of sick companies and speedy remedial measures by Board of Industrial and Financial Reconstruction (BIFR).</li>
<li>It put in place a debtor-friendly regime, in which defaulting borrowers could delay resolution.</li>
</ul>
</td>
<td style="width: 853px; height: 19px; background-color: #c7f4ff;">
<ul>
<li>The Act was repealed in 2004, and BIFR was dissolved in 2016 to give way to the Insolvency and Bankruptcy Code (IBC), 2016.</li>
</ul>
</td>
</tr>
</tbody>
</table>
<p>However, several areas of unnecessary and inefficient government intervention still remain. The following are some key Acts, as low-hanging fruits to begin with, which have outlived their use and need to be repealed or amended to enable functioning of competitive markets.</p>
<p><em>Acts which Need to be Repealed/Amended</em></p>
<table border="1" style="border-collapse: collapse;">
<tbody>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Act</strong></span></td>
<td style="width: 665px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Market Distortion Created</strong></span></td>
<td style="width: 801px; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Need for Repeal/Amendment</strong></span></td>
</tr>
<tr style="height: 89px;">
<td style="width: 343px; height: 89px; background-color: #c7f4ff;">Factories Act, 1948</td>
<td style="width: 665px; height: 89px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Regulates occupational safety and health in factories and docks</li>
<li>Gives prosecuting powers to the Chief Inspector</li>
<li>Nudges capital away from labour</li>
</ul>
</td>
<td style="width: 801px; height: 89px; background-color: #c7f4ff;">
<ul>
<li>Proposed to be subsumed by the Occupational Safety, Health and Working Conditions Code, 2019</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Essential&nbsp;Commodities Act (ECA), 1955</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Enables the Government to regulate the production, supply and distribution of &lsquo;essential&rsquo; commodities</li>
<li>It imposes stock limits</li>
<li>Discourages large-scale private investments in agricultural market</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>These owe their origin in times of shortage and inefficient linking of markets</li>
<li>These have become an instrument of coercion and inhibit proper functioning of markets</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Food Corporation of India (FCI), 1965</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>FCI was created to safeguard the interests of farmers, maintain buffer stocks for food security and make grains accessible at reasonable prices through the public distribution system (PDS).</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>The production scenario of foodgrains has reached a comfortable level.</li>
<li>The role of FCI, with a total storage capacity of more than 80 million tonnes, must be re-examined.</li>
<li>FCI should primarily focus on creating competition in the foodgrain supply chain.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Sick Textile Undertaking (Nationalisation) Act, 1974</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>To acquire sick textile units, reorganize and rehabilitate them.</li>
<li>103 sick textile mills were nationalised and transferred to the National Textile Corporation (NTC).</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Nationalisation of these mills failed to achieve the desired objectives.</li>
<li>Land of textile units has been monetised.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">Recovery of Debts due to Banks and Financial Institutions Act, 1993</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Led to establishment of Debt Recovery Tribunals (DRTs) for expeditious adjudication and recovery of debts.</li>
<li>Huge delays due to insufficient number of presiding officers.</li>
<li>Lack of sufficient judicial experience by recovery officers.</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>The IBC is now firmly in place to fix the problem of non-performing assets.</li>
</ul>
</td>
</tr>
<tr style="height: 19px;">
<td style="width: 343px; height: 19px; background-color: #c7f4ff;">The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013</td>
<td style="width: 665px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>Regulates land acquisition with 80% of the land to be acquired through negotiations, with the government stepping in only for the balance 20%.</li>
<li>For Public Private Partnership projects, it is 70%.</li>
</ul>
</td>
<td style="width: 801px; height: 19px; background-color: #c7f4ff;">
<ul style="list-style-type: square;">
<li>This tilts the balance in favour of land owners who need to be made an equal partner in development of land.</li>
</ul>
</td>
</tr>
</tbody>
</table>
<p><em>Conclusion</em></p>
<p>The government must systematically examine areas where the Government needlessly intervenes and undermines markets. It does not mean that there should be no government intervention; appropriate and relevant interventions are welcome, majorly at the regulation level. Eliminating instances of needless interventions will enable competitive markets and thereby spur investments and economic growth.</p>
<h2>CREATING JOBS AND GROWTH BY SPECIALIZING IN EXPORTS IN NETWORK PRODUCTS</h2>
<p>Integrating &lsquo;Assemble In India for the World&rsquo; into &lsquo;Make In India&rsquo; can set a precedent in making India a global manufacturing hub. India has to take crucial and defining steps if it wants to achieve an export-led growth and create jobs for its youth.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Growth in exports provides a much-needed pathway for job creation in India. For example, in just five year period 2001-2006, labour-intensive exports enabled China to create 70 million jobs for workers with primary education.</li>
<li>On similar lines, steps can be taken by India to chart an export trajectory and create unparalleled job opportunities for its youth.</li>
<li>China&rsquo;s image as a low-cost location for final assembly of industrial products is rapidly changing due to labour shortages and increases in wages. As no other country can match China in the abundance of its labour, India must grab the space getting vacated in labour-intensive sectors.</li>
<li>This also holds significance as the US-China trade war is causing major adjustments in Global Value Chains (GVCs) and firms are now looking for alternative locations for their operations.</li>
</ul>
<h3>Current State of Trade and Exports</h3>
<ul style="list-style-type: square;">
<li>India&rsquo;s share in merchandise (goods) exports in world exports has increased from 0.6% in 1991 to 1.7% in 2018. Yet it remains paltry compared to 12.8% for China (2018).</li>
<li>Further, merchandise exports as a percentage of GDP remained consistently lower for India compared to the world average by a significant margin.</li>
<li>Imports of merchandise have grown faster (at the rate of 14.9% per annum during 1993-2018) than exports, resulting in increased trade deficits.</li>
<li>On the other hand, exports of services generally grew faster than imports, providing some cushion to the current account deficit.</li>
</ul>
<h3>Reasons for India&rsquo;s Underperformance in Exports</h3>
<ul style="list-style-type: square;">
<li><strong>Specialization versus Diversification</strong>
<ul style="list-style-type: circle;">
<li>India is far behind China in terms of <strong>specialization</strong> of markets and products. However, India has been catching up with China in terms of <strong>diversification</strong> across products and markets.</li>
<li>Overall, high diversification combined with low specialization implies that India is spreading its exports thinly over many products and partners, leading to its lacklustre performance compared to China.</li>
<li>The bottom line is that if India wants to become a major exporter, it should specialize more in the areas of its comparative advantage and achieve significant quantity expansion.</li>
</ul>
</li>
<li><strong>Low Level of Participation in Global Value Chains (GVCs)</strong>
<ul style="list-style-type: circle;">
<li>China&rsquo;s export composition shows a strong bias towards traditional labour-intensive industries and labour-intensive stages of production processes within capital intensive industries.</li>
<li>Export growth of capital intensive products from China has been mainly driven by its participation in the GVCs. China&rsquo;s export promotion policies since the 1990s have relied heavily on a strategy of integrating its domestic industries within the GVCs.</li>
<li>Making use of imported parts and components, China emerged as a major assembly hub for several capital-intensive products.</li>
<li>India&rsquo;s participation in GVCs has been low compared to the major exporting nations in East and Southeast Asia.</li>
</ul>
</li>
<li><strong>Low Market Penetration in High-Income Countries</strong>
<ul style="list-style-type: circle;">
<li>The dominance of capital intensive products in the export basket along with low participation in GVCs have resulted in a disproportionate shift in India&rsquo;s geographical direction of exports from traditional rich country markets to other destinations.</li>
<li>The high-income OECD markets accounted for 49.7% of China&rsquo;s exports in 2018 while the corresponding figure for India was 40.2%.</li>
<li>Developing countries, especially with a low level of participation in GVCs, find it extremely difficult to export capital intensive products to the quality/brand conscious markets in richer countries.</li>
</ul>
</li>
<li>Thus, China&rsquo;s remarkable export performance, compared to India, is driven by a set of interrelated factors - a high level of participation in GVCs; a high degree of specialization in labour-intensive production activities; large scale in the chosen sectors of specialization; and a high level of export penetration in traditional rich countries.</li>
</ul>
<div class="border-bg">
<p><strong>Related Information</strong></p>
<p><em>Flying Geese Model</em></p>
<ul style="list-style-type: square;">
<li>Developed by Kaname Akamatsu during the 1930s, the flying geese paradigm (FGP) is a model for the international division of labour in East Asia based on dynamic comparative advantage.</li>
<li>The paradigm/model postulated that Asian nations will catch up with the West as part of a regional hierarchy where the production of commoditized goods would continuously move from the more advanced countries to the less advanced ones.&nbsp;</li>
</ul>
</div>
<h3>Reaping Gains from Participation in Global Value Chains (GVCs)</h3>
<ul style="list-style-type: square;">
<li>A higher level of participation in GVCs implies that for any given country, the share of foreign value-added in gross exports is higher than when most inputs are sourced locally.</li>
<li>However, owing to scale and productivity effects of selling in the world markets, participation in GVCs can lead to higher absolute levels of domestic value-added and domestic job creation.</li>
<li>The scale effect creates millions of jobs and is therefore particularly suited for implementation in a labour-intensive economy such as India.</li>
<li>India can reap rich dividends by adopting policies aimed at strengthening its participation in GVCs.</li>
</ul>
<h3>Which Industries should India Specialize in for Job Creation?</h3>
<ul style="list-style-type: square;">
<li>Given our comparative advantage in labour-intensive activities and the imperative of creating employment for a growing labour force, there are two groups of industries that hold the greatest potential for export growth and job creation.</li>
<li>First, there exists a significant unexploited export potential in India&rsquo;s traditional unskilled labour-intensive industries such as textiles, clothing, footwear and toys.<br />
<ul style="list-style-type: circle;">
<li>The GVCs in these industries are controlled by <strong>&ldquo;buyer driven&rdquo; networks</strong> wherein the lead firms based in developed countries concentrate in higher value added activities such as design, branding and marketing.</li>
<li>Physical production is carried out, through subcontracting arrangements, by firms in developing countries. Examples include Wal-mart, Nike, Adidas etc.</li>
</ul>
</li>
<li>Second, India has huge potential to emerge as a major hub for final assembly in a range of products, referred to as &ldquo;network products&rdquo; (NP).<br />
<ul style="list-style-type: circle;">
<li>The GVCs in these industries are controlled by leading MNEs such as Apple, Samsung, Sony etc. within <strong>&ldquo;producer driven&rdquo; networks</strong>. In general, these products are not produced from start to finish within a given country.</li>
<li>Within the production network, each country specializes in a particular fragment of the production process; this specialization is based on the country&rsquo;s comparative advantage.</li>
<li>Labour abundant countries, like China, specialize in low skilled labour-intensive stages of production such as assembly while the richer countries specialise in capital and skill-intensive stages such as R&amp;D.</li>
</ul>
</li>
</ul>
<h3>The Current Case of Network Products</h3>
<ul style="list-style-type: square;">
<li>Examples of network products (NP) include computers, electronic and electrical equipment, telecommunication equipment, road vehicles etc.</li>
<li>On an average, NP accounts for about 42% of world manufactured exports. Asia&rsquo;s share in world exports of NP increased from about 37% in 2000 to 51% in 2018 while the shares of both Europe and America declined.</li>
<li>India&rsquo;s export of NP increased from about $2 billion in 2000 to $32 billion in 2018, however, in comparison to other Asian countries, its share is very minuscule.</li>
<li>NP exports account for a very small share (10% in 2018) in India&rsquo;s export basket. In contrast, these products account for about one half of the total national exports of China and Japan.</li>
<li>The main category of NP exported by India is road vehicles with a share of 4.9% in its total exports in 2018. Several leading automobile companies have established assembly plants in India and some of them have begun to use India as an export base within their production networks.</li>
<li>The key learning from the successful case of the Automobiles sector is that domestic firms graduate up the production value chain by first starting with low-technology operations such as assembly and then moving to manufacturing of components.</li>
</ul>
<h3>Free Trade Agreements (FTAs) and India</h3>
<ul style="list-style-type: square;">
<li>There is an apprehension that most of the FTAs that India has signed in the past have not worked in India&rsquo;s favour. The recent debate around India joining the Regional Comprehensive Economic Partnership has been aligned on the same context of cost and benefit analysis of FTAs.</li>
<li>However, an analysis shows that the overall impact on India&rsquo;s exports to the partners, with which the agreements have been signed, is 13.4% for manufactured products and 10.9% for total merchandise. The overall impact on imports is found to be lower at 12.7% for manufactured products and 8.6% for total merchandise.</li>
<li>Therefore, from the perspective of trade balance, India has gained in terms of 0.7% increase in trade surplus per year for manufactured products and of 2.3% increase in trade surplus per year for total merchandise.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>India can reap rich dividends by adopting policies aimed at strengthening its involvement in the export market for network products (NP). Assembly is highly labour intensive, which can provide jobs for the masses, while domestic production of parts and components can create high skill jobs.</li>
<li>For a country to become an attractive location for assembly activities, it is imperative that import tariff rates for intermediate inputs are zero or negligible. An enabling environment should also be created for the entry of lead firms into the country.</li>
<li>A pro-active FDI policy is also critical as MNEs are the leading vehicles for the country&rsquo;s entry into global production networks while local firms play a role as subcontractors and suppliers of intermediate inputs to MNEs.</li>
<li>Supply disruptions in a given location due to shipping delays, power failure, political disturbances, labour disputes etc. could disrupt the entire production chain. A low level of service link costs (costs related to transportation, communication etc.) is a prerequisite for countries to strengthen their participation in GVCs.</li>
</ul>
<h2>TARGETING EASE OF DOING BUSINESS IN INDIA</h2>
<p>Ease of doing business is the key to entrepreneurship, innovation and wealth creation. India has risen significantly in the World Bank&rsquo;s Doing Business rankings in recent years.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>As India leapfrogs towards a five trillion-dollar economy by 2024-25, simplifying and maintaining a business-friendly regulatory environment is essential.</li>
<li>India has made substantial gains in the Ease of Doing Business rankings from 142 in 2014 to 63 in 2019.</li>
<li>It has progressed on 7 out of the 10 parameters. The Goods and Services Tax and the Insolvency and Bankruptcy Code top the list of reforms that have propelled India&rsquo;s rise in rankings.</li>
<li>However, India continues to trail in parameters such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts.</li>
<li>To illustrate, it takes an average of 18 days (down from 30 in 2009) to set up a business in India. On the other hand, New Zealand has a seamless process of business incorporation which takes place through one agency and just takes half-a-day.</li>
<li>Similarly, it takes roughly 50 days and costs on an average 7.8% of a property&rsquo;s value to register it, and 1,445 days for a company to resolve a commercial dispute.</li>
<li>Thus, a holistic assessment and a sustained effort to ease business regulations and provide an environment for businesses to flourish is a key structural reform that India needs.</li>
</ul>
<h3>Density of Legislations</h3>
<ul style="list-style-type: square;">
<li>A major challenge most companies face is the complex architecture of the Indian governance framework including the legislation and statutory compliance requirements.</li>
<li>For example, manufacturing units have to conform with nearly 6,796 compliance items, which is a tedious task. The services sector too faces many regulatory hurdles even for routine businesses.</li>
<li>Besides, In India, only the list of licences and permissions can be obtained from a government portal or information centre.</li>
<li>On the other hand, in New Zealand, a dedicated website operated by a private agency has all detailed guides and stepwise procedures about permissions, fees and timeline to start a business. The website is also equipped with ready-to-use business plan templates.</li>
<li>The contrast reflects a difference in approach &ndash; government control versus curation/ partnership.</li>
</ul>
<h3>Construction Permits</h3>
<ul style="list-style-type: square;">
<li>Hong Kong, which tops the rankings for ease of obtaining construction permits, takes just over two months to obtain a construction permit, while Delhi takes almost four months.</li>
<li>It must be observed that India has improved the process of obtaining a construction permit, as it took 186 days in 2014, it now takes 98-113 days in 2019.</li>
</ul>
<h3>Achieving Scale of Across Business</h3>
<ul style="list-style-type: square;">
<li>Most of the manufacturing units in India have small capacities and consequently low manufacturing efficiencies which are a disadvantage in the global supply chain.</li>
<li>Compared to Bangladesh, China, and Vietnam, which have more than 80% of market value of exports by large enterprises, India has 80% by small enterprises.</li>
<li>Moreover, in India it can take 7-10 days to reach a port whereas in countries like China, Bangladesh and Vietnam it takes less than a day.</li>
<li>Countries like Bangladesh, China, Vietnam are able to progress in the value chain by increasing their competitiveness in the international market by improving their delivery time and domestic production capacity.</li>
</ul>
<h3>Trading across Borders</h3>
<ul style="list-style-type: square;">
<li>This indicator records the time and cost associated with the logistical process of exporting and importing goods.</li>
<li>Globally, transportation by ports is the most favoured followed by railways and then roads, whereas in India it is the other way round.</li>
<li>While India takes 60-68 and 88-82 hours in border and documentary compliance for exports and imports respectively, Italy takes only one hour for each. Italy tops the EoDB rankings in Trading across Borders.</li>
<li>Almost 70% of the delays (both in exports and imports) occur on account of port or border handling processes pertaining to procedural complexities, multiple documentations and involvement of multiple agencies for approval and clearances.</li>
<li>Such delays and procedural inefficiencies end up pushing the cost to trade.</li>
<li>Government has reduced procedural and documentation requirements considerably, increasing digitalization and seamlessly integrating multiple agencies onto a single digital platform.</li>
<li><strong>Authorized Economic Operators</strong> scheme is also being used to smoothen the process for registered exporters/importers.</li>
<li>The turnaround time of ships in India has been on a continuous decline. This shows that achieving significant efficiency gains in the case of sea ports is possible.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Given the maze of laws, rules and regulations in the manufacturing and services sector, the scope for streamlining is clear.</li>
<li>The streamlining of the logistics process at sea-ports requires close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.</li>
<li>The simplification of the Ease of Doing Business landscape of individual sectors such as tourism or manufacturing, however, requires a more targeted approach that maps out the regulatory and process bottlenecks for each segment.</li>
</ul>
<div class="border-bg">
<p><strong>Authorised Economic Operators (AEO)</strong></p>
<ul style="list-style-type: square;">
<li>AEO is a programme under the aegis of the <strong>World Customs Organization (WCO) SAFE Framework of Standards</strong>.</li>
<li>AEO seeks to secure and facilitate global trade. It aims to enhance international supply chain security and facilitate the movement of goods.</li>
<li>Under this, an entity engaged in international trade is approved by WCO as compliant with supply chain security standards and granted AEO status. An entity with an AEO status is considered a &lsquo;secure&rsquo; trader and a reliable trading partner.</li>
<li>Benefits of AEO status include expedited clearance times, fewer examinations, improved security and communication between supply chain partners, and more.</li>
<li>AEO is a voluntary programme.</li>
</ul>
</div>
<h2>GOLDEN JUBILEE OF BANK NATIONALISATION: TAKING STOCK</h2>
<p>In 2019, India completed the 50th anniversary (Golden Jubilee) of the bank nationalization program undertaken in 1969.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>This is apt to celebrate the accomplishments. At the same time, an objective assessment of Public Sector Banks (PSBs) is apposite.</li>
<li>Currently, PSBs account for 70% of the market share in banking. Despite being dominant players, they lag considerably in performance metrics when compared to their peers.</li>
<li>Dwarfism of our banking sector is quite evident when assessed on three characteristics ; size of the economy (GDP), development of the economy (GDP per capita) and population.</li>
</ul>
<h3>Dwarfism of Our Banking Sector</h3>
<ul style="list-style-type: square;">
<li><strong>Size of the Economy</strong><br />
<ul style="list-style-type: circle;">
<li>India&rsquo;s banking sector is disproportionately underdeveloped given the size of its economy.</li>
<li>For instance, ranked at 55<sup>th</sup> in the world, State Bank of India (SBI) is the only bank from India that figures in the global top 100 banks. Due to this characteristic India is grouped with countries that are a fraction of its size like Finland and Denmark.</li>
<li>All the largest economies have proportionately large banks with China being an outlier with 18 banks in the global top 100.</li>
