SWAMIH Fund Completes First Housing Project; Export-Led Growth Model for India

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The final hit to UPSC Exam
Comprehensive, Integrated and Current Linked Notes for CSE Mains 2021
GS PAPER - III
INDIAN ECONOMY
UPDATED (April -2021 to November - 2021)
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OnlyIAS PRAHAAR : ECONOMY UPDATE
SPECIAL WINDOW FOR AFFORDABLE & MID-INCOME HOUSING (SWAMIH) FUND ..................................................... 2
EXPORT LED MODEL FOR INDIA........................................................................................................................................................... 3
INTEGRATION OF E-WAY BILL WITH FASTAG ............................................................................................................................... 4
E-RUPI .............................................................................................................................................................................................................. 5
FREE TRADE AGREEMENTS (FTA)-NEED, CHALLENGES AND STRATEGIES ..................................................................... 6
30 YEARS OF LPG REFORMS: PERSISTENT CHALLENGES ......................................................................................................... 7
SEVEN YEARS OF PRADHAN MANTRI JAN DHAN YOJANA......................................................................................................... 8
NATIONAL MISSION ON EDIBLE OILS – OIL PALM (NMEO-OP)............................................................................................ 10
INDIAN SHIPPING INDUSTRY.............................................................................................................................................................. 11
AGRISTACK ................................................................................................................................................................................................. 13
SEMICONDUCTOR MANUFACTURING IN INDIA.......................................................................................................................... 14
CAPITAL ACCOUNT CONVERTIBILITY (CAC) ............................................................................................................................... 16
ONE NATION ONE STANDARD ............................................................................................................................................................ 17
COAL SHORTAGE IN INDIA ................................................................................................................................................................... 18
PM GATI SHAKTI SCHEME .................................................................................................................................................................... 20
PM MITRA PARKS ..................................................................................................................................................................................... 22
TAX HAVENS IN THE UNITED STATES ............................................................................................................................................ 22
AIR INDIA DISINVESTMENT ................................................................................................................................................................ 24
COMMON PROSPERITY POLICY OF CHINA .................................................................................................................................... 25
REFORMS IN INTERNATIONAL INSTITUTIONS: WORLD BANK AND IMF........................................................................ 26
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SPECIAL WINDOW FOR AFFORDABLE & MID -INCOME HOUSING (SWAMIH) FUND
• In News: Recently, the finance minister announced the completion of
first residential project which was funded through Special Window
for Affordable & Mid-Income Housing (SWAMIH) fund.
DATA AND FIGURES: REAL ESTATE SECTOR

• Real estate sector plays an important role in the country’s economy.
The industry is the second-largest employment generation sector in
India, providing jobs to 5 crore people.
• In 2019-2020, the sector’s contribution to the economy was close to
USD 200 billion and it is expected that the sector’s contribution to
the economy would be around USD 1 trillion by 2030.
ABOUT SWAMIH FUND:

• There are around 1,600 housing projects and 4.58 lakh units that
are stalled. The increase in the number of stalled projects has
adversely affected the middle-and low-income housing category of
projects.
• Further, the poor balance sheet of the Banks and NBFCs has led to shortage of liquidity for the real estate
sector.
• Hence, in order to complete the stalled housing projects, the Government announced setting up of SWAMIH
fund in November 2019. This fund was set up in the form of Category II Alternate Investment Fund
(AIF).
• Category II AIF: Includes real estate funds, private equity funds, and funds for distressed assets. Such
funds are prohibited from raising debt except for meeting day-to-day requirements.
• The SWAMIH fund has been set up as Category II Alternate Investment Fund (AIF) to provide last-mile
funding to the sector. The Centre plans to invest Rs 10,000 crore in the fund, while Rs 15,000 crore will
be pooled from domestic institutions such as LIC and other investors in a phased manner.
• The fund would provide necessary capital for the completion of stalled housing projects. Funding shall
be provided to the projects that meet the following criteria:
1. Stalled for lack of adequate funds
2. Affordable and Middle-Income Category
3. RERA registered
4. Priority for projects very close to completion.
SWAMIH INVESTMENT FUND: BENEFITS

• A large amount of capital locked up in these projects will be released once these homes are constructed and
completed.
• It will provide employment to construction workers and will provide impetus to the allied industries such as
steel and cement.
• It will significantly improve the economic sentiment in the nation and will also improve portfolios of Banks
and NBFCs.
STEPS TAKEN BY GOVERNMENT TO BOOST REAL ESTATE SECTOR:

• Reduction in Goods and Services Tax (GST) on under-construction Affordable Housing projects from
existing 8% to 1% without Input Tax Credit (ITC) and in case of other housing projects from 12% to 5%
without ITC.
• Increase in Priority Sector Lending for Affordable Housing Project from Rs. 28 lakh to Rs. 35 lakh in
metros and from Rs. 20 lakh to Rs. 25 lakh in non-metros. Read in detail about Housing for ALL Scheme on
the given link.
• Setting up of Affordable Housing Fund in National Housing Bank.

• Additional Deduction of Rs. 1.5 lakh on account of Home Loan Interest in addition to the deduction of
Rs. 2 lakh for affordable housing.
• Extension of 100% deduction on profits for construction of affordable housing projects under section
80-IBA of the Income Tax Act till 31.03.2021 and widening the scope of section 80-IBA from 30 to 60 square
meters in metros regions and 60 to 90 square meters in non-metros cities.
EXPORT LED MODEL FOR INDIA
NEED FOR EXPORT LED MODEL:

• India's Experience during 1947-91: Inward-oriented and protectionist policies followed prior to LPG
reforms affected the economy in terms of lower
exports, lower foreign investment, poor
competitiveness of industries and overall reduced
GDP growth rate. Need to learn from the past
mistakes and adopt outward-oriented policies
which focusses on boosting exports.
• Empirical Evidence: Countries such as Japan,
China, Vietnam etc. have been able to sustain
higher economic growth by integrating with the
global economy. In the recent times, such an
export-led strategy has benefitted both bigger
economies such as China as well as smaller
economies such as Vietnam.
• Shift from Consumption-led to Investment and
Export driven Model: To ensure $ 5 trillion
economy, we cannot rely only on domestic
demand. Like China, we need to cater to global
demand by boosting our exports.
• Conducive environment: in terms of US-China
Trade war, rising Labour costs in China, growing anti-china sentiment etc. India needs to fill up the
vacuum which is slowly left by China.
• Boost Make in India and Assemble in India: By integrating “Assemble in India for the world” into
Make in India, India can raise its export market share to about 3.5 percent by 2025 and 6 per cent
by 2030. India would create about 4 crore well-paid jobs by 2025 and about 8 crores by 2030 (Eco
Survey 2019-20).
• Innovation and Efficiency: The export-led model would force domestic Industries to innovate and
adapt to boost exports.
CHALLENGES IN BOOSTING EXPORTS:

• Dominance of Dwarf Firms in MSME Sector: MSMEs account for around 40% of the exports and
45% of manufacturing output. However, these MSMEs face problems with respect to factors of
production such as Land, labour and capital. Plus, most of the MSMEs use obsolete technology which
leads to poor efficiency and competitiveness.
• Higher Logistics Cost: India’s logistics cost as a share of GDP is 14 percent, which is high when
compared to developed nations, where it ranges between eight and ten percent. Higher logistics cost
in turn reduces the overall competitiveness of Indian economy.
• Trade facilitation: involves reducing the number of documents needed for trade. Trade facilitation
reduces the time to export and cost of exports. In India, trade facilitation, as measured by "Trading
Across Borders" is quite poor, which is one of the parameters for measuring World Bank's Ease of
Doing Business Index.
• Poor Innovation: India spends hardly around 0.7% of its GDP on R&D, which is quite lower in
comparison to USA (2.1%), China (2.8%), Israel (4.3%) etc. Improvement in innovation ecosystem
would help us improve manufacturing competitiveness and help us manufacture high quality goods for
the global market.

• Lack of Market Intelligence related to consumer preference in export markets. For example, higher
sweetness in Indian mangoes is not necessarily in demand in many countries.
• Identification Challenges: Each district of a country has a potential equivalent to that of a small
country in boosting exports. However, there is lack of focus on identifying potential export clusters
within a state.
• Lack of coordination among multiple government ministries involved in boosting exports.
• Adverse Impact of FTAs: Some of the FTAs with countries such as Japan, South Korea etc. has led
to inverted duty structure which has in turn encouraged import of finished goods and discouraged
domestic manufacturing.
• Policy Instability: Delay in announcement of incentives under RoDTEP scheme. Even though, this
scheme was announced on 1st Jan 2021. The Government has notified the guidelines in Aug 2021.
Similarly, whenever there is increase in prices of agricultural commodities such as Onions, Potato etc.,
the Government imposes ad-hoc ban on export of such commodities. This affects India’s image as a
reliable supplier of agricultural commodities.
• Rising Protectionist Policies in importing countries: High import duties and Quota limits in export
markets.
• Easier market access to India's competitors: Goods from countries such as Bangladesh, Vietnam etc.
enter into export markets such as EU, USA etc. at almost zero customs duty. However, Indian goods
enter such markets with comparatively higher customs duty and thus our goods become uncompetitive.
India's exports of Textiles and Leather to USA and EU have been declining on account of this.
• WTO Norms: Indiscriminate application of sanitary and phytosanitary measures by other countries
against Indian products. For example, basmati and non-basmati rice exports to the US have been
rejected multiple times on the grounds of low hygiene standards. Similarly, the issue of pesticides
residues is frequently raised by the EU and Japan.
WAY FORWARD:
• Improve Trade Competitiveness by improving access to factors of production (Land, Labour, Capital),
Reduce Logistics costs (14% of GDP) to global benchmarks (8% of GDP), improving Ease of Doing
Business etc.
• Protect the domestic Market from the import cheap foreign goods through (a) strong and effective
technical regulations (b) trade safeguards such as Anti-dumping duties and safeguard duties.
• Better Inter-Ministerial Coordination: The ministry of Commerce and Industry must hold regular
Inter-ministerial meetings. Further, regular Interactions with the State Governments is also crucial so
that trade facilitation takes place under cooperative federalism.
• Handholding support to MSMEs: The MSMEs need to be provided handholding support to have
access to factors of factors and use appropriate technology to boost exports.
• Increase access to formal finance: Less than 4 per cent of small firms in India have access to formal
finance. The figure for the US, China, Vietnam and Sri Lanka is 21 per cent.
• Reorient SEZs (Baba Kalyani Committee): The SEZs should be renamed as 3 E's- Employment and
Economic Enclaves. Focus should not only be on boosting exports, but also on employment creation
and GDP growth rate. Incentives given to companies in SEZs should depend upon factors such as Value
addition, Technology adoption etc. This would encourage the companies to innovate and compete at
the global level.
• Integration into Global value chains (GVCs): Invite large anchor firms in critical products to set up
operations in India. Government initiatives like simplified labour laws, PLI incentives, low corporate
tax on new manufacturing operations and scrapping of retrospective tax would encourage many firms
searching for China plus-one location to shift base to India.
INTEGRATION OF E-WAY BILL WITH FASTAG

