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Chardham Pariyojana

Why in News The Border Roads Organisation (BRO) has completed construction of a 440 m long tunnel below the Chamba town on the Rishikesh-Dharasu...

27 May 2020 News Analysis
World Turtle Day

Why in News Recently, World Turtle Day was observed on 23rd May to increase attention on conservation of Turtles and Tortoises. The theme for the...

26 May 2020 News Analysis
Restriction on Paddy Cultivation

Why in News Recently, the farmers from Haryana are protesting against the State Government’s order under which farmers have to diversify at...

26 May 2020 News Analysis
Diplomatic Low In Indo-Nepal Relations

This article is based on “Lower the temperature, defuse the issue” published in The Hindu on 23/05/2020. It talks about recent...

26 May 2020 News Editorials
Egypt-Ethiopia Conflict on GERD

Why in News Recently, Egypt has announced that it is willing to resume negotiations with Ethiopia and Sudan, concerning the Grand Ethiopian...

26 May 2020 News Analysis
CoAST India

Why in News Recently, India Observatory has come up with a Geographic Information System (GIS)-enabled dashboard called Collaboration/Covid...

26 May 2020 News Analysis
Purandara Dasa

Why in News The Department of Archaeology, Heritage and Museums, Karnataka will soon commence field research work at Araga in Malnad (Malenadu)...

26 May 2020 News Analysis
Year End Review 2019: Ministry of Chemicals & Fertilizers

Introduction The Ministry of Chemicals & Fertilizers comprises a combination of three departments: Department of Fertilisers: The main...

26 May 2020 Paper 2
Heat Waves

Why in News Recently, the India Meteorological Department (IMD) has forecasted the “heatwave to severe heatwave conditions” over...

26 May 2020 News Analysis
Punitus Sanctus: New Freshwater Fish

Why in News Recently, Puntius Sanctus, a new freshwater fish, has been found in Velankanni, Tamil Nadu. It has been found in a small...

26 May 2020 News Analysis
Tea, Immunity & Coronavirus

Why in News During a webinar organised on the occasion of International Tea Day, the Institute of Himalayan Bioresource Technology (IHBT), Himachal...

26 May 2020 News Analysis
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
Katkari Tribe

Why in News Katkari tribal youth from Shahpur in Maharashtra are making a name by selling Giloy and other products online during lockdown. They...

26 May 2020 News Analysis
Increased Chinese Transgression

Why in News Recently, there has been a marked increase in the number of Chinese transgressions across the disputed India-China border in...

23 May 2020 News Analysis
India-Nepal Border Dispute

Why in News Recently, Nepal has released a new political map that claims Kalapani, Limpiyadhura and Lipulekh of Uttarakhand as part of Nepal’s...

23 May 2020 News Analysis
Open Skies Treaty

Why in News Recently, the United States of America (USA) has announced that it will exit the Open Skies Treaty (OST) due to continuous violation of...

23 May 2020 News Analysis
MGNREGA and Migrant Crisis

This article is based on “Additional allocation for MGNREGA must be supplemented with steps to make it more effective” published in The...

23 May 2020 News Editorials
Covid-19 Halts Global Vaccination Programme

Why in News As per the report released by the World Health Organisation (WHO) and partners, nearly 80 million children under the age of 1 are at...

23 May 2020 News Analysis
Plan for Calamity Cess on GST

Why in News The Central Government is considering imposing a calamity cess on Goods and Services Tax (GST), similar to the one introduced by Kerala...

23 May 2020 News Analysis
ReStart Programme for MSMEs

Why in News Recently the Chief Minister of Andhra Pradesh has launched a new programme ‘ReStart’ to support the Micro, Small and Medium...