</ul>
</li>
<li><strong>Development of the Economy</strong><br />
<ul style="list-style-type: circle;">
<li>India as an outlier when the penetration of credit to the private sector is plotted against the GDP per capita of a country.</li>
<li>Historically, economies have always been ably supported by their banks. The U.S., Japan, and China are the best example of this.</li>
<li>The support of the U.S. banking system in making the U.S. an economic superpower is well documented. Similarly, in the eighties during the heydays of the Japanese economy, Japan had 15 of the top 25 largest banks then. In recent times, China has emerged as an economic superpower and it has been ably supported by its banks - the top four largest banks globally are all Chinese banks.</li>
<li>Thus, a large economy needs an efficient banking sector to support its growth. Yet, credit growth among PSBs has declined significantly since 2013.</li>
<li>India becoming a $5 trillion economy will require at least eight Indian banks to be large enough to belong in the top 100 globally.</li>
</ul>
</li>
</ul>
<h3>Why the Banking Sector Needs Urgent Attention?</h3>
<ul style="list-style-type: square;">
<li>Fulfilment of social goals can happen at scale through financial intermediation. Given India&rsquo;s demographics and the growth opportunities, we need a thriving banking sector which can support and unleash a multiplier effect and permanently alter India&rsquo;s growth trajectory in a positive way.</li>
<li>Conversely, inefficient PSBs can severely handicap the country's ability to exploit the unique opportunities.</li>
<li>In 2019, PSBs&rsquo; collective loss - largely due to bad loans - amounted to over ₹ 66,000 crores, an amount that could nearly double the nation&rsquo;s budgetary allocation for education.</li>
<li>PSBs account for 85% of reported bank frauds while their gross non-performing assets (NPAs) equal ₹ 7.4 lakh crores which is more than 150% of the total infrastructure spend in 2019.</li>
<li>Every rupee of taxpayer money invested in PSBs as equity by the Government loses 23 paise. In contrast, every rupee of investor money invested in New Private Banks (NPBs) - banks licensed post-liberalization - on average gained 9.6 paise.</li>
<li>The market to book ratio for PSBs is very poor in comparison to NPBs. Every rupee of taxpayer money fetches a market value of 71 paise. In stark contrast, every rupee invested in NPBs fetches a market value of ₹ 3.70.</li>
<li>The primary difference between PSBs and NPBs stems from the difference in efficiencies and the costs stemming from inefficiency of PSBs are enormous.</li>
</ul>
<div class="border-bg">
<p><strong>NOTE:</strong></p>
<p>The <strong>Market to Book ratio</strong> is a financial valuation metric used to evaluate a company&rsquo;s current market value relative to its book value.</p>
</div>
<ul style="list-style-type: square;">
<li>Banking Structure: Nationalization to Today</li>
<li>Banking in India dates back to thousands of years. Several of India's ancient texts including those in the Vedic period mention bank lending functions.</li>
<li>India's public sector banks (PSBs) are essentially legacy banks from the colonial period (since 1800s) that were subsequently nationalized.</li>
<li>India's largest PSB, State Bank of India (SBI), was founded as Bank of Calcutta in 1806, took the name Imperial Bank of India in 1921 and became state-owned in 1955.</li>
<li>The remaining PSBs in India were formed through two waves of nationalizations, one in 1969 and the other in 1980.</li>
<li>After the 1980 nationalization, PSBs had a 91% share in the national banking market with the remaining 9% held by &ldquo;old private banks&rdquo; (OPBs) that were not nationalized.</li>
<li>PSBs continue to have a significant footprint today albeit with a market share that is less than 91%. The decline in PSB market share has been largely absorbed by &ldquo;new private banks&rdquo; (NPBs), which were licensed in the early 1990s after the liberalization of licensing rules.</li>
<li>PSBs, OPBs, and NPBs are currently subject to similar banking regulations on virtually all aspects of their functioning including branching and priority sector lending.</li>
</ul>
<h3>Assessment of Nationalization</h3>
<ul style="list-style-type: square;">
<li>The allocations of banking resources to rural areas, agriculture, and priority sectors increased. The number of rural bank branches increased ten-fold. It led to an increase in credit and deposit from rural areas.</li>
<li>However, some caution is necessary in interpreting the above trends as being entirely caused by nationalisation.</li>
<li>For instance, interventions like the &lsquo;Green Revolution&rsquo; and multiple anti-poverty programmes had their own role in financial inclusion and deepening institutional credit.</li>
<li>Similarly, the policies pursued by RBI after nationalization set lending targets for priority sectors. These tools carried special force given that banks were essentially operating in a marketplace sheltered from entry.</li>
<li>Nevertheless, a significant portion of the poor remained unbanked till 2014 when the Pradhan Mantri Jan Dhan Yojana (PMJDY) got 18 million bank accounts opened in the first week of its launch.</li>
</ul>
<h3>Problems Faced by PSBs</h3>
<ul style="list-style-type: square;">
<li>PSBs enjoy <strong>less strategic and operating freedom</strong> than private banks because of majority government ownership.</li>
<li>The <strong>government exercises significant control</strong> over all aspects of PSB operations ranging from policies on recruitment and pay to investments and financing and bank governance.</li>
<li>The majority ownership of the government and its writ on bank functioning also results in an implicit promise of the bailout of bank liabilities which is an <strong>implicit cost to the taxpayer</strong>.</li>
<li>The majority ownership by the government also subjects PSB officers to <strong>scrutiny of their decisions</strong> by the central vigilance commission and the comptroller auditor general.</li>
<li>Officers of state-run banks are <strong>wary of taking risks</strong> in lending or in renegotiating bad debt due to <strong>fears of harassment under the veil of vigilance investigations</strong>.</li>
</ul>
<div class="border-bg">
<p><strong>Microfinance institutions (MFIs)</strong></p>
<ul style="list-style-type: square;">
<li>MFIs are financial companies that provide small loans to people who do not have any access to banking facilities. Their objective was poverty alleviation via inclusive growth and financial inclusion.</li>
<li>Improved access of savings, credit, and insurance facilities enable the poor to smoothen their consumption, manage their risks better, build their assets gradually, and develop their microenterprises.</li>
<li>MFIs also help poor people to manage and optimize resources over a time to develop their enterprises.</li>
</ul>
</div>
<h3>Reasons for Failure of PSBs</h3>
<ul style="list-style-type: square;">
<li>As the 2014 P. J. Nayak Committee report shows, the structural weaknesses in PSBs explain their poor performance. The committee was set up by RBI to look into the governance, management and operational issues of the public sector banks.</li>
<li>The banking crises are due to some combination of unsustainable macroeconomic policies, market failures, regulatory distortions, and government interference in the allocation of capital.</li>
<li>A plausible explanation for the NPA problems of PSBs is that in the Indian economy&rsquo;s growth phase between 2004 and 2011, PSBs grew their loan portfolios but this credit growth was of suspect quality. When the economy slowed, the banking system saw a dramatic increase in NPAs.</li>
</ul>
<h3>Ways to Enhance Efficiency of PSBs</h3>
<ul style="list-style-type: square;">
<li>The key drivers of India&rsquo;s growth prospects are (a) highly favourable demographics; (b) a modern and modernizing digital infrastructure that encompasses the &ldquo;JAM&rdquo; trinity of financial inclusion; and (c) a uniform indirect taxation system (GST). India&rsquo;s growth path depends on how quickly and productively these growth levers are deployed using a well-developed financial system.</li>
<li>The use of direct benefit transfers and growth in digital transactions has been significant. It has helped to bring both credit and deposits into the banking system across all geographies.</li>
<li>More importantly, the inclusion is backed by state-of-art digital infrastructure that generates and stores an abundance of high quality structured data. Such data are the gold mine for economic growth in the 21st century.</li>
<li>All these indicate the possibilities that exist for the Indian banking sector to grow proportionate to the scale of the Indian economy.</li>
<li>PSBs have many important ingredients in place to cater to this new demand. For example, they have local market insights and relationships based on operating histories spanning many decades. Their geographic footprint is also vast.</li>
<li>PSBs, however, need significant investments in the capabilities to exploit the coming data-rich environment in India.</li>
</ul>
<h3>Application of Low-cost Technology to Keep Assets Secure</h3>
<ul style="list-style-type: square;">
<li>Most corporate term loans are secured and lenders have recourse to pledged assets in the event of default. However, wilful defaulters have a natural incentive to misrepresent the value of collateral. They may also pledge fictitious collateral. If they pledge genuine collateral, they have an incentive to dispose of these assets without the lender&rsquo;s knowledge.</li>
<li>Geo-tagging &ndash; the process of adding geographical identification such as latitude and longitude to photos, videos or other media &ndash; can help lenders keep track of the location of assets. Geo-tagging can also help verify the value of pledged land or property.</li>
<li>GPS systems can confer even more monitoring power. GPS devices, when affixed to collateralized equipment or machinery, can alert lenders if these assets are moved out of the plant. It may serve lenders well if they could, say, disable a vehicular asset remotely if the borrower attempts to dispose of it or wilfully defaults on the loan.</li>
<li>Integrated data on collateral across all lenders can become useful in curbing double-pledging of collateral. For example, a party may pledge the same collateral to multiple lenders to obtain multiple lines of credit for the same project.</li>
<li>While these technologies are powerful, they carry an important risk, i.e., the risk of infringing upon the borrower&rsquo;s privacy and dignity. Therefore, strong and clear policy guidelines are needed on what data may be collected, how, by whom and for how long.</li>
</ul>
<h3>The Benefits of Credit Analytics</h3>
<ul style="list-style-type: square;">
<li>Analytics based on market data are quite capable of providing accurate predictions of corporate distress.</li>
<li>The data that can be employed for credit analytics is available in both structured and unstructured form.<br />
<ul style="list-style-type: circle;">
<li><strong>Data in a structured form</strong> include credit information and credit scores based on loan grants and repayments held in the credit registries or credit bureaus.</li>
<li>The <strong>unstructured micro-data</strong> is available in text, images, geo-tagged data, social network data, mobile apps, as well as other shallow or deep digital footprints of current and potential customers.</li>
</ul>
</li>
<li>Leveraging these data requires new data, analytics, and modelling skills. Likewise, banks need to invest in credit recovery infrastructure.</li>
<li>A large proportion of NPAs of Indian banks, especially PSBs, could have been prevented if data and analytics were employed in corporate lending.</li>
<li>There are several leading indicators that a robust credit analytics platform can easily pick up and provide warning signals. For instance, the systematic differences in the disclosure of related party transactions, pledging of promoter shares, and large loans to related parties.</li>
<li>Similarly, an analysis of the annual reports of the large defaulters suggests that the quality of audit disclosure in these firms was very poor. Again, this is an easily detectable characteristic that a robust credit analytics platform could easily flag.</li>
</ul>
<h3>Creation of a FinTech Hub for PSBs</h3>
<ul style="list-style-type: square;">
<li>FinTech or financial technology is forcing traditional banks to review their outdated business paradigms to come up with effective, low cost, banking solutions. PSBs have the maximum to gain from FinTech.</li>
<li>As of now, most information processing on loans happens manually which causes inefficiency, frauds and loan defaults. PSBs also face many challenges such as high operating costs and subjective decision making.</li>
<li>FinTech can radically change the way information is processed by banks. In corporate lending, for instance, a huge mass of quantitative data such as company financials and qualitative data such as company filings are machine-analysed.</li>
<li>Tools such as Machine Learning (ML), Artificial Intelligence (AI) as well as Big Data provide banks the ability to recognize patterns quickly by analysing vast datasets.</li>
<li>Using FinTech will allow banks to better screen borrowers and set interest rates that better predict ex-post loan performances.</li>
<li>Its efficiency can be further enhanced by packaging all the information held by various PSBs into a common entity. With this, economies of scale can be utilized to make the necessary investments in undertaking analytics using AI and ML.</li>
<li>An entity, called PSBN (PSB Network), shall be established on the lines of GSTN (Goods and Services Network).</li>
<li>PSBs would be able to make quicker decisions, process loan applications faster, and reduce turn-aroundtimes (TAT). These would, in turn, help PSBs to compete better with NPBs.</li>
</ul>
<h3>The Case for Employee Stakes in PSBs</h3>
<ul style="list-style-type: square;">
<li>The bank employees are paid through fixed and flat compensation contracts. Coupled with pressures from ex-post monitoring by the vigilance agencies, this induces conservatism and preference for safety over risk-taking even among senior executives.</li>
<li>A long-term solution to this problem is enabling employees to own stakes in the PSBs and thereby incentivise them to embrace risk-taking and innovation.</li>
<li>In this respect, a portion of the government stakes can be transferred to employees exhibiting good performance across all levels of the organization through Employee Stock Option Plans (ESOPs).</li>
<li>Ownership by motivated, capable employees across all levels in the organization could give such employees tangible financial rewards for value enhancement, align their incentives with what is beneficial to the PSB, and create a mind-set of enterprise ownership for employees.</li>
</ul>
<h3>The Need for Best Talent</h3>
<ul style="list-style-type: square;">
<li>Embracing disruptive innovations through disruptive processes requires a degree of risk-taking, a more flexible human capital acquisition strategies at all levels, and complementary incentive structures.</li>
<li>This pertains to the process for recruitment of bank officials. PSBs cannot, for instance, recruit professional MBAs directly from the campuses.</li>
<li>PSBs need to enable cutting-edge recruitment practices that allow lateral entry of professionals and recruitment of professionally trained talent at the entry level. For example, professionals with domain skills in technology, data science, finance, and economics.</li>
</ul>
<h2>FINANCIAL FRAGILITY IN THE NBFC SECTOR</h2>
<p>The problems faced by the Non-Banking Financial Companies (NBFCs) stems from their over-dependence on short-term wholesale funding from the Liquid Debt Mutual Funds (LDMFs). Any asset-side shock not only exacerbates the Asset Liability Management (ALM) problem but also makes investors in LDMFs jittery leading to a redemption pressure akin to a &ldquo;bank run&rdquo;.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The liquidity crunch in the shadow banking system in India took shape in the wake of defaults on loan obligations by major NBFCs - Infrastructure Leasing &amp; Financial Services (IL&amp;FS) and Dewan Housing Finance Limited (DHFL).</li>
<li>In response to the defaults, mutual funds started selling off their investments in the NBFC sector to reduce exposure to stressed NBFCs. Panic-stricken investors in debt mutual funds started pulling out their investments in these funds rapidly.</li>
<li>The redemption pressure faced by debt mutual funds is akin to a <strong>&ldquo;bank run&rdquo;</strong>, a situation when a large number of customers of a bank withdraw their deposits simultaneously over concerns of the bank's solvency.</li>
<li>Debt mutual funds, facing increasing redemptions, were hesitant to finance the NBFC sector. This, in turn, led to the difficulty of NBFCs to raise funds, which took a toll on the overall credit growth in the Indian economy and a decline in GDP growth. Thus, the redemption pressure gives rise to refinancing risk (rollover risk) for NBFCs.</li>
</ul>
<div class="border-bg">
<p><strong>Shadow Banking System</strong></p>
<ul style="list-style-type: square;">
<li>Shadow banking comprises a set of activities, markets, contracts and institutions that operate partially (or fully) outside the traditional commercial banking sector. These are either lightly regulated or not regulated at all.</li>
<li>A shadow banking system comprises entities that intermediate between end-suppliers and end-users of funds. However, they do not have explicit access to central bank liquidity and are highly levered with risky and illiquid assets.</li>
<li>There are three important segments of the shadow banking system in India - Non-Banking Housing Finance Companies (HFCs), Retail Non-Banking Financial Companies (Retail-NBFCs) and Liquid Debt Mutual Funds (LDMFs).</li>
</ul>
</div>
<h3>Conceptual Framework of Rollover Risk</h3>
<ul style="list-style-type: square;">
<li>NBFCs rely on short term financing to fund long-term investments. This reliance on short-term funding causes asset-liability management (ALM) problem because asset side shock reduces expected future cashflows for an NBFC, and thereby risk perceptions about the NBFC.</li>
<li>NBFCs raise capital in the short-term commercial paper (CP) market at a lower cost. The frequent repricing of CPs exposes NBFCs to the risk of facing higher financing costs and, in the worst case, <strong>credit rationing</strong>. Such refinancing risks are referred to as Rollover Risk.</li>
<li>When an asset-side shock reduces expected future cashflows for an NBFC, it adversely affects the ALM problem in the NBFC and thereby risk perceptions about the NBFC.</li>
<li>Such a shock amplifies the problems of NBFCs when the liability structure is <strong>over-dependent</strong> on short-term wholesale funding, which requires frequent refinancing.</li>
<li>The LDMF sector is a primary source of short-term wholesale funds in the NBFC sector. Thus, the NBFC sector is intricately connected with the LDMF sector. This interconnectedness is a channel for the transmission of <strong>systemic risk</strong> from the NBFC sector to the LDMF sector and vice-versa.</li>
<li>Shocks in the NBFC sector may lead to concerted redemptions by investors in the LDMF sector. Faced with this situation, LDMFs may withdraw funding to the NBFC sector when refinancing is due. It may lead to a liquidity crisis in the NBFC sector.</li>
<li>At the time of refinancing, the NBFCs having stronger balance sheets are successful in rolling over. NBFCs with weaker balance sheets face higher default probabilities.</li>
</ul>
<div class="border-bg">
<p><strong>Related Information</strong></p>
<ul style="list-style-type: square;">
<li><strong>Liquid Debt Mutual Funds</strong> are a category of debt mutual funds that invest in very short-term market instruments like treasury bills, government securities, and call money.</li>
<li><strong>Commercial paper</strong> is a short-term money-market security issued by large corporations to obtain funds to meet short-term debt obligations. It is not backed by collateral, only firms with excellent credit ratings are able to sell commercial paper.</li>
</ul>
</div>
<h3>Differences between HFCs and Retail-NBFCs</h3>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Housing Finance Companies (HFCs)</strong></span></td>
<td style="width: 50%; height: 19px; background-color: #0e92b3;"><span style="color: #ffffff;"><strong>Retail Non-Banking Financial Companies (Retail-NBFCs)</strong></span></td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">HFCs hold much longer duration assets (housing loans, developer loans, etc.).</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Retail-NBFCs, hold medium-term assets (auto, consumer durables, gold loans, etc.).</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">HFCs face a greater gap between the average maturity of their assets and liabilities.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Retail-NBFCs provide loans of shorter duration in the form of working capital loans to MSME, automobile financing loans or gold loans.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Asset side shocks cause significant deterioration in the asset-liability mismatch of the HFCs.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Asset side shocks induce less of an adverse impact on asset-liability mismatch of Retail-NBFCs.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">HFCs rely less on the short-term wholesale funding market and, thus, are less exposed to interconnectedness risk compared to Retail-NBFCs.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Due to their reliance on the short-term wholesale funding market Retail-NBFCs are more exposed to interconnectedness risk compared to HFCs.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Key drivers of Rollover Risk are <strong>ALM Risk</strong> and Financial and Operating Resilience.</td>
<td style="width: 50%; height: 19px; background-color: #cdf1fa;">Key drivers of Rollover Risk are <strong>Interconnectedness Risk</strong> and Financial and Operating Resilience.</td>
</tr>
</tbody>
</table>
<h3>Risks From Asset Liability Management (ALM) Mismatch</h3>
<ul style="list-style-type: square;">
<li>ALM risk arises in most financial institutions due to a <strong>mismatch</strong> in the <strong>duration of assets and liabilities</strong>.<strong> Liabilities are of much shorter duration than assets</strong> which tend to be of longer duration.</li>
<li>ALM risk arises if the future contractual <strong>cash inflows</strong> from loan assets are not enough to meet the future contractual <strong>cash outflows</strong> from debt obligations. ALM risk is more problematic for HFCs than the Retail-NBFC sector.</li>
<li>HFCs invest in significantly longer duration (15 to 20-year horizon) assets. HFCs&rsquo; short term liabilities (upto maturities of 3 years) are greater than their assets in these maturity buckets. Therefore, HFCs face significant rollover risk due to their ALM mismatch problem.</li>
<li>In contrast, for Retail-NBFCs, the assets are greater than their liabilities with respect to the profile of cashflows for all maturity buckets. The Rollover Risk stemming from ALM mismatch is, therefore, lower for Retail- NBFCs.</li>
</ul>
<h3>Risks From Interconnectedness</h3>
<ul style="list-style-type: square;">
<li>Interconnectedness Risk is a measure of the transmission of systemic risk between an NBFC and the LDMF sector.</li>
<li>First, if the LDMF sector holds concentrated positions of a specific stressed NBFC, it may lead to a greater redemption risk.</li>
<li>The average dependence of HFCs is lower than that of Retail-NBFCs.</li>
</ul>
<h3>Financial and Operating Resilience</h3>
<ul style="list-style-type: square;">
<li>Liquidity crunch in debt markets often leads to credit rationing. Credit rationing results when firms with robust financial and operating performance get access to credit while the less robust ones are denied credit.</li>
<li>Firms with robust financial and operating performance can withstand a prolonged period of liquidity crunch if they choose not to raise funds from debt mutual funds.</li>