• In News : The Union Government has decided to integrate GST E-way bill with the FASTag and RFID in order
to keep a track of movement of vehicles and curb tax evasion.
• E-way bill: It is Electronic Way bill for movement of goods. A GST registered person cannot transport goods
in a vehicle whose value exceeds Rs. 50,000 without an e- way bill. E-Way Bills are mandatory for movement
of Goods both within a state (Intra-State) as well as Inter-state. Not applicable for the movement of Goods
exempted under GST.
• FASTag: It is a device that employs Radio Frequency Identification (RFID) technology for making toll
payments directly while the vehicle is in motion. FASTag (RFID Tag) is affixed on the windscreen of the
vehicle and enables a customer to make the toll payments directly from the account which is linked to
FASTag.
• Need of integration: Mechanism to ensure that goods being transported comply with the GST Law and is an
effective tool to track movement of goods and check tax evasion.
BENEFITS OF E-WAY BILL:

• Ease of Doing Business: Previously under the VAT regime, traders had to visit the offices to get the delivery
notes issued. This has been done away with under the E-Way Bill regime. Thus, it has reduced the harassment
and compliance burden leading to improvement in Ease of Doing Business.
• Spirit of One-Nation One Tax: Issuance of separate E-Way Bills by the states would complicate the process
and result in hindrance in movement of goods from one state to another. The new Regime provides for
common E-Way Bills which would be applicable across the states.
• Boost Logistics: Reduce the congestion at check posts and hence ensure Faster movement of Goods leading
to reduction in travel time and costs.
• Self-policing by traders: A trader while uploading gives the identification of the buyer trader who will also
account the transaction automatically.
• Environment friendly: The need of the paper form of the multiple copies of waybill is eliminated.
• Better Tax administration: Officials saved of monotonous work collecting and matching the manual waybill
with the returns of the taxpayers.
INTEGRATION OF E-WAY BILL WITH FASTag/RFID:

• From January 1, 2021, RFID/FASTag has been integrated with the e-way bill system and a transporter is
required to have radio-frequency identification (RFID) tag in his vehicle and details of the e-way bill
generated for goods being carried by the vehicles are uploaded into the RFID system.
• When a vehicle passes the RFID tag reader on the highway, the details fed into the device get uploaded on the
government portal. The information is later used by revenue authorities to validate the supplies made by a
GST registered person.
E-RUPI
• In News: PM Modi has recently launched E-RUPI as the new digital payment system to send Government’s
monetary benefits directly to the beneficiaries be leveraging mobile phones.
• E-RUPI is developed by the National Payments Corporation of India (NPCI) in collaboration of many
government departments.
FEATURES OF E-RUPI:
• Person and purpose specific cashless digital
payment solution. It could be used only by the
person it is meant for and only for the purpose it
is issued.
• It is a cashless and contactless instrument for
digital payment medium apart from the current
UPI, digital wallets, and e-payments.
• It is a QR code or SMS string-based e-voucher,
which is delivered to the mobile of beneficiaries.
• It could be used as a voucher in case of payments
to medical treatment, education etc.
• It is one-time use voucher.
• It is offline hence can be accessible even in the
remotest areas.
• A beneficiary must carry an SMS or QR code which
is then scanned to make payments.
• It works even on basic phones (No requirement of smart phones).

• It does not require any physical interface for transactions and could be taken up in the remotest area of the
country.
BENEFITS OF E-RUPI:
• Can be used to provide benefits under various government schemes such as Ayushman Bharat, fertiliser
subsidy etc.
• Private sector can also leverage the new system for employee welfare and corporate social responsibility
programmes.
• Ensures leak-proof delivery of welfare services.
• Easy, safe, and secure as it keeps the details of the beneficiaries completely confidential.
• Being pre-paid in nature, it assures timely payment to the service provider without the involvement of any
intermediary or commission agents.
• No need for bank account makes it universally available in rural India.
• It would help in meeting financial inclusion targets.
LIMITATION:
• Mobile connectivity is still limited with network glitches in India. The number of mobile connections in
India as of January 2020 is equivalent to 78% of the total population.
• Digital literacy in rural areas is a matter of concern.
FREE TRADE AGREEMENTS (FTA)-NEED, CHALLENGES AND STRATEGIES

• In News: According to experts, Government's rethinking on FTAs is a welcome move that would ensure
India's integration into global economy and provide a fillip to Aatma-Nirbhar Bharat. But questions remain
as to what should be done to optimally utilise the FTAs.
NEED FOR FTAs:

• India's experience during 1947-91: The protectionist policies followed by India prior to 1991 LPG reforms
adversely affected the economy in terms of lower exports, lower foreign investment, poor competitiveness
of industries and overall reduced GDP growth rate.
• Empirical evidence: Countries such as Japan, South Korea, Singapore etc. have been able to sustain higher
economic growth by integrating with the global economy. In the recent times, such an export-led strategy
has benefitted both bigger economies such as China as well as smaller economies such as Vietnam. In
particular, FTAs signed by Vietnam with other countries has made it possible to attract foreign companies
exiting from China.
• Shift from consumption-led to investment and export driven model: Consumption expenditure
accounting for 60% of India's GDP is the major driver. To ensure $ 5 trillion economy, we cannot rely only on
domestic demand. Like China, we need to cater to global demand by boosting our exports.
• Conducive environment in terms of US-China Trade war, rising labour costs in China, growing anti-china
sentiment etc. India needs to fill up the vacuum which is slowly left by China.
• Boost ‘Make in India’ and ‘Assemble in India’: By integrating “Assemble in India for the world” into ‘Make
in India’, India can raise its export market share to about 3.5 percent by 2025 and 6 per cent by 2030. India
would create about 4 crore well-paid jobs by 2025 and about 8 crores by 2030.
• Innovation and efficiency: The FTAs would force domestic industries to innovate, adapt and exporters
would be required to innovate and adopt new technologies to boost exports.
• Trade liberalisation with flexibility: FTAs help reduce tariffs with a chosen trade partner in a calibrated
manner with tariff reductions spread over time. Further, the partner country would also be required to
reciprocate by reducing the tariffs.
INDIA’S EXPERIENCE WITH FTA:

• India’s FTA experience has been a mixed bag.
• India has gained significantly from the FTAs that it has signed with the South Asian neighbours such as Sri
Lanka, Bhutan, Nepal etc.
• However, the FTAs signed by India with the East Asian Economies and ASEAN have led to huge trade deficits
leading to an adverse impact on our domestic manufacturing.

POSITIVE IMPACTS OF FTA:

• India's trade with FTA partners: India’s total trade has increased with each FTA partner in post-FTA phase.
• Structure of imports and exports: India’s imports are primarily accounted for by non-consumer goods with
respect to each FTA partner. This shows that the FTA partners have been able to provide for high quality raw
materials to our domestic Industries leading to a push to "Make in India". Further, India’s exports are
primarily accounted for by non-raw materials with respect to each FTA partner.
• Trade in Services: India's trade in services has increased with some of the FTA partners such as Japan, South
Korea, Malaysia etc. Some of the sectors that have been benefitted include technology (Computer Software),
telecommunication, finance, tourism etc.
ADVERSE IMPACTS OF FTA:

• Structure of trade: FTAs have led to increased imports and exports. However, imports are much higher than
exports.
• Widening trade deficit: India’s trade deficit with ASEAN, Korea and Japan has widened post-FTAs.
• Inverted duty structure: Signing of FTAs with countries such as Japan has led to inverted duty structure
and hence it has affected domestic manufacturing.
• Sector-Wise Impact of FTAs: Apart from the widening trade deficit, the quality of trade has also deteriorated
after signing of FTAs. Out of 21 important sectors, 13 sectors have been adversely affected by higher imports
as compared to exports. Some of these affected sectors are minerals, leather, textiles, gems and jewellery,
metals, vehicles etc.
• Under-utilised FTAs: Utilisation rate of FTAs by exporters in India is very low (between 5 and 25%).
STRATEGIES: SURJIT BHALLA COMMITTEE

• Renegotiate existing FTAs to ensure that India's interests and concerns are adequately addressed.
• Improve trade competitiveness by improving access to factors of production (Land, Labour, Capital),
reduce logistics costs (14% of GDP) to global benchmarks (8% of GDP), improving Ease of Doing Business
etc.
• Protect the domestic market from the import cheap foreign goods through (a) strong and effective
technical regulations (b) trade safeguards such as Anti-dumping duties and safeguard duties.
• Better inter-ministerial coordination: The Ministry of Commerce and Industry must hold regular Inter-
ministerial meetings to improve the coordination between various ministries. Further, regular interactions
with the State Governments is crucial so that trade facilitation takes place under cooperative federalism.
• Launch FTA utilisation mission: The MSMEs are often unable to take advantage of the FTAs due to lack of
information about the FTAs. Hence, there is a need to launch nation-wide sensitisation scheme whereby the
MSMEs can be explained about the potential of FTAs.
• Reorient SEZs (Baba Kalyani Committee): The SEZs should be renamed as 3 E's- Employment and
Economic Enclaves. Focus should not only be on boosting exports, but also on employment creation and GDP
growth rate. Incentives given to companies in SEZs should depend upon factors such as value addition,
technology adoption etc. This would encourage the companies to innovate and compete at the global level.
• Integrate government initiatives such as One- District One Product, RoDTEP Scheme etc. into FTAs to push
for exports.
30 YEARS OF LPG REFORMS: PERSISTENT CHALLENGES
• In News: July 2021 marks the 30th anniversary of the LPG Reforms. On one hand, the GDP size of India has
increased from $275 bn to $ 2.9 trillion. However, on the other hand, the increase in GDP size has not been
accompanied by transformative changes in the Indian Economy.
CHALLENGES WITH THE LPG REFORMS IN INDIA:

• Agricultural Development: The average growth rate of Indian agriculture is below the targeted growth rate
of 4% and is way below the double-digit growth rate of the service sector. In spite of being the one of the
largest producers of food grains, India's share in global export of agricultural commodities has remained
stagnant at 2% (9th Rank). Similarly, the import of cheaper agricultural commodities has adversely affected
the income levels of the farmers. This clearly shows that the farmers in India have not able to get benefitted
from LPG reforms.