23 May 2020 News Analysis

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			'title' => 'Chardham Pariyojana',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>The <strong>Border Roads Organisation (BRO)</strong> has completed <strong>construction of a 440 m long tunnel below the Chamba town</strong> on the Rishikesh-Dharasu road highway (National Highway - 94).</p>
<ul style="list-style-type: square;">
<li>The construction of the tunnel is a <strong>part of the Chardham Pariyojana.</strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>It is a programme taken up by the Ministry of Road Transport and Highways for connectivity improvement for <strong>Chardham</strong> (Kedarnath, Badrinath, Yamunotri and Gangotri) in Uttrakhand.</li>
<li>The cost of the project is around Rs. 12,000 Crore.</li>
<li>It envisages improvement as well as development of 889 km length of national highways.</li>
<li><strong>Implementing Agencies:</strong> Uttarakhand State Public Works Department (PWD), BRO and the National Highway &amp; Infrastructure Development Corporation Limited (NHIDCL).</li>
<li><strong>Project Mode:</strong> The work under the programme is being implemented on <strong>Engineering, Procurement and Construction (EPC)</strong> mode.<br />
<ul style="list-style-type: circle;">
<li>Under the EPC mode, the<strong> project cost</strong> is completely borne by the government.</li>
<li>However, the contractor is directly responsible for <strong>ensuring quality of the work</strong> as well as rectification of defects and maintenance of the project stretch for a period of 4 years after completion of construction.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Border Roads Organisation</strong></p>
<ul style="list-style-type: square;">
<li>It was conceived and<strong> raised in 1960 by Pandit Jawaharlal Nehru</strong> for coordinating the speedy development of a network of roads in the North and the North Eastern border regions of the country.</li>
<li>It works under the <strong>administrative control of the Ministry of Defence.</strong></li>
<li>It has diversified into a large spectrum of construction and development works comprising airfields, building projects, defence works and tunneling and has endeared itself to the people.</li>
</ul>
</div>
<p><a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1626876" target="_blank" rel="noopener"><strong>Source: PIB</strong></a></p>',
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		(int) 1 => [
			'title' => 'World Turtle Day',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, World Turtle Day was observed on 23<sup>rd</sup> May to increase attention on conservation of Turtles and Tortoises.</p>
<ul style="list-style-type: square;">
<li>The theme for the <strong>World Turtle Day 2020</strong> is <strong>&lsquo;Adopt, Don&rsquo;t Shop&rsquo;.</strong></li>
</ul>
<h3>Key Points<a href="http://www.drishtiias.com/images/uploads/1590493522_image4.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590493522_image4.jpg" style="float: right;" width="350" caption="false" /></a></h3>
<ul style="list-style-type: square;">
<li>World Turtle Day is an<strong> annual event</strong> that has been taking place <strong>since 2000.</strong></li>
<li>It is being organised by the nonprofit organisation namely, <strong>American Tortoise Rescue (ATR).</strong></li>
<li>It aims to protect the turtles and tortoises from illegal smuggling, exotic food industry, habitat destruction, global warming and pet trade.</li>
<li>The day was observed in India by the <a href="/daily-updates/daily-news-analysis/15-point-directive-to-clean-ganga" target="_blank" rel="noopener"><strong>National Mission for Clean Ganga (NMCG)</strong></a>, along with the <a href="/daily-updates/daily-news-analysis/sal-forest-tortoise" target="_blank" rel="noopener"><strong>Wildlife Institute of India (WII)</strong></a>.</li>
</ul>
<div class="border-bg">
<p><strong>Turtle and its Significance</strong></p>
<ul style="list-style-type: square;">
<li><strong>Description:</strong><br />
<ul style="list-style-type: circle;">
<li>Turtles are the reptiles of the order <strong>Testudines,</strong> characterized by a special bony or cartilaginous shell developed from their ribs and acting as a shield.</li>
<li>It can reside inside <strong>freshwater or saltwater.</strong></li>
<li><strong>Tortoise</strong> are distinguished from other turtles by being<strong> land-dwelling,</strong> while many (though not all) other turtle species are at <strong>partly aquatic.</strong></li>
<li>Turtles are cold-blooded species.<br />
<ul style="list-style-type: disc;">
<li><strong>Cold blooded species</strong> have a higher range of body temperature and move between environments to make themselves warmer or cooler. E.g. Insects, arachnids, fish, reptiles, and amphibians.</li>
</ul>
</li>
<li>They have very <strong>slow metabolism</strong> and can survive without food and water for a long time.</li>
<li>According to the<a href="/daily-updates/daily-news-analysis/iucn-red-list" target="_blank" rel="noopener"><strong> International Union for Conservation of Nature (IUCN)</strong></a> most of the species of turtles and tortoises are <strong>vulnerable, endangered or critically endangered.</strong></li>
</ul>
</li>
<li><strong>Significance:</strong><br />
<ul style="list-style-type: circle;">
<li>Turtles play an important role in the river by scavenging dead organic material and diseased fish by controlling the water pollution.</li>
<li>They also help in maintaining healthy fish stocks in the water by giving them habitat over their body.</li>
<li>Turtle populations could improve seagrass ecosystem health by removing seagrass biomass and preventing sediment formation.</li>
<li>Turtles are also transporters of nutrients and energy to coastal areas.</li>
</ul>
</li>
</ul>
</div>
<h3>Turtle Conservation in India</h3>
<ul style="list-style-type: square;">
<li>There are five species in Indian waters i.e. <a href="/daily-updates/daily-news-analysis/olive-ridley-turtles" target="_blank" rel="noopener"><strong>Olive Ridley</strong></a>, <strong>Green turtle, Loggerhead, Hawksbill, Leatherback.</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>Olive Ridley, Leatherback and Loggerhead</strong> are listed as '<strong>Vulnerable'</strong>&nbsp;on the IUCN Red List of Threatened Species.</li>
<li>The <strong>Hawksbill&nbsp;turtle</strong> is listed as&nbsp;'<strong>Critically Endangered'&nbsp;</strong>and<strong> Green Turtle </strong>is listed as<strong> 'Endangereed' </strong>on the&nbsp;IUCN Red List of Threatened Species.<br />
<ul style="list-style-type: disc;">
<li>They are protected in <a href="/daily-updates/daily-news-analysis/wild-life-protection-act-implementation-and-failure" target="_blank" rel="noopener"><strong>Indian Wildlife Protection Act of 1972</strong></a>, under Schedule I.</li>
</ul>
</li>
</ul>
</li>
<li>Turtles have been protected in India under the <strong>Biodiversity Conservation and Ganga Rejuvenation</strong> programme.</li>
</ul>
<h3>Way Forward</h3>
<p>Turtles play an important role in ocean ecosystems by maintaining healthy seagrass beds and coral reefs, providing key habitat for other marine life. It also helps to balance marine food webs and facilitate nutrient cycling from water to land. Thus, conservation of turtles will help to conserve biodiversity and to maintain natural balance.</p>
<p><a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1626462" target="_blank" rel="noopener"><strong>Source: PIB</strong></a></p>',
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		(int) 2 => [
			'title' => 'Restriction on Paddy Cultivation',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the farmers from Haryana are protesting against the State Government&rsquo;s order under which farmers have to<strong> diversify at least 50% of their last-year cultivated <a href="/daily-updates/daily-news-analysis/direct-seeding-of-rice" target="_blank" rel="noopener">paddy (rice)</a></strong> area by growing alternate crops.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Government&rsquo;s Action</strong><br />
<ul style="list-style-type: circle;">
<li>The restriction of cultivation is under the state government&rsquo;s <strong>crop diversification scheme &lsquo;Mera Pani, Meri Virasat&rsquo;</strong> for replacement of paddy by alternative crops in 1 lakh hectare.</li>
<li>According to the Government, the step is aimed at<strong> water conservation</strong> and <strong>crop diversification.</strong></li>
<li>Directed farmers to <strong>sow alternative crops</strong> such as maize, millet, and pulses.</li>
<li>Offered Rs. 7,000 per acre to farmers shifting the paddy fields to other alternative crops.</li>
</ul>
</li>
<li><strong>Farmer&rsquo;s Response/ Stand</strong><br />
<ul style="list-style-type: circle;">
<li>Farmers have started a <strong>&lsquo;Kisan Bachao-Kheti Bachao&rsquo;</strong> campaign against the government's decision under which they are demanding the<strong> freedom to decide what is to be sown in the field.</strong></li>
<li>Other options of agriculture are not much viable.</li>
<li>The soil and climate is not conducive for alternative crops in most parts of the block.</li>
<li>The compensation amount of Rs. 7000 offered by the government is inadequate.</li>
<li>It is not the time for experiments in the farming system when the country is battling with <a href="/daily-updates/daily-news-editorials/covid-19-and-india-1" target="_blank" rel="noopener"><strong>Covid-19.</strong></a></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Mera Pani Meri Virasat Scheme</strong></p>
<ul style="list-style-type: square;">
<li>The Haryana government had recently launched &lsquo;Mera Pani Meri Virasat&rsquo; scheme, aimed at <strong>crop diversification</strong> to move away from water-guzzling paddy.</li>
<li>Under the scheme, farmers sowing alternative crops other than paddy during the ensuing kharif season will get an <strong>incentive of ₹7,000 per acre.</strong></li>
</ul>
<p><strong>Crop Diversification</strong></p>
<ul style="list-style-type: square;">
<li><strong>Crop diversification</strong> refers to the addition of new crops or cropping systems to agricultural production on a particular farm.</li>
<li><strong>Benefits:</strong><br />
<ul style="list-style-type: circle;">
<li>Farmers can grow several crops even in areas where the variability of rainfall is high and adequate sources of irrigation are not available.</li>
<li>Diversification helps in enhancing nitrogen in the soil and replenishing the soil fertility.</li>
<li>This helps to generate employment as the farmers get the opportunity to cultivate different crops.</li>
<li>Higher earnings of farmers transforms to greater inputs to the crops such as fertilizers, insecticides and irrigation equipment.</li>
<li>Enable farmers to gain access to national and international markets with new products, food and medicinal plants.</li>
<li>Diversification can also manage price risk, since not all products suffer low market prices at the same time and increase the profitability of the farming community.</li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>There is a need for a paradigm shift towards a better farming system which may include transition towards improving water use efficiency, reducing leakages, recharging/restoring local water bodies, etc.</li>
<li>However, It is more important to pay heed towards farmers&rsquo; concerns in the coronavirus crisis by providing better compensations and other farming related assistance, rather than restricting or forcing upon anything which may compromise their earning avenues.</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/other-states/farmers-protest-restrictions-on-paddy-cultivation-in-haryana/article31674921.ece" target="_blank" rel="noopener"><strong>Source:TH</strong></a></p>',
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		],
		(int) 3 => [
			'title' => 'Diplomatic Low In Indo-Nepal Relations',
			'catname' => 'News Editorials',
			'desc' => '<div class="border">
<p>This article is based on <a href="https://www.thehindu.com/opinion/lead/lower-the-temperature-defuse-the-issue/article31653570.ece?homepage=true" target="_blank" rel="noopener"><strong>&ldquo;Lower the temperature, defuse the issue&rdquo;</strong></a> published in The Hindu on 23/05/2020. It talks about recent diplomatic tussles between India and Nepal over the boundary dispute issue.</p>
</div>
<p>Recently, the Nepal government referring to the Treaty of Sugauli, 1816, took a decision to adopt a new political map that claims Indian territory of Lipulekh, Kalapani and other areas, as a part of Nepal.</p>
<p>Further, India Indian Army Chief&rsquo;s contention that Nepal raised the dispute at the &ldquo;behest of an external force&rdquo;, namely China. These developments over the <a href="/daily-updates/daily-news-editorials/indo-nepal-territorial-dispute" target="_blank" rel="noopener"><strong>Kalapani territorial issue</strong></a> appears to threaten the basis of their special relationship, which has nurtured open borders and the free movement of people.</p>
<p>In this context, India must realize the importance of Nepal and quickly take diplomatic efforts to resolve this impasse.</p>
<p><a href="http://www.drishtiias.com/images/uploads/1590491753_image5.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590491753_image5.png" style="display: block; margin-left: auto; margin-right: auto;" caption="false" width="639" height="408" /></a></p>
<h3>What is the Issue?</h3>
<ul style="list-style-type: square;">
<li>Kalapani is a valley that is currently administered by India as a part of the Pithoragarh district of Uttarakhand.</li>
<li>The Treaty of Sugauli concluded between British India and the Kingdom of Nepal in the year 1816, states the Kali River in the Kalapani region demarcates the border between India and Nepal.</li>
<li>Also, the Survey of India maps since the 1870s showed the area of Lipulekh down to Kalapani as part of British India.</li>
<li>First, Rana rulers of Nepal and later Nepalese Kings accepted the boundary and did not raise any objection with the government of India after India&rsquo;s Independence.</li>
<li>However, in recent times, the Nepalese contest that the tributary that joins the Mahakali river at Kalapani is not the Kali river. Nepal now contends that the Kali river lies further west to the Lipulekh pass. This results in a boundary dispute between India and Nepal.</li>
<li>For India, the Lipulekh pass has always been part of the road to Tibet and was mentioned as one of the border passes for trade in a 1954 agreement with China, which was also reaffirmed in another trade agreement in 2015.</li>
<li>In 2019, a new political map of India, made after the bifurcation of the state of Jammu and Kashmir (J&amp;K) into the Union Territories of J&amp;K and Ladakh, showed Kalapani, Lipulekh and Limpiyadhura as part of Pithoragarh district in Uttarakhand state. <br />
<ul style="list-style-type: circle;">
<li>Nepal protested strongly against India&rsquo;s &ldquo;unilateral&rdquo; act and opinionated that the issue should be resolved through negotiations.</li>
</ul>
</li>
<li>Further, the inauguration of a road up to Lipulekh Pass by the Indian government on the border with China has sparked more protests in Nepal.</li>
<li>In retaliation, Nepal has released a new map that includes all the disputed territories, which India has described as &ldquo;unjustified cartographic assertion&rdquo;.</li>
</ul>
<h3>Importance of Nepal For India</h3>
<ul style="list-style-type: square;">
<li>Nepal lies in the middle of India&rsquo;s &lsquo;Himalayan frontiers&rsquo;, and along with Bhutan, it acts as northern &lsquo;borderland&rsquo; flanks and acts as buffer states against any possible aggression from China.</li>
<li>Nepal shares borders with 5 Indian states- Uttarakhand, Uttar Pradesh, West Bengal, Sikkim and Bihar and with free movement of people and thereby acting as an important point of cultural and economic exchange in India-Nepal relations.</li>
<li>Rivers originating in Nepal feed the perennial river systems of India in terms of ecology and hydropower potential.</li>
<li>Many Hindu and Buddhist religious sites are in Nepal making it an important pilgrimage site for a large number of Indians.</li>
</ul>
<h3>China Factor In Indo-Nepal Relations</h3>
<ul style="list-style-type: square;">
<li>In the past, Chinese interest in Nepal was to ensure that Nepalese territory is not used by Tibetans for the breeding of discontent.</li>
<li>However, in recent times, China has made inroads into Nepal in infrastructure, education and health sectors. Also, Nepal wants to take advantage of the BRI project built by China.</li>
<li>India feels that the Chinese inroads into Nepal are necessarily to counterbalance the Indian influence in Nepal. However, Nepal has asserted that its relationship with China is purely economic and will not be hurting the Indian strategic interests in any way.</li>
<li>Also, India is of the view that the rising Nepal and China cooperation would undermine Nepal&rsquo;s distinction of buffer state between India and China.</li>
</ul>
<h3>Way Forward</h3>
<p>Although the people-to-people relationship between India and Nepal is unmatched, in recent times the not so good government-to-government relationship has curated many issues. In this context:</p>
<ul style="list-style-type: square;">
<li>India should stop looking at Nepal purely through a security prism, and at bilateral relations only as transactional and part of a zero-sum game with China.</li>
<li>India should focus on working towards <a href="/to-the-points/Paper2/india-nepal-relations" target="_blank" rel="noopener"><strong>multifaceted relationships</strong></a> to the advantage of both nations.</li>
<li>India should negotiate diplomatically to resolve the boundary dispute with Nepal under the aegis of <a href="/daily-updates/daily-news-editorials/indo-nepal-territorial-dispute" target="_blank" rel="noopener"><strong>International law on Trans-boundary Water Disputes.</strong></a> In this case, <a href="/daily-updates/daily-news-editorials/india-bangladesh-relationship" target="_blank" rel="noopener"><strong>boundary dispute resolution between India and Bangladesh</strong></a> should serve as a model for this.</li>
<li>India should maintain a policy of keeping away from the internal affairs of Nepal, while at the same time, in the spirit of friendship, India should guide the nation towards a more inclusive democracy.</li>
</ul>
<p>Boundary disputes are common ground for countries that have an ancient history and shared borders, and the India-Nepal border issues one such dispute. Thus, the two neighbouring countries should not let the war of maps deteriorate their historical ties.</p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #fffcf2;">
<p><span style="color: #333399;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>&ldquo;Boundary disputes have remained the Achilles heel in India&rsquo;s Neighbourhood policy&rdquo;. Discuss the statement in the context of the recent diplomatic tussle between India and Nepal.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/kkKW_FmH_i8" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>This editorial is based on <a href="https://www.thehindu.com/opinion/editorial/cold-neighbourhood-the-hindu-editorial-on-india-nepal-ties/article31653546.ece" target="_blank" rel="noopener"><strong>&ldquo;Cold Neighbourhood&rdquo;</strong></a> which was published in The Hindu on May 23<sup>rd</sup>, 2020. Now watch this on our Youtube Channel.</p>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/daily-updates/daily-news-editorials/diplomatic-low-in-indo-nepal-relations'
		],
		(int) 4 => [