<li>Measures of financial resilience of NBFCs are commercial paper (CP) as a percentage of borrowings, Capital Adequacy Ratio (CAR) and provisioning policy.</li>
<li>Measures of operating resilience are cash as a percentage of borrowings, loan quality and operating expense ratio (Opex Ratio).</li>
<li>From 2015-16 onwards, large and medium-sized Retail-NBFCs had lower operating resilience as compared to HFCs and small-sized NBFCs.</li>
</ul>
<h3>Health Score to Assess Financial Fragility</h3>
<ul style="list-style-type: square;">
<li>To estimate the financial fragility of the NBFC sector an Index called Health Score is developed. It ranges from -100 to +100 with the higher score indicating higher financial stability of the firm/sector.</li>
<li>ALM Risk and Financial and Operating Resilience are the most important constituents of the Health Score of HFCs.</li>
<li>Interconnectedness Risk between an NBFC and the LDMF sector and Financial and Operating Resilience are the most important constituents of Health Score of Retail-NBFCs.</li>
<li>The Health Score for the HFC sector exhibited a declining trend post 2014. By the end of FY2019, the health of the overall sector had worsened considerably.</li>
<li>The Health Score of the Retail-NBFC sector was consistently below par for the period 2014 till 2019.</li>
<li>Furthermore, the large Retail-NBFCs had higher Health Scores but among medium and small Retail- NBFCs, the medium size ones had a lower Health Score.</li>
<li>The Health Score can serve as a timely indicator of future performance of these firms. It can also be used by policy makers to allocate scarce capital to stressed NBFCs in an optimal way to alleviate a liquidity crisis.</li>
</ul>
<h2>PRIVATIZATION AND WEALTH CREATION</h2>
<p>The recent approval of strategic disinvestment in Bharat Petroleum Corporation Limited (BPCL) led to a huge increase in value of its shareholders&rsquo; equity. This reflected an increase in BPCL&rsquo;s overall firm value and thereby an increase in national wealth. Moreover, as stock markets reflect the current value of future cash flows of a firm, the increase in value reflected anticipated gains from consequent improvements in the efficiency of BPCL.</p>
<h3>Benefits of Privatization/Disinvestment</h3>
<ul style="list-style-type: square;">
<li>Central Public Sector Enterprises (CPSEs) are most likely to perform better in the private hands due to factors like <strong>technology up-gradation</strong> and <strong>efficient management practices</strong>. These in turn would <strong>create wealth for the economy</strong>.</li>
<li>A comparison shows that the performance of the privatized CPSE and its peers is quite similar till the year of privatization. However, post privatization, the <strong>performance of the privatized entity</strong> improves significantly when compared to the change in the peers&rsquo; performance.</li>
<li>Majority of privatized CPSEs witnessed improvement in net worth, net profit, gross revenue, net profit margin, sales growth in the post-privatization period compared to pre privatization period.</li>
<li>Moreover, disinvestment improves firms&rsquo; overall productivity and unlocks their potential to create wealth. This would have a multiplier effect on other sectors of the economy.</li>
<li>Disinvestment of CPSEs is required to bring in higher profitability, promote efficiency, increase competitiveness and to promote professionalism in management in CPSEs.</li>
<li>The focus of the strategic disinvestment needs to be exit from non-strategic business and directed towards optimizing economic potential of CPSEs.</li>
<li>This would, in turn, unlock capital for use elsewhere, especially in public infrastructure like roads, irrigation systems, railways and urban infrastructure. This would improve the efficient allocation of public resources.</li>
</ul>
<h3>Evolution of Disinvestment Policy in India</h3>
<ul style="list-style-type: square;">
<li>The 1991 liberalization reforms ushered in an increased demand for privatization/disinvestment of PSUs.</li>
<li>The government started off with disinvestment through the sale of minority stake in bundles through auction. This was followed by separate sales for each company in the following years, a method prevalent till 1999-2000.</li>
<li>The next phase began in 1999-2000 by <strong>strategic sale</strong> of substantial portions (up to 50 % or more) of Government shareholding in identified CPSEs, along with transfer of management control.</li>
<li>The next major shift in disinvestment policy was made in 2004-05 when it was decided that the government may dilute its equity and raise resources to meet the social needs of the people, a distinct departure from strategic sales.</li>
<li>Strategic Sales have got a renewed push after 2014. During the period of 2016-17 to 2018-19, on average, strategic sales accounted for around 28.2% of total proceeds from disinvestment.</li>
<li>In May 2016, the Department of Investment and Public Asset Management (DIPAM) has laid down comprehensive guidelines on Capital Restructuring of CPSEs:<br />
<ul style="list-style-type: circle;">
<li>Disinvestment through minority stake sale in listed CPSEs to achieve minimum public shareholding norms of 25%.</li>
<li>Listing of CPSEs to facilitate people&rsquo;s ownership and improve the efficiency of companies through accountability to its stakeholders.</li>
<li>Strategic Disinvestment.</li>
<li><strong>Buy-back of shares</strong> by large PSUs having huge surplus. It means a company repurchasing its own outstanding shares.</li>
<li>Merger and acquisitions among PSUs.</li>
<li>Launch of <strong>Exchange Traded funds (ETFs)</strong>, an equity instrument that tracks a particular Index. For example, CPSE ETF.</li>
<li>Monetization of select assets of CPSEs to improve their balance sheet/reduce their debts and to meet part of their capital expenditure requirements.</li>
</ul>
</li>
<li>NITI Aayog has been mandated to identify PSUs for strategic disinvestment. For this purpose, NITI Aayog has classified PSUs into <strong>high priority</strong> and <strong>low priority</strong>. The classification is based on national security, sovereign functions and public purpose. The PSUs falling under low priority are covered for strategic disinvestment.</li>
</ul>
<div class="border-bg">
<p><strong>The UK Model of Privatization</strong></p>
<ul style="list-style-type: square;">
<li>The British privatization programme started in 1980.</li>
<li><strong>Methods</strong><br />
<ul style="list-style-type: circle;">
<li>An <strong>Initial Public Offering (IPO)</strong> of all or a portion of company shares to private owners for the first time.</li>
<li>A direct sale or trade sale, which involves the sale of a company to an existing private company through negotiations or competitive bidding.</li>
<li>An employee or management buyout, which involves the sale of company shares to employees or managers.</li>
</ul>
</li>
<li>In most cases, British privatizations went hand-in-hand with reforms of regulatory structures.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Strategic disinvestment is guided by the basic economic principle that the Government should discontinue its engagement in manufacturing/producing goods and services in sectors where competitive markets have come of age.</li>
<li>The aim of any privatization or disinvestment programme should be the maximisation of the Government&rsquo;s equity stake value.</li>
<li>The Government can transfer its stake in the listed CPSEs to a separate corporate entity. This entity would be managed by an independent board and would be mandated to divest the Government stake in these CPSEs over a period of time.</li>
<li>This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs.</li>
</ul>
<h2>IS INDIA&rsquo;S GDP GROWTH OVERSTATED? NO!</h2>
<p>As investors deciding to invest in an economy care for the country&rsquo;s Growth in Gross Domestic Product (GDP), uncertainty about its magnitude can affect investment.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>To achieve the objective of becoming a $5 trillion economy by 2025, a strong investment climate is critical.</li>
<li>The level and growth of a country&rsquo;s GDP informs several critical policy initiatives as it is a barometer of the economy&rsquo;s size and health. It is also a pre-eminent driver of investment and a critical variable for decision-making by investors and policymakers.</li>
<li>Therefore, it is important that GDP is measured as accurately as possible. The recent debate about accuracy of India&rsquo;s GDP estimation following the revised estimation methodology in 2011 is extremely significant.</li>
</ul>
<h3>Change in the Base Year of the GDP Series</h3>
<ul style="list-style-type: square;">
<li>The Base Year of the <strong>GDP Series was revised from 2004-05 to 2011-12</strong> and released on 30 January 2015.</li>
<li>It was based on adaptation of the sources and methods in line with the <strong>System of National Accounts (SNA) 2008</strong>. Countries follow the SNA for the purpose of <strong>global standardization and comparability</strong>.</li>
<li>The SNA 2008 is the latest version of the international statistical standard for the national accounts, adopted by the <strong>United Nations Statistical Commission (UNSC)</strong> and is an update of the earlier 1993 SNA.</li>
<li>The SNA describes a coherent, consistent and integrated set of macroeconomic accounts in the context of a set of internationally agreed concepts, definitions, classifications and accounting rules.</li>
<li>In addition, the SNA provides an overview of economic processes, recording how production is distributed among consumers, businesses, government and foreign nations. It shows how income originating in production, modified by taxes and transfers, flows to these groups and how they allocate these flows to consumption, saving and investment.</li>
</ul>
<h3>Is GDP Misestimated?</h3>
<ul style="list-style-type: square;">
<li>The survey tried to estimate the inaccuracy, if any, in the GDP growth rate using the <strong>Difference-In-Difference (DID) methodology</strong> as implemented by other studies which calculated the misestimation.</li>
<li>After closely carrying-out <strong>cross country comparison under the DID methodology,</strong> the Survey found <strong>no evidence</strong> <strong>of misestimation of India&rsquo;s GDP growth</strong>. Cross-country data was gathered from the World Bank&rsquo;s <strong>World Development Indicators</strong>.</li>
<li>Cross-country comparisons are fraught with risks of incorrect inference. Thus, cross-country analysis has to be carefully undertaken so that correlation is distinguished from causality.</li>
</ul>
<h3>What the Economic Survey Concludes?</h3>
<ul style="list-style-type: square;">
<li>There are structural differences between the Indian economy and others. To illustrate, compared to other countries, India has very high informal sector employment and a large proportion of youth that is not in employment, education or training. Agriculture contributes disproportionately to India&rsquo;s employment whereas services contributes disproportionately to GDP.</li>
<li>All these variables undoubtedly affect GDP, but in indirect ways that cannot be easily measured or observed. Besides, institutional and legal structures are inherently different across countries, which affect countries in ways that cannot be measured directly.</li>
<li>The pattern of GDP growth in India is far more complex than what a few indicators of economic activity can predict, and therefore, asserting a mis-estimation based on these indicators alone is inappropriate.</li>
<li>At the same time, more work is needed to fully understand the determinants of India&rsquo;s growth rate over time. India has made impressive improvements in several social development indicators, such as access to nutrition and electricity, that might explain the higher growth rate in Indian GDP in the post-change period.</li>
<li>There is also a need to invest in ramping up India&rsquo;s statistical infrastructure. In this context, the setting up of the 28-member <strong>Standing Committee on Economic Statistics (SCES)</strong> headed by India&rsquo;s former Chief Statistician is important.</li>
</ul>
<div class="border-bg">
<p><strong>Difference-in-difference Method</strong></p>
<ul style="list-style-type: square;">
<li>It is a statistical technique that compares the changes in outcomes over time between the treatment group and the control group that is affected by the specific intervention such as a passage of law, enactment of policy, or large-scale program implementation.</li>
<li>It is typically used to mitigate the possibility of any extraneous factors affecting the estimated impact of an intervention.</li>
</ul>
</div>
<h2>THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA</h2>
<p>Economics affects the common lives of people in tangible ways but this fact often remains unnoticed. A plate of food is something that people encounter every day. Thus, Thalinomics: The economics of a plate of food in India can become a prudent way to make economics relate to the common people.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>As food is a necessity, a rapid rise in the price of a Thali has the most direct and conspicuous effect on the common man. Food and beverages constitute around 46% in the Consumer Price Index-Combined.</li>
<li>Thalinomics is an attempt to quantify what a common person pays for a Thali across India.</li>
<li>After 2015-16, the average household gained ₹10887 on average per year from the moderation in prices in the case of vegetarian Thali. Similarly, an average household that consumes two non-vegetarian Thalis gained around ₹11787 on average per year during the same period.</li>
</ul>
<h3>Affordability of Thali</h3>
<ul style="list-style-type: square;">
<li>The price of a Thali indicates the cost of consuming a healthy plate of food but knowing whether prices are increasing or decreasing is not sufficient to infer whether the common person is better-off or worse-off.</li>
<li>Hence, it is also important to see how the earnings of the individual have changed during the same period of time compared to the prices of a Thali.</li>
<li>After comparing the wages with Thali prices, it was found that the affordability of Thalis has increased over the years.</li>
<li>In terms of vegetarian Thali, it was found that an individual who would have spent around 70% of his/her daily wage on two Thalis in 2006- 07 is able to afford the same number of Thalis from around 50% of his daily wage in 2019-20.</li>
<li>Similarly, the affordability of non-vegetarian Thalis has also increased with the share of wages required decreasing from around 93% to around 79% between 2006-07 and 2019-20.</li>
<li>Many reform measures were introduced during the period of analysis to enhance the productivity of the agricultural sector as well as efficiency and effectiveness of agricultural markets for better and more transparent price discovery.</li>
</ul>
<table border="1" style="border-collapse: collapse;">
<tbody>
<tr style="height: 35px;">
<td style="width: 1809px; height: 10px; text-align: center; background-color: #0e92b3;" colspan="3"><span style="color: #ffffff;"><strong>Initiatives for Enhancing Productivity of Agriculture and Efficiency of Agricultural Markets</strong></span></td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;"><strong>Sl. No.</strong></td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;"><strong>Name of Scheme</strong></td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;"><strong>Description</strong></td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">01</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Pradhan Mantri Annadata Aay SanraksHan Abhiyan (PM-AASHA)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Covers three sub-schemes i.e. Price Support Scheme (PSS), Price Deficiency Payment Scheme (PDPS) and Pilot of Private Procurement &amp; Stockist Scheme (PDPS).</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">02</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) - Per Drop More Crop</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Focuses on enhancing water use efficiency through the expansion of cultivable area under assured irrigation, improve on-farm water use efficiency, enhance the adoption of precision-irrigation, enhance recharge of aquifers and introduce sustainable water conservation practices.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">03</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Pradhan Mantri Fasal Bima Yojana (PMFBY)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">To provide better insurance coverage for agricultural crops and thereby mitigate risk.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">04</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">Soil Health Card</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Provides farmers information on the nutrient status of their soil along with recommendation on appropriate dosage of nutrients to be used for their soil conditions.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">05</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">e-National Agricultural Market (e-NAM)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">An online trading platform for agricultural commodities for transparent price discovery.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">06</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">National Food Security Mission (NFSM)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">Seeks to increase the production of rice, wheat, pulses and coarse cereals.</td>
</tr>
<tr style="height: 19px;">
<td style="width: 78px; height: 19px; text-align: center; background-color: #d5f0f7;">07</td>
<td style="width: 515px; height: 19px; background-color: #d5f0f7;">National Food Security Act (NFSA)</td>
<td style="width: 1216px; height: 19px; background-color: #d5f0f7;">The Act legally entitles 67% of the population (75% in rural areas and 50% in urban areas) to receive highly subsidized food grains.</td>
</tr>
</tbody>
</table>
<h3>Conclusion</h3>
<ul style="list-style-type: square;">
<li>Food is not just an end in itself but also an essential ingredient in the growth of human capital and therefore important for national wealth creation.</li>
<li>Food security is essential to achieve &lsquo;Zero Hunger&rsquo; which has been agreed upon by nations of the world as a Sustainable Development Goal (SDG). This goal (SDG 2) is directly related to other SDGs such as Goal 1 (No poverty), Goal 4 (Quality Education), Goal 5 (Gender equality), Goal 12 (Responsible consumption and production), Goal 13 (Climate Action) and Goal 15 (Life on Land).</li>
</ul>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/gist-of-economic-survey/gist-of-economic-survey-2019-20/gist-of-economic-survey-2019-2020'
	],
	(int) 1 => [
		'title' => 'Katkari Tribe',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p><strong>Katkari tribal youth</strong> from Shahpur in<strong> Maharashtra</strong> are making a name by <strong>selling Giloy and other products online</strong> during lockdown.</p>
<ul style="list-style-type: square;">
<li>They received help under the <a href="/daily-updates/daily-news-analysis/van-dhan-internship-programme" target="_blank" rel="noopener"><strong>Pradhan Mantri Van Dhan Yojana (PMVDY)</strong></a> run by the <strong>Tribal Cooperative Marketing Development Federation of India</strong> (TRIFED).<br />
<ul style="list-style-type: circle;">
<li>TRIFED is a national level apex organisation functioning under the administrative control of the Ministry of Tribal Affairs.</li>
</ul>
</li>
<li><strong>Giloy</strong> <em>(Tinospora Cordifolia)</em> is an Ayurvedic herb that has been used and advocated in Indian medicine for ages..</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Katkari is one of <strong>the 75 <a href="/daily-updates/daily-news-analysis/particularly-vulnerable-tribal-groups" target="_blank" rel="noopener">Particularly Vulnerable Tribal Groups (PVTGs)</a>.</strong></li>
<li>Katkaris are <strong>located</strong> primarily in Raigad and in parts of Palghar, Ratnagiri and Thane districts of Maharashtra as well as in some places of Gujarat.</li>
<li>Katkaris were historically forest dwellers.<br />
<ul style="list-style-type: circle;">
<li>The name<strong> Katkari is derived from a forest-based activity &ndash;</strong> the making and bartering or sale of Catechu from the Khair tree <em>(Acacia Katechu)</em>.</li>
<li><strong>Catechu</strong> is an extract of acacia trees used variously as a food additive, dye, etc. It is extracted by boiling the wood in water and evaporating the resulting brew.</li>
</ul>
</li>
<li>The British administration had classified them under<strong> the Criminal Tribes Act, 1871.</strong><br />
<ul style="list-style-type: circle;">
<li>The Act described certain groups of people as &lsquo;habitually criminal&rsquo;. The stigma associated with the Act continues.</li>
</ul>
</li>
</ul>
<h3>Pradhan Mantri Van Dhan Yojana</h3>
<ul style="list-style-type: square;">
<li>Pradhan Mantri Van Dhan Yojana (PMVDY) is a <strong>retail marketing led value addition plan for Minor Forest Produce (MFP),</strong> meant for forest-based tribes to optimize the tribal income, locally. <br />
<ul style="list-style-type: circle;">
<li>MFP <strong>means all non-timber forest produce of plant origin</strong> and includes <strong>bamboo, canes, fodder, leaves, gums, waxes, dyes, resins and many forms of food including nuts, wild fruits, honey, lac, tusser etc.</strong></li>
<li>It provides both <strong>subsistence and cash income</strong> for people who live in or near forests. They form a major portion of their food, fruits, medicines and other consumption items and also provide cash income through sales.</li>
</ul>
</li>
<li>Under the program, MFP-based tribal groups / enterprises of around 300 members are formed for collection, value addition, packaging &amp; marketing of Minor Forest Produces (MFPs).<br />
<ul style="list-style-type: circle;">
<li>These tribal enterprises are in the form of <strong>Van Dhan Self Help Groups (SHGs)</strong> which is a group of 15-20 members and such 15 SHG groups will further be federated into a larger group of <strong>Van Dhan Vikas Kendras (VDVKs)</strong> of around 300 members.</li>
</ul>
</li>
<li>TRIFED supports the VDVKs through providing them with model business plans, processing plans &amp; tentative list of equipment for carrying out the value addition work of MFPs.</li>
</ul>
<p><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1626550" target="_blank" rel="noopener"><strong>Source:PIB</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/katkari-tribe'
	],
	(int) 2 => [
		'title' => 'Increased Chinese Transgression',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, there has been a marked increase in the number of <strong>Chinese transgressions</strong> across the disputed India-China border in Ladakh.</p>
<ul style="list-style-type: square;">
<li>In Ladakh, a<strong> surge of 75%</strong> have been observed in <strong>2019</strong> compared to 2018 and the <strong>first four months of 2020</strong> have also witnessed an<strong> increase</strong> compared to 2019.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Chinese Transgression:</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>border</strong> between India and China is<strong> not fully demarcated</strong> and the <a href="/daily-updates/daily-news-analysis/india-china-3" target="_blank" rel="noopener"><strong>Line of Actual Control</strong></a> (LAC) is neither clarified nor confirmed by the two countries.</li>
<li>This leads to different perceptions of the LAC for the two sides while soldiers from either side try to patrol the area.</li>
<li><strong>Observation Methods:</strong> Use of surveillance equipment, face-offs by patrols, reliable indications by locals, or evidence left by the Chinese in the form of wrappers, biscuit packets etc. in an unmanned area.</li>
<li>Official data shows that <strong>80%</strong> of Chinese transgressions across the LAC since 2015 have taken place in<strong> four locations</strong> of which <strong>three are in eastern Ladakh</strong> in the western sector.<br />
<ul style="list-style-type: disc;">
<li>These areas of eastern Ladakh are <strong>Pangong Tso, Trig Heights and Burtse.</strong></li>
<li>The fourth area is the <strong>Dichu Area/Madan Ridge area</strong> (Arunachal Pradesh) of the Eastern sector.</li>