• Stagnation in Manufacturing sector:

The share of manufacturing sector to
India's GDP has remained stagnant at
16-17% since 1991 reforms. Instead of
focussing on labour intensive industries,
the manufacturing sector has come to be
dominated by capital intensive
Industries. The failure of the LPG
reforms to promote manufacturing
sector is considered to be the biggest
loss for the Indian Economy.
• Jobless Growth: The employment
elasticity is hardly around 0.1 which
means every 1% increase in GDP growth
rate leads to 0.1% increase in
employment creation. Apart from low
quantity of jobs, concerns have also been
raised with respect to poor quality of
jobs. 90% of India's workforce is
employed in informal sector which is
characterised by low wages, poor
productivity and lack of access to social
security benefits. Hence, there is a need
to create high-paying, high-productivity
formal sector jobs.
• Lack of Inclusive Growth: India has failed to prevent concentration of wealth and provide for equitable
distribution of income. For instance, as per Credit Suisse, 1% of the wealthiest in India have increased their
share in wealth from 40% in 2010 to 60% in the last five years. The richest 10% in India own more than 4
times the wealth than the remaining 90%. Going forward, richest 10% in India would take away the majority
share of $ 5 trillion economy.
• Provision of basic services: The Government has failed to allocate sufficient financial resources for
provision of basic goods and services. For instance, India's expenditure of 3% on education is much below
the target of 6%. Similarly, expenditure on health has remained quite lower at 1.5% as against the mandated
3%.
• Balanced Regional Development: The private sector investment tends to get concentrated in the already
well- developed states and regions. This in turn leads to disparity in the development across the states and
within states in India. Some of the states such as Maharashtra, TN, Punjab etc. have made rapid progress.
However, the states in the Northeast and Eastern India continue to have lower growth rates. Similarly, even
within the states, there are certain pockets of underdeveloped regions such as Vidarbha (Maharashtra),
Saurashtra (Gujarat), Hyderabad-Kar region (Karnataka) etc.
• Poor Innovation Ecosystem: The R&D Expenditure as % of GDP at 0.7% has remained stagnant in the last
2 decades. Unlike developed economies, the R&D expenditure in India is mainly driven by public sector. The
private sector investment in R&D needs to be substantially enhanced.
CONCLUSION:
• The 1991 reforms helped the economy stave off a crisis and then bloom. It is time to outline a credible new
reform agenda that will not just bring GDP back to pre-crisis levels, but also ensure growth rates higher than
it had when it entered the pandemic.
SEVEN YEARS OF PRADHAN MANTRI JAN DHAN YOJANA

• In News: Recently, the Pradhan Mantri Jan-Dhan Yojana (PMJDY), announced in 2014 has completed seven
years of its implementation.
• PMJDY is National Mission for Financial Inclusion to ensure access to financial services, namely, Banking/
Savings & Deposit Accounts, Remittance, Credit, Insurance, Pension in an affordable manner.

• Objectives of the scheme: To ensure access to various financial services like access to need based credit,
insurance and pension to the excluded sections i.e. weaker sections and low income groups. Use of technology
to lower cost and widen the reach of financial sector.
BASIC TENETS OF THE SCHEME:

• Banking the unbanked - Opening of basic savings bank deposit (BSBD) account with minimal paperwork,
relaxed KYC, e-KYC, account opening in camp mode, zero balance & zero charges.
• Securing the unsecured - Issuance of Indigenous Debit cards for cash withdrawals & payments at merchant
locations, with free accident insurance coverage of Rs. 2 lakh.
• Funding the unfunded - Other financial products like micro-insurance, overdraft for consumption, micro-
pension & micro-credit.
FINANCIAL INCLUSION
• The concept of financial inclusion was first introduced in India in 2005 by the Reserve Bank of India.
Financial inclusion is the process of ensuring access to financial products and services needed by
vulnerable groups at an affordable cost in a transparent manner by institutional players. It is a major step
towards inclusive growth.
SUCCESS OF PMJDY:
• PMJDY accounts: They have grown three-fold from 14.72 Crore in 2015 to 43.04 Crore in 2021. More than
half of the beneficiaries are women
and about two-third of the accounts
are in rural and semi-urban areas.
• Smooth DBTs (Direct Benefit
Transfer) transactions: About 5
crore PMJDY account holders
received DBT from the Government
under various schemes.
• Operative accounts: 85.6%
accounts are operative which
indicates that more and more of these accounts are being used by customers on a regular basis.
• Creation of Jan Dhan Darshak App: It provides a citizen centric platform for locating banking touch points
such as bank branches, ATMs, Bank Mitras, Post Offices, etc. Over 8 lakh banking touch points have been
mapped on the GIS App.
• Deposits under accounts: Increased about 6.38 times from 2015 to 2021.
• Rupay Cards: Number of RuPay cards and their usage has increased over time.
POSITIVE IMPACT OF PMJDY ON THE FINANCIAL SYSTEM:

• Prevent Leakage: DBTs have empowered and provided financial security to the vulnerable sections of
society via PMJDY accounts as well as ensured every rupee reaches its intended beneficiary and preventing
systemic leakage.
• Financial inclusion: PMJDY has been the foundation stone for people-centric economic initiatives. Whether
it is DBTs, COVID-19 financial assistance, PM-KISAN, increased wages under MGNREGA, life and health
insurance cover, the first step of all these initiatives is to provide every adult with a bank account, which
PMJDY has nearly completed.
• Formalization of the financial system: Jan dhan provides an avenue to the poor for bringing their savings
into the formal financial system, an avenue to remit money to their families in villages besides taking them
out of the clutches of the usurious money lenders.
CHALLENGES FACED IN PMJDY:

• Connectivity: Lack of physical and digital connectivity in hinterlands and hilly areas such as the Northeast,
Jammu and Kashmir, Uttarakhand, and Bihar etc. pose a major hurdle in achieving Financial Inclusion.
• Technological issues: Issues ranging from poor connectivity, network outage, power shortage and
bandwidth problems to managing costs of maintaining the infrastructure affect the banks.

• Keeping the accounts ‘Active’: Villagers are reluctant to deposit a small amount of money in far located
branches that costs time and loss of a full day’s earnings. On the other side, Banks have to spend Rs. 100- 150
per account on the necessary paper work, cost of holding camps and the commission paid to Business
Correspondents (BC) who are authorised to open accounts.
• Financial and Technology illiteracy: There is a lack of financial illiteracy, awareness, knowledge and skills
among rural people to make informed decisions about savings, borrowings, investments and expenditure.
About 65 percent of Indians lack financial literacy (survey conducted by Visa).
• Duplication of Accounts: The lure of getting a large insurance cover, accidental death benefit cover and
overdraft facility, may prompt people to open multiple accounts in different banks using different
identification documents, as there is no single centralised information sharing system to detect duplication
of account.
• Managing the ecosystem of Business Correspondents (BC): It is a complex and unwieldy task for the
banks due to delay in payout of subsidies and remuneration granted under MNERGA, DBT, pension, etc. to
villagers by BC, Bank’s lack of commitment to monitor the operations of BC, lack of effective grievance
redressal systems and absence of proper training to a BC agent regarding financial products and ability to
handle customer complaints.
THE ROAD AHEAD:

• Endeavour to ensure coverage of PMJDY account holders under micro insurance schemes. Eligible PMJDY
account holders will be sought to be covered under PMJJBY and PMSBY. Banks have already been
communicated about the same.
• Promotion of digital payments including RuPay debit card usage amongst PMJDY account holders through
creation of acceptance infrastructure across India
• Improving access of PMJDY account holders to Micro-credit and micro investment such as flexi-
recurring deposit etc.
• Financial empowerment: Going forward, there is need to move from financial inclusion to financial
empowerment by providing credit. The PMJDY should become PM Jan Dhan Vridhi with universal access to
bank credit to the most underprivileged sections of the society.
• Model of credit history: This will require reduction in cash transactions and moving to digital transactions
and building credit models using artificial intelligence techniques to promote digital payments including
RuPay debit card usage amongst PMJDY account holders.
• Create Database: There is a need to build up a data base to capture the income, transaction history of the
Jan Dhan account holders on the basis of which credit delivery models can be worked out.
NATIONAL MISSION ON EDIBLE OILS – OIL PALM (NMEO-OP)

• In News: Despite being the fifth largest oilseed crop producing country in the world, India is also one of the
largest importers of vegetable oils. The demand-supply gap in the edible oils has necessitated huge imports
accounting for 60 per cent of the country’s requirement. Against this backdrop, PM Modi has recently
launched National Edible Oil Mission- Oil Palm (NMEO-OP).
DATA AND FIGURES: OIL SEEDS

• India’s vegetable oil economy is the world’s fourth-largest after the USA, China & Brazil.
• The oilseed accounts for 13% of the Gross Cropped Area, 3% of the Gross National Product and
10% value of all agricultural commodities.
• Oilseeds cultivation is undertaken across the country in about 27 million hectares mainly on marginal
lands, of which 72% is confined to rainfed farming.
• A substantial portion of our requirement of edible oil is met through the import of palm oil from Indonesia
and Malaysia.
• India has emerged as the largest importer of vegetable oils in the world followed by China & USA. Import bill
staggered at Rs 75,000 crore (2020-21). In the current year, the import bill could go up to Rs 1 lakh
crores.
OBJECTIVE OF NMEO-OP:
• Increase domestic production of palm oil by 3 times to 11 lakh tonnes by 2025-26. Special emphasis will
be laid on North-eastern States and Andaman & Nicobar Islands.
• The Mission hopes to increase oil palm acreage by an additional 6.5 lakh hectares by 2025-26 and grow
production of crude palm oil to 11.2 lakh tonnes by 2025-26 and up to 28 lakh tonnes by 2029-30.
• This is the first time the Centre will give oil palm farmers a price assurance, with industry mandated to
pay the viability gap funding of 14.3% of crude palm oil prices.
• The proposed scheme will subsume the current National Food
Security Mission-Oil Palm programme.
STRATEGY TO PROMOTE CULTIVATION OF OILSEEDS (DALWAI

PANEL RECOMMENDATIONS):
• Increasing production through adoption of high yielding varieties of
seeds; soil and moisture conservation techniques in rainfed areas;
balanced utilisation of fertilisers; intercropping of oilseeds with other
crops; contract farming etc.
• Encourage Cooperatives and FPOs and link them to oil processing
Industries.
• Reduce per capita consumption of edible oil and minimize import.
Campaign for a healthy oil consumption.
• Promotion of Secondary Sources (rice bran, coconut, cotton seed, oil
palm and TBOs).
• Enhancing capacity utilization of domestic processing industries.
• Promoting consumption of coconut as edible oil.
INDIAN SHIPPING INDUSTRY

• In News: Recently, the Union Cabinet approved a scheme for promotion of Flagging in merchant ships in
India while Parliament also passed the Marine Aids to Navigation Bill, 2021.
• The Bill seeks to provide a framework for the development, maintenance, and management of aids to
navigation in India. It repeals the Lighthouse Act, 1927, which provides for the maintenance and control of
lighthouses in India.
DATA AND FIGURES:

• Approximately, 95 percent of the country's trade by volume (70 percent in terms of value) is moved by
sea.
• With a coastline close to 7517 km and 12 major & 187 minor ports India happens to be a potential
destination for shipping and transhipment in the futures to come.
• The industry offers numerous benefits like capabilities to transport large freight, is cost effective, eco-
friendly and creates employment in coastal regions among others.
• India imports around 40 million tonnes of crude and 20 million tonnes of products every year, chiefly
from the Gulf, Malaysia, and Nigeria via the Shipping route.
WHY WAS SUCH BILL NEEDED?