			'title' => 'Egypt-Ethiopia Conflict on GERD',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, <strong>Egypt</strong> has announced that it is willing to resume negotiations with <strong>Ethiopia</strong> and <strong>Sudan,</strong> concerning the <a href="/daily-updates/daily-news-analysis/grand-ethiopian-renaissance-dam" target="_blank" rel="noopener"><strong>Grand Ethiopian Renaissance Dam</strong></a> (GERD).</p>
<ul style="list-style-type: square;">
<li>The dam is located on River <strong>Blue Nile</strong> (a tributary of River Nile) in Ethiopia and is the centre of a dispute involving several East-African countries, dependent on the river&rsquo;s waters.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590489952_Image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590489952_Image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Background:</strong><br />
<ul style="list-style-type: circle;">
<li>Ethiopia began the construction of the GERD in <strong>2011</strong> on the Blue Nile that runs across one part of the country.<br />
<ul style="list-style-type: disc;">
<li>After completion, the dam hydropower project will be <strong>Africa&rsquo;s largest.</strong></li>
</ul>
</li>
<li><strong>Egypt has objected</strong> to the construction of the dam and proposed a longer timeline for the project.</li>
<li><strong>Sudan</strong> has also been<strong> involved</strong> due to its location.</li>
<li>The Nile is an important water source in the region so there are concerns that this dispute may evolve into a full-fledged conflict between Egypt and Ethiopia.</li>
<li>For the past four years, tri-party talks between Egypt, Ethiopia and Sudan have been unable to reach agreements.</li>
<li>Recently, the<strong> USA</strong> has stepped in to <strong>mediate.</strong></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>River Nile</strong></p>
<ul style="list-style-type: square;">
<li>The name Nile is derived from the <strong>Greek</strong> word <em><strong>Neilos</strong></em> (Latin: <em>Nilus</em>), meaning a valley or a river valley.</li>
<li>It is the <strong>longest river in the world</strong> and is called the <strong>father of African rivers.</strong> It has a length of about 4,132 miles and drains an area estimated at 1,293,000 square miles.</li>
<li>It <strong>rises south of the Equator</strong> and <strong>flows northward</strong> through<strong> northeastern Africa</strong> to <strong>drain into the Mediterranean Sea.</strong><br />
<ul style="list-style-type: circle;">
<li>The Nile River forms an<strong> arcuate delta as it empties into the Mediterranean Sea.</strong> Deltas with triangular or fan-shape are called<strong> arcuate (arc-like) deltas.</strong></li>
</ul>
</li>
<li>The Nile is formed by <strong>three principal streams:</strong> the <strong>Blue Nile,</strong> the <strong>Atbara</strong>, and the <strong>White Nile.</strong></li>
<li><strong>Drainage:</strong> Parts of Tanzania, Burundi, Rwanda, the Democratic Republic of the Congo, Kenya, Uganda, South Sudan, Ethiopia, Sudan, and the cultivated part of Egypt.</li>
</ul>
</div>
<ul style="list-style-type: square;">
<li><strong>Dam&rsquo;s Importance for Ethiopia:</strong><br />
<ul style="list-style-type: circle;">
<li>Ethiopia believes that the dam will <strong>generate approximately 6,000 megawatts</strong> of electricity after completion.<br />
<ul style="list-style-type: disc;">
<li>This dam will <strong>reduce electricity shortages</strong> and <strong>help</strong> the country&rsquo;s <strong>manufacturing industry.</strong></li>
</ul>
</li>
<li>It will also enable Ethiopia to <strong>supply electricity to neighbouring nations</strong> and <strong>earn revenue</strong> in exchange.<br />
<ul style="list-style-type: disc;">
<li>Neighbouring countries like Kenya, Sudan, Eritrea and South Sudan also suffer from electricity shortages and they can also benefit from the hydropower project if Ethiopia decides to sell electricity to them.</li>
</ul>
</li>
<li>Ethiopia sees the dam as a matter of<strong> national sovereignty</strong> and the dam project <strong>does not rely on external funding</strong> and relies on government bonds and private funds to pay for the project.</li>
</ul>
</li>
<li><strong>Cause of Conflict:</strong><br />
<ul style="list-style-type: circle;">
<li>The hydropower project may just allow Ethiopia to control the Nile&rsquo;s waters, and this concerns <strong>Egypt</strong> because it <strong>lies downstream on the Nile.</strong><br />
<ul style="list-style-type: disc;">
<li>The dam would <strong>jeopardise food and water security</strong> and <strong>livelihoods</strong> of ordinary Egyptian citizens.</li>
<li>Egypt has also written to the <a href="/daily-updates/daily-news-analysis/un-security-council-1" target="_blank" rel="noopener"><strong>United Nations Security Council</strong></a> (UNSC) concerning the matter and has also implied that the dam<strong> would cause armed conflict</strong> between the two countries.</li>
</ul>
</li>
<li>Egypt has <strong>proposed a longer timeline</strong> because it does not want the water level of the Nile to drastically drop as the dam reservoir needs plenty of water to fill in the initial stages. <br />
<ul style="list-style-type: disc;">
<li>The longer it takes to fill the reservoir, the less impact will be there on the water level of the river.</li>
</ul>
</li>
<li><strong>Sudan</strong> too believes that Ethiopia having control over the river through the dam may <strong>affect the water supplies</strong> of the country. It has proposed<strong> joint management</strong> of the dam.<br />
<ul style="list-style-type: disc;">
<li>Sudan is likely<strong> to benefit from the power generated by the dam.</strong></li>
<li>The <strong>regulated flow of the river</strong> will save Sudan from serious flooding in August and September.</li>
</ul>
</li>
<li>There is a possibility that the conflict would <strong>threaten the vital international trade</strong> route through the<strong> Suez Canal</strong> and along the <a href="/daily-updates/daily-news-analysis/nobel-prize-for-peace-2019" target="_blank" rel="noopener"><strong>Horn of Africa</strong></a>.</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>To solve the conflict peacefully, <strong>mediation and facilitation</strong> by the neighbouring countries and the international bodies are necessary.</li>
<li>In case, the attempt to resolve the conflict does not work out by facilitating negotiations between the conflict parties, then a <strong>compensation method</strong> can be adopted which would need the countries to compensate each others&rsquo; losses.</li>
<li>All countries involved in the issue need to <strong>peacefully resolve</strong> the issue so that they can<strong> reap the advantages</strong> of the dam and their <strong>peace and security is restored</strong> again.</li>
</ul>
<p><a href="https://indianexpress.com/article/explained/how-a-dam-on-river-nile-may-trigger-water-wars-in-east-africa-6424689/" 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/egypt-ethiopia-conflict-on-gerd'
		],
		(int) 5 => [
			'title' => 'CoAST India',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, India Observatory has come up with a <strong>Geographic Information System&nbsp;</strong><strong>(GIS)-enabled dashboard</strong> called<strong> Collaboration/Covid Action Support Group (CoAST India)</strong> to monitor the movements of migrants.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The CoAST India dashboard includes an <strong>India map,</strong> which <a href="/daily-updates/daily-news-analysis/woes-of-migrants-amid-covid-19" target="_blank" rel="noopener"><strong>reflects the movement of migrants</strong></a> in <strong>real time,</strong> often on foot, <strong>along with facilities and relief organisations on their routes.</strong></li>
<li>It <strong>draws information from 55 organisations</strong> on the ground, mostly in villages.</li>
<li>The dashboard<strong> aims to make such data available to governments and small local civil society groups</strong> to be used for planning and providing assistance to migrants.</li>
<li>The dashboard has been made in collaboration with<strong> Foundation for Ecological Security (FES).</strong></li>
<li>India Observatory was set up in December 2019, with FES. It focused on ecological issues about forests, water bodies, conservation, etc. <br />
<ul style="list-style-type: circle;">
<li>However, after <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong></a> broke out, it has decided to focus on the movements of people.</li>
</ul>
</li>
<li>The National Disaster Management Authority has also developed &lsquo;<a href="/daily-updates/daily-news-editorials/acute-encephalitis-syndrome-causes-and-lapses" target="_blank" rel="noopener"><strong>National Migrant Information System (NMIS)</strong></a>&rsquo; to maintain a central repository of migrant workers.</li>
</ul>
<h3>Geographic Information System</h3>
<ul style="list-style-type: square;">
<li>A GIS is a <strong>computer system for capturing, storing, checking, and displaying data</strong> related to positions on Earth&rsquo;s surface.</li>
<li>By relating seemingly unrelated data, GIS can help individuals and organizations better understand spatial patterns and relationships.</li>
<li>GIS can use<strong> any information that includes location.</strong> The location can be expressed in many different ways, such as latitude and longitude, address, or ZIP code.</li>
<li>GIS can include<strong> data about people, such as population, income, or education level.</strong>
<ul style="list-style-type: circle;">
<li>It can also include <strong>information about the sites of factories, farms, and schools, or storm drains, roads, and electric power lines etc.</strong></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>India Observatory</strong></p>
<ul style="list-style-type: square;">
<li>It is <strong>India&rsquo;s first socio, economic and ecological open-source</strong> integrated Geospatial data platform.</li>
<li>The observatory is <strong>designed to supplement local level decision</strong> making by village communities, Panchayats, NGOs and government officials.</li>
<li>It has the <strong>&lsquo;India Data Platform&rsquo;</strong> at its core, which is built on open source and brings together data on over 1,600 parameters, ranging from village to national level in the form of maps, graphs, tables and infographics.</li>
<li>It is freely available for civil society organizations, students, government departments and citizens.</li>
</ul>
<p><strong>Foundation for Ecological Security</strong></p>
<ul style="list-style-type: square;">
<li>The Foundation for Ecological Security (FES) is a registered <strong>non-profit organisation</strong> based in Anand, Gujarat.</li>
<li>It works towards the <strong>ecological restoration and conservation of land and water resources</strong> in ecologically fragile, degraded and marginalised regions of the country.</li>
<li>It works with the concentrated and collective efforts of village communities.</li>
</ul>
</div>
<p><a href="https://indianexpress.com/article/explained/coronavirus-india-lockdown-now-online-a-map-tracking-migrants-real-time-6427104/" 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/coast-india'
		],
		(int) 6 => [
			'title' => 'Purandara Dasa',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>The <strong>Department of Archaeology, Heritage and Museums, Karnataka</strong> will soon commence field research work at <strong>Araga in Malnad</strong> (Malenadu) region in <strong>Karnataka,</strong> to end the <strong>speculations regarding the birthplace of Purandara Dasa.</strong></p>
<ul style="list-style-type: square;">
<li>The department comes <strong>under the Ministry of Culture</strong> and is<strong> responsible for archaeological studies and the preservation</strong> of cultural monuments.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Issue About Birthplace:</strong><br />
<ul style="list-style-type: circle;">
<li>It was widely <strong>believed</strong> that the Purandara Dasa was born in<strong> Purandharagad, Maharashtra.</strong> However, many <strong>people in Malnad claimed that he hailed from their region.</strong></li>
<li>On <strong>literary evidence,</strong> it is being<strong> speculated that Purandara Dasa was born near Araga.</strong> However, <strong>definitive conclusions can be reached only if tangible archaeological evidence</strong> like inscriptions, coins, remains of building-related to the name Srinivasa Nayaka or Purandara Dasa<strong> are found.</strong></li>
</ul>
</li>
<li><strong>About Purandara Dasa:<a href="http://www.drishtiias.com/images/uploads/1590486494_image3.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590486494_image3.jpg" style="float: right;" width="200" caption="false" /></a></strong><br />
<ul style="list-style-type: circle;">
<li>Purandara Dasa belonged to the<strong> Vaishnava tradition</strong> during the<a href="/daily-updates/daily-news-analysis/hampi-1" target="_blank" rel="noopener"><strong> Vijayanagar</strong></a> <strong>rule.</strong></li>
<li>Prior to the adoption of Vaishnava tradition, he was a rich merchant and was called <strong>Srinivasa Nayaka.</strong><br />
<ul style="list-style-type: disc;">
<li>The proponents of the theory that Puranadara Dasa was born in Malnad, refer to his older name and point out that <strong>Nayaka title</strong> was attributed to locally influential people, including wealthy merchants in Malnad during the Vijayanagar rule.</li>
</ul>
</li>
<li>He was a great <strong>devotee of Lord Krishna,</strong> a<strong> poet</strong> and a <strong>musician.</strong> He is considered the<strong> father of <a href="/to-the-points/paper1/carnatic-music" target="_blank" rel="noopener">Carnatic Music</a>.</strong><br />
<ul style="list-style-type: disc;">
<li>He formalized the music system which was a <strong>blend of various traditions of South India and the musical science</strong> as explained in the Vedas.</li>
<li>He<strong> identified 84 ragas</strong> and devised a system of teaching Carnatic music in graded lessons.</li>
</ul>
</li>
<li>He<strong> composed songs in Kannada and Sanskrit</strong> with the pen name<strong> Purandara Vithala.</strong></li>
<li>In his compositions, he expressed his love for Sri Krishna <strong>describing various aspects of Krishna&rsquo;s life.</strong></li>
</ul>
</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/karnataka/purandara-dasas-birthplace-archaeology-dept-to-start-research-in-village-in-shivamogga-dist/article31673889.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/purandara-dasa'
		],
		(int) 7 => [
			'title' => 'Year End Review 2019: Ministry of Chemicals & Fertilizers',
			'catname' => 'Paper 2',
			'desc' => '<p><strong>Introduction</strong></p>
<p>The Ministry of Chemicals &amp; Fertilizers comprises a combination of three departments:</p>
<ul style="list-style-type: square;">
<li><strong>Department of Fertilisers:</strong> The main objective of the Department of Fertilizers is to ensure <strong>adequate and timely availability of fertilizers at affordable prices for maximizing agricultural production</strong> in the country.</li>
<li><strong>Department of Chemicals and Petrochemicals:</strong> The Department of Chemicals and Petrochemicals has been part of the Ministry since 1991. It is entrusted with the responsibility of <strong>policy, planning, development and regulation of Chemicals and Petrochemicals Industries.</strong></li>
<li><strong>Department of Pharmaceuticals:</strong> The Department of Pharmaceuticals was created in July 2008 to provide greater focus for the growth of the high potential Pharmaceuticals industry.</li>
</ul>
<h3>Important Schemes and Policies</h3>
<p><strong>Neem Coating of Urea</strong></p>
<ul style="list-style-type: square;">
<li>The Department of Fertilizers (DoF) has made it mandatory for all the domestic producers to produce 100% urea as Neem Coated Urea (NCU). The benefits of use of NCU are as under:-<br />
<ul style="list-style-type: circle;">
<li>Improvement in soil health</li>
<li>Reduction in usage of plant protection chemicals</li>
<li>Reduction in pest and disease attack</li>
<li>An increase in yield of paddy, sugarcane, maize, soybean, Tur/Red Gram</li>
<li>Negligible diversion towards non-agricultural purposes.</li>
<li>Due to slow release of Nitrogen, Nitrogen Use Efficiency (NUE) of Neem Coated Urea increases resulting in reduced consumption of NCU as compared to normal urea</li>
</ul>
</li>
</ul>
<p><a href="/prs-capsule/prs-capsule-april-2019#3" target="_blank" rel="noopener"><strong>New Urea Policy (NUP) 2015</strong></a></p>
<ul style="list-style-type: square;">
<li>Objectives of the policy are-<br />
<ul style="list-style-type: circle;">
<li>To maximize indigenous urea production.</li>
<li>To promote energy efficiency in the urea units.</li>
<li>To rationalize the subsidy burden on the Government of India.</li>
</ul>
</li>
<li><strong>Achievements of NUP:</strong> The production of urea during the year 2017-18 was significantly higher than the production of urea during 2013-14.</li>
</ul>
<p><strong>New Investment Policy- 2012</strong></p>
<ul style="list-style-type: square;">
<li>The Government announced New Investment Policy (NIP)-2012 in January, 2013 and made amendments in 2014 <strong>to facilitate fresh investment in the urea sector</strong> and to make India self-sufficient in the urea sector.</li>
</ul>
<p><strong>Policy on Promotion of City Compost</strong></p>
<ul style="list-style-type: square;">
<li>The Government of India approved a policy on promotion of City Compost, notified by the DoF in 2016 granting Market Development Assistance of Rs. 1500/- for scaling up production and consumption of city compost.</li>
<li>To increase sale volumes, compost manufacturers willing to market city compost were allowed to sell city compost in bulk directly to farmers.</li>
<li>Fertilizer companies marketing city compost covered under the Direct Benefit Transfer (DBT) for Fertilizers.</li>
</ul>
<p><strong>Use of Space Technology in Fertilizer Sector</strong></p>
<ul style="list-style-type: square;">
<li>DoF commissioned a three year Pilot Study on &ldquo;Resource Mapping of Rock Phosphate using Reflectance Spectroscopy and Earth Observations Data&rdquo; by National Remote Sensing Centre under ISRO, in collaboration with Geological Survey of India(GSI) and the Atomic Mineral Directorate (AMD).</li>
<li>Preliminary Data processing for the phosphate mapping is completed. Spectral analysis of samples collected during field work is completed.</li>
</ul>
<p><strong>The Nutrient Based Subsidy (NBS) Scheme</strong></p>
<ul style="list-style-type: square;">
<li>It is being implemented from April 2010 by the DoF.</li>
<li>Under<a href="/daily-updates/daily-news-analysis/cabinet-approves-nutrient-based-subsidy-rates" target="_blank" rel="noopener"><strong> NBS</strong></a>, a fixed amount of subsidy decided on an annual basis, is provided on each grade of subsidized Phosphatic &amp; Potassic (P&amp;K) fertilizers depending on its nutrient content.</li>
<li>It aims at ensuring the balanced use of fertilizers, improving agricultural productivity, promoting the growth of the indigenous fertilizers industry and also reducing the burden of Subsidy.</li>
</ul>
<p><strong>The Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP)</strong></p>
<ul style="list-style-type: square;">
<li><a href="/daily-updates/daily-news-analysis/janaushadhi-week" target="_blank" rel="noopener"><strong>PMBJP</strong></a> aims to make available generic medicines at affordable prices to all.</li>
<li>It also intends to reinvigorate the supply of affordable generic medicines with efficacy and quality equivalent to that of branded drugs.</li>
<li>About 10-15 lakh people benefit from Janaushadhi medicines per day. And the scheme has led to total savings of approximately Rs.1,000 crores for common citizens, as these medicines are cheaper by 50% to 90% of average market price.</li>