</ul>
</li>
<li><strong>Implications of Increased Number of Transgressions:</strong><br />
<ul style="list-style-type: disc;">
<li>It is an indicator of<strong> increased Chinese assertiveness.</strong></li>
<li>Even if there are no major incidents, it should not be taken lightly.</li>
<li>So far, there has been <strong>no major standoff</strong> between the two sides after the 73-day <a href="/loksabha-rajyasabha-discussions/india-s-world-pm-modi-s-visit-to-bhutan" target="_blank" rel="noopener"><strong>Doklam standoff</strong></a> on Sikkim-Bhutan border in 2017.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Different Sectors of India-China Border</strong></p>
<ul style="list-style-type: square;">
<li>India and China share a boundary that stretches<strong> 3,488 km</strong> from <strong>Ladakh to Arunachal Pradesh.</strong></li>
<li>The <a href="/to-the-points/Paper2/disputed-territories-of-india" target="_blank" rel="noopener"><strong>border dispute</strong></a> still stands <strong>unresolved.</strong></li>
<li>It is <strong>divided into three sectors:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Western Sector:</strong> It falls in the Union Territory (UT) of Ladakh and is 1597 km long.<br />
<ul style="list-style-type: disc;">
<li>It witnesses the highest <strong>transgressions between</strong> the two sides.</li>
</ul>
</li>
<li><strong>Middle Sector:</strong> It falls in Uttarakhand and Himachal Pradesh and is 545 km long.<br />
<ul style="list-style-type: disc;">
<li>It is the<strong> least disputed</strong> sector between the two countries.</li>
</ul>
</li>
<li><strong>Eastern Sector:</strong> It falls in the states of Sikkim and Arunachal Pradesh and is 1346 km long.</li>
</ul>
</li>
</ul>
</div>
<h3>Concerns</h3>
<ul style="list-style-type: square;">
<li>India is worried about the <a href="/daily-updates/daily-news-analysis/face-off-between-india-and-china" target="_blank" rel="noopener"><strong>tensions at Naku La in Sikkim and at Galwan river and Pangong Tso in Ladakh.</strong></a></li>
<li>The increased transgressions lead to <strong>more tensions</strong> between both countries which are already struggling to contain the <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong></a> <a href="/daily-updates/daily-news-analysis/covid-19-now-pandemic-who" target="_blank" rel="noopener">pandemic</a>.</li>
<li><a href="/daily-updates/daily-news-analysis/india-nepal-on-kailash-mansarovar-link-road" target="_blank" rel="noopener"><strong>Nepal&rsquo;s recent behaviour on the Mansarovar Link Road</strong></a> raising the <a href="/daily-updates/daily-news-editorials/indo-nepal-territorial-dispute" target="_blank" rel="noopener"><strong>border map issue</strong></a> also raises Indian concerns.</li>
<li>The <strong>constant accusations</strong> on each other also cause tensions and disrupt the peace on borders.<br />
<ul style="list-style-type: circle;">
<li>Recently, Chinese media accused India of building defence facilities in the <strong>Galwan Valley region</strong> of the contested <a href="/daily-updates/daily-news-analysis/aksai-chin" target="_blank" rel="noopener"><strong>Aksai Chin</strong></a> <strong>area.</strong></li>
</ul>
</li>
<li>India and China are both <strong>nuclear-armed countries</strong> with<strong> strong militaries</strong> and the constant border conflicts are not a desirable thing.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>In the <a href="/loksabha-rajyasabha-discussions/the-big-picture-india-china-ties-marching-on" target="_blank" rel="noopener"><strong>Wuhan</strong></a> <strong>and <a href="/daily-updates/daily-news-analysis/india-china-2nd-informal-summit-mamallapuram-summit" target="_blank" rel="noopener">Mahabalipuram</a> summits,</strong> both China and India had <strong>reaffirmed</strong> that they will make efforts to <strong>ensure peace and tranquility in the border</strong> areas.</li>
<li>On 1<sup>st</sup> April, 2020 <a href="/daily-updates/daily-news-analysis/india-china-70-years-of-diplomatic-relations" target="_blank" rel="noopener"><strong>India and China completed their 70 years of diplomatic relations.</strong></a></li>
<li>Both countries have <strong>resolved border issues peacefully in the past</strong> four decades which gives the <strong>hope</strong> that the tensions will subside soon.</li>
<li><strong>Establishment of peace</strong> between the two big powers of such an<strong> important geopolitical region</strong> is essential for their own<strong> growth and development</strong> as well as for<strong> maintenance of global peace.</strong></li>
</ul>
<p><a href="https://indianexpress.com/article/explained/chinese-transgressions-ladakh-line-of-actual-control-6421855/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/increased-chinese-transgression'
	],
	(int) 3 => [
		'title' => 'India-Nepal Border Dispute',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, Nepal has released a<strong> new political map that claims Kalapani, Limpiyadhura and Lipulekh of Uttarakhand as part of Nepal&rsquo;s territory.</strong> The area of <strong>Susta (West Champaran district, Bihar)</strong> can also be noted in the new map.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>India rejected the new map of Nepal</strong> saying that Nepal's new map involves artificial enlargement of territories, which is <strong>not based on historical facts and evidence.</strong> <br />
<ul style="list-style-type: circle;">
<li>Nepal&rsquo;s act is an unilateral act and is contrary to the bilateral understanding to resolve the outstanding boundary issues through diplomatic dialogue.</li>
</ul>
</li>
<li>India has urged the Government of Nepal <strong>to refrain from such an unjustified cartographic assertion</strong> and <strong>respect India&rsquo;s sovereignty and territorial integrity.</strong></li>
<li>India has also asked Nepal <strong>to return to dialogue.</strong></li>
<li>Nepal&rsquo;s move came after India&rsquo; Defence Minister recently <a href="/daily-updates/daily-news-analysis/india-nepal-on-kailash-mansarovar-link-road" target="_blank" rel="noopener"><strong>inaugurated a motorable link road</strong></a> that connects <strong>India and China,</strong> significantly reducing the time of Kailash Mansarovar Yatra.<br />
<ul style="list-style-type: circle;">
<li>The road passes through territory at the Lipulekh pass that Nepal claims as its own territory.</li>
<li>Earlier, Nepal had protested strongly against India, when India published <a href="/daily-updates/daily-news-analysis/kalapani-territory" target="_blank" rel="noopener"><strong>a new map which showed the region of Kalapani as part of the Indian territory.</strong></a></li>
<li>Nepal had also expressed <strong>displeasure on the 2015 agreement between India and China</strong> for using the Lipulekh pass for trade, without consulting Nepal.</li>
</ul>
</li>
</ul>
<h3>Border Dispute Between India and Nepal</h3>
<ul style="list-style-type: square;">
<li>Currently, India and Nepal have border disputes over <strong>Kalapani - Limpiyadhura - Lipulekh trijunction between India-Nepal and China</strong> and<strong> Susta area (West Champaran district, Bihar).</strong></li>
<li><strong>Kalapani Region:</strong> <br />
<ul style="list-style-type: circle;">
<li>Kalapani is a valley that is administered by India as a part of the Pithoragarh district of Uttarakhand. It is situated on the Kailash Mansarovar route.<br />
<ul style="list-style-type: disc;">
<li>Kalapani is advantageously located at a height of over 20,000 ft and serves as an observation post for that area.</li>
</ul>
</li>
<li>The <a href="/daily-updates/daily-news-analysis/india-nepal-on-kailash-mansarovar-link-road" target="_blank" rel="noopener"><strong>Kali River</strong></a> in the<strong> Kalapani region</strong> demarcates the border between India and Nepal.<br />
<ul style="list-style-type: disc;">
<li>The <strong>Treaty of Sugauli</strong> signed by the<strong> Kingdom of Nepal and British India</strong> (after <strong>Anglo-Nepalese War</strong>) in <strong>1816</strong> located the Kali River as Nepal's western boundary with India.</li>
</ul>
</li>
<li>The discrepancy in locating the <strong>source of the Kali river</strong> led to boundary disputes between India and Nepal, with each country producing maps supporting their own claims.</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590235590_image1.png" target="_blank" rel="noopener"><img width="639" height="408" class="content-img" style="display: block; margin-left: auto; margin-right: auto;" src="http://www.drishtiias.com/images/uploads/1590235590_image1.png" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Susta Region:</strong> <br />
<ul style="list-style-type: circle;">
<li>The <strong>change of course by the Gandak river</strong> is the main reason for disputes in the Susta area.</li>
<li>Susta is located on the bank of the<strong> Gandak river.</strong><br />
<ul style="list-style-type: disc;">
<li>It is called Narayani river in Nepal.</li>
<li>It joins Ganga near Patna, Bihar.</li>
</ul>
</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590235616_image3.png" target="_blank" rel="noopener"><img width="639" class="content-img" style="display: block; margin-left: auto; margin-right: auto;" src="http://www.drishtiias.com/images/uploads/1590235616_image3.png" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Nepal&rsquo;s Stand:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Kali river originates from a stream at Limpiyadhura, north-west of Lipu Lekh.</strong> Thus Kalapani, and Limpiyadhura, and Lipu Lekh, fall to the east of the river and are part of Nepal&rsquo;s Dharchula district.</li>
<li>Lipulekh was deleted from the country&rsquo;s map by the kings to get favours from India.</li>
<li style="box-sizing: border-box;">The territory of <strong style="box-sizing: border-box; font-weight: bold;">Kalapani was offered to India by King Mahendra</strong> after the 1962 India-China war who wanted to help India&rsquo;s security concerns due to perceived lingering Chinese threats.
<ul style="list-style-type: disc;">
<li style="box-sizing: border-box;">Kalapani was <strong style="box-sizing: border-box; font-weight: bold;">not a part of Nepal-India dispute.</strong> It was Nepal&rsquo;s territory that the king had allowed India to use temporarily</li>
</ul>
</li>
<li>The new map is in fact a document that was in circulation in Nepal till the 1950s.</li>
</ul>
</li>
<li><strong>India&rsquo;s Stand:</strong> <br />
<ul style="list-style-type: circle;">
<li>Kali river originates in springs well below the<strong> Lipu-lekh pass, </strong>and <strong>the Sugauli Treaty does not demarcate the area north of these streams.</strong></li>
<li>The administrative and revenue <strong>records of the nineteenth century also show that Kalapani was on the Indian side,</strong> and counted as part of Pithoragarh district of Uttarakhand.</li>
</ul>
</li>
<li><strong>Efforts to Solve Border Dispute:</strong><br />
<ul style="list-style-type: circle;">
<li>In the 1980s, the two sides set up the<strong> Joint Technical Level Boundary Working Group</strong> to delineate the boundary. <br />
<ul style="list-style-type: disc;">
<li>The group demarcated everything except Kalapani and Susta area.</li>
</ul>
</li>
<li>Officially, <strong>Nepal brought the issue of Kalapani before India in 1998.</strong> Both sides agreed to demarcate the outstanding areas (including Kalpani) by 2002 at the prime ministerial level talk held in 2000. But that has not happened yet.</li>
</ul>
</li>
<li><strong>Issues Involved:</strong><br />
<ul style="list-style-type: circle;">
<li>Nepal's <strong>deliberate effort to make the Lipu-Lekh Pass a disputed tri-junction</strong> (between India-China and Nepal) in which Nepal has an equal share.</li>
<li>India perceives <strong>Nepal to be tilting towards China</strong> under the leadership of Prime Minister K P Oli and his Nepal Communist Party.</li>
<li>Despite the open border between both countries and the people to people contact, <strong>the levels of distrust in Nepal about India have only increased.</strong></li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Given the <strong>importance of ties with Nepal,</strong> often romanticised as one of &ldquo;roti-beti&rdquo; (food and marriage), India must not delay dealing with the matter, and at a time<strong> when it already has a faceoff with China in Ladakh and Sikkim.</strong></li>
<li>Since the free movement of people is permitted across the border, Nepal enjoys immense strategic relevance from India&rsquo;s national security point of view, as terrorists often use Nepal to enter India.<br />
<ul style="list-style-type: circle;">
<li>Therefore,<strong> stable and friendly relations with Nepal</strong> is one of prerequisites which India can&rsquo;t afford to overlook.</li>
</ul>
</li>
<li>India should also try to convey to Nepal&rsquo;s leadership about the congenial and friendly environment that 6 to 8 million Nepali citizens living in India enjoy.
<ul style="list-style-type: circle;">
<li>Therefore, Any thoughtless erosion of this centuries old togetherness may prove difficult for both countries.</li>
</ul>
</li>
<li>The existing bilateral treaties between India and Nepal have not taken the shifting of Himalayan rivers into consideration. A primary reason for this is the lack of an approach where ecological concerns and needs of rivers are often discussed.<br />
<ul style="list-style-type: circle;">
<li>Therefore, India and Nepal should try to resolve the boundary dispute by taking into account all shared environmental characteristics.</li>
</ul>
</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/nepals-new-political-map-claims-indias-territories/article31632033.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/india-nepal-border-dispute'
	],
	(int) 4 => [
		'title' => 'Open Skies Treaty',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the United States of America (USA) has announced that it will exit the <strong>Open Skies Treaty (OST)</strong> due to continuous violation of the treaty by Russia and changes in the security environment.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>It is expected to formally pull out of Open Skies in six months.</li>
<li><strong>USA&rsquo;s Stand:</strong> The USA has blamed Russia for restricting US flyovers in neighbour Georgia and its military enclave in Kaliningrad (Russia). <br />
<ul style="list-style-type: circle;">
<li>Russia misused its flights over the US and Europe to identify critical infrastructure for potential attack in a time of war.</li>
<li>Russia intends to annex the Crimean peninsula and has designated an Open Skies refueling airfield in the region.</li>
<li>Yet, the USA has expressed willingness to make a new agreement.</li>
</ul>
</li>
<li><strong>Russia&rsquo;s Stand:</strong> Russia has denied the allegations and warned that the withdrawal will affect the interests of all of 35 participating countries.<br />
<ul style="list-style-type: circle;">
<li>However, Russia intended to fully follow all the rights and obligations under the treaty as long as the treaty is in force.</li>
</ul>
</li>
<li>It can be noted that the USA has used the treaty more intensively than Russia. <br />
<ul style="list-style-type: circle;">
<li>Between 2002 and 2016, the U.S. flew 196 flights over Russia compared to the 71 flights flown by Russia.</li>
</ul>
</li>
<li>This move by the USA has further deepened doubts on extension of the <a href="/daily-updates/daily-news-analysis/new-start-treaty" target="_blank" rel="noopener"><strong>New START treaty</strong></a>, which expires in February, 2021.</li>
<li>Throughout its term, the Trump administration has been skeptical of arms control agreements. In 2019, the U.S. and Russia walked away from the <strong><a href="/daily-updates/daily-news-analysis/important-facts-for-prelims-2nd-february-2019" target="_blank" rel="noopener">1987 Intermediate-Range Nuclear Forces Treaty.</a></strong></li>
</ul>
<div class="border-bg">
<p><strong>Open Skies Treaty</strong></p>
<ul style="list-style-type: square;">
<li>It was signed in 1992 and came into effect in 2002.</li>
<li>It is an agreement that allows its 34 signatories countries to monitor arm development by conducting<strong> surveillance flights (unarmed)</strong> over each other&rsquo;s territories.</li>
<li>Therefore, the<strong> treaty established an aerial surveillance system</strong> for its participants.</li>
<li>Both US and Russia are signatories of the treaty.</li>
<li>India is not a member of this treaty.</li>
</ul>
<p><strong>Intermediate-Range Nuclear Forces Treaty</strong></p>
<ul style="list-style-type: square;">
<li>It was a nuclear arms-control accord reached by the United States and the Soviet Union <strong>in 1987</strong> in which the two nations agreed to eliminate<strong> their stocks of intermediate-range and shorter-range (or &ldquo;medium-range&rdquo;)</strong> land-based missiles (which could carry nuclear warheads).</li>
<li>It also covered all land-based missiles, including those carrying nuclear warheads but <strong>did not cover sea-launched missiles.</strong></li>
<li>The United States withdrew from the Treaty on 2<sup>nd</sup> August 2019.</li>
</ul>
<p><strong>New START Treaty</strong></p>
<ul style="list-style-type: square;">
<li>The new <strong>Strategic Arms Reduction Treaty (START)</strong> is a treaty between the United States of America and the Russian Federation on measures for the further reduction and limitation of strategic offensive arms.</li>
<li>It entered into force on 5<sup>th</sup> February, 2011.</li>
<li>It is a successor to the START framework of 1991 (at the end of the Cold War) that limited both sides to 1,600 strategic delivery vehicles and 6,000 warheads.</li>
<li>The USA has been worried that extending New Start would negatively impact an arms deal with China and Russia.</li>
<li>It is concerned that China&rsquo;s nuclear stockpile could be doubled if the New Start Treaty continued as is, without including China.</li>
<li>The New Start Treaty also suffered from verification inadequacies and that the U.S. intended to <strong>establish a new arms control regime which would include China.</strong></li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/international/will-exit-open-skies-treaty-announces-us/article31653173.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/open-skies-treaty'
	],
	(int) 5 => [
		'title' => 'MGNREGA and Migrant Crisis',
		'catname' => 'News Editorials',
		'desc' => '<div class="border">
<p>This article is based on &ldquo;<a href="https://indianexpress.com/article/opinion/columns/india-lockdown-rural-distress-coronavirus-a-moment-to-revive-mgnrega-6421558/" target="_blank" rel="noopener"><strong>Additional allocation for MGNREGA must be supplemented with steps to make it more effective</strong></a>&rdquo; published in The Indian Express on 22/05/2020. It talks about the importance of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, 2005) during the economic crisis emanating from Covid-19 pandemic.</p>
</div>
<p>The virtual shutdown of all economic activities due to <a href="/daily-updates/daily-news-editorials/covid-19-and-india-1" target="_blank" rel="noopener"><strong>Covid-19 pandemic</strong></a> has resulted in a massive loss of livelihoods. Nearly 400-million workforce in the unorganised sector has been one of the worst affected sections of society.</p>
<p>Further, a significant part of this workforce has reverse migrated from cities to rural areas. In order to address this migrant crisis, the government has allocated an additional fund of Rs 40,000 crore for <a href="/daily-updates/daily-news-analysis/sub-group-of-chief-ministers-on-coordination-between-mgnrega-and-agriculture" target="_blank" rel="noopener"><strong>MGNREGA</strong></a>, as part of the stimulus package under <a href="/daily-updates/daily-news-analysis/atmanirbhar-bharat-and-economic-stimulus" target="_blank" rel="noopener"><strong>Atma Nirbhar Bharat Abhiyan.</strong></a></p>
<p>With nearly eight crore migrant workers returning to their villages and an additional allocation of funds could be a moment for the true revival of MGNREGA. However, in order to utilise the true potential of this scheme, there is a need to address the underlying challenges of MGNREGA.</p>
<h3>Key Features of MGNREGA</h3>
<ul style="list-style-type: square;">
<li>MGNREGA is one of the <strong>largest work guarantee programmes in the world.</strong></li>
<li><strong>Objective:</strong> The primary objective of the scheme is to guarantee 100 days of employment in every financial year to adult members of any rural household willing to do public work-related unskilled manual work.</li>
<li><strong>Legal Right to Work:</strong> Unlike earlier employment guarantee schemes, the act aims at addressing the causes of chronic poverty through a rights-based framework.<br />
<ul style="list-style-type: circle;">
<li>At least one-third of beneficiaries have to be women.</li>
<li>Wages must be paid according to the statutory minimum wages specified for agricultural labourers in the state under the <a href="/daily-updates/daily-news-editorials/labour-laws-and-covid-19" target="_blank" rel="noopener"><strong>Minimum Wages Act, 1948.</strong></a></li>
</ul>
</li>
<li><strong>Demand-Driven Scheme:</strong> The most important part of MGNREGA&rsquo;s design is its legally-backed guarantee for any rural adult to get work within 15 days of demanding it, failing which an &lsquo;unemployment allowance&rsquo; must be given.<br />
<ul style="list-style-type: circle;">
<li>This demand-driven scheme enables the self-selection of workers.</li>
</ul>
</li>
<li><strong>Decentralised planning:</strong> There is an emphasis on strengthening the process of decentralisation by giving a significant role in <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/panchayati-raj-institution-pri" target="_blank" rel="noopener"><strong>Panchayati Raj Institutions (PRIs)</strong></a> in planning and implementing these works.<br />
<ul style="list-style-type: circle;">
<li>The act mandates Gram sabhas to recommend the works that are to be undertaken and at least 50% of the works must be executed by them.</li>
</ul>
</li>
</ul>
<h3>Underlying Challenges</h3>
<ul style="list-style-type: square;">
<li><strong>Inadequate Financing:</strong> This year&rsquo;s allocation is the highest allocation for MGNREGA in any year since the passage of the law. <br />
<ul style="list-style-type: circle;">
<li>However, the allocation amounts to 0.47% of the GDP continues to be much lower than the World Bank recommendations of 1.7% of GDP for the optimal functioning of the programme.</li>
<li>Due to lack of funds, state governments find it difficult to meet the demand for employment under MGNREGA.</li>
</ul>
</li>
<li><strong>Delay in Payment of wages:</strong> Most states have failed to disburse wages within 15 days as mandated by MGNREGA. In addition, workers are not compensated for a delay in payment of wages.<br />
<ul style="list-style-type: circle;">
<li>This has turned the scheme into a supply-based programme and subsequently, workers had begun to lose interest in working under it.</li>
</ul>
</li>
<li><strong>Ineffective Role of PRI:</strong> With very little autonomy, gram panchayats are not able to implement this act in an effective and efficient manner.</li>
<li><strong>Large Number of Incomplete works:</strong> There has been a delay in the completion of works under MGNREGA and inspection of projects has been irregular. Also, there is an issue of quality of work and asset creation under MGNREGA.</li>
<li><strong>Fabrication of Job cards:</strong> There are several issues related to the existence of fake job cards, the inclusion of fictitious names, missing entries and delays in making entries in job cards.</li>
</ul>
<h3>Way Forward</h3>
<p><strong>Short-Term Measures</strong></p>
<ul style="list-style-type: square;">
<li>State governments must ensure that public work gets started in every village. Workers turning up at the worksite should be provided work immediately, without much delay.</li>
<li>Local bodies must proactively reach out to returned and quarantined migrant workers and help those in need to get job cards.</li>
<li>Adequate facilities such as soap, water, and masks for workers must be provided free of cost, at the worksite.</li>
<li>At this time, there is a need to speed up the payments to MGNREGA workers. Preferably, cash needs to reach the workers easily and efficiently.</li>