• India has a long coastline of 7517 km and 12 major & 187 minor ports. There are radar beacons, GPS
Navigation system to guide a ship for proper directing of the ship.
• In India there are 18 light houses which are more than 75 years old.
• There are light house districts where safe navigation is provided. Cost of Maintaining of these Light houses is
also very high.
Logistics performance Index (LPI): In 2018, India was ranked 44th in the Logistics Performance Index, a
measure through which the World Bank ranks countries based on their logistics performance.
KEY FEATURES OF THE BILL INCLUDE:

• Application: The Bill applies to the whole of India including various maritime zones including territorial
waters, continental shelf, and exclusive economic zone.
• Aid to navigation: The Bill defines aid to navigation as a device, system, or service, external to the vessels
designed and operated to enhance the safety and efficiency of navigation of vessels and vessel traffic.
• Director General of Aids to Navigation: The Bill provides that the central government will appoint: (i) a
Director General, (ii) Deputy Director Generals, and (iii) Directors for districts (which the centre may
demarcate). The Director General will advise the central government on matters related to aids to
navigation, among others.
• Central Advisory Committee: The central government may appoint a Central Advisory Committee (CAC)
consisting of persons representing the interests affected by the Bill, or having special knowledge of the sector.
• Management of General Aids to Navigation and vessel traffic services: The central government will be
responsible for the development, maintenance, and management of all general aids to navigation and vessel
traffic services.
• Training and certification: The Bill provides that no person shall be allowed to operate on any aid to
navigation (including any ancillary activities), or any vessel traffic service in any place unless he holds a valid
training certificate.
• Levy of marine aids to navigation dues: The Bill provides that marine aids to navigation dues will be levied
and collected for every ship arriving at or departing from any port in India, at the rate specified by the central
government from time to time. The central government may wholly or partially exempt certain vessels from
these dues.
• Jurisdiction with civil court: Any dispute related to the marine aids to navigation dues, expenses, or costs,
will be heard and determined by a civil court having jurisdiction at the place where the dispute arose.
• Heritage Lighthouse: The central government may designate any aid to navigation under its control as a
heritage lighthouse. In addition to their function as aids to navigation, such lighthouses will be developed for
educational, cultural, and tourism purposes.
• Penalties: The Bill provides certain offences and penalties. For instance: intentionally causing obstruction
of, reduction in, or limitation of, the effectiveness of any aid to navigation or vessel traffic service, also
intentionally causing damage to, or destruction of any aid to navigation or vessel traffic services.
BENEFITS OF BILL:
• Better Navigation safety and efficiency with protection of environment
• Skill development and strengthening of Auditing and Accreditation of Institutes at par with international
standards.
• Realize tourism potential of coastal regions through Heritage lighthouses development for educational,
cultural, and tourism purposes.
• Improved Legal Framework for Matters related to Aids to Navigation & Vessel Traffic Services.
• Marking of “Wreck” in general waters to identify sunken/ stranded vessels for safe and efficient
navigation.
ISSUES AND CHALLENGES WITH SHIPPING INDUSTRY:

• Small Fleet Size: The size of Indian Shipping Industry and its fleet is comparatively smaller to its
counterparts (Ranked at 16 with 1,431 vessels or 1.2% of world).
• Lack of Competitiveness: Due to high taxation, compliance burden and lack of skilled manpower, the
operational costs of Indian vessels is high. Because of the above two reasons, India had nearly US$ 53 billion
of foreign exchange outflow in 2018-19 alone as shipping payments.
• Low capacity: Despite handling 90% of EXIM Cargo by volume and 70% by value, the traffic handled at ports
is far less than capacity (704.92 MTPA in 2019-20 against 1534.91 MTPA capacity at major ports alone by
March 2020).
• High turnaround time: The average turnaround time at Indian ports reached 12 days in Covid-19 despite
being in the essential list.
• Lower foreign investment: Despite 100% FDI and 10 year tax holiday to enterprises engaged in
maintenance and operation of ports, a cumulative FDI of only US$ 1.63 billion is received from April 2000 to
March 2021.
CONCLUSION:
• Shipping plays an important role in the economic development of a country. India needs to focus on
developing it to achieve the economic prosperity.

AGRISTACK
• In News: Recently, many organisations that work for farmers’ rights and digital rights flagged concern over
government’s plan of creating ‘AgriStack’.
• A recent EY report has estimated that India's farm economy to grow to as high as $24 billion by 2025,
on the back of agritech adoption.
• The Department of Agriculture, Cooperation and Farmers Welfare, recently entered into a Memorandum of
Understanding (MoU) with Microsoft Corporation to create a ‘Unified Farmer Service Interface’ through
its cloud computing services.
• The MoU will start as a pilot project in 100 villages of Uttar Pradesh, Madhya Pradesh, Gujarat,
Haryana, Rajasthan and Andhra Pradesh.
ABOUT AGRISTACK:
• AgriStack is a collection of technologies and digital databases proposed by the Union government that
focuses on farmers and the agricultural sector.
• AgriStack may have a Farmers’ Stack, a Farm Stack and a Crop Stack integrated on a technology platform
linking existing digital land records, cadastral maps of farms and information.
• Farmers’ Stack can consist of farmer data with Aadhaar as unique identifier, Farm Stack can have
geospatial information on each farm (with a farm identity) owned by a farmer with cadastral maps, and Crop
Stack can contain crop data linked to farms.
• Data would be interlinked to land registration, cadastral maps and satellite images from state government
departments and public entities.
• Government’s schemes such as Pradhan Mantri Fasal Bima Yojana (PMFBY), PM-KISAN and Soil Health Card
will be integrated through a common database along with land record details over a period of time.
• Also, government is preparing a centralised farmers database and formulating various services based on
it in order to create a digital ecosystem for agriculture.
POTENTIAL BENEFITS OF AGRISTACK:

• Improved access to formal credit: It can enable closer study of the flow of agricultural credit to specific
land parcels. It will also enable credit flows and interest subventions to become more transparent. It can
enable financing for small and marginal farmers.
• Improved Crop insurance products and delivery: especially with geographic information system (GIS)
and remote sensing technologies.
• Smooth mechanism for marketing and price discovery: It can enable the provision of market intelligence
for de-risking commodity price fluctuations, demand-supply forecasting and weather advisory. A
marketplace can be created where various entrepreneurs and suppliers of products and services can meet.
• Better quality of input: Agristack could address the asymmetry in information flow by providing all
information about farmers and their farming easily to relevant stakeholders (seed, chemical fertiliser and
pesticides, machinery companies or fin-tech companies).
• GIS and IoT (internet of things) services: can be deployed to give feedback to stakeholders. For example,
at the post-harvesting stage, a trigger to harvesting equipment suppliers and buyers may be sent, who can
approach the cultivator for providing services.
• Prevent leakages of aid with accurate targeting.
ISSUES WITH THE AGRISTACK:

• Absence of a Data Protection Legislation: In its absence, it might end up being an exercise where private
data processing entities may know more about a farmer’s land than the farmer himself and they would be
able to exploit farmers’ data to whatever extent they wish to.
• Commercialisation: The formation of ‘Agristack’ will imply commercialisation of agriculture extension
activities as they will shift into a digital and private sphere.
• Absence of Dispute Settlement: The MoUs provide for physical verification of the land data
gathered digitally, but there is nothing on what will be the course of action if disputes arise, especially when
historical evidence suggests that land disputes take years to settle.
• Privacy and Exclusion Issues: Given that the proposed farmer ID will be Aadhaar-seeded, further issues of
privacy and exclusion would emerge. Also, making land records the basis for farmer databases would
mean excluding tenant farmers, sharecroppers and agricultural labourers.
WAY FORWARD:
• Ensure digital security and privacy: Government should prepare a stronger framework to protect the
interests of the farmers whose data is being used.
• Wider consultation: Since agriculture is a state subject, it is critical that state governments are taken on
board. There is a need for creation of common agricultural data standards and sharing mechanisms
through inter-ministerial/centre-state consultations.
• Ensure asymmetric flow of information: There is no denial that there is potential in data and technology
in empowering farmers but only when the flow of information is balanced.
GOVERNMENT INITIATIVES TOWARDS DIGITISATION IN AGRICULTURE:

• AI-Sowing App: Microsoft has developed this app in collaboration with International Crops Research
Institute for the Semi-arid Tropics (ICRISAT). This application sends advisory to the farmers regarding the
optimal date of seed- sowing.
• NITI Aayog has partnered with IBM to develop a crop yield prediction model backed by AI to provide
real-time data and communicate the required advisory to farmers.
• Kisan Suvidha: It is an omnibus smartphone app that helps farmers by providing them relevant information
regarding weather, dealers’ market prices, plant protection, agro advisories, IPM practices etc.
• MKisan App: This app enables farmers and stakeholders to obtain advisories and other information being
sent by experts and govt. officials through mkisan portal without registering on the portal.
• Farm-o-pedia: Developed by CDAC Mumbai, this is a multilingual Android app that targets the farmers of
rural Gujrat. The major functionalities of this app are, it helps farmers get suitable crops as per soil and
season, helps farmers get crop-wise information, weather monitoring and cattle management.
• Crop Insurance App: is used to calculate Insurance Premium for notified crops based on area, coverage
amount and loan amount.
• Shetkari App: helps download Shetkari Masik an Agriculture magazine & there is no requirement of internet
to read it.
• Agri Market app: provides information of market price of all crops at the markets located within 50
kilometre radius of the device’s location.
• Pusa Krishi app: provides information about various types of crops.
CONCLUSION:
• At present the majority of farmers across India are small and marginal farmers with limited access to
advanced technologies or formal credit that can help improve output and fetch better prices. Among the new
proposed digital farming technologies and services under the programme include sensors to monitor cattle,
drones to analyse soil and apply pesticide, may significantly improve the farm yields and boost farmers'
incomes.
SEMICONDUCTOR MANUFACTURING IN INDIA

• In News: Recently, an unusual shortage of inputs, especially semiconductor chips, has made India-based
vehicle manufactures (car manufactures and premium bikes) curtail production across categories.
• Government is reportedly working on a plan to offer around $1 billion in cash to every company that
sets up a Semiconductor chip manufacturing unit in India.
• A semiconductor is a physical substance designed to manage and control the flow of current in
electronic devices and equipment. It either doesn’t allow a freely flowing electric current or repels the
current completely.
• Semiconductors are an essential component of electronic devices, enabling advances in
communications, computing, healthcare, military systems, transportation, clean energy, and
countless other applications.
IMPACT OF SHORTAGE:
• Reduced Supply: Consumers of semiconductor chips, which are mainly car manufacturers and consumer
electronics manufactures, have not been receiving enough of this crucial input to continue production. Chip
shortage is measured in chip lead time, which is the gap between when a chip is ordered and when it is
delivered.