<li>The sale of &lsquo;<a href="/daily-updates/daily-news-analysis/janaushadhi-sugam" target="_blank" rel="noopener"><strong>Jan Aushadhi Suvidha Oxo-Biodegradable&rsquo; Sanitary Napkin</strong></a> through Pradhan Mantri Bhartiya Janaushadhi Kendras (PMBJKs) started in the year 2018-2019. Over 2 crore pads have been sold at PMBJK in the year 2019.</li>
</ul>
<p><strong>Scheme for Development of Pharmaceutical Industry</strong></p>
<ul style="list-style-type: square;">
<li>It&rsquo;s objective is to ensure drug security in the country by increasing the efficiency and competitiveness of domestic pharmaceutical industry with the following <strong>sub-schemes:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Assistance to Bulk Drug Industry</strong> for Common Facility Centre - For creation of common facilities in any upcoming Bulk Drug Park.</li>
<li><strong>Assistance to Medical Device Industry</strong> for Common Facility Centre -For creation of common facilities in any upcoming Medical Device Park.</li>
<li><strong>Pharmaceuticals Technology Upgradation Assistance Scheme</strong> (PTUAS) - To facilitate Small and Medium Pharma Enterprises (SMEs) to upgrade their plant and machinery to World Health Organization (WHO)/Good Manufacturing Practices (GMP) standards.</li>
<li><strong>Assistance for Cluster Development -</strong> For creation of common facilities in any pharma clusters including Bulk Drug, Medical Device, Ayurvedic, Unani and Cosmetics Units; and</li>
<li><strong>Pharmaceutical Promotion Development Scheme</strong> (PPDS) - For promotion, development and export promotion in Pharmaceutical sector</li>
</ul>
</li>
</ul>
<p><strong>Medical Devices Sector</strong></p>
<ul style="list-style-type: square;">
<li>The DoP approved a sub-scheme termed as <strong>Development of Common Facility Centre for Medical Devices</strong> (DCFC-MD) under the umbrella scheme for Development of Pharmaceuticals Industry.</li>
<li>It aims to give financial assistance for creation of Common Facility Centers (CFC) in the upcoming Medical Device Parks. This is expected to lower down the cost of manufacturing of indigenous medical devices and hence making it more competitive.</li>
</ul>
<p><strong>Affordable &amp; Quality HealthCare for All - Availability of Cheaper Medicines</strong></p>
<ul style="list-style-type: square;">
<li>National Pharmaceutical Pricing Authority (NPPA) fixes retail prices of the drugs on the National List of Essential Medicines (NLEM) under schedule-I of Drug Price Control Orders (DPCO) and ensures the affordability of life-saving drugs for all.</li>
</ul>
<div class="border-bg">
<p><strong>National Pharmaceutical Pricing Authority (NPPA)</strong></p>
<ul style="list-style-type: square;">
<li>It was established on 29<sup>th</sup> August 1997 as an independent body of experts under the Department of Pharmaceuticals (DoP), Ministry of Chemicals &amp; Fertilizers.</li>
<li>It is headquartered in New Delhi.</li>
<li>The Authority has been entrusted with the task of fixation/revision of prices of pharmaceutical products (bulk drugs and formulations), enforcement of provisions of the <strong>Drugs (Prices Control) Order</strong> and monitoring of the prices of controlled and decontrolled drugs in the country.</li>
</ul>
<p><strong>Drug (Prices Control) Order, (DPCO) 2013</strong></p>
<ul style="list-style-type: square;">
<li>Under the provisions of DPCO 2013, only the prices of drugs that figure in the National List of Essential Medicines (NLEM) are monitored and controlled by the regulator, the National Pharmaceutical Pricing Authority.</li>
<li>Essential medicines are those that satisfy the priority healthcare needs of the majority of the population. The primary purpose of NLEM is to promote rational use of medicines considering the three important aspects i.e. cost, safety and efficacy.</li>
<li>Paragraph 19 of the DPCO, 2013, deals with increase or decrease in drug prices under extraordinary circumstances. However, there is neither a precedent nor any formula prescribed for upward revision of ceiling prices.</li>
</ul>
<p><strong>National List of Essential Medicines (NLEM)</strong></p>
<ul style="list-style-type: square;">
<li>Essential medicines are those that satisfy the priority health care needs of the population. These are selected with due regard to disease prevalence, evidence on efficacy and safety, and comparative cost-effectiveness.</li>
<li>The list is prepared by the Union Ministry of Health and Family Welfare.</li>
</ul>
</div>
<p><strong>Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)</strong></p>
<ul style="list-style-type: square;">
<li>A PCPIR would be a specifically delineated investment region with an area of around 250 square kilometers planned for the establishment of manufacturing facilities for domestic and export led production in petroleum, chemicals &amp; petrochemicals, alongwith the associated services and infrastructure.</li>
<li>A PCPIR would be a combination of production units, public utilities, logistics, environmental protection mechanisms, residential areas and administrative services.</li>
<li>The Government of India has approved setting up of 4 PCPIRs in the States of Gujarat (Dahej), Andhra Pradesh (Vishakhapatnam&ndash;Kakinada), Odisha (Paradeep) and Tamil Nadu (Cuddalore- Nagapattinam).</li>
</ul>
<p><strong>Central Institute of Plastic Engineering &amp; Technology (CIPET): STAR</strong></p>
<ul style="list-style-type: square;">
<li>The primary objective of CIPET has been contributing towards the growth of the plastics industry through a combined program of education and research.</li>
<li>The Institute has evolved through the years, creating closer ties with industries with the intent to create innovative plastic based solutions which are resource efficient and marketable. This has led to an exponential growth with activities and programs focusing on:<strong> &lsquo;STAR&rsquo;</strong><br />
<ul style="list-style-type: circle;">
<li><strong>S- Skill Development, T- Technology Support Services, A- Academic and R- Research.</strong></li>
</ul>
</li>
</ul>
<p><strong>Read More:</strong></p>
<ul style="list-style-type: square;">
<li><strong><a href="/daily-updates/daily-news-analysis/janaushadhi-week" target="_blank" rel="noopener">Janaushadhi Sugam</a></strong></li>
<li><a href="/daily-updates/daily-news-editorials/india-s-pharma-sector" target="_blank" rel="noopener"><strong>India&rsquo;s Pharma sector</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/schemes-approved-to-promote-drug-manufacturing" target="_blank" rel="noopener"><strong>Schemes to Promote Drug Manufacturing</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/plastic-parks-in-india" target="_blank" rel="noopener"><strong>Plastic Park in India</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/coal-gasification-plant-for-urea-project" target="_blank" rel="noopener"><strong>Coal Gasification Plant for urea Project</strong></a></li>
</ul>',
			'postdate' => object(Cake\I18n\FrozenTime) {},
			'url' => 'https://www.drishtiias.com/to-the-points/Paper2/year-end-review-2019-ministry-of-chemicals-fertilizers'
		],
		(int) 8 => [
			'title' => 'Heat Waves',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, the<strong> India Meteorological Department (IMD)</strong> has forecasted the <strong>&ldquo;heatwave to severe heatwave conditions&rdquo;</strong> over northwest, central and adjoining peninsular India along with heavy rain over northeast India.</p>
<ul style="list-style-type: square;">
<li>Many parts of coastal Andhra Pradesh, Odisha and Maharashtra have also observed <strong>increase in temperatures above 42&deg;C,</strong> triggering heatwave conditions.</li>
<li>The heat wave has been observed due to <strong>dry northwesterly winds</strong> prevailing over northwest and central India.</li>
</ul>
<div class="border-bg">
<p><strong>India Meteorological Department</strong></p>
<ul style="list-style-type: square;">
<li>The India Meteorological Department (IMD) was established in <strong>1875.</strong></li>
<li>It is an agency of the <strong>Ministry of Earth Sciences</strong> of the Government of India.</li>
<li>It is the principal agency responsible for meteorological observations, weather forecasting and seismology.</li>
</ul>
</div>
<h3>Heat Wave</h3>
<ul style="list-style-type: square;">
<li>A heat wave is a period of <strong>abnormally high temperatures,</strong> more than the normal maximum temperature that occurs during the summer season in the North-Western and South Central parts of India.</li>
<li>Heat waves typically occur <strong>between March and June,</strong> and in some rare cases even extend till July.</li>
<li>Higher daily peak temperatures and longer, more intense heat waves are becoming increasingly frequent globally <strong>due to <a href="/loksabha-rajyasabha-discussions/in-depth-melting-himalayas" target="_blank" rel="noopener">climate change</a>.</strong></li>
</ul>
<h3>Criteria for Heat Waves</h3>
<ul style="list-style-type: square;">
<li>The heat wave is considered when the maximum temperature of a station reaches at least <strong>40&deg;C for Plains</strong> and at least <strong>30&deg;C for Hilly regions.</strong></li>
<li>If the<strong> normal maximum temperature</strong> of a station is<strong> less than or equal to 40&deg;C,</strong> then an<strong> increase</strong> of<strong> 5&deg;C to 6&deg;C</strong> from the normal temperature is considered to be <strong>heat wave</strong> condition. <br />
<ul style="list-style-type: circle;">
<li>Further, an increase of<strong> 7&deg;C or more</strong> from the normal temperature is considered as <strong>severe heat wave condition.</strong></li>
</ul>
</li>
<li>If the normal maximum temperature of a station is<strong> more than 40&deg;C,</strong> then an <strong>increase of 4&deg;C to 5&deg;C</strong> from the normal temperature is considered to be <strong>heat wave condition.</strong> Further, an <strong>increase of 6&deg;C or more</strong> is considered as<strong> severe heat wave</strong> condition.</li>
<li>Additionally, if the actual maximum temperature remains<strong> 45&deg;C or more</strong> irrespective of normal maximum temperature, a <strong>heat wave is declared.</strong></li>
</ul>
<h3>Health Impacts of Heat Waves</h3>
<ul style="list-style-type: square;">
<li>The health impacts of Heat Waves typically involve<strong> dehydration, heat cramps, heat exhaustion and/or heat stroke.</strong></li>
<li>It also causes heat cramps, fatigue, weakness, dizziness, headache, nausea, vomiting, muscle cramps and sweating.</li>
<li>The extreme temperatures and resultant atmospheric conditions adversely affect people living in these regions as they cause physiological stress, sometimes resulting in death.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>While climate change does have a strong link with the occurrence of extreme weather events, it<strong> isn't the cause for extreme weather events.</strong> Episodes of heat waves are growing more common as climate change intensifies. Therefore, the intensity and frequency of heatwaves can be reduced if the global community adopts and adheres to a lower emissions scenario in the future.</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/other-states/heatwave-sweeps-north-india/article31674229.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/heat-waves'
		],
		(int) 9 => [
			'title' => 'Punitus Sanctus: New Freshwater Fish',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>Recently, <em><strong>Puntius Sanctus</strong></em>, a new freshwater fish, has been found in Velankanni, Tamil Nadu. It has been found in a small waterbody.<a href="http://www.drishtiias.com/images/uploads/1590481336_image1.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590481336_image1.jpg" style="float: right;" width="350" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li>The fish has been identified and named by the Department of Zoology, BJM Government College in Kollam. Sanctus means holy (pilgrim town) in Latin.</li>
<li>Species of Puntius are known from India mainly from the drainages of the Western and Eastern Ghats, as well as the Eastern Himalayas.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Puntius Genus:</strong> <br />
<ul style="list-style-type: circle;">
<li>The genus shows great species richness in Kerala and Tamil Nadu.</li>
<li>The Puntius species are known locally as <strong>Paral</strong> in kerala and <strong>Kende</strong> in Tamil Nadu.</li>
<li>It belongs to the family<strong> &lsquo;Cyprinidae&rsquo;.</strong></li>
</ul>
</li>
<li><em><strong>Puntius Sanctus:</strong></em><br />
<ul style="list-style-type: circle;">
<li>It is a silver-hued fish. The species is small in size and grows to a<strong> length of 7 cm.</strong></li>
<li>It is different from other species.<br />
<ul style="list-style-type: disc;">
<li>It has a protractible (extended) mouth, a pair of maxillary barbels (a sensory organ near the snout).</li>
<li>It bears lateral line scales and pre-dorsal scales.<br />
<ul style="list-style-type: disc;">
<li>The lateral line scales are found within the dermis i.e. under the skin of a fish and usually have sense organs.</li>
<li>The dorsal scale row in a fish consists of a series of deep scales devoid of spines.</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li><strong>Cyprinidae:</strong><br />
<ul style="list-style-type: circle;">
<li>It is the family of freshwater fish, collectively called cyprinids, that includes the minnows, goldfish, bitterlings, barbs, and carps.</li>
<li>It ranges from small aquarium sized species to huge fish.</li>
<li><strong>Freshwater fish</strong> are those that spend some or all of their lives in freshwater, such as rivers and lakes, with a salinity of less than 1.05%. E.g. <strong>Rohu, Katla, Hilsa</strong> etc.</li>
</ul>
</li>
<li>The new fish has been deposited in the <a href="/printpdf/andaman-nicobar-islands-rich-faunal-diversity" target="_blank" rel="noopener"><strong>Zoological Survey of India</strong></a> at Pune.</li>
<li>It has also been registered with Zoo Bank of the <strong>International Commission of Zoological Nomenclature,</strong> the official authority for naming animals.</li>
</ul>
<div class="border-bg">
<p><strong>Zoological Survey of India</strong></p>
<ul style="list-style-type: square;">
<li>It is a subordinate organization of the <strong>Ministry of Environment, Forest and Climate Change</strong> and was established in 1916.</li>
<li>It is a national centre for faunistic survey and exploration of the resources leading to the advancement of knowledge on the exceptionally rich faunal diversity of the country.</li>
<li>It has its <strong>headquarters at Kolkata</strong> and 16 regional stations located in different geographic locations of the country.</li>
</ul>
<p><strong>International Commission of Zoological Nomenclature</strong></p>
<ul style="list-style-type: square;">
<li>It regulates a <strong>uniform system of zoological nomenclature</strong> ensuring that every animal has a unique and universally accepted scientific name.</li>
<li>It creates and revises the <strong>International Code of Zoological Nomenclature.</strong></li>
<li>It is based in the Lee Kong Chian Natural History Museum, National University of <strong>Singapore.</strong></li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/national/kerala/a-silver-fish-from-velankanni/article31671645.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/punitus-sanctus-new-freshwater-fish'
		],
		(int) 10 => [
			'title' => 'Tea, Immunity & Coronavirus',
			'catname' => 'News Analysis',
			'desc' => '<h3>Why in News</h3>
<p>During a webinar organised on the occasion of<a href="/daily-updates/daily-news-analysis/international-tea-day" target="_blank" rel="noopener"><strong> International Tea Day</strong></a>, the Institute of Himalayan Bioresource Technology (IHBT), Himachal Pradesh has claimed that <strong>tea chemicals can boost immunity and block <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener">coronavirus</a> activity better than anti-HIV drugs.</strong></p>
<ul style="list-style-type: square;">
<li>IHBT, Palampur, Himachal Pradesh is a constituent of <a href="/daily-updates/daily-news-analysis/z-scan-method-for-parkinson-s-disease" target="_blank" rel="noopener"><strong>Council of Scientific and Industrial Research (CSIR)</strong></a>.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>There was a<strong> special focus on polyphenols</strong> (bioactive chemicals) <strong>that could bind to a specific viral protein</strong> more efficiently than commercially available anti-HIV drugs approved for treating Covid-19 patients. <br />
<ul style="list-style-type: circle;">
<li>These chemicals can<strong> further block the activity of the viral protein that helps the virus to thrive inside human cells.</strong></li>
</ul>
</li>
<li>A combination of anti-HIV drugs <a href="/daily-updates/daily-news-analysis/covid-19-and-medical-solutions" target="_blank" rel="noopener"><strong>Lopinavir and Ritonavir</strong></a> is being used in many countries to treat Covid-19.</li>
<li>The findings on Kangra tea comes days after an earlier research study where Indian and Japanese scientists <a href="/daily-updates/daily-news-analysis/ashwagandha-and-anti-covid-19-drug" target="_blank" rel="noopener"><strong>claimed that Ashwagandha - a popular herb in Ayurveda - may hold an efficient anti-Covid-19 drug</strong></a>.</li>
</ul>
<div class="border-bg">
<p><strong>Polyphenols</strong></p>
<ul style="list-style-type: square;">
<li>Polyphenols are a category of compounds naturally found in plant foods, such as fruits, vegetables, herbs, spices, tea, dark chocolate, and wine.</li>
<li>They have<strong> antioxidant properties</strong> that can protect against various diseases. They can be subdivided into <strong>flavonoids, phenolic acid, polyphenolic amides, and other polyphenols.</strong></li>
<li>Polyphenols may help prevent blood clots, reduce blood sugar levels, and lower heart disease risk. They may also promote brain function, improve digestion, and offer some protection against cancer.</li>
</ul>
</div>
<h3>Kangra Tea</h3>
<ul style="list-style-type: square;">
<li><strong>Kangra tea</strong> is grown in the <strong>Kangra district of Himachal Pradesh.</strong></li>
<li>It is well known for its<strong> unique colour and flavour.</strong></li>
<li>Kangra tea has got the <a href="/daily-updates/daily-news-analysis/gi-tag-to-two-products" target="_blank" rel="noopener"><strong>Geographical Indication (GI) tag</strong></a>.</li>
<li>It is loaded with <strong>antioxidants</strong> like <strong>catechins and polyphenols,</strong> and said to offer these health benefits: promotes weight loss, builds immunity, improves oral health and mental alertness, etc.</li>
<li>It is also <strong>used in making sentizers, soap, vinegar, wine</strong> etc.</li>
</ul>
<p><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1626349" 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/tea-immunity-coronavirus'
		],
		(int) 11 => [
			'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) 12 => [
			'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) 13 => [
			'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) 14 => [
			'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) 15 => [
			'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) 16 => [
			'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) 17 => [
			'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>',
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		(int) 18 => [
			'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>',
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		(int) 19 => [
			'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>',
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		'title' => 'Chardham Pariyojana',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>The <strong>Border Roads Organisation (BRO)</strong> has completed <strong>construction of a 440 m long tunnel below the Chamba town</strong> on the Rishikesh-Dharasu road highway (National Highway - 94).</p>