</ul>
<p><strong>Long-Term Measures</strong></p>
<ul style="list-style-type: square;">
<li>The pandemic has demonstrated the importance of decentralised governance. <br />
<ul style="list-style-type: circle;">
<li>Gram panchayats need to be provided with adequate resources, powers, and responsibilities to sanction works, provide work on demand, and authorise wage payments to ensure there are no delays in payments.</li>
</ul>
</li>
<li>MGNREGA should be converged with other schemes of the government. For example, Green India initiative, Swachh Bharat Abhiyan etc.</li>
<li>Social Auditing creates accountability of performance, especially towards immediate stakeholders. Hence, there is a need to to create awareness regarding government policies and measures in rural areas.</li>
</ul>
<p>MGNREGA is a bottom-up, people-centred, demand-driven, self-selecting and rights-based programme. Thus, MGNREGA remains crucial for integrated resource management and livelihoods generation perspective.</p>
<p><a href="http://www.drishtiias.com/images/uploads/1590232365_image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590232365_image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #fff5eb;">
<p><span style="color: #000080;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>MGNREGA remains crucial for integrated resource management and livelihoods generation perspective. Comment.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/K-Ve_G7tckE" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p><span style="font-weight: 400;">This editorial is based on <a href="https://www.thehindu.com/opinion/editorial/keeping-the-peace-the-hindu-editorial-on-india-china-border-tension/article31643986.ece" target="_blank" rel="noopener"><strong>&rdquo;</strong></a></span><a href="https://www.thehindu.com/opinion/editorial/keeping-the-peace-the-hindu-editorial-on-india-china-border-tension/article31643986.ece" target="_blank" rel="noopener"><strong>Keeping the peace: On India-China border tension</strong></a><span style="font-weight: 400;"><a href="https://www.thehindu.com/opinion/editorial/keeping-the-peace-the-hindu-editorial-on-india-china-border-tension/article31643986.ece" target="_blank" rel="noopener"><strong>&rdquo;</strong></a> which was published in The Hindu on May 22<sup>nd</sup>, 2020. Now watch this on our Youtube channel.</span></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-editorials/mgnrega-and-migrant-crisis'
	],
	(int) 6 => [
		'title' => 'Covid-19 Halts Global Vaccination Programme',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>As per the report released by the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/world-health-organization-who" target="_blank" rel="noopener"><strong>World Health Organisation (WHO)</strong></a> and partners, <strong>nearly 80 million children under the age of 1 are at risk of contracting deadly but vaccine preventable diseases</strong> such as <a href="/daily-updates/daily-news-analysis/measles-2" target="_blank" rel="noopener"><strong>measles</strong></a>, <strong><a href="/daily-updates/daily-news-analysis/world-polio-day" target="_blank" rel="noopener">polio</a></strong> and diphtheria.</p>
<ul style="list-style-type: square;">
<li>This is so because many countries have <strong>postponed their vaccine campaigns due to <a href="/daily-updates/daily-news-editorials/covid-19-and-india-1" target="_blank" rel="noopener">Covid-19</a>.</strong></li>
<li>The report has come <strong>ahead of the Global Vaccine Summit on 4<sup>th</sup> June,</strong> at which world leaders are expected to come together to help maintain immunization programmes and mitigate the impact of the pandemic in lower-income countries.<br />
<ul style="list-style-type: circle;">
<li>The Summit will provide <strong>an opportunity for the international community to pledge its support for Gavi&rsquo;s five-year strategy (2021-2025)</strong> which is aimed at immunizing 300 million children and saving up to 8 million lives.</li>
</ul>
</li>
<li>The <a href="/important-institutions/drishti-specials-important-institutions-international-institution/unicef-1" target="_blank" rel="noopener"><strong>United Nations Children's Fund (UNICEF)</strong></a>, the Sabin Vaccine Institute (Washington, USA), and <a href="/daily-updates/daily-news-analysis/pneumococcal-conjugate-vaccine" target="_blank" rel="noopener"><strong>Global Alliance for Vaccines and Immunizations (Gavi)</strong></a>, are the partner organisations.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Data:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>More than half (53%) of the 129 countries</strong> where data were available reported <strong>moderate-to-severe disruptions, or a total suspension of vaccination services</strong> during March-April 2020.</li>
</ul>
</li>
<li><strong>Reasons for the disruption:</strong><br />
<ul style="list-style-type: circle;">
<li>Vaccination, which is typically done in mass campaigns, has been stopped due to <strong>fear of breaking social distancing guidelines</strong> needed to stop the spread of Covid-19.</li>
<li><strong>Health workers</strong> who provide vaccinations have also been<strong> diverted to help with the response to the pandemic.</strong></li>
<li>Also, there has been a<strong> significant delay in planned vaccine deliveries</strong> due to lockdown measures and reduction in the number of available flights. <br />
<ul style="list-style-type: disc;">
<li>More than 40 of Africa's 54 nations have closed their borders, though some allow cargo and emergency transport.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Concerns:</strong><br />
<ul style="list-style-type: circle;">
<li>Disruption to immunization programs from the Covid-19 pandemic threatens to undo decades of progress against vaccine-preventable diseases like Measles, Polio and Diphtheria.</li>
<li>According to the experts, children need routine immunizations before the age of 2.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Immunization</strong></p>
<ul style="list-style-type: square;">
<li>It is the process whereby a person is made immune or resistant to an infectious disease, typically by the administration of a vaccine.</li>
<li><strong>Functioning:</strong><br />
<ul style="list-style-type: circle;">
<li>A vaccine usually consists of two parts and is usually given through an injection. The first part is the<strong> antigen,</strong> which is a piece of disease one&rsquo;s body must learn to recognise. The second part is the <strong>adjuvant,</strong> which sends a danger signal to the body and helps the immune system to respond strongly against the antigen.</li>
<li>In simple terms, vaccines work by exposing a person to a safer version of a disease. While the body responds to the vaccine, it builds <strong>an adaptive immune system,</strong> which helps the body to fight off the actual infection in the future.</li>
</ul>
</li>
<li>According to the WHO, vaccination prevents between<strong> two-three million deaths each year,</strong> a figure that will rise by another 1.5 million if vaccine coverage improves.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>There is an urgent need to focus upon the <strong>Global Vaccine Action Plan 2011-2020</strong> that is a framework to prevent millions of deaths by 2020 through more equitable access to existing vaccines for people in all communities.</li>
<li>It is equally important for the countries to give importance to the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/united-nations-1" target="_blank" rel="noopener">United Nations</a> <strong><a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener">Sustainable Development Goal</a></strong>&nbsp;<strong>3</strong> i.e. Good Health and Well being.</li>
<li>There is a need for an immediate action plan to restart the vaccination programmes through better health infrastructure and medical equipment during the corona crisis.</li>
<li>Countries should start efforts at individual level e.g. India can expedite the vaccination programmes under the <a href="/daily-updates/daily-news-analysis/mission-indradhanush-1" target="_blank" rel="noopener"><strong>Mission Indardhanush.</strong></a></li>
</ul>
<p><strong><a href="https://health.economictimes.indiatimes.com/news/industry/pandemic-halts-vaccination-for-nearly-80-million-children/75907136" target="_blank" rel="noopener">Source: ET</a></strong></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/covid-19-halts-global-vaccination-programme'
	],
	(int) 7 => [
		'title' => 'Plan for Calamity Cess on GST',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>The Central Government is considering imposing a <strong>calamity cess</strong> on <a href="/daily-updates/daily-news-analysis/fall-in-goods-and-services-tax-gst-collections" target="_blank" rel="noopener"><strong>Goods and Services Tax (GST)</strong></a>, similar to the one introduced by Kerala in 2019, to deal with the economic crisis triggered by the <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>coronavirus</strong></a> pandemic.</p>
<ul style="list-style-type: square;">
<li>The Central government is planning to raise additional revenue by imposing cess on GST, excluding goods and services in the 5% slab.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Kerala introduced a <strong>disaster relief cess</strong> following the monsoon floods of 2018. It imposed a 1% calamity cess on GST for a period of two years applicable from 1<sup>st</sup> August, 2019.</li>
<li>It is the only state to have levied such a cess using the <strong>Constitutional provision, Section (4) (f) of Article 279 A.</strong><br />
<ul style="list-style-type: circle;">
<li>Article 279A (4)(f) allows the Union and State to raise additional resources during any natural calamity or disaster.<br />
<ul style="list-style-type: disc;">
<li>The article was inserted through the <strong>101<sup>st</sup> Constitutional Amendment Act, 2016.</strong></li>
</ul>
</li>
<li>Article 279A (4)(f) specifies that the <a href="/daily-updates/daily-news-analysis/gst-council-meet" target="_blank" rel="noopener"><strong>GST Council</strong></a> shall make recommendations to the Union and the States on &ldquo;any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster&rdquo;.</li>
</ul>
</li>
<li>The <strong>GST (Compensation to States) Act, 2017</strong> also provides for the imposition of cess up to the rate of 15% ad valorem (based on estimated value) on some supplies.<br />
<ul style="list-style-type: circle;">
<li>The Act provides for compensation to states for any loss in revenue due to the implementation of GST.</li>
</ul>
</li>
<li><strong>Issues involved:</strong> <br />
<ul style="list-style-type: circle;">
<li>As the manufacturing industry is already facing a huge crisis due to Covid-19 lockdown, imposing cess on GST would not be a good idea.<br />
<ul style="list-style-type: disc;">
<li>Imposition of cess will increase the cost of products, which may decrease the demand.</li>
</ul>
</li>
<li>The states are already not able to collect the GST due to closure of many economic activities.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Cess</strong></p>
<ul style="list-style-type: square;">
<li>Cess is a <strong>form of tax levied over and above the base tax liability of a taxpayer.</strong> It can be <strong>levied on both indirect and direct taxes.</strong></li>
<li>A cess is usually imposed additionally when the state or the central government looks to<strong> raise funds for specific purposes.</strong> For example, for education, for disaster relief, for cleaning rivers etc. <br />
<ul style="list-style-type: circle;">
<li>An example of cess is <strong>Swachh Bharat Cess,</strong> which was introduced in 2015 to fund a national campaign for clearing the roads, streets and the infrastructure of India.</li>
</ul>
</li>
<li>It is <strong>not a permanent source of revenue for the government,</strong> and it is discontinued when the purpose of levying it is fulfilled.</li>
</ul>
<p><strong>Difference between tax and cess</strong></p>
<ul style="list-style-type: square;">
<li>Cess is different from taxes such as income tax, GST, and excise duty etc.<strong> as it is charged over and above the existing taxes.</strong></li>
<li>Cess has to be <strong>used for the purpose for which it was collected.</strong> <br />
<ul style="list-style-type: circle;">
<li>If the cess collected in a particular year goes unspent, it cannot be allocated for other purposes. The amount gets carried over to the next year and can only be used for the cause it was meant for.</li>
</ul>
</li>
<li>The <strong>central government does not need to share the cess with the state government,</strong> unlike some other taxes.</li>
<li>The <strong>procedure for introducing, modifying and abolishing cess is comparatively simpler</strong> than getting the provisions done for introducing, modifying and abolishing taxes, which usually means a change in the law.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Additional cess on GST can be imposed after 6-7 months, when the economic condition in the country normalises.</li>
<li>Till then, the states can rely on other monetary instruments, such as<strong> borrowing,</strong> increase in <a href="/daily-updates/daily-news-analysis/wma-borrowings-of-states" target="_blank" rel="noopener"><strong>Ways and Means Advances (WMA)</strong></a>,<strong> overdraft,</strong> etc, to raise their income.</li>
<li>They can also<strong> consider levying a cess on &ldquo;sin goods&rdquo;.</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Sin goods</strong> are<strong> goods</strong> which are considered harmful to society and individuals.</li>
<li>Example of <strong>sin goods:</strong> Alcohol and Tobacco, Candies, Drugs, Soft drinks, Fast foods, etc.</li>
</ul>
</li>
</ul>
<p><a href="https://indianexpress.com/article/india/calamity-cess-coronavirus-crisis-gst-tax-6423103/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/plan-for-calamity-cess-on-gst'
	],
	(int) 8 => [
		'title' => 'ReStart Programme for MSMEs',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently the Chief Minister of <strong>Andhra Pradesh</strong> has launched a new programme <strong>&lsquo;ReStart&rsquo;</strong> to support the<strong> Micro, Small and Medium Enterprise (MSME) sector</strong> in the State.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>The Package:</strong> The government will spend ₹1,100 crore on revival of the sector which is expected to benefit 98,000 units that provide employment to more than 10 lakh people.</li>
<li><strong>Special Fund:</strong> A special fund of ₹200 crore to provide input capital loan to the firms at low interest rates.</li>
<li><strong>Waiving Off Power Charges:</strong> The minimum power demand charges of the MSMEs for the months of April, May and June, amounting to ₹188 crore to be waived off.</li>
<li><strong>Mandatory Purchasing by Government:</strong> The government will purchase around 360 products from the MSMEs, and payments towards it would be cleared in 45 days.<br />
<ul style="list-style-type: circle;">
<li>Of the total purchases, almost 25% would be done from the micro and small enterprises, 4% from the SC/ST community enterprises, and 3% from women entrepreneurs.</li>
</ul>
</li>
<li><strong>Capacity Development:</strong> Skills required by the industries (MSMEs) to be imparted through Skill Development Colleges.</li>
</ul>
<h3>Importance of MSMEs for Indian Economy</h3>
<ul style="list-style-type: square;">
<li><strong>Employment:</strong> It is the second largest employment generating sector after agriculture. It provides employment to around 120 million persons in India.</li>
<li><strong>Contribution to GDP:</strong> With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.<br />
<ul style="list-style-type: circle;">
<li>The MSME ministry has set a target to up its contribution to GDP to 50% by 2025 as India becomes a $5 trillion economy.</li>
</ul>
</li>
<li><strong>Exports:</strong> It contributes around 45% of the overall exports from India.</li>
<li><strong>Inclusive growth:</strong> MSMEs promote inclusive growth by providing employment opportunities in rural areas especially to people belonging to weaker sections of the society.<br />
<ul style="list-style-type: circle;">
<li>For example: Khadi and Village industries require low per capita investment and employ a large number of women in rural areas.</li>
</ul>
</li>
<li><strong>Financial inclusion:</strong> Small industries and retail businesses in tier-II and tier-III cities create opportunities for people to use banking services and products.</li>
<li><strong>Promote innovation:</strong> It provides opportunity for budding entrepreneurs to build creative products boosting business competition and fuels growth.</li>
</ul>
<h3>Problems Faced by MSMEs in India</h3>
<ul style="list-style-type: square;">
<li><strong>Too Small to get Registered:</strong> Being out of the formal network, these MSMEs do not have to maintain accounts, pay taxes or adhere to regulatory norms etc., which brings down their costs. But in a time of crisis, it also constrains a government&rsquo;s ability to help them.</li>
<li><strong>Lack of Financing:</strong> According to a 2018 report by the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/world-bank-group" target="_blank" rel="noopener"><strong>International Finance Corporation (part of the World Bank)</strong></a>, the formal banking system supplies less than one-third (or about Rs 11 lakh crore) of the MSME credit need that it can potentially fund.</li>
<li><strong>Delays in Payments to MSMEs:</strong> MSMEs face delays in payment from their buyers which also includes the government. It also faces delays in GST refunds.</li>
</ul>
<div class="border-bg">
<p><strong>Revised definition for MSME</strong></p>
<ul style="list-style-type: square;">
<li>Under the new MSME Classification MSMEs will now be defined in a composite manner, taking <strong>both investments</strong> as well as <strong>turnover into account.</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Micro:</strong> Any firm with <strong>investment up to Rs 1 crore and turnover under Rs 5 crore.</strong></li>
<li><strong>Small:</strong> Any firm with <strong>investment up to Rs 10 crore and turnover upto Rs 50 crore.</strong></li>
<li><strong>Medium:</strong> Any firm with <strong>investment up to Rs 20 crore and turnover under Rs 100 crore.</strong></li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Along with the<a href="/daily-updates/daily-news-analysis/atmanirbhar-bharat-and-economic-stimulus" target="_blank" rel="noopener"><strong> Atma Nirbhar Bharat Abhiyan package</strong></a> of the Central Government, the ReStart Programme will further provide much needed relief to the people engaged in this sector. Other States may also follow in the true spirit of cooperative and competitive federalism in order to support the backbone of Indian Economy.</li>
<li>Further, the government can provide tax relief, give swifter refunds, and provide liquidity to rural India to boost demand for MSME products.</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/andhra-pradesh/state-launches-restart-to-revive-msme-sector/article31653729.ece" target="_blank" rel="noopener">Source: TH</a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/restart-programme-for-msmes'
	],
	(int) 9 => [
		'title' => 'RBI Cuts Repo Rate',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>The <strong><a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener">Reserve Bank of India </a></strong>has <strong>extended the moratorium on loan repayments by three more months</strong> in view of <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong></a>. Further,<strong> a 40 basis points (bps) cut to both the repo and reverse repo rates</strong> has been announced.</p>
<ul style="list-style-type: square;">
<li>The decision has been taken by the<strong> RBI&rsquo;s <a href="/daily-updates/daily-news-analysis/repo-rate-unchanged-1" target="_blank" rel="noopener">Monetary Policy Committee</a></strong> which met ahead of its scheduled meeting in early June.</li>
<li>The latest moves are expected to ease the financial burden on businesses due to the extended lockdown.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Repo Rate and Reverse Repo Rate:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Decision:</strong> The <strong>repo rate</strong> is presently at<strong> 4%,</strong> while the<strong> reverse repo rate</strong> stands at<strong> 3.35%.</strong></li>
<li><strong>Impact:</strong> This will make funds cheaper for banks, thus aiding them to bring down loan lending rates. <strong>Repo rate</strong> is the rate at which a country&rsquo;s central bank (RBI) lends money to commercial banks.<br />
<ul style="list-style-type: disc;">
<li>The cut in reverse repo rate will prompt banks to lend more rather than keeping their funds with the RBI. <strong>Reverse repo</strong> rate is the rate at which the central bank of a country borrows money from commercial banks within the country.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Extension of Moratorium on Loan Repayments by Another 3 Months:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Decision:</strong> The lending institutions have been permitted to extend the moratorium (suspension) on term loan instalments by <strong>another three months,</strong> i.e., from 1st June, 2020 to 31<sup>st</sup> August, 2020.<br />
<ul style="list-style-type: disc;">
<li>A<strong> term loan</strong> is a loan from a bank for a specific amount that has a specified repayment schedule and either a fixed or floating interest rate.</li>
</ul>
</li>
<li><strong>Impact:</strong> This is expected to help borrowers, especially companies, which have halted production and are facing cash flow problems, to get more time to restart their units.</li>
<li>Earlier, the <a href="/daily-updates/daily-news-analysis/rbi-s-covid-19-economic-relief-package" target="_blank" rel="noopener"><strong>RBI announced the moratorium for a three-month period</strong></a> &mdash; 1<sup>st</sup> March to 25<sup>th</sup> May.</li>
<li><strong>All Conditions Unchanged:</strong> All conditions related to the extension remain unchanged, that is, the loan will not be classified by the lender as a<strong> &lsquo;non-performing asset&rsquo;</strong> and there will not be any impact on the creditworthiness of any individual/firm.<br />
<ul style="list-style-type: disc;">
<li>A <strong>Non Performing Asset (NPA)</strong> is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Conversion of Interest Charges into a Term Loan:</strong> <br />
<ul style="list-style-type: circle;">
<li>The RBI has allowed borrowers and banks to convert the interest charges during the moratorium period (from 1<sup>st</sup> March to 31<sup>st</sup> August) into a term loan which can be repaid by March 2021.</li>
<li>This is expected to reduce the burden on borrowers who have gone for moratorium.</li>
</ul>
</li>
<li><strong>Group Exposure Limit Raised:</strong> <br />
<ul style="list-style-type: circle;">
<li>The group exposure limit of banks has been <strong>increased from 25% to 30% of the capital base</strong> for a temporary period till 30<sup>th</sup> June, 2021.</li>
<li>Group exposure limit determines the maximum amount a bank can lend to one business house. Under the existing guidelines on the Large Exposures Framework, the exposure of a bank to a group of connected counterparties should not be higher than 25% of its capital base.</li>
<li>The decision was taken to facilitate flow of resources to the companies as many of them were unable to raise funds from capital markets and are predominantly dependent on funding from banks.</li>
</ul>
</li>
<li><strong>For Boosting Foreign Trade:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>A Rs. 15,000 crore line of credit for a period of 90 days would be extended to the Exim Bank</strong> to boost the foreign trade. Export-Import (Exim) Bank is the premier export finance institution of the country.</li>
<li>The <strong>maximum permissible period</strong> of pre-shipment and post-shipment export <strong>credit sanctioned by banks has been increased from the existing one year to 15 months</strong> (for loan disbursements made up to 31<sup>st</sup> July, 2020).<br />
<ul style="list-style-type: disc;">