• Reduced Production of Automobiles: With just-in-time deliveries, carmakers typically kept low inventory
holdings and relied on an electronics industry supply chain to feed production lines as per demand.
• Delayed Supply and Reduced Features: It has caused delaying vehicle deliveries, some companies have
reportedly started discarding features and high-end electronic capabilities on a temporary basis to deal with
the chip shortage.
NEED TO FACILITATE SEMICONDUCTOR MANUFACTURING:

• To tackle global shortage: Resulting from a surge in demand for electronic items after the outbreak of the
COVID-19 pandemic last year, is pushing several countries to have their own chip-making facilities to bring
down their dependency on the global supply chain. Demand for semiconductors grew massively in 2020,
increasing production requirements across the world. COVID-19 led to an increase in worldwide chip sales
from $412.2 billion in 2019 to $439 in 2020.
• Electronics manufacturing: India is the second-largest smartphone manufacturer in the world after China,
and chips are at the center of these devices. Further, several new-age technologies, like 5G, Internet of Things
(IoT), and artificial intelligence (AI), are likely to drive the demand for chips in the years to come.
• Strategic requirement: Semiconductor manufacturing also has strategic advantages, as countries don’t
want to depend on their imports for essential infrastructure like defence and power.
• Reducing import bill: As of now, India is dependent on imports to meet the demand for chips. India
consumed around $21 billion worth of semiconductors in 2019, according to India Electronics and
Semiconductor Association (IESA).
• Fostering innovation: production and exports of electronic goods at large scale will expose the Indian
industry to foreign competition and ideas, which will help in improving its capabilities to innovate for the
future.
CHALLENGES FACED BY INDIA IN MANUFACTURING SEMICONDUCTOR:

• Complex manufacturing: Chip making is a highly complex process, which is why only a few countries have
the expertise and skills required to gain a leadership position for this segment. India has done well in design
and verification for the semiconductor industry, with most of the global semiconductor companies having an
R&D footprint in India, but most of our chips, memory and display are imported into the country.
• Massive investment requirement: Setting up a semiconductor unit demands a massive investment of
around INR50,000 to INR75,000 crore over two-to-three years. This kind of investment is challenging even
for big players.
• Lack of skilled workforce: A key requirement for semiconductor firms is the availability of a qualified
workforce, and it is here that the India is found lacking.
• Requirement of very specific raw materials: Apart from Silicon, numerous types of chemicals & gases are
involved in semiconductor fabrication that are not till now available in India and has to be imported.
• Gaps in supportive infrastructure: chip manufacturing units require a massive quantity of water and an
uninterrupted power supply, which can be a problem in India.
• Global Competition: It is also difficult to compete with neighbouring countries which, due to better cost-
efficiency and first mover advantage, have become the favoured destinations for global chip manufacturers.
• Lack of intent: A case in point is Intel's plant in 2007. A delay in coming out with semiconductor policy
pushed the chip giant Intel to opt for Vietnam over India.
WAY FORWARD:
• Supporting Infrastructure: A world class, sustainable infrastructure needs to be provided, with swift
transportation, large quantity of pure water, uninterrupted electricity, communication, pollutant free
environment etc.
• Start with assembly, testing, marking, and packaging (ATMP): ATMP companies generate more
employment and require less investment than full-fledged fabrication plants (fabs).
• Stable and long-term policy: The policy (that includes all kinds of subsidies) taken up now must be valid
and stable for at least 10 to 15 years. It must be supported with a solid long term plan and financial backing.
• Industry and academia collaboration: With a greater emphasis on research and innovation in India’s
higher education landscape through the newly unveiled National Education Policy, there is now the
possibility of a better synergy between industry and academia in designing curriculum to meet the needs of
semiconductor companies in India.
GOVERNMENT INITIATIVES:
• 100 per cent Foreign Direct Investment (FDI) allowed under the automatic route in Electronics Systems
Design & Manufacturing sector.
• National Policy on Electronics launched in 2012 to attract global and domestic companies to invest
towards the growing Electronics System Design & Manufacturing (ESDM) sector in India
• Union Budget 2017-18 increased the allocation for incentive schemes like the Modified Special
Incentive Package Scheme (M-SIPS) and the Electronic Development Fund (EDF)for providing a boost
to the semiconductor as well as the electronics manufacturing industry.
• Electronic Manufacturing Clusters Scheme which provides 50% of the cost for development of
infrastructure and common facilities in Greenfield clusters and 75% of the cost for Brownfield clusters
• Union Cabinet has reconstituted an empowered committee on setting up semiconductor wafer
fabrication manufacturing facilities in the country.
• According to IESA, ESDM industry will benefit from the government's “Make in India” campaign and is
projected to see investment proposals worth Rs 10,000 crore (US$ 1.5 billion) over the next two years.
CAPITAL ACCOUNT CONVERTIBILITY (CAC)

• In news: Deputy Governor of RBI has recently indicated towards fundamental shifts in the capital account
convertibility framework in India, resurrecting a debate relating to Capital account liberalization.
• Convertibility refers to the ability to convert domestic currency into foreign currencies and vice versa
to make payments for balance of payments transactions.
• Capital account liberalization is the process of removing impediments to inflows of capital, or allowing
domestic investors to invest more freely in foreign assets.
BENEFITS WITH CAC:

• Facilitates economic growth:
o Improved liquidity in financial markets and better risk allocation.
o Reduction in the cost of both foreign equity and debt capital.
o Off shore rupee market development.
o Improved employment and business opportunities.
o Positive pressures for better infrastructure and business practices.
• Other benefits:
o Provides opportunities for diversification of investments by residents.
o Enhances credibility of national economy as CAC is seen as a sign of stable and mature markets. o Enables
higher stock market returns.
o Reduction in transaction cost due to free rupee convertibility.
o Improvement in domestic savings and investments.
o Better access to a global variety of goods and services.
• Improves the efficiency of the financial sector: as openness to capital flows can-
o Expose a country’s financial sector to greater competition.
o Spur improvements in domestic corporate governance to meet standards of foreign investors.
o Impose discipline on macroeconomic policies, and the government.
RISKS ASSOCIATED WITH FREE CAPITAL MOBILITY:

• Exchange rate volatility: A lack of suitable regulatory control and rates subject to open markets with a large
number of global market participants can lead to sudden exit of capital causing volatility, devaluation, or
inflation in forex.
• Unsustainable Foreign Debts: Businesses are prone to the risk of high repayments in case of foreign debt
if exchange rates become unfavorable.
• Credit and asset bubbles: Foreign investors may use equity markets in emerging countries to bet on
currency appreciation, thereby distorting asset values and adding to the risk of speculative bubbles.
• Exposure to global macroeconomic shocks: Fuller CAC exacerbates risks associated with Global financial
crises, especially for emerging economies like India. For instance, the 1997 Asian financial crisis was
exacerbated because the countries affected had full capital account convertibility and the financial crisis of
2008 led to huge foreign capital outflows from emerging countries.

• Effects on Balance of Trade and Exports: Substantial inflows could lead to an overvalued exchange rate
which can make Indian exports less competitive in the international markets.
• Lack of effectiveness in generating growth: Foreign capital inflows by themselves only have temporary
effects on growth because productivity growth is the main determinant of long-term growth which needs
robust infrastructure, ease of business, technological advancements etc.
STEPS TAKEN TO MOVE TOWARDS FULLER CAC:

• Introduction of the Fully Accessible Route (FAR), which places no limit on non-resident investment in
specified Government securities (G-Secs).
• Allowing trade in non-convertible forward (NDF) rupee market: The RBI permitted banks in India, which
operate International Financial Services Centre Banking Units (IBUs), to participate in the NDF market.
• Liberalised Remittance Scheme allows all resident individuals, including minors, to freely remit up to USD
2,50,000 per financial year for any permissible current or capital account transaction or a combination of
both.
• Rationalisation of External Commercial Borrowing (ECB): Steps taken by RBI include-
o Replacing the system of sector wise limits: All entities eligible to receive FDI have been permitted to
raise ECBs up to USD 750 million per financial year under automatic route subject to certain terms and
conditions prescribed in the Guidelines.
o Relaxed the end-use restrictions related to ECBs: allowing corporates and non-banking finance
companies (NBFCs) to raise ECBs for working capital and general corporate purposes.
o Foreign Direct Investment has been made more or less unrestricted except (i) for some sectoral caps
and (ii) restrictions in a few socially sensitive (e.g., gambling) or volatile (e.g., real estate) or strategic
(e.g., atomic energy) sectors.
ONE NATION ONE STANDARD

• Why in News: Recently, Research Design and Standards Organisation (RDSO) of Indian Railways has become
the first Institution to be declared Standard Developing Organization (SDO) under "One Nation One
Standard" mission of BIS (Bureau of Indian Standards).
• One Nation One Standard Mission focuses on making India the leader in setting global benchmarks for
setting quality standards.
• Product standardization: It refers to the process of maintaining uniformity and consistency among the
different iterations of a particular good or service that is available in different markets.
• It ensures that goods or services produced in a specific industry come with consistent quality and are
equivalent to other comparable products or services in the same industry.
ABOUT ONE NATION, ONE STANDARD (ONOS):

• Aim is to synergize standards adopted by various SDOs in the country. The idea is to develop one
template of standard for one given product instead of having multiple agencies set it.
• Currently, BIS is the only national body that frames standards. But different Institutions and PSUs also
develop standards in their specific domains.
ADVANTAGES OF ONE NATION, ONE STANDARD:

• Standardization helps in ensuring the safety, interoperability, and compatibility of goods produced.
• It also facilitates trade and commerce, makes processes more efficient, conserve resources and
simplify comparison of goods and services.
• International recognition: Integration of multiple standard formulating bodies will bring uniformity in the
quality of goods & services produced in the country and will boost the 'Brand India' image.
• Access to global Market: It will allow recognition on International Standards Making Bodies and integration
with Global Supply Chain and will help in larger participation of Industry in these supply chains. It will also
ensure market relevance for the Indian standards.
• Benefit to the consumer: It will help in increasing competitiveness amongst Industry / Vendors, Reduction
in Cost, Quantum improvement in Quality of Product & Services for Indian consumers.
• Product innovation: Availability of a basic template to work with will allow smooth induction of evolving &
emerging technologies and will also reduce dependence on imports by providing thrust to “Make-in-India”.

• Promotion to domestic standards: It will help in having maximum industrial products under Indian
Standards thereby removing the need to go abroad to get quality certification.
• Access to Finance: Banks are willing to advance loans since the prices of standardised commodities can be
easily established.
ISSUES IN STANDARDIZATION IN INDIA:

• Lack of regulations: In sectors like machinery safety and chemicals, India is in the process of developing
regulations. Therefore, imports and even domestic manufacturers have a free run in the Indian market.
• Slow pace of adoption of international standards: for example, the adoption of Hazard analysis and
critical control points (HACCP) system in the food industry is resisted due to the unorganised nature of
industry.
• Poor testing facilities: The testing facilities are quite inadequate and manufacturers face problems in
getting the products tested.
• Misuse of Standards: Many producers use standards in an unauthorized manner. There is lack of feeling of
responsibility and national character among our producers and it is a big hindrance in the development of
standardization.
• Poor awareness: The general awareness about standards and grades is very low among masses, especially
in rural areas.
WAY FORWARD:
• Convergence of all standards development activities in India by enhancing capability of SDOs for
dynamic and faster development of standards, encouraging setting up of new SDOs in emerging technology
areas etc. BIS SDO recognition scheme is a right step in this direction.
• Setting up a dynamic mechanism for new standards identification, development and their revision by
creating forums and processes to articulate and prioritize needs for standards development in different
sectors.
• Inclusive participation of all stakeholders in standards development including States and MSMEs.
• Harmonizing Indian standards with international standards for reducing technical barriers to trade and
improving market access for Indian products and services.
• Identify sectors where India could pioneer standardization work to not only unleash their commercial
potential but also enhance India’s contribution to global standardization efforts.
• Participation in international standards setting projects to enable voicing, consideration and possible
inclusion of national priorities and concerns.
GOVERNMENT INITIATIVES FOR STANDARDISATION IN INDIA:

• Indian National Strategy for Standardization: It considers the current state of development across sectors,
the existing quality infrastructure and the policy directions in relation to domestic economic developments
and for trade in goods and services.
• Formulation of Indian Standards is one of the core activities of BIS. The activity is done through 17
Division Councils representing diverse areas of economy and technology such as Civil engineering,
Electrotechnical, chemical, services etc.
• Pahchan Initiative: To organize and standardize the Indian Handicrafts, Government has registered
approximately 22.85 lakhs artisans under Pahchan initiative.
• Quality Control Orders (QCOs): For ensuring availability of quality products to consumers, QCOs are issued
by various Ministries/ Departments.
COAL SHORTAGE IN INDIA

• In News: India’s thermal power plants are facing a severe coal shortage, with coal stocks having come down
to an average of four days of fuel across an increasing number of thermal stations.
• Of total 135 thermal plants using coal for power generation, 106 or nearly 80 per cent were either in
critical or supercritical stage, on October 5. These power plants had stocks for next 6-7 days only.
• Top 5 States in terms of total coal reserves in India are: Jharkhand > Odisha > Chhattisgarh > West Bengal >
Madhya Pradesh.
• Coal minister mentioned that coal shipments to thermal power plants had crossed 2 million tonnes against a
daily requirement of about 1.87 million tonnes of coal as on October 11.
REASONS FOR SHORTAGE:

• Eruption in Power Demand: Economy recovering from the Covid-19 pandemic coupled with supply issues
have led to the current coal shortage. India is suffering from the
impacts of a sharp surge in electricity demand, a squeeze on
domestic mine output and surging prices of seaborne coal.
• Supply side issue: On the supply side, because of low investment,
coal cannot be mined more than the capacity which exists today.
Hence, the increase in supplies will be gradual.
• Increased Share of Thermal Power Plants: Coal fired thermal
power plants have also supplied a higher proportion of the increase
in demand leading the share of thermal power in India’s power mix
increasing to 66.4% from 61.9% in 2019.
• Flooding and Rainfall: Lower than normal stock accumulation by
thermal power plants in the April-June period and continuous
rainfall in coal bearing areas in August and September which led to
lower production and fewer despatches of coal from coal mines.
• Lowering Imports: A consistent move to lower imports coupled
with high international prices of coal have also led to plants cutting imports.
• High global prices: The global coal crisis has led to higher prices.
• China factor: China – a major producer and consumer – has also faced this problem as it has tried to save
coal for the future and imposed restrictions on mining to go green.
IMPACT AN DMAGNITUDE OF COAL SHORTAGE:

• If Industries face electricity shortages, it could delay India’s economic reopening.
• Some businesses might downscale production.
• Providing India’s population and underdeveloped energy infrastructure, the power crisis could hit long
and hard.
• The economy has been showing signs of recovering and the October-December period is crucial because
there are expectations of pent-up demand helping to accelerate growth.
• Any disruption in the power supply can push back this process.
• The challenge is that today all the three sectors, agriculture, industry and households, are equally important.
• A lot of business is being conducted from home after the pandemic, and power disruptions will come in
the way of work.
• If power companies start revising their tariffs, inflation will shoot up.
WHAT MEASURES IS THE GOVERNMENT TAKING TO ADDRESS THE SITUATION?

• An inter-ministerial team, including representatives of the Power and Railway Ministries, Coal India Ltd,
the Central Electricity Authority and Power System Operation Corporation, is monitoring the supply of coal
to thermal power plants.
• The government is pressing thermal plants with captive coal mines to boost their coal output so that
they can meet more of their own demand and is also prioritising coal supplies for thermal power plants with
low levels of stock.
• The Power Ministry is also trying to increase the supply of coal by expediting the start of production
from a number of mines that already have all requisite clearances in place.
• Clean coal as an idea has huge potential in India because of the age and inefficiency of some of our plants.
• With government’s efforts to push renewable energy due to international conventions on climate change,
increase in carbon cess and other initiatives for lesser use of coal, there is a need for ‘Vision 2030 for the
coal sector’, which takes into account the environmental factors such as reduction of carbon footprint,
abatement of global warming.
WAY FORWARD:
• Ram-up Mining: Government is working to closely monitor stocks and also State run Coal India and NTPC
are working to raise output from mines to boost supply.
• Supply Controls: Rationing domestic power supplies, especially in rural and semi-urban areas, may emerge
as one of India’s easiest solutions. Indian power distributors do typically cut supplies to certain areas on a

rotational basis when generation is lower than demand, and an extension of load-shedding would likely be
considered if power plants take any further hits.
• Increase Imports: India will need to amplify its imports despite the financial cost. From Indonesia for
instance, the price rose from USD 60 per tonne in march to 200 per tonne in September.
• Hydro-Power Generation: The same monsoon rains that have flooded coal mines are likely to boost hydro-
power generation. Large hydro-electric projects on dams are India’s major electricity source after coal and
the sector performs at its peak around the rainy season which typically extends from June to October.
• Turn to Natural Gas Powered Generators: There could be a larger role for natural gas to play, even with
global prices currently surging. In a desperate situation, the gas-powered fleet could help prevent any
widespread power outages. State-run generator NTPC Ltd., for example, has idle capacity that can be fired up
in around 30 minutes if needed and is connected to a gas grid.
CONCLUSION:
• The coal shortage problem is very serious as it affects power supply, which is the backbone of all economic
activity. All stakeholders – the Centre, states, miners and power generators – must work together and plan
the strategy going ahead.
PM GATI SHAKTI SCHEME

• In News: Recently, the government of India has launched the ambitious Gati Shakti scheme or National
Master Plan for multi-modal connectivity plan, with the aim of coordinated planning and execution of
infrastructure projects to bring down logistics costs.
• The Gati Shakti scheme will subsume the Rs 110 lakh crore National Infrastructure Pipeline (NIP) that
was launched in 2019.
• Aim: To ensure integrated planning and implementation of infrastructure projects in the next four years,
with focus on expediting works on the ground, saving costs and creating jobs.
ABOUT THE SCHEME:

• The Gati Shakti scheme will subsume the Rs 110 lakh crore National Infrastructure Pipeline that was
launched in 2019.
• It also aims to have 11 industrial corridors and two new
defence corridors - one in Tamil Nadu and other in Uttar
Pradesh. Extending 4G connectivity to all villages is another
aim. Adding 17,000 kms to the gas pipeline network is being
planned.
• It will help in fulfilling the ambitious targets set by the
government for 2024-25, including expanding the length of the
national highway network to 2 lakh kms, creation of more than
200 new airports, heliports and water aerodromes.
• Integrated Approach: It intends to bring together 16
infrastructure related Ministries.
• Gati Shakti Digital Platform: It involves the creation of a
common umbrella platform through which infrastructure
projects can be planned and implemented in an efficacious
manner by way of coordination between various ministries/
departments on a real-time basis.
SERVICES PROVIDED BY THE PM GATI SHAKTI:

• Planning and obtaining clearances: The portal will offer 200 layers of geospatial data, including on existing
infrastructure such as roads, highways, railways, and toll plazas, as well as geographic information about
forests, rivers and district boundaries to aid in planning and obtaining clearances.
• Centralised tracking of projects: The portal will also allow various government departments to track, in
real-time and at one centralised place, the progress of various projects, especially those with multi-sectoral
and multi-regional impact.

• Project clearances: The portal will also highlight all the clearances that any new project would need, based
on its location — and allow stakeholders to apply for these clearances from the relevant authority directly
on the portal. The objective is to streamline the process and shorten the period required for clearances.
NEED FOR INTEGRATED INFRASTRUCTURE DEVELOPMENT:

• There exists a wide gap between macro planning and micro implementation due to the lack of
coordination and advanced information sharing as departments think and work in silos.
• According to a study, the logistical cost in India is about 13% of GDP, which is higher than developed
countries. Due to this high logistical cost, the competitiveness of India’s exports is greatly reduced.
• It is globally accepted that the creation of quality infrastructure for Sustainable Development is a
proven way, which gives rise to many economic activities and creates employment on a large scale.
• The scheme is in synergy with the National Monetisation Pipeline (NMP). The NMP has been announced
to provide a clear framework for monetisation and give potential investors a ready list of assets to generate
investment interest.
POTENTIAL BENEFITS OF PM GATI SHAKTI IN INDIA’S DEVELOPMENT STORY:

• Bring the economy out of pandemic impacts: The Covid-19 Pandemic reduced the GDP growth and
resulted in large job loss, depressed wages and consumption. The infrastructure projects will boost jobs and
increase the demand for goods and commodities, besides attracting major investments.
• Solve issues in logistics: According to a study, the logistical cost in India is about 13%-14% of GDP as against
about 7-8% of GDP in developed economies. The plan will help India to cut down its logistics cost. Besides
cutting logistics costs, the plan is also aimed at increasing cargo handling capacity and reducing the
turnaround time at ports to boost trade.
• Help in increasing economic zones and industrial parks: Currently, a number of economic zones and
industrial parks are not able to reach their full productive potential due to inefficient and fragmented multi-
modal connectivity. By incorporating infrastructure schemes under various ministries and state
governments, the Gati Shakti platform will boost the last-mile connectivity.
• Reduce implementation overlaps: Poor Infrastructure planning at present results in various challenges.
For example, newly-built roads are being dug up by the water department to lay pipes and construction of
different tunnels for roads and railways in the same area.
• Save taxpayers money: PM Gati Shakti would address the problem of government departments and
Ministries working in silos. There is a wide gap between macro planning and micro implementation. The
National Master Plan will address this, as working on the basis of the master plan will lead to optimum
utilization of resources and reduce both cost and time overruns. This will help the government to save
thousands of crores of taxpayers money.
• Help in reducing human intervention within ministry: Currently, any inter-ministerial issues that arise
relating to a project are addressed in regular meetings of infrastructure-related ministries. The Gati Shakti
portal would help reduce the human intervention required as ministries will be in constant touch.
ISSUES AND CONCERNS:

• Investments from states: The Economic Survey for 2020-21 underscored the role of active Centre-State
partnerships for infrastructure building. The Survey projects maximum investments towards NIP sectors
such as energy, roads, urban infrastructure and railways for FY 2021 and 22, with about ₹8.5-lakh crore to
be invested by either side annually.
• Low Credit Off-take: According to the RBI’s paper, the growth rate in credit off-take has steeply declined to
5.8% in November 2020, as against 14.2% in 2013. This will reduce private investment in infrastructure
projects. At present, there are concerns about the declining credit offtake trends from banks as they don’t
want to get into another Non-Performing Asset (NPA) crisis in future.
• Lack of Demand: In the post-Covid-19 scenario, there is a lack of private demand and investment demand.
• Structural Problems: Due to land acquisition delays and litigation issues, the rate of implementation of
projects is very slow on global standards. Getting approvals is very difficult in terms of land access,
environmental clearances; also impending litigation in court delays the infrastructure projects.
• The plan does not address a few key infrastructural challenges: Land acquisition is often the biggest
impediment in the development of India. Many development projects get delayed due to land acquisition
issues. There are other issues such as litigation issues, alienation of local communities and the violation of
environmental norms, etc.
WAY FORWARD:
• Address certain key issues: To the proper implementation of PM Gati Shakti, India needs to
address structural and macroeconomic stability concerns, emanating from high public expenditure.
• Tackle land acquisition decisions: With the availability of Geographic Information Systems and remote
sensing technologies under the master plan, the policymakers have to do well to reclaim lands already
subjected to degradation and pollution, rather than alienate controversial new parcels.
• Solve the credit offtake challenge: The Economic Survey for 2020-21 mentioned that India needs ₹4.5-lakh
crore investments per year from the private sector to boost NIP sectors. So, the government has to address
the issues associated with low credit offtake for successful private investments.
• Incorporate the digital features in all spheres: This can be done by adding optical fibres along with railway
lines and gas pipelines. India also needs digital solutions for aggregation of demand and supply, which can
be done by bringing the open network and open protocols under the Gati Shakti initiative.
• Improve the performance of roads: India needs to improve the performance of roads for a smooth supply
of goods. Roads should be made smart with automatic monitoring of traffic, drone-based support, including
drone-based monitoring of maintenance of assets.
PM MITRA PARKS
• In News: Recently, the government has approved the setting up of seven PM MITRA textiles
parks, following the “Union Budget for 2021-22″ commitments, with a total outlay of Rs. 4,445 crores in
a period of 5 years.
• The MITRA park aims to integrate the entire textile value chain from spinning, weaving,
processing/dyeing, printing to garment manufacturing at one location.
INFRASTRUCTURES IN THE PM MITRA PARKS:

• Core Infrastructure: Incubation Centre & Plug & Play facility, Developed Factory Sites, Roads, Power, Water
and Waste Water system, Common Processing House and other related facilities e.g., Design Centre, Testing
Centres etc.
• Support Infrastructure: Workers’ hostels & housing, logistics park, warehousing, medical, training & skill
development facilities.
ADVANTAGES AND SIGNIFICANCE OF THE PM-MITRA SCHEME:

• Ease of Doing Business: The Scheme will offer an opportunity to create an integrated textiles value
chain right from spinning, weaving, processing/dyeing and printing to garment manufacturing at one
location that would ease business and will reduce logistics costs of the Industry.
• SDG: Apart from that, the scheme will also help India in achieving the United Nations Sustainable
Development Goal 9 (“Build resilient infrastructure, promote sustainable industrialization and foster
innovation”).
• Reduce Logistics Cost: It will reduce logistics cost and strengthen the value chain of the textile sector to
make it globally competitive. High logistics costs are considered a key hurdle to India’s goal of boosting textile
exports.
• Generate Employment: Each MITRA park is expected to directly generate 1 lakh jobs and indirectly
generate a further 2 lakh jobs.
• Attract FDI: The parks are crucial to attract Foreign Direct Investment (FDI).
OTHER RELATED INITIATIVES:

• The Production Linked Incentive Scheme for man-made fibre segment (MMF) apparel, MMF fabrics and
ten products of technical textiles for five years has been approved.
• A National Technical Textiles Mission has already been launched to promote research and development
in that sector.
TAX HAVENS IN THE UNITED STATES

• In News: Recently, a report informed how world leaders and some of the world’s wealthiest people hide their
riches in the United States (US).

• The release of the Pandora Papers has shed light on the financial dealings of the elite and the corrupt and
how they have used offshore accounts and tax havens to shield trillions of dollars in assets.
• There are over 300 Indian names in the leak, including over 60 prominent ones.
• Pandora Papers are 11.9 million leaked files from 14 global corporate services firms which set up about
29,000 off-the-shelf companies and private trusts.
• The Pandora Papers reveal how trusts are used as a vehicle in conjunction with offshore companies
set up for the sole purpose of holding investments and other assets by business families and ultra- rich
individuals. The trusts can be set up in known tax havens which offer relative tax advantages.
REASONS FOR US’ STATES BECOMING TAX HAVENS:

• No Rule against Perpetuity: Lawmakers in these states have abolished the rule against perpetuities which
has allowed the establishment of so-called dynasty trusts, in which wealth
can be passed from generation to generation while avoiding federal estate
taxes.
• Asset Protection Trusts: Some states also allow asset protection trusts,
which protect wealth from claims against creditors. Such trusts can be
attractive to wealthy lawyers and doctors as a way to shield their assets
from malpractice claims.
• Trusts not Taxed: Tax avoidance is another big draw. While most states
levy a tax on trust income, trusts established in Delaware are not subject
to state income tax if the beneficiaries are not Delaware residents. South
Dakota does not tax personal income, corporate income or capital gains.
• Privacy Protection: South Dakota provides extensive privacy protections
for assets held in trusts, including the sealing of trust-related court
documents and court proceedings.
REASONS FOR SETTING UP TRUSTS OVERSEAS:

• Secrecy: Overseas trusts offer remarkable secrecy because of stringent privacy laws in the jurisdiction they
operate in.
• Maintain a Degree of Separation: Business persons set up private offshore trusts to project a degree of
separation from their personal assets.
• Avoid Tax in the Guise of Planning: Business persons avoid their Non-resident Indians (NRI) children being
taxed on income from their assets by transferring all the assets to a trust.
• Prepare for Estate Duty Eventuality: There is a pervasive fear that estate duty, which was abolished back
in 1985 will likely be re-introduced soon.
• Flexibility in a Capital-Controlled Economy: India is a capital-controlled economy. Individuals can invest
only USD 2,50,000 a year under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS).
GOVERNMENT’S INITIATIVES:
• Legislative Action:
o The Fugitive Economic Offenders Act, 2018
o The Central Goods and Services Tax Act, 2017
o The Benami Transactions (Prohibition) Amendment Act, 2016
o The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
o Prevention of Money Laundering Act, 2002
• International Cooperation:
o Double Taxation Avoidance Agreements (DTAAs): India is proactively engaging with foreign
governments with a view to facilitate and enhance the exchange of information under Double Taxation
Avoidance Agreements (DTAAs)/ Tax Information Exchange Agreements (TIEAs)/ Multilateral
Conventions.
o Automatic Exchange of Information: India has been a leading force in the efforts to forge a multilateral
regime for proactive sharing of financial information known as Automatic Exchange of Information which
will greatly assist the global efforts to combat tax evasion.
o Foreign Account Tax Compliance Act of USA: India has entered into an information sharing agreement
with the USA under the act.

AIR INDIA DISINVESTMENT

• In News: Recently, Government has approved Tata Group’s Rs 18,000-crore bid for the state-owned carrier,
Air India. The deal, which is expected to be completed by December-end, also includes sale of Air India
Express and ground handling arm AISATS. This marks the first major outright privatisation of a public sector
company in almost two decades.
• The NITI Aayog, in its recommendations on strategic disinvestment of CPSEs in May 2017, while referring
to the fragile finances of Air India, had stated that further financial support in a mature and competitive
aviation market would not be the best use of scarce financial resources of the government.
REASONS FOR AIR INDIA’S COLLAPSE:

• The main reason for Air India’s collapse has been mismanagement over the decades by successive
governments.
• Among other things, Air India has had a record of trading away valuable landing slots, acquiring aircraft
far in excess of what is financially justifiable (thus saddling it with a mountain of debt), fudging
accounts and going in for needless expenditure programmes.
• Absence of a strong independent regulator for civil aviation.
WHY WAS AIR INDIA SOLD?

• End of Monopoly: With economic liberalisation and the growing presence of private players, this dominance
came under serious threat.
• Govt running an airline: Ideologically too, the government running an airline did not quite gel with the
mantra of liberalisation.
• Continuous losses: By 2007, AI (which flew international flights) was merged with the domestic carrier,
Indian Airlines, to reduce losses.
• Wastage of taxpayers money: But it is the mark of how poorly the airline was run that it has never made a
profit since 2007.
SIGNIFICANCE OF THE DEAL:

• Disinvestment: It underscores govt commitment to reducing the its role in the economy.
• Easing burden on taxpayers: This claims to have saved taxpayers from paying for daily losses of AI.
• Economic reforms: Given the historical difficulties in AI’s disinvestment, or any disinvestment at all this is
a significant achievement.
• Missing the target: Purely in terms of money, the deal does not result in as big a step towards achieving the
government’s disinvestment target of the current year.
• Unresolved bankruptcy: The assets left with the government, such as buildings, etc., will likely generate Rs
14,718 crore. But that will still leave the government with a debt of Rs 28,844 crore to pay back.

• Business success: From the Tatas’ perspective, apart from the emotional aspect of regaining control of an
airline that they started, AI’s acquisition is a long-term bet.
• Investment boost: The Tatas are expected to invest far more than what they have paid the government if
this bet is to work for them.
POTENTIAL IMPLICATIONS OF THE PRIVATISATION OF AIR INDIA:

• Privatisation of loss-making assets: That there was little opposition to the sale from employees of the
beleaguered PSU or, for that matter, from political parties, suggests an acceptance of the fact that the
government could no longer throw good money after bad. The government has also displayed flexibility and
pragmatism in pushing the sale of Air India by retaining a part of its huge debt with itself, this time.
• Freeing up of scarce resources: With the conclusion of this sale, the government will no longer need to
constantly infuse cash in the loss-making enterprise. In 2019-20 alone, the airline’s operational losses were
to the tune of Rs 8,743 crore. This now frees up scarce resources which are better spent on providing public
services like health and education.
• Creation of a monopoly: A complete lack of state control might give rise to private monopolies. To prevent
this some form of govt regulation still needs to be there.
• Rise in prices: Since, government will no longer be there to subsidies losses for Air India, it might lead to a
rise in ticket prices.
• No political influence: As the public sector industries are managed by the government, political interference
is bound to take place. Similar was the case with Air India. Several decisions were made under political
pressure without consideration of their impact on company as well as its employees. Privatisation will put a
stop to this.
CONCLUSION:
• Complete liberalization: The privatisation of Air India is a message from the Government to the markets
and global investors that it has the political will to bite the reform bullet.
• Roadmap for economic reforms: The govt had to shed the “over-conservatism” that is typical of
bureaucracy.
• Future disinvestments: A transaction as “tough and complex” as Air India’s in an open, transparent and
competitive bidding process, will boost future privatisation.
COMMON PROSPERITY POLICY OF CHINA

• In News: Recently, China started a ‘common prosperity’ drive to narrow the widening wealth gap between
people with stringent measures on how business and society should function.
• Xi Jinping has pledged to make "solid progress" towards common prosperity by 2035 and "basically
achieve" the goal by 2050.
• “Common prosperity” was first mentioned in the 1950s by Mao Zedong, founding leader of what was then an
impoverished country.
• The idea was repeated in the 1980s by Deng Xiaoping, who modernized an economy devastated by the
Cultural Revolution.
• Economic inequality is the unequal distribution of income or opportunity in a population or groups of a
society. E.g., If we talk of income inequality, i.e., how unevenly income is distributed throughout a population,
income inequality between the richest 10% and poorest 10% in OECD countries increased from 7.2
times of mid-1980s to 9.6 times in 2013.
WHAT WILL BE THE ECONOMIC IMPACT OF ‘COMMON PROSPERITY’ DRIVE ?