<ul style="list-style-type: square;">
<li>The construction of the tunnel is a <strong>part of the Chardham Pariyojana.</strong></li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>It is a programme taken up by the Ministry of Road Transport and Highways for connectivity improvement for <strong>Chardham</strong> (Kedarnath, Badrinath, Yamunotri and Gangotri) in Uttrakhand.</li>
<li>The cost of the project is around Rs. 12,000 Crore.</li>
<li>It envisages improvement as well as development of 889 km length of national highways.</li>
<li><strong>Implementing Agencies:</strong> Uttarakhand State Public Works Department (PWD), BRO and the National Highway &amp; Infrastructure Development Corporation Limited (NHIDCL).</li>
<li><strong>Project Mode:</strong> The work under the programme is being implemented on <strong>Engineering, Procurement and Construction (EPC)</strong> mode.<br />
<ul style="list-style-type: circle;">
<li>Under the EPC mode, the<strong> project cost</strong> is completely borne by the government.</li>
<li>However, the contractor is directly responsible for <strong>ensuring quality of the work</strong> as well as rectification of defects and maintenance of the project stretch for a period of 4 years after completion of construction.</li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Border Roads Organisation</strong></p>
<ul style="list-style-type: square;">
<li>It was conceived and<strong> raised in 1960 by Pandit Jawaharlal Nehru</strong> for coordinating the speedy development of a network of roads in the North and the North Eastern border regions of the country.</li>
<li>It works under the <strong>administrative control of the Ministry of Defence.</strong></li>
<li>It has diversified into a large spectrum of construction and development works comprising airfields, building projects, defence works and tunneling and has endeared itself to the people.</li>
</ul>
</div>
<p><a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1626876" target="_blank" rel="noopener"><strong>Source: PIB</strong></a></p>',
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	(int) 1 => [
		'title' => 'World Turtle Day',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, World Turtle Day was observed on 23<sup>rd</sup> May to increase attention on conservation of Turtles and Tortoises.</p>
<ul style="list-style-type: square;">
<li>The theme for the <strong>World Turtle Day 2020</strong> is <strong>&lsquo;Adopt, Don&rsquo;t Shop&rsquo;.</strong></li>
</ul>
<h3>Key Points<a href="http://www.drishtiias.com/images/uploads/1590493522_image4.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590493522_image4.jpg" style="float: right;" width="350" caption="false" /></a></h3>
<ul style="list-style-type: square;">
<li>World Turtle Day is an<strong> annual event</strong> that has been taking place <strong>since 2000.</strong></li>
<li>It is being organised by the nonprofit organisation namely, <strong>American Tortoise Rescue (ATR).</strong></li>
<li>It aims to protect the turtles and tortoises from illegal smuggling, exotic food industry, habitat destruction, global warming and pet trade.</li>
<li>The day was observed in India by the <a href="/daily-updates/daily-news-analysis/15-point-directive-to-clean-ganga" target="_blank" rel="noopener"><strong>National Mission for Clean Ganga (NMCG)</strong></a>, along with the <a href="/daily-updates/daily-news-analysis/sal-forest-tortoise" target="_blank" rel="noopener"><strong>Wildlife Institute of India (WII)</strong></a>.</li>
</ul>
<div class="border-bg">
<p><strong>Turtle and its Significance</strong></p>
<ul style="list-style-type: square;">
<li><strong>Description:</strong><br />
<ul style="list-style-type: circle;">
<li>Turtles are the reptiles of the order <strong>Testudines,</strong> characterized by a special bony or cartilaginous shell developed from their ribs and acting as a shield.</li>
<li>It can reside inside <strong>freshwater or saltwater.</strong></li>
<li><strong>Tortoise</strong> are distinguished from other turtles by being<strong> land-dwelling,</strong> while many (though not all) other turtle species are at <strong>partly aquatic.</strong></li>
<li>Turtles are cold-blooded species.<br />
<ul style="list-style-type: disc;">
<li><strong>Cold blooded species</strong> have a higher range of body temperature and move between environments to make themselves warmer or cooler. E.g. Insects, arachnids, fish, reptiles, and amphibians.</li>
</ul>
</li>
<li>They have very <strong>slow metabolism</strong> and can survive without food and water for a long time.</li>
<li>According to the<a href="/daily-updates/daily-news-analysis/iucn-red-list" target="_blank" rel="noopener"><strong> International Union for Conservation of Nature (IUCN)</strong></a> most of the species of turtles and tortoises are <strong>vulnerable, endangered or critically endangered.</strong></li>
</ul>
</li>
<li><strong>Significance:</strong><br />
<ul style="list-style-type: circle;">
<li>Turtles play an important role in the river by scavenging dead organic material and diseased fish by controlling the water pollution.</li>
<li>They also help in maintaining healthy fish stocks in the water by giving them habitat over their body.</li>
<li>Turtle populations could improve seagrass ecosystem health by removing seagrass biomass and preventing sediment formation.</li>
<li>Turtles are also transporters of nutrients and energy to coastal areas.</li>
</ul>
</li>
</ul>
</div>
<h3>Turtle Conservation in India</h3>
<ul style="list-style-type: square;">
<li>There are five species in Indian waters i.e. <a href="/daily-updates/daily-news-analysis/olive-ridley-turtles" target="_blank" rel="noopener"><strong>Olive Ridley</strong></a>, <strong>Green turtle, Loggerhead, Hawksbill, Leatherback.</strong><br />
<ul style="list-style-type: circle;">
<li>The <strong>Olive Ridley, Leatherback and Loggerhead</strong> are listed as '<strong>Vulnerable'</strong>&nbsp;on the IUCN Red List of Threatened Species.</li>
<li>The <strong>Hawksbill&nbsp;turtle</strong> is listed as&nbsp;'<strong>Critically Endangered'&nbsp;</strong>and<strong> Green Turtle </strong>is listed as<strong> 'Endangereed' </strong>on the&nbsp;IUCN Red List of Threatened Species.<br />
<ul style="list-style-type: disc;">
<li>They are protected in <a href="/daily-updates/daily-news-analysis/wild-life-protection-act-implementation-and-failure" target="_blank" rel="noopener"><strong>Indian Wildlife Protection Act of 1972</strong></a>, under Schedule I.</li>
</ul>
</li>
</ul>
</li>
<li>Turtles have been protected in India under the <strong>Biodiversity Conservation and Ganga Rejuvenation</strong> programme.</li>
</ul>
<h3>Way Forward</h3>
<p>Turtles play an important role in ocean ecosystems by maintaining healthy seagrass beds and coral reefs, providing key habitat for other marine life. It also helps to balance marine food webs and facilitate nutrient cycling from water to land. Thus, conservation of turtles will help to conserve biodiversity and to maintain natural balance.</p>
<p><a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1626462" 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/world-turtle-day'
	],
	(int) 2 => [
		'title' => 'Restriction on Paddy Cultivation',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the farmers from Haryana are protesting against the State Government&rsquo;s order under which farmers have to<strong> diversify at least 50% of their last-year cultivated <a href="/daily-updates/daily-news-analysis/direct-seeding-of-rice" target="_blank" rel="noopener">paddy (rice)</a></strong> area by growing alternate crops.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Government&rsquo;s Action</strong><br />
<ul style="list-style-type: circle;">
<li>The restriction of cultivation is under the state government&rsquo;s <strong>crop diversification scheme &lsquo;Mera Pani, Meri Virasat&rsquo;</strong> for replacement of paddy by alternative crops in 1 lakh hectare.</li>
<li>According to the Government, the step is aimed at<strong> water conservation</strong> and <strong>crop diversification.</strong></li>
<li>Directed farmers to <strong>sow alternative crops</strong> such as maize, millet, and pulses.</li>
<li>Offered Rs. 7,000 per acre to farmers shifting the paddy fields to other alternative crops.</li>
</ul>
</li>
<li><strong>Farmer&rsquo;s Response/ Stand</strong><br />
<ul style="list-style-type: circle;">
<li>Farmers have started a <strong>&lsquo;Kisan Bachao-Kheti Bachao&rsquo;</strong> campaign against the government's decision under which they are demanding the<strong> freedom to decide what is to be sown in the field.</strong></li>
<li>Other options of agriculture are not much viable.</li>
<li>The soil and climate is not conducive for alternative crops in most parts of the block.</li>
<li>The compensation amount of Rs. 7000 offered by the government is inadequate.</li>
<li>It is not the time for experiments in the farming system when the country is battling with <a href="/daily-updates/daily-news-editorials/covid-19-and-india-1" target="_blank" rel="noopener"><strong>Covid-19.</strong></a></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>Mera Pani Meri Virasat Scheme</strong></p>
<ul style="list-style-type: square;">
<li>The Haryana government had recently launched &lsquo;Mera Pani Meri Virasat&rsquo; scheme, aimed at <strong>crop diversification</strong> to move away from water-guzzling paddy.</li>
<li>Under the scheme, farmers sowing alternative crops other than paddy during the ensuing kharif season will get an <strong>incentive of ₹7,000 per acre.</strong></li>
</ul>
<p><strong>Crop Diversification</strong></p>
<ul style="list-style-type: square;">
<li><strong>Crop diversification</strong> refers to the addition of new crops or cropping systems to agricultural production on a particular farm.</li>
<li><strong>Benefits:</strong><br />
<ul style="list-style-type: circle;">
<li>Farmers can grow several crops even in areas where the variability of rainfall is high and adequate sources of irrigation are not available.</li>
<li>Diversification helps in enhancing nitrogen in the soil and replenishing the soil fertility.</li>
<li>This helps to generate employment as the farmers get the opportunity to cultivate different crops.</li>
<li>Higher earnings of farmers transforms to greater inputs to the crops such as fertilizers, insecticides and irrigation equipment.</li>
<li>Enable farmers to gain access to national and international markets with new products, food and medicinal plants.</li>
<li>Diversification can also manage price risk, since not all products suffer low market prices at the same time and increase the profitability of the farming community.</li>
</ul>
</li>
</ul>
</div>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>There is a need for a paradigm shift towards a better farming system which may include transition towards improving water use efficiency, reducing leakages, recharging/restoring local water bodies, etc.</li>
<li>However, It is more important to pay heed towards farmers&rsquo; concerns in the coronavirus crisis by providing better compensations and other farming related assistance, rather than restricting or forcing upon anything which may compromise their earning avenues.</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/other-states/farmers-protest-restrictions-on-paddy-cultivation-in-haryana/article31674921.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/restriction-on-paddy-cultivation'
	],
	(int) 3 => [
		'title' => 'Diplomatic Low In Indo-Nepal Relations',
		'catname' => 'News Editorials',
		'desc' => '<div class="border">
<p>This article is based on <a href="https://www.thehindu.com/opinion/lead/lower-the-temperature-defuse-the-issue/article31653570.ece?homepage=true" target="_blank" rel="noopener"><strong>&ldquo;Lower the temperature, defuse the issue&rdquo;</strong></a> published in The Hindu on 23/05/2020. It talks about recent diplomatic tussles between India and Nepal over the boundary dispute issue.</p>
</div>
<p>Recently, the Nepal government referring to the Treaty of Sugauli, 1816, took a decision to adopt a new political map that claims Indian territory of Lipulekh, Kalapani and other areas, as a part of Nepal.</p>
<p>Further, India Indian Army Chief&rsquo;s contention that Nepal raised the dispute at the &ldquo;behest of an external force&rdquo;, namely China. These developments over the <a href="/daily-updates/daily-news-editorials/indo-nepal-territorial-dispute" target="_blank" rel="noopener"><strong>Kalapani territorial issue</strong></a> appears to threaten the basis of their special relationship, which has nurtured open borders and the free movement of people.</p>
<p>In this context, India must realize the importance of Nepal and quickly take diplomatic efforts to resolve this impasse.</p>
<p><a href="http://www.drishtiias.com/images/uploads/1590491753_image5.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590491753_image5.png" style="display: block; margin-left: auto; margin-right: auto;" caption="false" width="639" height="408" /></a></p>
<h3>What is the Issue?</h3>
<ul style="list-style-type: square;">
<li>Kalapani is a valley that is currently administered by India as a part of the Pithoragarh district of Uttarakhand.</li>
<li>The Treaty of Sugauli concluded between British India and the Kingdom of Nepal in the year 1816, states the Kali River in the Kalapani region demarcates the border between India and Nepal.</li>
<li>Also, the Survey of India maps since the 1870s showed the area of Lipulekh down to Kalapani as part of British India.</li>
<li>First, Rana rulers of Nepal and later Nepalese Kings accepted the boundary and did not raise any objection with the government of India after India&rsquo;s Independence.</li>
<li>However, in recent times, the Nepalese contest that the tributary that joins the Mahakali river at Kalapani is not the Kali river. Nepal now contends that the Kali river lies further west to the Lipulekh pass. This results in a boundary dispute between India and Nepal.</li>
<li>For India, the Lipulekh pass has always been part of the road to Tibet and was mentioned as one of the border passes for trade in a 1954 agreement with China, which was also reaffirmed in another trade agreement in 2015.</li>
<li>In 2019, a new political map of India, made after the bifurcation of the state of Jammu and Kashmir (J&amp;K) into the Union Territories of J&amp;K and Ladakh, showed Kalapani, Lipulekh and Limpiyadhura as part of Pithoragarh district in Uttarakhand state. <br />
<ul style="list-style-type: circle;">
<li>Nepal protested strongly against India&rsquo;s &ldquo;unilateral&rdquo; act and opinionated that the issue should be resolved through negotiations.</li>
</ul>
</li>
<li>Further, the inauguration of a road up to Lipulekh Pass by the Indian government on the border with China has sparked more protests in Nepal.</li>
<li>In retaliation, Nepal has released a new map that includes all the disputed territories, which India has described as &ldquo;unjustified cartographic assertion&rdquo;.</li>
</ul>
<h3>Importance of Nepal For India</h3>
<ul style="list-style-type: square;">
<li>Nepal lies in the middle of India&rsquo;s &lsquo;Himalayan frontiers&rsquo;, and along with Bhutan, it acts as northern &lsquo;borderland&rsquo; flanks and acts as buffer states against any possible aggression from China.</li>
<li>Nepal shares borders with 5 Indian states- Uttarakhand, Uttar Pradesh, West Bengal, Sikkim and Bihar and with free movement of people and thereby acting as an important point of cultural and economic exchange in India-Nepal relations.</li>
<li>Rivers originating in Nepal feed the perennial river systems of India in terms of ecology and hydropower potential.</li>
<li>Many Hindu and Buddhist religious sites are in Nepal making it an important pilgrimage site for a large number of Indians.</li>
</ul>
<h3>China Factor In Indo-Nepal Relations</h3>
<ul style="list-style-type: square;">
<li>In the past, Chinese interest in Nepal was to ensure that Nepalese territory is not used by Tibetans for the breeding of discontent.</li>
<li>However, in recent times, China has made inroads into Nepal in infrastructure, education and health sectors. Also, Nepal wants to take advantage of the BRI project built by China.</li>
<li>India feels that the Chinese inroads into Nepal are necessarily to counterbalance the Indian influence in Nepal. However, Nepal has asserted that its relationship with China is purely economic and will not be hurting the Indian strategic interests in any way.</li>
<li>Also, India is of the view that the rising Nepal and China cooperation would undermine Nepal&rsquo;s distinction of buffer state between India and China.</li>
</ul>
<h3>Way Forward</h3>
<p>Although the people-to-people relationship between India and Nepal is unmatched, in recent times the not so good government-to-government relationship has curated many issues. In this context:</p>
<ul style="list-style-type: square;">
<li>India should stop looking at Nepal purely through a security prism, and at bilateral relations only as transactional and part of a zero-sum game with China.</li>
<li>India should focus on working towards <a href="/to-the-points/Paper2/india-nepal-relations" target="_blank" rel="noopener"><strong>multifaceted relationships</strong></a> to the advantage of both nations.</li>
<li>India should negotiate diplomatically to resolve the boundary dispute with Nepal under the aegis of <a href="/daily-updates/daily-news-editorials/indo-nepal-territorial-dispute" target="_blank" rel="noopener"><strong>International law on Trans-boundary Water Disputes.</strong></a> In this case, <a href="/daily-updates/daily-news-editorials/india-bangladesh-relationship" target="_blank" rel="noopener"><strong>boundary dispute resolution between India and Bangladesh</strong></a> should serve as a model for this.</li>
<li>India should maintain a policy of keeping away from the internal affairs of Nepal, while at the same time, in the spirit of friendship, India should guide the nation towards a more inclusive democracy.</li>
</ul>
<p>Boundary disputes are common ground for countries that have an ancient history and shared borders, and the India-Nepal border issues one such dispute. Thus, the two neighbouring countries should not let the war of maps deteriorate their historical ties.</p>
<table border="1" style="border-collapse: collapse; width: 100%;">
<tbody>
<tr>
<td style="width: 100%; border-style: dotted; border-color: #ff0000; background-color: #fffcf2;">
<p><span style="color: #333399;"><em><strong>Drishti Mains Question</strong></em></span></p>
<p>&ldquo;Boundary disputes have remained the Achilles heel in India&rsquo;s Neighbourhood policy&rdquo;. Discuss the statement in the context of the recent diplomatic tussle between India and Nepal.</p>
</td>
</tr>
</tbody>
</table>
<p style="text-align: center;"><iframe width="560" height="315" src="https://www.youtube.com/embed/kkKW_FmH_i8" frameborder="0" allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="allowfullscreen"></iframe></p>
<p>This editorial is based on <a href="https://www.thehindu.com/opinion/editorial/cold-neighbourhood-the-hindu-editorial-on-india-nepal-ties/article31653546.ece" target="_blank" rel="noopener"><strong>&ldquo;Cold Neighbourhood&rdquo;</strong></a> which was published in The Hindu on May 23<sup>rd</sup>, 2020. Now watch this on our Youtube Channel.</p>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/daily-updates/daily-news-editorials/diplomatic-low-in-indo-nepal-relations'
	],
	(int) 4 => [
		'title' => 'Egypt-Ethiopia Conflict on GERD',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, <strong>Egypt</strong> has announced that it is willing to resume negotiations with <strong>Ethiopia</strong> and <strong>Sudan,</strong> concerning the <a href="/daily-updates/daily-news-analysis/grand-ethiopian-renaissance-dam" target="_blank" rel="noopener"><strong>Grand Ethiopian Renaissance Dam</strong></a> (GERD).</p>