<li>This was done to help exporters support their production and realisation cycles. Simply put, any exporter who has taken credit from a bank can repay it in 15 months instead of one year.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Views on GDP and Inflation:</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>RBI refrained from providing a Gross Domestic Product (GDP)</strong> growth forecast for the year, or likely trajectory for inflation.</li>
<li>GDP growth will <strong>slip into negative territory</strong> this year, blaming it on the collapse in demand due to a fall in private consumption following the Covid-19 lockdown.</li>
<li>The central bank has, however, pointed to the likelihood of <strong>some pick-up in growth impulses beginning the second half of 2020-21.</strong></li>
</ul>
</li>
</ul>
<h3>Criticism</h3>
<ul style="list-style-type: square;">
<li>Some believe that the latest cut <strong>may be no more than a sentiment booster</strong> as economic activity is at its nadir (worst) and there are not many investment proposals that may benefit from the lower interest rate. Existing borrowers may be the only beneficiaries of the rate cut at this point in time.</li>
<li>The smaller<strong> Non-Banking Financial Companies (NBFCs) and corporates</strong> may remain stressed, despite liquidity being provided.</li>
<li>Bankers <strong>expect a spurt in Non-Performing Assets</strong> down the road as nearly six months of non-payment of debt would likely affect credit culture.</li>
<li>RBI <a href="/daily-updates/daily-news-analysis/banks-seek-another-moratorium" target="_blank" rel="noopener"><strong>did not permit a one time restructuring of existing loans</strong></a> to the seriously affected sectors such as real estate, hotels etc. as demanded by banks.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>The stress in the economy will continue. The government can provide subvention on existing loans.</li>
<li>The banks are unwilling to take risks in the current scenario. Thus, there is a need to remove risk averseness in the financial system.</li>
</ul>
<p><a href="https://www.thehindu.com/business/Economy/rbi-cuts-repo-rate-again-down-to-4/article31652475.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/rbi-cuts-repo-rate'
	],
	(int) 10 => [
		'title' => 'G-7 Summit',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the President of the USA made an announcement to host the 46<sup>th</sup> <a href="/important-institutions/drishti-specials-important-institutions-international-institution/g-7" target="_blank" rel="noopener"><strong>G7</strong></a> summit in-person instead of remotely by videoconference.</p>
<ul style="list-style-type: square;">
<li>Originally, the annual <strong><a href="/daily-updates/daily-news-analysis/g7-summit" target="_blank" rel="noopener">G7</a></strong> summit was scheduled to be held on June 10 to June 12, 2020 in <strong>Camp David, United States</strong>.</li>
</ul>
<h3>Group of Seven (G-7)</h3>
<p><a href="http://www.drishtiias.com/images/uploads/1590146688_Images.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590146688_Images.jpg" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li><strong>Description:</strong><br />
<ul style="list-style-type: circle;">
<li>G-7 is a bloc of industrialized democracies i.e. <strong>France, Germany, Italy, the United Kingdom, Japan, the United States, and Canada.</strong><br />
<ul style="list-style-type: disc;">
<li>The world's biggest population and second-biggest economy, China has relatively low levels of wealth per head of population. Thus it is not considered as an advanced economy like other G7 members. <strong>Hence China is not a member of G7.</strong></li>
</ul>
</li>
<li>It is an <strong>intergovernmental organisation</strong> that was formed in 1975.</li>
<li>The bloc meets<strong> annually</strong> to discuss issues of common interest like global economic governance, international security and energy policy.</li>
<li>The G7 was known as the &lsquo;G8&rsquo; for several years after the original seven were joined by Russia in 1997. <br />
<ul style="list-style-type: disc;">
<li>The Group returned to being called G7 after Russia was expelled as a member in 2014 following the latter&rsquo;s annexation of the Crimea region of Ukraine..</li>
</ul>
</li>
</ul>
</li>
<li><strong>Summit Participation:</strong><br />
<ul style="list-style-type: circle;">
<li>Summits are held annually and hosted on a<strong> rotation basis by the group's members.</strong></li>
<li>The host country not only holds the G7 presidency but also sets the agenda for the year.</li>
<li>The groundwork for the Summit, including matters to be discussed and follow-up meetings, is done by the<strong> sherpas,</strong> who are generally personal representatives or members of diplomatic staff such as ambassadors.</li>
<li>The leaders of important international organizations like European Union, IMF, World Bank and the United Nations are also invited.</li>
</ul>
</li>
<li><strong>Challenges and Concerns:</strong><br />
<ul style="list-style-type: circle;">
<li>Internally the G7 has a number of disagreements, e.g. clash of the USA with other members over taxes on imports and action on climate change.</li>
<li>The organisation has also been criticised for <strong>not reflecting the current state of global politics or economics.</strong></li>
<li>There are <strong>no G7 members from Africa, Latin America or the southern hemisphere.</strong></li>
<li>It is also facing a challenge from fast-growing emerging economies, like India and Brazil are not members of the G7.</li>
</ul>
</li>
</ul>
<h3>India and G-7</h3>
<ul style="list-style-type: square;">
<li>The participation of India at the <strong>45<sup>th</sup> summit in Biarritz, France,</strong> is a reflection of deepening strategic partnership and recognition of India as a major economic power.</li>
<li>While India has found the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/european-union" target="_blank" rel="noopener"><strong>European Union</strong></a> a difficult jurisdiction to navigate diplomatically, a better relationship between India and European Union is emerging as a policy priority under G-7.</li>
<li>India&rsquo;s ability to safeguard its core sovereign concerns such as trade, <a href="/loksabha-rajyasabha-discussions/in-depth-jammu-and-kashmir" target="_blank" rel="noopener"><strong>Kashmir issue</strong></a> and <a href="/daily-updates/daily-news-editorials/india-and-russia-ties-in-transition" target="_blank" rel="noopener"><strong>India&rsquo;s relations with Russia</strong></a> and Iran can be discussed with G7 members.</li>
<li>India raised issues on <a href="/daily-updates/daily-news-editorials/climate-change-and-development-in-india" target="_blank" rel="noopener"><strong>climate change</strong></a> and at meetings which signaled India&rsquo;s growing willingness to lead on issues that are points of contention for countries like China and the USA.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>G-7 must <strong>focus on the key international issues</strong> like terrorism, climate change, trade and internal conflicts between the countries.</li>
<li>As a platform it must reflect the solutions for the pressing issues and global concerns like elimination of poverty and diseases.</li>
<li>It should <strong>support the economies at the global level</strong> and help to establish the <strong>equal levels for each country.</strong></li>
</ul>
<p><a href="https://www.thehindu.com/news/international/trump-suggests-holding-in-person-g7-summit/article31644326.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/g-7-summit'
	],
	(int) 11 => [
		'title' => 'Year End Review 2019: Ministry of Commerce & Industry',
		'catname' => 'Paper 2',
		'desc' => '<h3>World Bank&rsquo;s Ease of Doing Business Report 2020</h3>
<ul style="list-style-type: square;">
<li>India has made a remarkable jump in the <a href="/daily-updates/daily-news-analysis/ease-of-doing-business-2020" target="_blank" rel="noopener"><strong>World Bank&rsquo;s Ease of Doing Business Report 2020</strong></a>. It is ranked 63<sup>rd</sup> among 190 countries improving by 14 ranks from its rank of 77 in 2019.</li>
<li>The 2020 edition of the Report acknowledges India as one of the top 10 improvers, third time in a row, with an improvement of 67 ranks in 3 years. It is also the highest jump by any large country since 2011.</li>
<li>The World Bank will now include Kolkata and Bengaluru, besides Delhi and Mumbai, for preparing ease of doing business reports, in order to provide a holistic picture of the business environment of the country.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590145118_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590145118_image1.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<h3>Essential Features of India's Performance</h3>
<ul style="list-style-type: square;">
<li>India&rsquo;s ranking improved basically on four parameters:<br />
<ul style="list-style-type: circle;">
<li><strong>Starting a Business-</strong> India made starting a business easier by fully integrating multiple application forms into a general incorporation form,</li>
<li><strong>Dealing with Construction Permits-</strong> For example, building a warehouse cost around 4% of the warehouse value as compared to 5.7% in the previous year,</li>
<li><strong>Trading across Borders-</strong> with a single electronic platform- improved electronic submission methods for documents and upgrades to port infrastructure, import and export process became easier, and</li>
<li><strong>Resolving Insolvency-</strong> Recovery rate under resolving insolvency has improved significantly from 26.5% to 71.6%. Also, the time taken for resolving insolvency has also come down significantly from 4.3 years to 1.6 years.</li>
</ul>
</li>
</ul>
<h3>Global Innovation Index (GII)</h3>
<ul style="list-style-type: square;">
<li>In the past 4 years India&rsquo;s rank in the GII has improved from the 81<sup>st</sup> rank in 2015 to the present 52<sup>nd</sup> rank in GII 2019 report.</li>
<li>India became the first developing country to launch the <a href="/daily-updates/daily-news-analysis/global-innovation-index-2019" target="_blank" rel="noopener"><strong>Global Innovation Index (GII)</strong> </a>in association with <a href="/important-institutions/drishti-specials-important-institutions-international-institution/important-institutions-international-world-intellectual-property-organisation-wipo" target="_blank" rel="noopener"><strong>World Intellectual Property Organisation (WIPO)</strong> </a>and <strong>Confederation of India (CII).</strong><br />
<ul style="list-style-type: circle;">
<li>India&rsquo;s rankings have been consistently increasing over the last few years and are among the top in the world in innovation drivers such as <strong>Information and Communication Technology (ICT), services exports, graduates in science and engineering, the quality of universities, gross capital formation</strong> (a measure of economy-wide investments) and <strong>creative goods exports.</strong></li>
<li>India stands out in the <strong>world&rsquo;s top science and technology clusters,</strong> with <strong>Bengaluru, Mumbai,</strong> and <strong>New Delhi</strong> featuring among the top 100 global clusters.</li>
<li>India continues to be the <strong>most innovative economy</strong> in central and southern Asia (a distinction held since 2011).</li>
</ul>
</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590145147_image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590145147_image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<div class="border-bg">
<p><strong>Global Performance</strong></p>
<ul style="list-style-type: square;">
<li>Switzerland tops the GII index followed by Sweden, United States of America, Netherlands, United Kingdom, Finland, Denmark, Singapore, Germany and Israel.</li>
<li>The theme of <strong>GII- 2019 (12<sup>th</sup> edition)</strong> is<strong> &ldquo;Creating Healthy Lives - The Future of Medical Innovation&rdquo;</strong> which aims to explore the role of medical innovation as it shapes the future of healthcare.</li>
</ul>
</div>
<h3>Steps Taken for Export Promotion</h3>
<p>In order to promote export the Department of Commerce has undertaken various measures:</p>
<ul style="list-style-type: square;">
<li><strong>&lsquo;NIRVIK&rsquo;</strong> scheme: Export Credit Guarantee Corporation (ECGC) has introduced a new Export Credit Insurance Scheme (ECIS) called<a href="/daily-updates/daily-news-analysis/nirvik-scheme" target="_blank" rel="noopener"><strong> &lsquo;NIRVIK&rsquo;</strong></a> for exporters in which increased insurance cover for export credit has been extended by banks from existing average of 60% to 90% for both Principal and Interest.</li>
</ul>
<div class="border-bg">
<p><strong>Export Credit Guarantee Corporation of India</strong></p>
<ul style="list-style-type: square;">
<li><strong>Export Credit Guarantee Corporation</strong> Ltd<strong> (ECGC)</strong> is wholly owned by the Ministry of Commerce and Industry.</li>
<li>The Government of India had initially set up the Export Risks Insurance Corporation in 1957.</li>
<li>After the introduction of insurance covers to banks during the period 1962-64, the name was changed to Export Credit &amp; Guarantee Corporation Ltd in 1964.<br />
<ul style="list-style-type: circle;">
<li>It was changed to ECGC Ltd in August 2014.</li>
</ul>
</li>
<li>Its<strong> objective</strong> was to promote exports from the country by providing credit risk insurance and related services for exports.</li>
</ul>
</div>
<ul style="list-style-type: square;">
<li><strong>Transport and Marketing Assistance (TMA) scheme:</strong> An online portal for filing applications under <a href="/daily-updates/daily-news-analysis/transport-and-marketing-assistance-tma-scheme" target="_blank" rel="noopener"><strong>&lsquo;Transport and Marketing Assistance (TMA)'</strong></a> scheme for Specified Agriculture Products has been launched.<br />
<ul style="list-style-type: circle;">
<li>It is a scheme for <strong>providing financial assistance</strong> for transport and marketing of agriculture products to boost exports of such commodities to certain countries in Europe and North America.</li>
<li>To <strong>mitigate disadvantage</strong> of higher cost of transportation of export of specified agriculture products due to trans-shipment.</li>
<li>To <strong>promote brand recognition</strong> for Indian agricultural products in the specified overseas markets.</li>
</ul>
</li>
<li><strong>Origin Management System:</strong> It gives a single access point for all exporters, for all Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs) and for all agencies. India has 15 FTAs/PTAs and 7 lakh &lsquo;Certificates of Origin&rsquo; are issued annually.
<ul style="list-style-type: circle;">
<li>The platform will be made live for FTAs as per the concurrence of the concerned partner countries. This process is electronic, paperless and transparent with real time tracking of FTA utilisation at product level and country level. It will also lead to reduced transaction cost and time.</li>
</ul>
</li>
<li><strong>Remission of Duties or Taxes on Export Product (RoDTEP):</strong> <a href="/daily-updates/daily-news-analysis/remission-of-duties-or-taxes-on-export-product" target="_blank" rel="noopener"><strong>RoDTEP</strong></a> is a new scheme to replace existing <strong>Merchandise Exports from India (MEIS)</strong> scheme.
<ul style="list-style-type: circle;">
<li>Apart from boosting the export sector of our country, RoDTEP will coordinate with the World Trade Organization (WTO) to reduce the post-production transaction costs for exporters.</li>
<li>The implementation of the scheme thereby must provide a production-oriented process along with WTO, which in turn can boost the production of SMEs, MSMEs.</li>
<li><strong>Merchandise Export from India Scheme (MEIS)</strong> was not WTO rules compliant. It was introduced in the <a href="/daily-updates/daily-news-analysis/draft-export-policy-unveiled" target="_blank" rel="noopener"><strong>Foreign Trade Policy (FTP) 2015-20</strong></a>.
<ul style="list-style-type: disc;">
<li>The objective was to offset infrastructural inefficiencies and associated costs involved in exporting goods/products which are produced /manufactured in India including products produced/manufactured by MSME Sector.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Logistics Sector:</strong> National Logistics Policy, 2019 is being prepared with the aim to bring down the total logistics cost from 14% to 9% of the country's GDP.
<ul style="list-style-type: circle;">
<li>The policy aims to boost business competitiveness, drive economic growth and make India a global logistics hub.
<ul style="list-style-type: disc;">
<li>As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to more than 22 million people and improving the sector will facilitate 10 % decrease in indirect logistics cost leading to the growth of 5 to 8% in exports.</li>
</ul>
</li>
<li><strong>Multi-Modal Transportation of Goods Bill, 2019</strong> aims at facilitating the movement of goods for exports, imports and domestic trade. It will help to fix accountability and liabilities for violation of its provisions.
<ul style="list-style-type: disc;">
<li>Multimodal transportation includes a combination of more than one mode of movement, such as rail, road or sea, for end-to-end deliveries of goods.</li>
</ul>
</li>
<li><strong>Skilling for Logistics Sector:</strong> 34 Qualification Packs (QPs) for skill development of manpower engaged in Logistics Sector have been developed and finalised in collaboration with Logistics Skill Council. This is the first time that such qualification packs have been developed.
<ul style="list-style-type: disc;">
<li><strong>Qualification Packs (QPs):</strong> These are occupational standards that describe what individuals need to do, know and understand in order to carry out a particular job role or function.</li>
<li>They are performance standards that individuals must achieve when carrying out functions in the workplace, together with specifications of the underpinning knowledge and understanding</li>
</ul>
</li>
</ul>
</li>
<li><a href="/to-the-points/paper3/agriculture-export-policy-2018-1" target="_blank" rel="noopener"><strong>Agriculture Export Policy</strong></a>: The Agriculture Export Policy has been approved to establish linkage between Farmers Producer Organisation (FPO) and the exporters, a portal has been created by Agricultural &amp; Processed Food Products Export Development Authority (APEDA).</li>
</ul>
<div class="border-bg">
<p><strong>Agricultural and Processed Food Products Export Development Authority (APEDA)</strong></p>
<ul style="list-style-type: square;">
<li>APEDA is a non-trading, <strong>statutory body</strong> established by the Government of India under the Agricultural and Processed Food Products Export Development Authority Act passed by the Parliament in December, 1985.</li>
<li>APEDA has marked its presence in almost all agro potential states of India and has been providing services to the agri-export community through its head office in New Delhi, five Regional offices and 13 Virtual offices.</li>
<li>In 2017, APEDA launched a mobile app- &ldquo;Farmer Connect&rdquo; to allow farmers to apply online to facilitate their farm registration, tracking the status of application &amp; approvals by State Government and Lab sampling by authorized Laboratories.</li>
</ul>
</div>
<ul style="list-style-type: square;">
<li><strong>Steel Import Monitoring System (SIMS):</strong> The <a href="/daily-updates/daily-news-analysis/steel-import-monitoring-system" target="_blank" rel="noopener"><strong>SIMS</strong></a> will facilitate the Steel Industry by providing advance information about steel imports to all stakeholders including Government, steel industry and steel importers for effective policy interventions.
<ul style="list-style-type: circle;">
<li>Importers of specified steel products will register in advance on the web portal of SIMS providing necessary information. The registration will be online and automatic and no human intervention is required.</li>
<li>This was launched in the background of <strong>India becoming a favourite dumping ground</strong> for steelmakers from not just China but also from Japan and South Korea, which threatened the domestic steel industry of the country.</li>
</ul>
</li>
<li><strong>Trade Facilitation Measures:</strong>
<ul style="list-style-type: circle;">
<li><strong>India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement (CECPA):</strong> It will enable trade promotion between the two countries.</li>
<li><strong>Border Haats:</strong> Besides the four operational Border Haats across India-Bangladesh border in Tripura and Meghalaya, construction of three Border Haats in Meghalaya, out of six already identified locations (two in Tripura and four in Meghalaya) has been completed. It will Improve trade with Bangladesh.-</li>
</ul>
</li>
<li><strong>Merger of Council of Trade and Development and Board of Trade:</strong>
<ul style="list-style-type: circle;">
<li>This common platform, consisting of representatives from industry, export promotion councils, Government of India and State Governments and representatives from Banking and Finance Sector is playing a critical role in addressing export related concerns, with a focus on addressing these on a priority basis.
<ul style="list-style-type: disc;">
<li>The new board would provide a platform to states and union territories for articulating their perspectives on trade policy and help states to develop and pursue export strategies in line with the national foreign trade policy.</li>
<li>Besides, the forum would advise the government on policy measures for preparation and implementation of short and long term plans.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Special Economic Zone (Amendment) Bill, 2019:</strong> This will enable any entity to set up a unit in the Special Economic Zone (SEZs), including Trusts. This will help boost investments and create new export and job opportunities.
<ul style="list-style-type: circle;">
<li><strong>Better facilities for employees:</strong> SEZ units allowed to create facilities/amenities like cr&egrave;che, gymnasium, cafeteria for their exclusive use as a measure towards ease of doing business.</li>
</ul>
</li>
<li><strong>Promoting Foreign Direct Investment:</strong>
<ul style="list-style-type: circle;">
<li>100% FDI has been allowed under the automatic route for coal mining activities including associated processing infrastructure.</li>
<li>100% FDI under automatic route has also been allowed in contract manufacturing. Providing more flexibility and ease of operations to <strong>Single Brand Retail Trading (SBRT)</strong> entities.
<ul style="list-style-type: disc;">
<li>All procurements made from India shall be counted towards local sourcing, whether goods are sold in India or exported. Online retail trading permitted up to two years prior to opening brick and mortar stores.</li>
</ul>
</li>
</ul>
</li>
<li><strong>National Institute of Design (Amendment) Act, 2019:</strong> It conferred <a href="/prs-capsule/prs-capsule-august-2019#30" target="_blank" rel="noopener"><strong>Institute of National Importance status</strong></a> to the four new National Institute of Design (NIDs). The four new NIDs at Andhra Pradesh, Madhya Pradesh, Assam and Haryana to be declared as Institutions of National Importance on the lines of NID, Ahmedabad.</li>
<li><strong>National Traders' Welfare Board:</strong> It is an institutional mechanism that will identify measures for the welfare of traders and their employees, improve their access to funds and recommend <strong>social security benefits</strong> for them including insurance and pension.
<ul style="list-style-type: circle;">
<li>The National Traders&rsquo; Welfare Board, constituted by the Department for Promotion of Industry and Internal Trade, will be headed by a non-official chairperson and its 15 members will be nominated by the Centre.</li>
</ul>
</li>
<li><strong>India&rsquo;s stand on mega-regional economic agreement:</strong>
<ul style="list-style-type: circle;">
<li>In order to ensure interests of the Indian industry and farmers in Free Trade Agreements (FTAs), India successfully laid out its stand in <a href="/daily-updates/daily-news-editorials/india-exits-rcep" target="_blank" rel="noopener"><strong>Regional Comprehensive Economic Partnership (RCEP)</strong></a> India&rsquo;s key concerns were not addressed.