• Chinese leaders are likely to tread cautiously so as not to derail a private sector that has been a vital engine
of growth and jobs, analysts said.
• The common prosperity goal may speed China’s economic rebalancing towards consumption driven growth
to reduce reliance on exports and investment, but policies could prove damaging to growth driven by the
private sector, analysts say.
• Increasing incomes and improved public services, especially in rural areas, would be positive for
consumption, and a better social safety net would lower precautionary savings.
• The effort supports Xi’s “dual circulation” strategy for economic development, under which China aims to
spur domestic demand, innovation and self-reliance, propelled by tensions with the United States.
IMPACT OF PERSISTENT ECONOMIC INEQUALITY:

• Increased Social Polarizations: Due to stagnant or reduced social mobilities due to widening economic
inequality the polarization in society increases. For India, with an already fractured society over religion,
region, gender, or caste, it adds another fracture point.
• Economic Risks: High economic inequalities are a drag on long term economic growth and equality of
opportunities, leading to risks of- mass poverty with higher number of young population experiencing
poverty, reduced state’s ability to protect their poor and vulnerable sections, and increased demands for
Deglobalization and Nationalization.
• Political Risks: Economic inequalities between people lead to marginalization of segments of population in
policy decisions, ability to question policies and processes.
• Security Risks: Globally, the economic inequalities lead to widening of power gap between nations,
enhancing risks of war among nations. E.g., the recent India-China border issues.
• Environment Risk: Economic inequalities lead to inequitable and unjust development with risks of
damaging wetlands, increased river pollution etc.
CHALLENGES IN REMOVING ECONOMIC INEQUALITIES:

• Income differences reflect individual efforts: The recent rise of startups highlight money as an incentive
of knowledge. State redistributive policies could curb individual incentives, reducing wealth generation in an
economy.
• Income differences are accumulated by generations: The economic inequalities are significant reflections
of differences between their parents and previous generations. Whether it is the number of children,
expenditure on education, health etc. varies even within people under the same income group.
• Historical differences: Usually, high income inequality regions or nations tend to have low
intergenerational mobility. As these regions fail to offer adequate opportunities for socio-economic mobility.
• Monetary Resource Constraints: Economic inequalities lead to issues of informal economy, presence of
parallel economy (Black Money), tax evasions, small tax base etc., limiting public finances and resources
available for redistributive policies from state.
• Human Capital Constraints: Higher inequality decreases human capital accumulation as well, it leads to a
vicious cycle of low income, low productivity, low taxes, and low human capital.
• Wealth Redistribution Challenges: How to redistribute wealth for best outcome is a challenge. Whether it
should focus on disparities between top versus bottom or greater focus should be on the middle class to
leverage the rise in economic activities for higher tax base is a difficult question to answer.
WAY FORWARD:
• Improved information on inequalities and policy outcomes through high-quality capture of information
about inequality. It can help not just in sound policies but change perceptions which lead to a divided public
opinion.
• Promote Entrepreneurship which leads to Quality Jobs and increasing the Labour Force Participation Rate,
especially of women.
• Formulation of policies or introducing reforms based on wider public support through increased
awareness among people and approval of efforts to tackle inequality of both- outcomes and opportunities.
• Promote an equitable society where companies are happy to give back rather than just to take or give due
to force.
• Rationalization of subsidies and better targeting of beneficiaries through alternatives like direct benefit
transfers over existing inefficient mechanisms.
REFORMS IN INTERNATIONAL INSTITUTIONS: WORLD BANK AND IMF

• In News: Recently, in the backdrop of the 2021 annual meetings of the World Bank Group and IMF, leading
experts have suggested reforms in these institutions.
• Experts have suggested the need to review the role of IMF amid changing dynamics of developed and
emerging economies including India.
• They also called for completing quota reforms and maintaining data integrity amid the World Bank
discontinuing its Ease of Doing Business (EoDB) reports.
REFORMS NEEDED IN IMF:

• IMF Quota: Each member’s quota determines its voting power as well as its borrowing capacity. Current
formula emphasises economic size and openness and consists of four elements: GDP openness (30%),
economic variability (15%) and international reserves (5%). Quotas are denominated in Special Drawing
Rights (SDRs). Quota reviews are mandated to be undertaken at intervals not exceeding five years.
• Due to discontent with IMF, BRICS countries established a new organization called BRICS bank to reduce
the dominance of IMF or World Bank and to consolidate their position in the world as BRICS countries
accounts for 1/5th of WORLD GDP and 2/5th of world population.
• More representative Executive Board: 2010 reforms also included an amendment to the Articles of
Agreement established an all-elected Executive Board, which facilitates a move to a more representative
Executive Board.
• The 15th General Quota Review (in process) provides an opportunity to assess the appropriate size and
composition of the Fund’s resources and to continue the process of governance reforms.
• Article IV consultations: It is through these consultations that IMF is expected to keep track of the behaviour
of the economy of the member countries. Under this, IMF holds bilateral discussions with its members usually
every year and their staffs prepare a report. Reports are utilised by credit rating agencies, impacting the fund-
raising capacity of countries like India.
• Governance Reforms: Board of Governors is the highest decision-making body of the IMF. Board is advised
by two ministerial committees, the International Monetary and Financial committees and the development
committee.
CONCERNS WITH IMF:

• Despite Fourteenth General Review of Quotas (2010), European nations still retain over 30% of overall
shareholding, despite collectively representing less than 20% of the global economy. The voting and
quota structure cannot be changed without an affirmative vote from US since such a vote requires a super
majority in the IMF, which gives US an effective veto.
• IMF could never pinpoint an incipient crisis. It failed, for instance, to see the signs of the Asian currency
crisis. Developing countries are subjected to far more rigorous Article IV consultation process and
scrutiny than the more developed countries, and the most curious example is, that in Spain and Greece.
• Governance structure continues to be disproportionately dominated by advanced economies. These
countries choose the leadership and senior management, and so their interests dominate, despite the fact
that the main borrowers are developing countries. Many of the economic reforms IMF required as conditions
for its lending (fiscal austerity, trade liberalization etc.) have often been counterproductive for target
economies.
SUGGESTIONS AND WAY FORWARD:

• Share of the European Union countries will have to reduce significantly. Share of BRICS countries would
have to increase significantly. After 2010 review India’s share increased to 2.75 % (from 2.44%), making it
the 8th largest quota holding country in the IMF.
• IMF should focus on lower income countries and support other developing countries’ market funds raising
activities.
• Need to shift the focus from the needs of the USA and European countries to those of developing
countries by reforming the voting structure.
REFORMS IN WORLD BANK:

• Governance related: Dominance of US and other members of the G7 in voting and administration do not
take into account significant changes in the profiles of major economic actors such as India and China. Critics
see the World Bank together with the other global economic institutions as an imperialism tool which protect
the interests and ideas of the western rich countries and expands their dominance in the rest of the world.
• Structural Adjustment Programs (SAP): SAPs imposed by both IMF and the World Bank severely affected
the developing countries. SAPs enforced privatization of industries, cuts in government spending and
imposition of user fees, market-based pricing, higher interest rates and trade liberalization. This has resulted
in slow growth, higher poverty, lower incomes, increased debt burdens, low human development indicators
and deteriorating social services in many developing countries.
• Redefining purpose: World Bank has not been able to redefine its purpose as a lending and developmental
institution in light of the emergence of non-traditional lenders such as China. Asia Infrastructure Investment

Bank (AIIB), established by China, is a multilateral development bank that focuses on infrastructure
financing, exactly the sort of work the World Bank does.
• Transparency in functioning: Both the World Bank and IMF are obscure and have little to open to the world
in terms of documents and information. The reliability of World Bank reports, and its predictions on
economic performances have been questioned.
A NEW GLOBAL ECONOMIC CONSENSUS: CORNWALL CONSENSUS

• In a report, the G7 Economic Resilience Panel demands a radically different relationship between the
public and private sectors, to create a sustainable, equitable and resilient economy.
• Since 1989, Washington Consensus (WC) defined the rules of the game for the global economy. The
alternative is the recently proposed “Cornwall Consensus.”
o Whereas the Washington Consensus minimized the state’s role in the economy and pushed an aggressive
free-market agenda of deregulation, privatisation and trade liberalisation. However, having narrowly
avoided a global economic crisis twice (first in 2008 and then in 2020 COVID crisis), WC has proven to
be incapable of responding effectively to economic, ecological, and epidemiological shocks.
o The Cornwall Consensus (reflecting commitments voiced at the G7 summit in Cornwall, England, last
June) would try to invert these imperatives.
Key features of Cornwall Consensus:
• Accelerate reform of global economic governance to promote the common good.
• Establish collective mechanisms to monitor, assess and invest in addressing emergent economic,
environmental or geo-political risks.
• Accelerate investment in the Sustainable Development Goals, promote digital inclusion, eliminate tax
evasion, and facilitate full access for developing countries to global markets.

SWAMIH Fund Completes First Housing Project; Export-Led Growth Model for India

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DATA AND FIGURES: REAL ESTATE SECTOR

ABOUT SWAMIH FUND:

SWAMIH INVESTMENT FUND: BENEFITS

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EXPORT LED MODEL FOR INDIA

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CHALLENGES IN BOOSTING EXPORTS:

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INTEGRATION OF E-WAY BILL WITH FASTAG

BENEFITS OF E-WAY BILL:

INTEGRATION OF E-WAY BILL WITH FASTag/RFID:

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FREE TRADE AGREEMENTS (FTA)-NEED, CHALLENGES AND STRATEGIES

NEED FOR FTAs:

INDIA’S EXPERIENCE WITH FTA:

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POSITIVE IMPACTS OF FTA:

ADVERSE IMPACTS OF FTA:

STRATEGIES: SURJIT BHALLA COMMITTEE

CHALLENGES WITH THE LPG REFORMS IN INDIA:

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• Stagnation in Manufacturing sector:

SEVEN YEARS OF PRADHAN MANTRI JAN DHAN YOJANA

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BASIC TENETS OF THE SCHEME:

POSITIVE IMPACT OF PMJDY ON THE FINANCIAL SYSTEM:

CHALLENGES FACED IN PMJDY:

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THE ROAD AHEAD:

NATIONAL MISSION ON EDIBLE OILS – OIL PALM (NMEO-OP)

DATA AND FIGURES: OIL SEEDS

STRATEGY TO PROMOTE CULTIVATION OF OILSEEDS (DALWAI

INDIAN SHIPPING INDUSTRY

DATA AND FIGURES:

WHY WAS SUCH BILL NEEDED?

KEY FEATURES OF THE BILL INCLUDE:

ISSUES AND CHALLENGES WITH SHIPPING INDUSTRY:

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POTENTIAL BENEFITS OF AGRISTACK:

ISSUES WITH THE AGRISTACK:

GOVERNMENT INITIATIVES TOWARDS DIGITISATION IN AGRICULTURE:

SEMICONDUCTOR MANUFACTURING IN INDIA

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NEED TO FACILITATE SEMICONDUCTOR MANUFACTURING:

CHALLENGES FACED BY INDIA IN MANUFACTURING SEMICONDUCTOR:

CAPITAL ACCOUNT CONVERTIBILITY (CAC)

BENEFITS WITH CAC:

RISKS ASSOCIATED WITH FREE CAPITAL MOBILITY:

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STEPS TAKEN TO MOVE TOWARDS FULLER CAC:

ONE NATION ONE STANDARD

ABOUT ONE NATION, ONE STANDARD (ONOS):

ADVANTAGES OF ONE NATION, ONE STANDARD:

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ISSUES IN STANDARDIZATION IN INDIA:

GOVERNMENT INITIATIVES FOR STANDARDISATION IN INDIA:

COAL SHORTAGE IN INDIA

REASONS FOR SHORTAGE:

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