<ul style="list-style-type: square;">
<li>The dam is located on River <strong>Blue Nile</strong> (a tributary of River Nile) in Ethiopia and is the centre of a dispute involving several East-African countries, dependent on the river&rsquo;s waters.</li>
</ul>
<p><a href="http://www.drishtiias.com/images/uploads/1590489952_Image2.png" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590489952_Image2.png" style="display: block; margin-left: auto; margin-right: auto;" width="500" caption="false" /></a></p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Background:</strong><br />
<ul style="list-style-type: circle;">
<li>Ethiopia began the construction of the GERD in <strong>2011</strong> on the Blue Nile that runs across one part of the country.<br />
<ul style="list-style-type: disc;">
<li>After completion, the dam hydropower project will be <strong>Africa&rsquo;s largest.</strong></li>
</ul>
</li>
<li><strong>Egypt has objected</strong> to the construction of the dam and proposed a longer timeline for the project.</li>
<li><strong>Sudan</strong> has also been<strong> involved</strong> due to its location.</li>
<li>The Nile is an important water source in the region so there are concerns that this dispute may evolve into a full-fledged conflict between Egypt and Ethiopia.</li>
<li>For the past four years, tri-party talks between Egypt, Ethiopia and Sudan have been unable to reach agreements.</li>
<li>Recently, the<strong> USA</strong> has stepped in to <strong>mediate.</strong></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>River Nile</strong></p>
<ul style="list-style-type: square;">
<li>The name Nile is derived from the <strong>Greek</strong> word <em><strong>Neilos</strong></em> (Latin: <em>Nilus</em>), meaning a valley or a river valley.</li>
<li>It is the <strong>longest river in the world</strong> and is called the <strong>father of African rivers.</strong> It has a length of about 4,132 miles and drains an area estimated at 1,293,000 square miles.</li>
<li>It <strong>rises south of the Equator</strong> and <strong>flows northward</strong> through<strong> northeastern Africa</strong> to <strong>drain into the Mediterranean Sea.</strong><br />
<ul style="list-style-type: circle;">
<li>The Nile River forms an<strong> arcuate delta as it empties into the Mediterranean Sea.</strong> Deltas with triangular or fan-shape are called<strong> arcuate (arc-like) deltas.</strong></li>
</ul>
</li>
<li>The Nile is formed by <strong>three principal streams:</strong> the <strong>Blue Nile,</strong> the <strong>Atbara</strong>, and the <strong>White Nile.</strong></li>
<li><strong>Drainage:</strong> Parts of Tanzania, Burundi, Rwanda, the Democratic Republic of the Congo, Kenya, Uganda, South Sudan, Ethiopia, Sudan, and the cultivated part of Egypt.</li>
</ul>
</div>
<ul style="list-style-type: square;">
<li><strong>Dam&rsquo;s Importance for Ethiopia:</strong><br />
<ul style="list-style-type: circle;">
<li>Ethiopia believes that the dam will <strong>generate approximately 6,000 megawatts</strong> of electricity after completion.<br />
<ul style="list-style-type: disc;">
<li>This dam will <strong>reduce electricity shortages</strong> and <strong>help</strong> the country&rsquo;s <strong>manufacturing industry.</strong></li>
</ul>
</li>
<li>It will also enable Ethiopia to <strong>supply electricity to neighbouring nations</strong> and <strong>earn revenue</strong> in exchange.<br />
<ul style="list-style-type: disc;">
<li>Neighbouring countries like Kenya, Sudan, Eritrea and South Sudan also suffer from electricity shortages and they can also benefit from the hydropower project if Ethiopia decides to sell electricity to them.</li>
</ul>
</li>
<li>Ethiopia sees the dam as a matter of<strong> national sovereignty</strong> and the dam project <strong>does not rely on external funding</strong> and relies on government bonds and private funds to pay for the project.</li>
</ul>
</li>
<li><strong>Cause of Conflict:</strong><br />
<ul style="list-style-type: circle;">
<li>The hydropower project may just allow Ethiopia to control the Nile&rsquo;s waters, and this concerns <strong>Egypt</strong> because it <strong>lies downstream on the Nile.</strong><br />
<ul style="list-style-type: disc;">
<li>The dam would <strong>jeopardise food and water security</strong> and <strong>livelihoods</strong> of ordinary Egyptian citizens.</li>
<li>Egypt has also written to the <a href="/daily-updates/daily-news-analysis/un-security-council-1" target="_blank" rel="noopener"><strong>United Nations Security Council</strong></a> (UNSC) concerning the matter and has also implied that the dam<strong> would cause armed conflict</strong> between the two countries.</li>
</ul>
</li>
<li>Egypt has <strong>proposed a longer timeline</strong> because it does not want the water level of the Nile to drastically drop as the dam reservoir needs plenty of water to fill in the initial stages. <br />
<ul style="list-style-type: disc;">
<li>The longer it takes to fill the reservoir, the less impact will be there on the water level of the river.</li>
</ul>
</li>
<li><strong>Sudan</strong> too believes that Ethiopia having control over the river through the dam may <strong>affect the water supplies</strong> of the country. It has proposed<strong> joint management</strong> of the dam.<br />
<ul style="list-style-type: disc;">
<li>Sudan is likely<strong> to benefit from the power generated by the dam.</strong></li>
<li>The <strong>regulated flow of the river</strong> will save Sudan from serious flooding in August and September.</li>
</ul>
</li>
<li>There is a possibility that the conflict would <strong>threaten the vital international trade</strong> route through the<strong> Suez Canal</strong> and along the <a href="/daily-updates/daily-news-analysis/nobel-prize-for-peace-2019" target="_blank" rel="noopener"><strong>Horn of Africa</strong></a>.</li>
</ul>
</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>To solve the conflict peacefully, <strong>mediation and facilitation</strong> by the neighbouring countries and the international bodies are necessary.</li>
<li>In case, the attempt to resolve the conflict does not work out by facilitating negotiations between the conflict parties, then a <strong>compensation method</strong> can be adopted which would need the countries to compensate each others&rsquo; losses.</li>
<li>All countries involved in the issue need to <strong>peacefully resolve</strong> the issue so that they can<strong> reap the advantages</strong> of the dam and their <strong>peace and security is restored</strong> again.</li>
</ul>
<p><a href="https://indianexpress.com/article/explained/how-a-dam-on-river-nile-may-trigger-water-wars-in-east-africa-6424689/" 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/egypt-ethiopia-conflict-on-gerd'
	],
	(int) 5 => [
		'title' => 'CoAST India',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, India Observatory has come up with a <strong>Geographic Information System&nbsp;</strong><strong>(GIS)-enabled dashboard</strong> called<strong> Collaboration/Covid Action Support Group (CoAST India)</strong> to monitor the movements of migrants.</p>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>The CoAST India dashboard includes an <strong>India map,</strong> which <a href="/daily-updates/daily-news-analysis/woes-of-migrants-amid-covid-19" target="_blank" rel="noopener"><strong>reflects the movement of migrants</strong></a> in <strong>real time,</strong> often on foot, <strong>along with facilities and relief organisations on their routes.</strong></li>
<li>It <strong>draws information from 55 organisations</strong> on the ground, mostly in villages.</li>
<li>The dashboard<strong> aims to make such data available to governments and small local civil society groups</strong> to be used for planning and providing assistance to migrants.</li>
<li>The dashboard has been made in collaboration with<strong> Foundation for Ecological Security (FES).</strong></li>
<li>India Observatory was set up in December 2019, with FES. It focused on ecological issues about forests, water bodies, conservation, etc. <br />
<ul style="list-style-type: circle;">
<li>However, after <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener"><strong>Covid-19</strong></a> broke out, it has decided to focus on the movements of people.</li>
</ul>
</li>
<li>The National Disaster Management Authority has also developed &lsquo;<a href="/daily-updates/daily-news-editorials/acute-encephalitis-syndrome-causes-and-lapses" target="_blank" rel="noopener"><strong>National Migrant Information System (NMIS)</strong></a>&rsquo; to maintain a central repository of migrant workers.</li>
</ul>
<h3>Geographic Information System</h3>
<ul style="list-style-type: square;">
<li>A GIS is a <strong>computer system for capturing, storing, checking, and displaying data</strong> related to positions on Earth&rsquo;s surface.</li>
<li>By relating seemingly unrelated data, GIS can help individuals and organizations better understand spatial patterns and relationships.</li>
<li>GIS can use<strong> any information that includes location.</strong> The location can be expressed in many different ways, such as latitude and longitude, address, or ZIP code.</li>
<li>GIS can include<strong> data about people, such as population, income, or education level.</strong>
<ul style="list-style-type: circle;">
<li>It can also include <strong>information about the sites of factories, farms, and schools, or storm drains, roads, and electric power lines etc.</strong></li>
</ul>
</li>
</ul>
<div class="border-bg">
<p><strong>India Observatory</strong></p>
<ul style="list-style-type: square;">
<li>It is <strong>India&rsquo;s first socio, economic and ecological open-source</strong> integrated Geospatial data platform.</li>
<li>The observatory is <strong>designed to supplement local level decision</strong> making by village communities, Panchayats, NGOs and government officials.</li>
<li>It has the <strong>&lsquo;India Data Platform&rsquo;</strong> at its core, which is built on open source and brings together data on over 1,600 parameters, ranging from village to national level in the form of maps, graphs, tables and infographics.</li>
<li>It is freely available for civil society organizations, students, government departments and citizens.</li>
</ul>
<p><strong>Foundation for Ecological Security</strong></p>
<ul style="list-style-type: square;">
<li>The Foundation for Ecological Security (FES) is a registered <strong>non-profit organisation</strong> based in Anand, Gujarat.</li>
<li>It works towards the <strong>ecological restoration and conservation of land and water resources</strong> in ecologically fragile, degraded and marginalised regions of the country.</li>
<li>It works with the concentrated and collective efforts of village communities.</li>
</ul>
</div>
<p><a href="https://indianexpress.com/article/explained/coronavirus-india-lockdown-now-online-a-map-tracking-migrants-real-time-6427104/" 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/coast-india'
	],
	(int) 6 => [
		'title' => 'Purandara Dasa',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>The <strong>Department of Archaeology, Heritage and Museums, Karnataka</strong> will soon commence field research work at <strong>Araga in Malnad</strong> (Malenadu) region in <strong>Karnataka,</strong> to end the <strong>speculations regarding the birthplace of Purandara Dasa.</strong></p>
<ul style="list-style-type: square;">
<li>The department comes <strong>under the Ministry of Culture</strong> and is<strong> responsible for archaeological studies and the preservation</strong> of cultural monuments.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Issue About Birthplace:</strong><br />
<ul style="list-style-type: circle;">
<li>It was widely <strong>believed</strong> that the Purandara Dasa was born in<strong> Purandharagad, Maharashtra.</strong> However, many <strong>people in Malnad claimed that he hailed from their region.</strong></li>
<li>On <strong>literary evidence,</strong> it is being<strong> speculated that Purandara Dasa was born near Araga.</strong> However, <strong>definitive conclusions can be reached only if tangible archaeological evidence</strong> like inscriptions, coins, remains of building-related to the name Srinivasa Nayaka or Purandara Dasa<strong> are found.</strong></li>
</ul>
</li>
<li><strong>About Purandara Dasa:<a href="http://www.drishtiias.com/images/uploads/1590486494_image3.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590486494_image3.jpg" style="float: right;" width="200" caption="false" /></a></strong><br />
<ul style="list-style-type: circle;">
<li>Purandara Dasa belonged to the<strong> Vaishnava tradition</strong> during the<a href="/daily-updates/daily-news-analysis/hampi-1" target="_blank" rel="noopener"><strong> Vijayanagar</strong></a> <strong>rule.</strong></li>
<li>Prior to the adoption of Vaishnava tradition, he was a rich merchant and was called <strong>Srinivasa Nayaka.</strong><br />
<ul style="list-style-type: disc;">
<li>The proponents of the theory that Puranadara Dasa was born in Malnad, refer to his older name and point out that <strong>Nayaka title</strong> was attributed to locally influential people, including wealthy merchants in Malnad during the Vijayanagar rule.</li>
</ul>
</li>
<li>He was a great <strong>devotee of Lord Krishna,</strong> a<strong> poet</strong> and a <strong>musician.</strong> He is considered the<strong> father of <a href="/to-the-points/paper1/carnatic-music" target="_blank" rel="noopener">Carnatic Music</a>.</strong><br />
<ul style="list-style-type: disc;">
<li>He formalized the music system which was a <strong>blend of various traditions of South India and the musical science</strong> as explained in the Vedas.</li>
<li>He<strong> identified 84 ragas</strong> and devised a system of teaching Carnatic music in graded lessons.</li>
</ul>
</li>
<li>He<strong> composed songs in Kannada and Sanskrit</strong> with the pen name<strong> Purandara Vithala.</strong></li>
<li>In his compositions, he expressed his love for Sri Krishna <strong>describing various aspects of Krishna&rsquo;s life.</strong></li>
</ul>
</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/karnataka/purandara-dasas-birthplace-archaeology-dept-to-start-research-in-village-in-shivamogga-dist/article31673889.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/purandara-dasa'
	],
	(int) 7 => [
		'title' => 'Year End Review 2019: Ministry of Chemicals & Fertilizers',
		'catname' => 'Paper 2',
		'desc' => '<p><strong>Introduction</strong></p>
<p>The Ministry of Chemicals &amp; Fertilizers comprises a combination of three departments:</p>
<ul style="list-style-type: square;">
<li><strong>Department of Fertilisers:</strong> The main objective of the Department of Fertilizers is to ensure <strong>adequate and timely availability of fertilizers at affordable prices for maximizing agricultural production</strong> in the country.</li>
<li><strong>Department of Chemicals and Petrochemicals:</strong> The Department of Chemicals and Petrochemicals has been part of the Ministry since 1991. It is entrusted with the responsibility of <strong>policy, planning, development and regulation of Chemicals and Petrochemicals Industries.</strong></li>
<li><strong>Department of Pharmaceuticals:</strong> The Department of Pharmaceuticals was created in July 2008 to provide greater focus for the growth of the high potential Pharmaceuticals industry.</li>
</ul>
<h3>Important Schemes and Policies</h3>
<p><strong>Neem Coating of Urea</strong></p>
<ul style="list-style-type: square;">
<li>The Department of Fertilizers (DoF) has made it mandatory for all the domestic producers to produce 100% urea as Neem Coated Urea (NCU). The benefits of use of NCU are as under:-<br />
<ul style="list-style-type: circle;">
<li>Improvement in soil health</li>
<li>Reduction in usage of plant protection chemicals</li>
<li>Reduction in pest and disease attack</li>
<li>An increase in yield of paddy, sugarcane, maize, soybean, Tur/Red Gram</li>
<li>Negligible diversion towards non-agricultural purposes.</li>
<li>Due to slow release of Nitrogen, Nitrogen Use Efficiency (NUE) of Neem Coated Urea increases resulting in reduced consumption of NCU as compared to normal urea</li>
</ul>
</li>
</ul>
<p><a href="/prs-capsule/prs-capsule-april-2019#3" target="_blank" rel="noopener"><strong>New Urea Policy (NUP) 2015</strong></a></p>
<ul style="list-style-type: square;">
<li>Objectives of the policy are-<br />
<ul style="list-style-type: circle;">
<li>To maximize indigenous urea production.</li>
<li>To promote energy efficiency in the urea units.</li>
<li>To rationalize the subsidy burden on the Government of India.</li>
</ul>
</li>
<li><strong>Achievements of NUP:</strong> The production of urea during the year 2017-18 was significantly higher than the production of urea during 2013-14.</li>
</ul>
<p><strong>New Investment Policy- 2012</strong></p>
<ul style="list-style-type: square;">
<li>The Government announced New Investment Policy (NIP)-2012 in January, 2013 and made amendments in 2014 <strong>to facilitate fresh investment in the urea sector</strong> and to make India self-sufficient in the urea sector.</li>
</ul>
<p><strong>Policy on Promotion of City Compost</strong></p>
<ul style="list-style-type: square;">
<li>The Government of India approved a policy on promotion of City Compost, notified by the DoF in 2016 granting Market Development Assistance of Rs. 1500/- for scaling up production and consumption of city compost.</li>
<li>To increase sale volumes, compost manufacturers willing to market city compost were allowed to sell city compost in bulk directly to farmers.</li>
<li>Fertilizer companies marketing city compost covered under the Direct Benefit Transfer (DBT) for Fertilizers.</li>
</ul>
<p><strong>Use of Space Technology in Fertilizer Sector</strong></p>
<ul style="list-style-type: square;">
<li>DoF commissioned a three year Pilot Study on &ldquo;Resource Mapping of Rock Phosphate using Reflectance Spectroscopy and Earth Observations Data&rdquo; by National Remote Sensing Centre under ISRO, in collaboration with Geological Survey of India(GSI) and the Atomic Mineral Directorate (AMD).</li>
<li>Preliminary Data processing for the phosphate mapping is completed. Spectral analysis of samples collected during field work is completed.</li>
</ul>
<p><strong>The Nutrient Based Subsidy (NBS) Scheme</strong></p>
<ul style="list-style-type: square;">
<li>It is being implemented from April 2010 by the DoF.</li>
<li>Under<a href="/daily-updates/daily-news-analysis/cabinet-approves-nutrient-based-subsidy-rates" target="_blank" rel="noopener"><strong> NBS</strong></a>, a fixed amount of subsidy decided on an annual basis, is provided on each grade of subsidized Phosphatic &amp; Potassic (P&amp;K) fertilizers depending on its nutrient content.</li>
<li>It aims at ensuring the balanced use of fertilizers, improving agricultural productivity, promoting the growth of the indigenous fertilizers industry and also reducing the burden of Subsidy.</li>
</ul>
<p><strong>The Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP)</strong></p>
<ul style="list-style-type: square;">
<li><a href="/daily-updates/daily-news-analysis/janaushadhi-week" target="_blank" rel="noopener"><strong>PMBJP</strong></a> aims to make available generic medicines at affordable prices to all.</li>
<li>It also intends to reinvigorate the supply of affordable generic medicines with efficacy and quality equivalent to that of branded drugs.</li>
<li>About 10-15 lakh people benefit from Janaushadhi medicines per day. And the scheme has led to total savings of approximately Rs.1,000 crores for common citizens, as these medicines are cheaper by 50% to 90% of average market price.</li>