<ul style="list-style-type: disc;">
<li>India took a strong stance to protect the interest of domestic producers. This decision will help vulnerable sectors including farmers and the dairy sector as well as small manufacturers, who would have been threatened by RCEP rules.</li>
</ul>
</li>
<li>India has also secured agreement for review of <a href="/important-institutions/drishti-specials-important-institutions-international-institution/regional-comprehensive-economic-partnership-1" target="_blank" rel="noopener"><strong>ASEAN FTA (ASEAN-India Free Trade Area-AIFTA)</strong></a> after repeated follow up. This will help in removing rules that affect Indian producers and exporters and will also promote Indian exports and Make in India.</li>
</ul>
</li>
</ul>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/to-the-points/Paper2/year-end-review-2019-ministry-of-commerce-industry'
	],
	(int) 12 => [
		'title' => 'International Tea Day',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the <strong>first International Tea Day</strong> was observed on 21<sup>st</sup> May after it was designated by the United Nations General Assembly in December 2019.</p>
<ul style="list-style-type: square;">
<li>The UN General Assembly called on the <strong>Food and Agricultural Organisation (FAO is an agency of the <a href="/important-institutions/drishti-specials-important-institutions-international-institution/united-nations-1" target="_blank" rel="noopener">United Nations</a>)</strong> to lead the observance of the day.</li>
<li>May 21 was chosen because the <strong>season of tea production begins in May</strong> in most of the tea producing countries.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>Tea is a beverage made from the<strong> Camellia sinesis plant.</strong> It is the world&rsquo;s most consumed drink, after water.</li>
<li><strong>Origin:</strong> It is believed that tea originated in <strong>northeast India, north Myanmar and southwest China,</strong> but the exact place where the plant first grew is not known. There is evidence that tea was consumed in China 5,000 years ago.</li>
<li><strong>Economy:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Tea production and processing</strong> constitutes a main source of livelihoods and subsistence for millions in developing and least developed countries.</li>
<li>It is a labour-intensive sector, providing jobs, especially in remote and economically disadvantaged areas.</li>
<li>Tea can play a <strong>significant role in rural development, poverty reduction and food security</strong> in developing countries, being one of the most important <strong>cash crops.</strong></li>
</ul>
</li>
<li><strong>Sustainable Development:</strong> Tea production and processing contributes towards various <a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener"><strong>sustainable development goals</strong></a>:<br />
<ul style="list-style-type: circle;">
<li>Reduction of extreme poverty (Goal 1).</li>
<li>Fight against hunger (Goal 2).</li>
<li>Empowerment of women (Goal 5).</li>
<li>Sustainable use of terrestrial ecosystems (Goal 15).</li>
</ul>
</li>
<li><strong>Plantation condition:</strong><br />
<ul style="list-style-type: circle;">
<li>Tea is a<strong> tropical</strong> and <strong>sub-tropical plant</strong> and grows well in moderately hot and humid climates.</li>
<li>The ideal temperature for its growth is 20&deg;-30&deg;C and temperatures above 35&deg;C and below 10&deg;C are harmful for the bush.</li>
<li>It requires 150-300 cm annual rainfall which should be well distributed throughout the year.</li>
<li>The most suitable soil for tea cultivation is<strong> slightly acidic soil (without calcium)</strong> with porous sub-soil which permits a free percolation of water.</li>
</ul>
</li>
<li><strong>Climate Change:</strong> <br />
<ul style="list-style-type: circle;">
<li>Changes in temperature and rainfall patterns, with more floods and droughts, are already affecting yields, tea product quality and prices, lowering incomes and threatening rural livelihoods.</li>
<li>In parallel, there is a growing recognition of the need to contribute to <a href="/daily-updates/daily-news-editorials/climate-change-and-land-1" target="_blank" rel="noopener"><strong>climate change</strong></a> mitigation, by reducing carbon emissions from tea production and processing.</li>
</ul>
</li>
<li>FAO has designated 4 tea cultivation sites in <strong>China, Korea</strong> and <strong>Japan</strong> as <strong>Globally Important Agricultural Heritage Systems.</strong> <br />
<ul style="list-style-type: circle;">
<li>Pu&rsquo;er Traditional Tea Agrosystem (China)</li>
<li>Fuzhou Jasmine and Tea Culture System (China)</li>
<li>Traditional Tea-grass Integrated System (Japan)</li>
<li>Traditional Hadong Tea Agrosystem, Hwagae-myeon (Republic of Korea)</li>
</ul>
</li>
</ul>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/M8tSwibr5_w" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<div class="border-bg">
<p><strong>Globally Important Agricultural Heritage Systems</strong></p>
<ul style="list-style-type: square;">
<li>Globally Important Agricultural Heritage Systems (GIAHS) was started by the FAO to safeguard and support the <strong>world's agricultural heritage systems.</strong></li>
<li>GIAHS are outstanding landscapes of aesthetic beauty that combine agricultural biodiversity, resilient ecosystems and a valuable cultural heritage.</li>
<li><strong>Three recognised GIAHS sites in India:</strong><br />
<ul style="list-style-type: circle;">
<li>Kuttanad Below Sea Level Farming System of <strong>Kerala.</strong></li>
<li>Koraput Traditional Agriculture of <strong>Odisha.</strong></li>
<li>Pampore Saffron Heritage of<strong> Kashmir.</strong></li>
</ul>
</li>
</ul>
</div>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/international-tea-day'
	],
	(int) 13 => [
		'title' => 'Ecologically Sensitive Areas in Western Ghats',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the Union Minister of Environment, Forest and Climate Change interacted with Chief Ministers of six states through a video conference to discuss issues relating to notification of<strong> Ecologically Sensitive Area (ESA) pertaining to Western Ghats.</strong></p>
<ul style="list-style-type: square;">
<li>These six states include <strong>Kerala, Karnataka, Goa, Maharashtra, Gujarat and Tamil Nadu.</strong></li>
</ul>
<h3>Background</h3>
<ul style="list-style-type: square;">
<li>The government had constituted a High Level Working Group under the <strong>Chairmanship of</strong> <strong>Dr. Kasturirangan to conserve and protect the biodiversity of Western Ghats</strong> while allowing for sustainable and inclusive development of the region.</li>
<li>The Committee had recommended that identified geographical areas falling in the six States of Kerala, Karnataka, Goa, Maharashtra, Gujarat and Tamil Nadu may be declared as <strong>Ecologically Sensitive Areas.</strong> <br />
<ul style="list-style-type: circle;">
<li>The Committee recommended to bring just <strong>37% of the Western Ghats</strong> under the Ecologically Sensitive Area (ESA) zones &mdash; <strong>down from the 64%</strong> suggested by the <strong>Gadgil Committee report.</strong></li>
<li>The <a href="/daily-updates/daily-news-analysis/green-tribunal-steps-in-to-conserve-ghats" target="_blank" rel="noopener"><strong>Western Ghats Ecology Expert Panel, also known as the Gadgil Committee</strong></a> was an environmental research commission appointed by the government in 2011.</li>
</ul>
</li>
<li>A <strong>draft notification</strong> related to the same was issued in <strong>2018</strong> mentioning the areas to be notified in the ESA.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>All the involved States recognised a <strong>need to protect the Western Ghats.</strong> However, the states expressed their concerns related to <strong>the allowed activities and extent of area</strong> mentioned in the draft notification.</li>
<li>Further, it has been also decided that <strong>state specific issues</strong> will be discussed and <strong>resolved through the consensus.</strong></li>
</ul>
<div class="border-bg">
<p><strong>Eco-Sensitive Areas</strong></p>
<ul style="list-style-type: square;">
<li>Eco-Sensitive Areas (ESAs)are located within <strong>10 kms</strong> around Protected Areas, National Parks and Wildlife Sanctuaries.</li>
<li>ESAs are notified by the <strong>Ministry of Environment, Forest and Climate Change (MoEFCC) </strong>under<strong> Environment Protection Act 1986.</strong></li>
<li>The basic aim is to regulate certain activities around National Parks and Wildlife Sanctuaries so as to minimise the negative impacts of such activities on the fragile ecosystem encompassing the protected areas.</li>
</ul>
<p><strong>Western Ghats Ecology Expert Panel</strong></p>
<ul style="list-style-type: square;">
<li>A committee headed by ecologist Madhav Gadgil also known as the Western Ghats Ecology Expert Panel (WGEEP) in 2011 recommended that all of the Western Ghats be declared as the Ecological Sensitive Areas (ESA) with <strong>only limited development allowed in graded zones.</strong></li>
<li>The panel had classified the Western Ghats into <strong>Ecologically Sensitive Areas (ESA) 1, 2 and 3 of which ESA-1 is high priority,</strong> almost all developmental activities (mining, thermal power plants etc) were restricted in it.</li>
<li>It specified that the system of governance of the environment should be a <strong>bottom to top approach (right from Gram sabhas)</strong> rather than a top to bottom approach.</li>
<li>It also recommended the constitution of a <strong>Western Ghats Ecology Authority (WGEA),</strong> as a statutory authority under the Ministry of Environment and Forests, with the powers under Section 3 of the Environment (Protection) Act, 1986.</li>
<li>The report was criticized for being <strong>more environment-friendly</strong> and not in tune with the ground realities.</li>
</ul>
<p><strong>Kasturirangan Committee</strong></p>
<ul style="list-style-type: square;">
<li>The Kasturirangan Commission sought to <strong>balance the development and environment</strong> protection in contrast to the system proposed by the Gadgil report.The committees major recommendations were:<br />
<ul style="list-style-type: circle;">
<li>Instead of the total area of Western Ghats, <strong>only 37%</strong> of the total area to be brought under ESA.</li>
<li>Complete ban on mining, quarrying and sand mining in ESA.</li>
<li>No thermal power projects to be allowed and hydropower projects be allowed only after detailed study.</li>
<li>Red industries i.e. which are highly polluting to be strictly banned.</li>
<li>The report recommended exclusion of inhabited regions and plantations from the purview of ESAs making it a pro farmer approach.</li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>It is a <strong>Development vs Conservation debate. Hence,</strong> a proper analysis based on scientific study followed by consensus among various stakeholders by addressing respective concerns is required urgently.</li>
<li>Holistic view of threats and demands on the forest land, products and services, devising strategies to address these with clearly stated objectives for the authorities involved must be taken.</li>
<li>Any further delay in the implementation will only accentuate degrading of the most prized natural resource of the country.</li>
</ul>
<p><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1625885" target="_blank" rel="noopener"><strong>Source:PIB</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/ecologically-sensitive-areas-in-western-ghats'
	],
	(int) 14 => [
		'title' => 'International Day for Biological Diversity',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>The International Day for Biological Diversity is<strong> observed on 22<sup>nd</sup> May</strong> every year to increase <strong>understanding and awareness of biodiversity issues.</strong></p>
<h3><a href="http://www.drishtiias.com/images/uploads/1590136096_image1.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590136096_image1.png" width="554" caption="false" style="display: block; margin-left: auto; margin-right: auto;" height="191" /></a></h3>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The theme for the year 2020 is<strong> &ldquo;Our solutions are in nature&rdquo;.</strong> <br />
<ul style="list-style-type: circle;">
<li>The theme highlights that Biodiversity remains the answer to a number of sustainable development challenges. From nature-based solutions to climate, to food and water security, and sustainable livelihoods, biodiversity remains the basis for a sustainable future.</li>
</ul>
</li>
<li>The year 2020 is a reflection, opportunity and solutions for biodiversity issues. The year will witness: <br />
<ul style="list-style-type: circle;">
<li>The final period for the <a href="/daily-updates/daily-news-analysis/sixth-national-report-to-the-convention-of-biological-diversity" target="_blank" rel="noopener"><strong>2011-2020 Strategic Plan on Biodiversity</strong></a> and its 20 Aichi Biodiversity Targets.</li>
<li>The end of the<strong> 2011-2020 United Nations Decade on Biodiversity,</strong> and start of other new pivotal biodiversity related decades for the period 2021-2030: the <strong>UN Decade of Ocean Science for Sustainable Development</strong> and the <strong>UN Decade on Ecosystem Restoration.</strong></li>
<li>The<strong> UN Biodiversity Summit</strong> (15<sup>th</sup> Conference of the Parties: COP-15) which will highlight the urgency of actions in support of a post-2020 global biodiversity framework that contributes to the <a href="/to-the-points/paper3/sustainable-development-3" target="_blank" rel="noopener"><strong>2030 Agenda for Sustainable Development</strong></a> and places the global community on a path towards realizing the <strong>2050 Vision for Biodiversity.</strong><br />
<ul style="list-style-type: disc;">
<li><strong>Sustainable Goal 15</strong> aims to &ldquo;Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss&rdquo;.</li>
</ul>
</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Note</strong></p>
<ul style="list-style-type: square;">
<li>22<sup>nd</sup> March: <strong><a href="/daily-updates/daily-news-analysis/world-water-day-1" target="_blank" rel="noopener">World Water Day</a></strong></li>
<li>22<sup>nd</sup> April: <a href="/daily-updates/daily-news-analysis/earth-day-1" target="_blank" rel="noopener"><strong>Earth Day</strong></a></li>
<li>22<sup>nd</sup> May :<strong> World Biodiversity Day</strong></li>
<li>Recently the<a href="/daily-updates/daily-news-analysis/earth-hour" target="_blank" rel="noopener"><strong> Earth Hour</strong></a> was observed on 28<sup>th</sup> March, 2020. It encourages people to switch off the lights from 8.30 pm to 9.30 pm as per their local time.</li>
</ul>
</div>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/international-day-for-biological-diversity'
	],
	(int) 15 => [
		'title' => 'Odisha Promotes Contract Farming',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the Odisha government has promulgated an ordinance allowing investors and farmers to enter into an agreement for <strong>contract farming.</strong></p>
<ul style="list-style-type: square;">
<li>The contract farming has been allowed in view of the continuing <strong>uncertainties</strong> due to the <a href="/daily-updates/daily-news-editorials/covid-19-and-india-s-preparedness" target="_blank" rel="noopener"><strong>Covid-19 pandemic</strong></a>.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Aim:</strong><br />
<ul style="list-style-type: circle;">
<li>The ordinance aims to facilitate both farmers and sponsors to develop<strong> mutually beneficial and efficient</strong> contract farming systems.</li>
<li>It is also expected to improve the production and marketing of agricultural produce and livestock while promoting farmers&rsquo; interest.</li>
</ul>
</li>
<li><strong>Participants in the Contract Farming Agreement:</strong><br />
<ul style="list-style-type: circle;">
<li>The agreement will be entered into between the contract farming sponsor (the one who offers to participate in any component) or entire value chain including pre production, and the contract farming producer (i.e. farmers who agree to produce the crop or rear the livestock).</li>
</ul>
</li>
<li><strong>Involved Loans and Advances:</strong><br />
<ul style="list-style-type: circle;">
<li>The loans and advances given by the sponsor to the producer can be recovered from the sale proceeds of the produce.</li>
<li>It cannot be realised by way of sale or mortgage or lease of the land in respect of which the agreement has been entered into.</li>
</ul>
</li>
<li><strong>No transfer of Land Rights:</strong><br />
<ul style="list-style-type: circle;">
<li>It also states that notwithstanding anything contained in the agreement, no title, rights, ownership or possession of land or premises or other such property will be transferred or alienated or vest in the sponsor or its successor or its agent.</li>
</ul>
</li>
<li><strong>Contract Farming and Services Committee:</strong><br />
<ul style="list-style-type: circle;">
<li>It also mentions the constitution of a <strong>&ldquo;Contract Farming and Services (Promotion and Facilitation) Committee&rdquo;</strong> to review the performance of the contract farming and to make suggestions to the government for its promotion and efficient performance.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Contract Farming</strong></p>
<ul style="list-style-type: square;">
<li><strong>Description:</strong><br />
<ul style="list-style-type: circle;">
<li>Contract farming signifies an agricultural production (including livestock and poultry) based on a <strong>pre-harvest agreement</strong> between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations).</li>
<li>The producer can sell the agricultural produce at a specific price in the future to the buyer as per the agreement.</li>
<li>Under contract farming, the <strong>producer</strong> can <strong>reduce the risk</strong> of fluctuating <strong>market price and demand.</strong> The <strong>buyer</strong> can reduce the<strong> risk of non-availability of quality produce.</strong></li>
</ul>
</li>
<li><strong>Regulations:</strong><br />
<ul style="list-style-type: circle;">
<li>In India, contract farming is regulated under the<strong> Indian Contract Act, 1872.</strong></li>
<li>In addition, the Model APMC (Agricultural Produce Market Committee) Act, 2003 provides specific provisions for contract farming, like compulsory registration of contract farming sponsors and dispute settlement.</li>
<li>Since<strong> agriculture is a state list</strong> subject, therefore contract farming is <strong>not uniform.</strong><br />
<ul style="list-style-type: disc;">
<li>The <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/niti-aayog-national-institution-for-transforming-india" target="_blank" rel="noopener"><strong>NITI Aayog</strong> </a>observed that market fees and other levies are paid to the <a href="/daily-updates/daily-news-editorials/agriculture-produce-to-agriculture-marketing" target="_blank" rel="noopener"><strong>APMC</strong></a> for contract framing when no services such as market facilities and infrastructure are rendered by them.</li>
<li>Thus, it has been recommended that contract farming should be out of the ambit of APMCs. Instead, an <strong>independent regulatory authority</strong> must be brought in to disengage contract farming stakeholders from the existing APMCs.</li>
</ul>
</li>
<li>Therefore, the Ministry of Agriculture came out with a<strong> draft Model Contract Farming Act, 2018.</strong> <br />
<ul style="list-style-type: disc;">
<li>The draft Model Act seeks to create a regulatory and policy framework for contract farming. Based on this draft Model Act, legislatures of states can enact a law on contract farming.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Advantages:</strong><br />
<ul style="list-style-type: circle;">
<li>Contract farming addresses the problem of <strong>low investment</strong> in agriculture and ensures a supply of quality inputs, technical guidance and management support for farmers.</li>
<li>It provides an <strong>assured market and a pre-agreed sale price for produce,</strong> makes it easier for farmers to<strong> access cheaper institutional credit.</strong></li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>The contract farming seeks to provide alternative marketing channels and better price realisation to farmers. It has been observed that if the market price rises higher than the contracted price, the farmers are tempted to sell the produce to someone else for a higher price. On the other hand, if market prices were to fall below the contracted rate, the buyer often fails to honour the commitment.</li>
<li>It is also necessary to remember that for <strong>growers agriculture is a livelihood issue</strong> and for <strong>processors and aggregators it is business.</strong> Hence the Government should play the <strong>role of a facilitator</strong> to promote as well as to develop a healthy system of <strong>farmer-corporate relationship for mutual benefit and development of the agriculture sector in India.</strong></li>
</ul>
<p><a href="https://www.thehindu.com/news/national/other-states/covid-19-impact-odisha-promotes-contract-farming-system/article31644389.ece" target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/odisha-promotes-contract-farming'
	],
	(int) 16 => [
		'title' => 'Self Reliance in Defence Manufacturing',
		'catname' => 'News Editorials',
		'desc' => '<div class="border">
<p>This article is based on<a href="https://www.thehindu.com/opinion/lead/grasping-the-defence-self-reliance-nettle/article31635965.ece?homepage=true" target="_blank" rel="noopener"><strong> &ldquo;Grasping the defence self-reliance nettle&rdquo;</strong></a> from The Hindu published on 21/05/20. It talks about the challenges and the way forward for Defence manufacturing in India.</p>
</div>
<p>The superpower ambition, growing complexity of security challenges in India&rsquo;s neighbourhood and economic power (India poised to become a $5 trillion-dollar economy by 2025), to safeguard these interests, India requires strong defence capabilities.</p>
<p>In pursuit of this, for most of the past decade, India has been one of the world&rsquo;s largest arms importers (accounting for about 12% of global arms imports). However, with 60-70% import-dependence for weapons, spares and ammunition create vulnerabilities during military crises.</p>
<p>In order to promote self-reliance in defence production, the government has announced several measures under <a href="/daily-updates/daily-news-analysis/atmanirbhar-bharat-and-economic-stimulus" target="_blank" rel="noopener"><strong>Atma Nirbhar Abhiyan</strong></a>. Though these steps are in the right direction, there are long-overdue reforms to make India truly self-reliant in defence manufacturing.</p>
<h3>Indigenous Defence Manufacturing: Challenges</h3>
<ul style="list-style-type: square;">
<li><strong>Too Much Delay:</strong> In the past five years, the Indian government has approved over 200 defence acquisition proposals with the transfer of technology provision, valued around Rs 4 trillion, but most are still in relatively early stages of processing.</li>
<li><strong>Public Sector Driven:</strong> India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.<br />
<ul style="list-style-type: circle;">
<li>All four of these companies are public sector enterprises and account for the bulk of the domestic armament demand.</li>