<li>The sale of &lsquo;<a href="/daily-updates/daily-news-analysis/janaushadhi-sugam" target="_blank" rel="noopener"><strong>Jan Aushadhi Suvidha Oxo-Biodegradable&rsquo; Sanitary Napkin</strong></a> through Pradhan Mantri Bhartiya Janaushadhi Kendras (PMBJKs) started in the year 2018-2019. Over 2 crore pads have been sold at PMBJK in the year 2019.</li>
</ul>
<p><strong>Scheme for Development of Pharmaceutical Industry</strong></p>
<ul style="list-style-type: square;">
<li>It&rsquo;s objective is to ensure drug security in the country by increasing the efficiency and competitiveness of domestic pharmaceutical industry with the following <strong>sub-schemes:</strong><br />
<ul style="list-style-type: circle;">
<li><strong>Assistance to Bulk Drug Industry</strong> for Common Facility Centre - For creation of common facilities in any upcoming Bulk Drug Park.</li>
<li><strong>Assistance to Medical Device Industry</strong> for Common Facility Centre -For creation of common facilities in any upcoming Medical Device Park.</li>
<li><strong>Pharmaceuticals Technology Upgradation Assistance Scheme</strong> (PTUAS) - To facilitate Small and Medium Pharma Enterprises (SMEs) to upgrade their plant and machinery to World Health Organization (WHO)/Good Manufacturing Practices (GMP) standards.</li>
<li><strong>Assistance for Cluster Development -</strong> For creation of common facilities in any pharma clusters including Bulk Drug, Medical Device, Ayurvedic, Unani and Cosmetics Units; and</li>
<li><strong>Pharmaceutical Promotion Development Scheme</strong> (PPDS) - For promotion, development and export promotion in Pharmaceutical sector</li>
</ul>
</li>
</ul>
<p><strong>Medical Devices Sector</strong></p>
<ul style="list-style-type: square;">
<li>The DoP approved a sub-scheme termed as <strong>Development of Common Facility Centre for Medical Devices</strong> (DCFC-MD) under the umbrella scheme for Development of Pharmaceuticals Industry.</li>
<li>It aims to give financial assistance for creation of Common Facility Centers (CFC) in the upcoming Medical Device Parks. This is expected to lower down the cost of manufacturing of indigenous medical devices and hence making it more competitive.</li>
</ul>
<p><strong>Affordable &amp; Quality HealthCare for All - Availability of Cheaper Medicines</strong></p>
<ul style="list-style-type: square;">
<li>National Pharmaceutical Pricing Authority (NPPA) fixes retail prices of the drugs on the National List of Essential Medicines (NLEM) under schedule-I of Drug Price Control Orders (DPCO) and ensures the affordability of life-saving drugs for all.</li>
</ul>
<div class="border-bg">
<p><strong>National Pharmaceutical Pricing Authority (NPPA)</strong></p>
<ul style="list-style-type: square;">
<li>It was established on 29<sup>th</sup> August 1997 as an independent body of experts under the Department of Pharmaceuticals (DoP), Ministry of Chemicals &amp; Fertilizers.</li>
<li>It is headquartered in New Delhi.</li>
<li>The Authority has been entrusted with the task of fixation/revision of prices of pharmaceutical products (bulk drugs and formulations), enforcement of provisions of the <strong>Drugs (Prices Control) Order</strong> and monitoring of the prices of controlled and decontrolled drugs in the country.</li>
</ul>
<p><strong>Drug (Prices Control) Order, (DPCO) 2013</strong></p>
<ul style="list-style-type: square;">
<li>Under the provisions of DPCO 2013, only the prices of drugs that figure in the National List of Essential Medicines (NLEM) are monitored and controlled by the regulator, the National Pharmaceutical Pricing Authority.</li>
<li>Essential medicines are those that satisfy the priority healthcare needs of the majority of the population. The primary purpose of NLEM is to promote rational use of medicines considering the three important aspects i.e. cost, safety and efficacy.</li>
<li>Paragraph 19 of the DPCO, 2013, deals with increase or decrease in drug prices under extraordinary circumstances. However, there is neither a precedent nor any formula prescribed for upward revision of ceiling prices.</li>
</ul>
<p><strong>National List of Essential Medicines (NLEM)</strong></p>
<ul style="list-style-type: square;">
<li>Essential medicines are those that satisfy the priority health care needs of the population. These are selected with due regard to disease prevalence, evidence on efficacy and safety, and comparative cost-effectiveness.</li>
<li>The list is prepared by the Union Ministry of Health and Family Welfare.</li>
</ul>
</div>
<p><strong>Petroleum, Chemicals and Petrochemical Investment Regions (PCPIRs)</strong></p>
<ul style="list-style-type: square;">
<li>A PCPIR would be a specifically delineated investment region with an area of around 250 square kilometers planned for the establishment of manufacturing facilities for domestic and export led production in petroleum, chemicals &amp; petrochemicals, alongwith the associated services and infrastructure.</li>
<li>A PCPIR would be a combination of production units, public utilities, logistics, environmental protection mechanisms, residential areas and administrative services.</li>
<li>The Government of India has approved setting up of 4 PCPIRs in the States of Gujarat (Dahej), Andhra Pradesh (Vishakhapatnam&ndash;Kakinada), Odisha (Paradeep) and Tamil Nadu (Cuddalore- Nagapattinam).</li>
</ul>
<p><strong>Central Institute of Plastic Engineering &amp; Technology (CIPET): STAR</strong></p>
<ul style="list-style-type: square;">
<li>The primary objective of CIPET has been contributing towards the growth of the plastics industry through a combined program of education and research.</li>
<li>The Institute has evolved through the years, creating closer ties with industries with the intent to create innovative plastic based solutions which are resource efficient and marketable. This has led to an exponential growth with activities and programs focusing on:<strong> &lsquo;STAR&rsquo;</strong><br />
<ul style="list-style-type: circle;">
<li><strong>S- Skill Development, T- Technology Support Services, A- Academic and R- Research.</strong></li>
</ul>
</li>
</ul>
<p><strong>Read More:</strong></p>
<ul style="list-style-type: square;">
<li><strong><a href="/daily-updates/daily-news-analysis/janaushadhi-week" target="_blank" rel="noopener">Janaushadhi Sugam</a></strong></li>
<li><a href="/daily-updates/daily-news-editorials/india-s-pharma-sector" target="_blank" rel="noopener"><strong>India&rsquo;s Pharma sector</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/schemes-approved-to-promote-drug-manufacturing" target="_blank" rel="noopener"><strong>Schemes to Promote Drug Manufacturing</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/plastic-parks-in-india" target="_blank" rel="noopener"><strong>Plastic Park in India</strong></a></li>
<li><a href="/daily-updates/daily-news-analysis/coal-gasification-plant-for-urea-project" target="_blank" rel="noopener"><strong>Coal Gasification Plant for urea Project</strong></a></li>
</ul>',
		'postdate' => object(Cake\I18n\FrozenTime) {},
		'url' => 'https://www.drishtiias.com/to-the-points/Paper2/year-end-review-2019-ministry-of-chemicals-fertilizers'
	],
	(int) 8 => [
		'title' => 'Heat Waves',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, the<strong> India Meteorological Department (IMD)</strong> has forecasted the <strong>&ldquo;heatwave to severe heatwave conditions&rdquo;</strong> over northwest, central and adjoining peninsular India along with heavy rain over northeast India.</p>
<ul style="list-style-type: square;">
<li>Many parts of coastal Andhra Pradesh, Odisha and Maharashtra have also observed <strong>increase in temperatures above 42&deg;C,</strong> triggering heatwave conditions.</li>
<li>The heat wave has been observed due to <strong>dry northwesterly winds</strong> prevailing over northwest and central India.</li>
</ul>
<div class="border-bg">
<p><strong>India Meteorological Department</strong></p>
<ul style="list-style-type: square;">
<li>The India Meteorological Department (IMD) was established in <strong>1875.</strong></li>
<li>It is an agency of the <strong>Ministry of Earth Sciences</strong> of the Government of India.</li>
<li>It is the principal agency responsible for meteorological observations, weather forecasting and seismology.</li>
</ul>
</div>
<h3>Heat Wave</h3>
<ul style="list-style-type: square;">
<li>A heat wave is a period of <strong>abnormally high temperatures,</strong> more than the normal maximum temperature that occurs during the summer season in the North-Western and South Central parts of India.</li>
<li>Heat waves typically occur <strong>between March and June,</strong> and in some rare cases even extend till July.</li>
<li>Higher daily peak temperatures and longer, more intense heat waves are becoming increasingly frequent globally <strong>due to <a href="/loksabha-rajyasabha-discussions/in-depth-melting-himalayas" target="_blank" rel="noopener">climate change</a>.</strong></li>
</ul>
<h3>Criteria for Heat Waves</h3>
<ul style="list-style-type: square;">
<li>The heat wave is considered when the maximum temperature of a station reaches at least <strong>40&deg;C for Plains</strong> and at least <strong>30&deg;C for Hilly regions.</strong></li>
<li>If the<strong> normal maximum temperature</strong> of a station is<strong> less than or equal to 40&deg;C,</strong> then an<strong> increase</strong> of<strong> 5&deg;C to 6&deg;C</strong> from the normal temperature is considered to be <strong>heat wave</strong> condition. <br />
<ul style="list-style-type: circle;">
<li>Further, an increase of<strong> 7&deg;C or more</strong> from the normal temperature is considered as <strong>severe heat wave condition.</strong></li>
</ul>
</li>
<li>If the normal maximum temperature of a station is<strong> more than 40&deg;C,</strong> then an <strong>increase of 4&deg;C to 5&deg;C</strong> from the normal temperature is considered to be <strong>heat wave condition.</strong> Further, an <strong>increase of 6&deg;C or more</strong> is considered as<strong> severe heat wave</strong> condition.</li>
<li>Additionally, if the actual maximum temperature remains<strong> 45&deg;C or more</strong> irrespective of normal maximum temperature, a <strong>heat wave is declared.</strong></li>
</ul>
<h3>Health Impacts of Heat Waves</h3>
<ul style="list-style-type: square;">
<li>The health impacts of Heat Waves typically involve<strong> dehydration, heat cramps, heat exhaustion and/or heat stroke.</strong></li>
<li>It also causes heat cramps, fatigue, weakness, dizziness, headache, nausea, vomiting, muscle cramps and sweating.</li>
<li>The extreme temperatures and resultant atmospheric conditions adversely affect people living in these regions as they cause physiological stress, sometimes resulting in death.</li>
</ul>
<h3>Way Forward</h3>
<ul style="list-style-type: square;">
<li>While climate change does have a strong link with the occurrence of extreme weather events, it<strong> isn't the cause for extreme weather events.</strong> Episodes of heat waves are growing more common as climate change intensifies. Therefore, the intensity and frequency of heatwaves can be reduced if the global community adopts and adheres to a lower emissions scenario in the future.</li>
</ul>
<p><a href="https://www.thehindu.com/news/national/other-states/heatwave-sweeps-north-india/article31674229.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/heat-waves'
	],
	(int) 9 => [
		'title' => 'Punitus Sanctus: New Freshwater Fish',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>Recently, <em><strong>Puntius Sanctus</strong></em>, a new freshwater fish, has been found in Velankanni, Tamil Nadu. It has been found in a small waterbody.<a href="http://www.drishtiias.com/images/uploads/1590481336_image1.jpg" target="_blank" rel="noopener"><img class="content-img" src="http://www.drishtiias.com/images/uploads/1590481336_image1.jpg" style="float: right;" width="350" caption="false" /></a></p>
<ul style="list-style-type: square;">
<li>The fish has been identified and named by the Department of Zoology, BJM Government College in Kollam. Sanctus means holy (pilgrim town) in Latin.</li>
<li>Species of Puntius are known from India mainly from the drainages of the Western and Eastern Ghats, as well as the Eastern Himalayas.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li><strong>Puntius Genus:</strong> <br />
<ul style="list-style-type: circle;">
<li>The genus shows great species richness in Kerala and Tamil Nadu.</li>
<li>The Puntius species are known locally as <strong>Paral</strong> in kerala and <strong>Kende</strong> in Tamil Nadu.</li>
<li>It belongs to the family<strong> &lsquo;Cyprinidae&rsquo;.</strong></li>
</ul>
</li>
<li><em><strong>Puntius Sanctus:</strong></em><br />
<ul style="list-style-type: circle;">
<li>It is a silver-hued fish. The species is small in size and grows to a<strong> length of 7 cm.</strong></li>
<li>It is different from other species.<br />
<ul style="list-style-type: disc;">
<li>It has a protractible (extended) mouth, a pair of maxillary barbels (a sensory organ near the snout).</li>
<li>It bears lateral line scales and pre-dorsal scales.<br />
<ul style="list-style-type: disc;">
<li>The lateral line scales are found within the dermis i.e. under the skin of a fish and usually have sense organs.</li>
<li>The dorsal scale row in a fish consists of a series of deep scales devoid of spines.</li>
</ul>
</li>
</ul>
</li>
</ul>
</li>
<li><strong>Cyprinidae:</strong><br />
<ul style="list-style-type: circle;">
<li>It is the family of freshwater fish, collectively called cyprinids, that includes the minnows, goldfish, bitterlings, barbs, and carps.</li>
<li>It ranges from small aquarium sized species to huge fish.</li>
<li><strong>Freshwater fish</strong> are those that spend some or all of their lives in freshwater, such as rivers and lakes, with a salinity of less than 1.05%. E.g. <strong>Rohu, Katla, Hilsa</strong> etc.</li>
</ul>
</li>
<li>The new fish has been deposited in the <a href="/printpdf/andaman-nicobar-islands-rich-faunal-diversity" target="_blank" rel="noopener"><strong>Zoological Survey of India</strong></a> at Pune.</li>
<li>It has also been registered with Zoo Bank of the <strong>International Commission of Zoological Nomenclature,</strong> the official authority for naming animals.</li>
</ul>
<div class="border-bg">
<p><strong>Zoological Survey of India</strong></p>
<ul style="list-style-type: square;">
<li>It is a subordinate organization of the <strong>Ministry of Environment, Forest and Climate Change</strong> and was established in 1916.</li>
<li>It is a national centre for faunistic survey and exploration of the resources leading to the advancement of knowledge on the exceptionally rich faunal diversity of the country.</li>
<li>It has its <strong>headquarters at Kolkata</strong> and 16 regional stations located in different geographic locations of the country.</li>
</ul>
<p><strong>International Commission of Zoological Nomenclature</strong></p>
<ul style="list-style-type: square;">
<li>It regulates a <strong>uniform system of zoological nomenclature</strong> ensuring that every animal has a unique and universally accepted scientific name.</li>
<li>It creates and revises the <strong>International Code of Zoological Nomenclature.</strong></li>
<li>It is based in the Lee Kong Chian Natural History Museum, National University of <strong>Singapore.</strong></li>
</ul>
</div>
<p><a href="https://www.thehindu.com/news/national/kerala/a-silver-fish-from-velankanni/article31671645.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/punitus-sanctus-new-freshwater-fish'
	],
	(int) 10 => [
		'title' => 'Tea, Immunity & Coronavirus',
		'catname' => 'News Analysis',
		'desc' => '<h3>Why in News</h3>
<p>During a webinar organised on the occasion of<a href="/daily-updates/daily-news-analysis/international-tea-day" target="_blank" rel="noopener"><strong> International Tea Day</strong></a>, the Institute of Himalayan Bioresource Technology (IHBT), Himachal Pradesh has claimed that <strong>tea chemicals can boost immunity and block <a href="/daily-updates/daily-news-analysis/coronavirus-disease-named-covid-19" target="_blank" rel="noopener">coronavirus</a> activity better than anti-HIV drugs.</strong></p>
<ul style="list-style-type: square;">
<li>IHBT, Palampur, Himachal Pradesh is a constituent of <a href="/daily-updates/daily-news-analysis/z-scan-method-for-parkinson-s-disease" target="_blank" rel="noopener"><strong>Council of Scientific and Industrial Research (CSIR)</strong></a>.</li>
</ul>
<h3>Key Points</h3>
<ul style="list-style-type: square;">
<li>There was a<strong> special focus on polyphenols</strong> (bioactive chemicals) <strong>that could bind to a specific viral protein</strong> more efficiently than commercially available anti-HIV drugs approved for treating Covid-19 patients. <br />
<ul style="list-style-type: circle;">
<li>These chemicals can<strong> further block the activity of the viral protein that helps the virus to thrive inside human cells.</strong></li>
</ul>
</li>
<li>A combination of anti-HIV drugs <a href="/daily-updates/daily-news-analysis/covid-19-and-medical-solutions" target="_blank" rel="noopener"><strong>Lopinavir and Ritonavir</strong></a> is being used in many countries to treat Covid-19.</li>
<li>The findings on Kangra tea comes days after an earlier research study where Indian and Japanese scientists <a href="/daily-updates/daily-news-analysis/ashwagandha-and-anti-covid-19-drug" target="_blank" rel="noopener"><strong>claimed that Ashwagandha - a popular herb in Ayurveda - may hold an efficient anti-Covid-19 drug</strong></a>.</li>
</ul>
<div class="border-bg">
<p><strong>Polyphenols</strong></p>
<ul style="list-style-type: square;">
<li>Polyphenols are a category of compounds naturally found in plant foods, such as fruits, vegetables, herbs, spices, tea, dark chocolate, and wine.</li>
<li>They have<strong> antioxidant properties</strong> that can protect against various diseases. They can be subdivided into <strong>flavonoids, phenolic acid, polyphenolic amides, and other polyphenols.</strong></li>
<li>Polyphenols may help prevent blood clots, reduce blood sugar levels, and lower heart disease risk. They may also promote brain function, improve digestion, and offer some protection against cancer.</li>
</ul>
</div>
<h3>Kangra Tea</h3>
<ul style="list-style-type: square;">
<li><strong>Kangra tea</strong> is grown in the <strong>Kangra district of Himachal Pradesh.</strong></li>
<li>It is well known for its<strong> unique colour and flavour.</strong></li>
<li>Kangra tea has got the <a href="/daily-updates/daily-news-analysis/gi-tag-to-two-products" target="_blank" rel="noopener"><strong>Geographical Indication (GI) tag</strong></a>.</li>
<li>It is loaded with <strong>antioxidants</strong> like <strong>catechins and polyphenols,</strong> and said to offer these health benefits: promotes weight loss, builds immunity, improves oral health and mental alertness, etc.</li>
<li>It is also <strong>used in making sentizers, soap, vinegar, wine</strong> etc.</li>
</ul>
<p><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1626349" 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/tea-immunity-coronavirus'
	],
	(int) 11 => [
		'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) 12 => [
		'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) 13 => [
		'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) 14 => [
		'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) 15 => [
		'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) 16 => [
		'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) 17 => [
		'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) 18 => [
		'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) 19 => [
		'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'
	]
]
$updates = object(Cake\ORM\Query) {

	'(help)' => 'This is a Query object, to get the results execute or iterate it.',
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	'formatters' => (int) 0,
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	'contain' => [],
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	'repository' => object(App\Model\Table\ArticlesTable) {}

}
$page = (int) 75
$search = 'class'
$totalPages = (float) 275
$title = 'Search'
$lastyear = (int) 2018
$year = '2021'
$i = (int) 2017
$selected = ''
$m = (int) 13
$month = 'December'

include - ROOT/plugins/Drishti/src/Template/Element/rightsection.ctp, line 100
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1196
Cake\View\View::_render() - CORE/src/View/View.php, line 1157
Cake\View\View::_renderElement() - CORE/src/View/View.php, line 1554
Cake\View\View::element() - CORE/src/View/View.php, line 668
include - ROOT/plugins/Drishti/src/Template/Element/articlebox.ctp, line 5
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1196
Cake\View\View::_render() - CORE/src/View/View.php, line 1157
Cake\View\View::_renderElement() - CORE/src/View/View.php, line 1554
Cake\View\View::element() - CORE/src/View/View.php, line 668
include - ROOT/plugins/Drishti/src/Template/Search/index.ctp, line 85
Cake\View\View::_evaluate() - CORE/src/View/View.php, line 1196
Cake\View\View::_render() - CORE/src/View/View.php, line 1157
Cake\View\View::render() - CORE/src/View/View.php, line 765
Cake\Controller\Controller::render() - CORE/src/Controller/Controller.php, line 623
Cake\Http\ActionDispatcher::_invoke() - CORE/src/Http/ActionDispatcher.php, line 125
Cake\Http\ActionDispatcher::dispatch() - CORE/src/Http/ActionDispatcher.php, line 93

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