<li>Governments usually have tended to privilege Defence Public Sector Units (DPSUs) over the private sector, despite &lsquo;Make in India&rsquo;.</li>
</ul>
</li>
<li><strong>Lack of Critical Technologies:</strong> Poor design capability in critical technologies, inadequate investment in R&amp;D and inability to manufacture major subsystems and components hamper the indigenous manufacturing. <br />
<ul style="list-style-type: circle;">
<li>The relationship between the R&amp;D establishment, production agencies (public or private) and the end-user are extremely weak.</li>
</ul>
</li>
<li><strong>Long Gestation Period:</strong> The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. <br />
<ul style="list-style-type: circle;">
<li>For a factory to reach optimum levels of capacity utilisation, it could take anywhere between five to 10 to even 15 years and by the time a unit commences production, any of the following developments can take place:<br />
<ul style="list-style-type: disc;">
<li>There could be changes in the threat assessment/ strategy involving a complete change in priorities. For instance, buying a new advanced radar system may acquire a higher priority instead of adding more tanks or armoured vehicles.</li>
<li>Newer technologies could make products outdated unable to match with what the enemy may have acquired.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Poor Manufacturing Environment:</strong> Also, issues related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.<br />
<ul style="list-style-type: circle;">
<li>Due to this, India hasn&rsquo;t been able to attract FDI in defence.</li>
</ul>
</li>
<li><strong>Lack of Coordination:</strong> Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India's capability of defence manufacturing.</li>
</ul>
<h3>Steps To Be Taken</h3>
<ul style="list-style-type: square;">
<li><strong>Newly Appointed CDS:</strong> The <a href="/daily-updates/daily-news-editorials/chief-of-defence-staff-4" target="_blank" rel="noopener"><strong>Chief of Defence Staff (CDS)</strong></a> could examine the defence acquisitions from a tri-service angle, this may avoid delays and speed up the defence procurement process.</li>
<li><strong>Mandatory Transfer of Technology for Subsystems:</strong> It is imperative that when India imports any weapon systems, there should be a plan for the ammunition and spares to be eventually manufactured in India so that we are not driven to seek urgent replenishments from abroad during crises. <br />
<ul style="list-style-type: circle;">
<li>The same goes for repair, maintenance and overhaul facilities for the upgrading of the weapons platforms.</li>
</ul>
</li>
<li><strong>Modernising Ordnance Factories Board:</strong> Over the decades, ordnance factories have been the backbone of indigenous supplies to India&rsquo;s armed forces, from weapons systems to spares, ammunition and auxiliaries.<br />
<ul style="list-style-type: circle;">
<li>Their structure, work culture and the product range now need to be responsive to technology and quality demands of modern armed forces.</li>
</ul>
</li>
<li><strong>Overhauling of Existing Regulations and Practices:</strong> A long-term integrated perspective plan of the requirements of the armed forces should give the industry a clear picture of future requirements. <br />
<ul style="list-style-type: circle;">
<li><strong>The next Defence Procurement Procedure</strong> should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies, with a view to achieving indigenisation over a period of time for even sophisticated platforms.</li>
</ul>
</li>
<li><strong>Promoting Defence Exports:</strong> Investment, Indian or foreign, will be viable when the door to defence exports is promoted with a transparent policy.</li>
<li><strong>Resolving Conflict of Interest:</strong> The role of<strong> Defence Research and Development Organisation (DRDO)</strong> as the government&rsquo;s sole adviser, developer and evaluator of technologies creates a conflict of interest for entry of private players.<br />
<ul style="list-style-type: circle;">
<li>Thus, the role of DRDO should be revised, in order to give private industry a level playing field for developing defence technologies.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Defence Sector Reforms Under Atma Nirbhar Abhiyan</strong></p>
<ul style="list-style-type: square;">
<li><strong>Revision of FDI Limit:</strong> The FDI limit in defence manufacturing under automatic route is raised from 49% to 74%.</li>
<li><strong>Project Management Unit (PMU):</strong> The government is expected to begin time-bound defence procurement and faster decision making by setting up a Project Management Unit (for contract management purposes).</li>
<li><strong>Reduction in Defence Import Bill:</strong> The government will notify a list of weapons/platforms banned for imports and thus such items can only be purchased from the domestic market.<br />
<ul style="list-style-type: circle;">
<li><strong>Separate budget provision</strong> for domestic capital procurement.</li>
</ul>
</li>
<li><strong>Corporatisation of the Ordnance Factory Board:</strong> It will include a public listing of some units, ensuring a more efficient interface of the manufacturer with the designer and end-user.</li>
</ul>
</div>
<h3>Conclusion</h3>
<p>Self-reliance in defence manufacturing is a crucial component of effective defence capability and to maintain national sovereignty and achieve military superiority. The attainment of this will ensure strategic independence, cost-effective defence equipment and may lead to saving on defence import bill, which can subsequently finance the physical and social infrastructure.</p>
<p><a href="/admin/articles/edit/&lt;iframe%20width=&quot;560&quot; height=&quot;315&quot; src=&quot;https:/www.youtube.com/embed/eZuoNjQZdj0&quot; frameborder=&quot;0&quot; allow=&quot;accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture&quot; allowfullscreen&gt;&lt;/iframe&gt;" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590125626_image1.png" style="display: block; margin-left: auto; margin-right: auto;" caption="false" width="564" height="695" /></a></p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #eaf7e9;">
<p><span style="color: #333399;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>&ldquo;Self-reliance in defence manufacturing is a crucial component of effective defence capability and to maintain national sovereignty and achieve military superiority.&rdquo; Analyse the statement in the context of defence manufacturing in India.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/eZuoNjQZdj0" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>This editorial is based on <strong><a href="https://www.thehindu.com/opinion/lead/grasping-the-defence-self-reliance-nettle/article31635965.ece?homepage=true" target="_blank" rel="noopener">&ldquo;Grasping the defence self-reliance nettle&rdquo;</a></strong> from The Hindu published on May 21st, 2020. Now watch this on our Youtube channel.</p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-editorials/self-reliance-in-defence-manufacturing'
	],
	(int) 17 => [
		'title' => 'Banks Seek Another Moratorium',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>The banking sector is pushing for a moratorium on loan repayments by another <strong>three months to 31<sup>st</sup> August,</strong> easing of <strong>bad loan (Non-Performing Assets) recognition norms</strong> from 90 days to 180 days and <strong>one-time restructuring of loans</strong> as relief measures to tackle the impact of <a href="/daily-updates/daily-news-analysis/21-days-lockdown" target="_blank" rel="noopener"><strong>lockdown</strong></a> and the slowdown in the economy due to <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong> </a><a href="/daily-updates/daily-news-analysis/covid-19-now-pandemic-who" target="_blank" rel="noopener">pandemic</a>.</p>
<ul style="list-style-type: square;">
<li>These demands were raised at the recent meetings of the <a href="/important-institutions/drishti-specials-important-institutions-national-institutions/important-institutions-national-institution-reserve-bank-of-india" target="_blank" rel="noopener"><strong>Reserve Bank of India</strong></a> (RBI) top officials with the chiefs of banks and <a href="/daily-updates/daily-news-editorials/A%20nuanced%20understanding%20of%20the%20NBFC%20sector" target="_blank" rel="noopener"><strong>Non-Banking Financial Companies</strong></a> (NBFCs).</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Background:</strong><br />
<ul style="list-style-type: circle;">
<li>On 27<sup>th</sup> March, 2020, the RBI announced a <a href="/daily-updates/daily-news-analysis/rbi-s-covid-19-economic-relief-package" target="_blank" rel="noopener"><strong>three-month moratorium</strong></a> (1<sup>st</sup> March to 31<sup>st</sup> May) on loan and <strong>card repayments</strong> and <strong>slashed its main policy rate, <a href="/daily-updates/daily-news-analysis/repo-rate-unchanged" target="_blank" rel="noopener">Repo rate</a></strong> by 75 basis points and <a href="/daily-updates/daily-news-analysis/rbi-keeps-policy-rates-unchanged" target="_blank" rel="noopener"><strong>Cash Reserve Ratio</strong></a> (CRR) of banks by 100 basis points to stabilize the financial markets and reduce the pain on borrowers.</li>
<li>The RBI had stipulated banks should create a <strong>10% provisioning on all loans</strong> that are overdue but not yet a <a href="/daily-updates/daily-news-editorials/lessons-from-npa-crisis" target="_blank" rel="noopener"><strong>non-performing asset</strong></a> (NPA) and where moratorium has been approved.</li>
<li>While the provisioning could be adjusted against the provisioning for slippages into NPAs during fiscal 2021, it becomes important to see how the <strong>banking sector manages asset quality</strong> in the near term post the moratorium period.</li>
</ul>
</li>
<li><strong>Use of Moratorium Provision :</strong><br />
<ul style="list-style-type: circle;">
<li>In the <strong>retail</strong> segment, higher instances of moratorium utilisation were observed in <strong>agri loans, micro-credit, commercial vehicle loans and other unsecured retail products like credit cards.</strong></li>
<li>Several<strong> borrowers</strong> opting for moratorium had sufficient account balances indicating that borrowers want to be more liquid.</li>
</ul>
</li>
<li><strong>Reasons Behind Demands:</strong><br />
<ul style="list-style-type: circle;">
<li>Extension of moratorium is <strong>required</strong> as <strong>factories are unlikely to start production</strong> in May due to curbs in many important industrial belts, supply chains remain broken and job losses have increased.</li>
<li>It will imply companies<strong> need not pay till 31<sup>st</sup> August,</strong> and it also implies almost minimal possibility of companies being able to pay their interest liabilities then in September,<strong> failing which the account might be classified NPA</strong> as per existing norms.<br />
<ul style="list-style-type: disc;">
<li>Currently, loans in which the borrower fails to pay principal and/or interest charges within 90 days are classified as NPAs and provisioning is made accordingly.</li>
</ul>
</li>
<li>Banks want the NPA recognition limit to be raised to 180 days to limit the surge in NPAs.</li>
<li>Restructuring of loans will help in easing the interest burden on borrowers.</li>
<li>Also, bankers are not sure whether RBI will change its <strong>&lsquo;June 7 circular&rsquo;</strong> concept on stressed assets and restructuring.<br />
<ul style="list-style-type: disc;">
<li><strong>RBI&rsquo;s <a href="/daily-updates/daily-news-analysis/rbis-debt-resolution-norms" target="_blank" rel="noopener">Prudential Framework for Resolution of Stressed Assets</a> June 7 circular,</strong> mandates banks to recognize stress and initiate a review of default within 30 days. The June 7 circular is stringent and gives little flexibility to banks.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Negative Impact:</strong><br />
<ul style="list-style-type: circle;">
<li>Extension means a <strong>delay in payment and borrowers will have to shell out the installments and interest charges</strong> later.</li>
<li>Banks are already facing sluggish credit offtake and a spike in non-performing assets due to the lockdown and the contraction in the economy.</li>
<li>According to <strong>Crisil</strong> ratings, NPAs are set to rise by 150-200 basis points this fiscal (2020-21).</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>Banks and NBFCs have raised these demands as <strong>moratorium alone is not sufficient</strong> to come out of the crisis.</li>
<li>The RBI needs to give <strong>operational flexibility to banks</strong> for a<strong> comprehensive restructuring of the existing loans</strong> and also a reclassification of 90-day norm.</li>
</ul>
<p><a href="https://indianexpress.com/article/business/banking-and-finance/as-lockdown-extends-banks-seek-another-3-month-moratorium-from-rbi-6420047/" target="_blank" rel="noopener"><strong>Source: IE</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/banks-seek-another-moratorium'
	],
	(int) 18 => [
		'title' => 'India Resumes Purchase of Malaysian Palm Oil',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, India has <strong>resumed purchases of Malaysian palm oil after</strong> a gap of four-month following a diplomatic row between the two countries.</p>
<h3>Background</h3>
<ul style="list-style-type: square;">
<li>The former Prime Minister had criticised India's <a href="/to-the-points/Paper2/citizenship-amendment-act-2019" target="_blank" rel="noopener"><strong>Citizenship Amendment Act (CAA)</strong></a> which was considered as an interference in the internal matter of India.</li>
<li>Subsequently, the <a href="/loksabha-rajyasabha-discussions/the-big-picture-india-s-trade-diplomacy-with-malaysia-turkey" target="_blank" rel="noopener"><strong>diplomatic row</strong></a> emerged between the two countries.</li>
<li>Following the incident, India <strong>imposed a ban on imports of palm oil</strong> from Malaysia.</li>
<li>The renewed purchases come amid improving trade relations between India and Malaysia after the formation of a new government in Malaysia.
<ul style="list-style-type: circle;">
<li>India's total palm oil imports from Malaysia for the first four months of 2020<strong> fell by more than 50% from the same period in 2019.</strong></li>
</ul>
</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>India's Palm Oil import:</strong> <br />
<ul style="list-style-type: circle;">
<li>India is the <strong>world&rsquo;s biggest buyer of edible oils.</strong></li>
<li>India buys<strong> more than two-thirds</strong> of its total edible oil imports as<strong> palm oil.</strong></li>
</ul>
</li>
<li><strong>Malaysian Import over Indonesia:</strong> <br />
<ul style="list-style-type: circle;">
<li><strong>Malaysia</strong> is the<strong> world's second</strong> largest producer of palm oil <strong>after Indonesia.</strong></li>
<li>Malaysia's palm oil inventories <strong>production has surged</strong> and <a href="/daily-updates/daily-news-analysis/21-days-lockdown" target="_blank" rel="noopener"><strong>coronavirus lockdowns</strong></a> led to a slump in demand.</li>
<li>Thus, Malaysian palm oil is available at a <strong>discount price</strong> compared to supplies from Indonesia. On the other hand, Indonesia has also raised its <strong>palm oil export levy.</strong></li>
<li>Additionally, Malaysia has also signed a deal to <strong>buy 100,000 tonnes of Indian rice.</strong></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>India-Malaysia Relation</strong></p>
<ul style="list-style-type: square;">
<li>India established diplomatic relations with Malaysia in 1957.</li>
<li><strong>Economic Relation:</strong> India and Malaysia have signed <strong>Comprehensive Economic Cooperation Agreement (CECA).</strong> CECA is a kind of<a href="/summary-of-important-reports/a-note-on-free-trade-agreements-and-their-costs" target="_blank" rel="noopener"><strong> Free Trade Agreement (FTA)</strong></a>.<br />
<ul style="list-style-type: circle;">
<li>India has also signed the Free Trade Agreement (FTA) in services and investments with the 10-member <a href="/daily-updates/daily-news-analysis/asean-summit-2" target="_blank" rel="noopener"><strong>Association of Southeast Asian Nations (ASEAN)</strong></a>. <br />
<ul style="list-style-type: disc;">
<li>Malaysia is the third largest trading partner in ASEAN.</li>
</ul>
</li>
<li>Bilateral trade between India and Malaysia is significantly biased in favour of Malaysia.</li>
</ul>
</li>
<li><strong>Defence &amp; Security Cooperation:</strong> Joint military exercises <strong>&ldquo;Harimau Shakti&rdquo;</strong> are held annually between the two countries.</li>
<li><strong>Traditional medicine:</strong> India and Malaysia have signed a MoU on cooperation in the field of Traditional Medicine in October 2010. <br />
<ul style="list-style-type: circle;">
<li>The Government of Malaysia has been working to popularize <a href="/daily-updates/daily-news-analysis/national-commission-for-indian-system-of-medicine-bill-2018" target="_blank" rel="noopener">AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy) systems</a> in Malaysia.</li>
<li>AYUSH systems are practiced in Malaysia.</li>
</ul>
</li>
</ul>
</div>
<p><a href="http://www.drishtiias.com/images/uploads/1590060002_image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590060002_image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="450" caption="false" /></a></p>
<p><a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/india-resumes-purchases-of-malaysian-palm-oil-traders/articleshow/75821854.cms" target="_blank" rel="noopener"><strong>Source: ET</strong></a></p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-analysis/india-resumes-purchase-of-malaysian-palm-oil'
	],
	(int) 19 => [
		'title' => 'Preventive Methods for Alzheimers',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Researchers at the <strong>Indian Institute of Technology-Guwahati</strong> (IIT-G) have found methods for preventing the accumulation of <strong>neurotoxic molecules</strong> in the brain, which leads to<strong> Alzheimer&rsquo;s</strong> disease.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The cause of Alzheimer&rsquo;s is the <strong>accumulation of amyloid-beta peptides</strong> (neurotoxic molecules) in the brain.<br />
<ul style="list-style-type: circle;">
<li><strong>Peptide</strong> is similar to the plaque that blocks arteries and affects blood supply, leading to cardiovascular diseases.</li>
<li><strong>Peptide aggregation/accumulation</strong> means their formation of one over the other, <strong>deforming the cortex of the brain</strong> which leads to Alzheimer&rsquo;s.</li>
<li>The peptide molecules need to have a <strong>certain structure to aggregate.</strong></li>
</ul>
</li>
<li><strong>Preventive Methods:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Use of Trojan Peptides:</strong><br />
<ul style="list-style-type: disc;">
<li>In this approach, the purpose is to design a <strong>deceitful peptide</strong> with <strong>&ldquo;negative syncretical points&rdquo;</strong> for checking the plaque formation.</li>
<li><strong>Trojan peptide</strong> (deceitful peptide) has the same structure as the peptide in the body but its <strong>function is contrary to aggregation.</strong></li>
<li>It adopts a similar <strong>approach of deceit</strong> to impede the aggregation of the amyloid peptide, and reduce poisoning of nerve cells that leads to memory loss.</li>
<li>The degeneration of poisoned cells can be delayed by intravenous injection of the trojan peptide, which in turn, can delay the onset of disease by 10 years.</li>
</ul>
</li>
<li><strong>Application of a low-voltage electric field:</strong><br />
<ul style="list-style-type: disc;">
<li>The electric field can <strong>prevent amyloid plaques from aggregating.</strong></li>
<li>The use of an external electric or magnetic field <strong>modulates peptide molecules</strong> to pull back the possibility of Alzheimer&rsquo;s to a certain extent.</li>
</ul>
</li>
</ul>
</li>
<li><strong>Earlier Discoveries:</strong><br />
<ul style="list-style-type: circle;">
<li>In <strong>July 2019,</strong> an Indian-American scientist at the <strong>University of New Mexico</strong> developed an <a href="/daily-updates/daily-news-analysis/vaccine-for-alzheimers-disease" target="_blank" rel="noopener"><strong>early version vaccine</strong></a> for Alzheimer&rsquo;s disease.<br />
<ul style="list-style-type: disc;">
<li>Vaccine intervention could <strong>rescue memory impairments and prevent neurons from dying</strong> by reducing tau tangles.</li>
</ul>
</li>
<li>In <strong>November 2019, China</strong> approved the <strong>world&rsquo;s first multi-targeting</strong> and <strong>carbohydrate-based</strong> drug <a href="/daily-updates/daily-news-analysis/world-s-first-drug-for-alzheimer-s-disease" target="_blank" rel="noopener"><strong>GV-971</strong></a> for Alzheimer&rsquo;s.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Alzheimer&rsquo;s Disease</strong></p>
<ul style="list-style-type: square;">
<li>It is a <strong>neurological disorder</strong> which causes brain cells to <strong>degenerate and die.</strong> This leads to loss of memory, problems with words in speaking or writing, poor judgment, changes in mood and personality, confusion with time or place, etc.<br />
<ul style="list-style-type: circle;">
<li>At the <strong>first stage,</strong> these symptoms are <strong>mild</strong> but they become <strong>more severe with time.</strong></li>
</ul>
</li>
<li>Alzheimer&rsquo;s is the <strong>most common cause of dementia</strong> among older adults.<br />
<ul style="list-style-type: circle;">
<li><strong>Dementia</strong> is a group of brain disorders that cause the loss of intellectual and social skills.</li>
</ul>
</li>
<li>Alzheimer&rsquo;s is caused by the <strong>build-up of proteins</strong> known as <strong>tau tangles or plaques</strong> within the brain and is also known as the <strong>third type of diabetes.</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Tau</strong> is a protein that when it occurs in tangled formations in the brain of Alzheimer patients, disrupts the ability of neurons to communicate with one another in the brain.</li>
</ul>
</li>
<li>Alzheimer&rsquo;s is an<strong> incurable disease,</strong> as the death of brain cells cannot be reversed.</li>
<li><strong>Women have a higher risk</strong> of having Alzheimer&rsquo;s disease than men.</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li><strong>Around 100 potential drugs</strong> for the treatment of Alzheimer&rsquo;s disease<strong> failed</strong> between 1998 and 2011 and now these developments are a <strong>big step</strong> in the direction.</li>
<li>The cure is important for<strong> India</strong> because it<strong> stands at the third position after China and the USA</strong> in the number of Alzheimer&rsquo;s patients. Along with cure, India also needs to clearly define public health strategy with a significant focus on research into degenerative diseases and investment in the training of healthcare personnel.</li>
</ul>
<p><a href="https://www.thehindu.com/sci-tech/health/iit-guwahati-takes-trojan-horse-route-to-fight-alzheimers-disease/article31634337.ece" target="_blank" rel="noopener"><strong>Source: TH</strong></a></p>',
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