The Centre unveiled its BioE3 (Biotechnology for Economy, Environment and Employment) policy last week.

On the face of it, the policy appears to be a routine attempt to create incentives and opportunities to energise growth in the biotech sector. But it is, in fact, about transforming existing industrial and manufacturing processes across various sectors to make them more sustainable and environment-friendly, and less wasteful.

The policy seeks to achieve this by harnessing the power of biotechnology, and developing new manufacturing methods that replicate, or mimic, processes found in natural biological systems.

Potential Benefits of Biotechnology:

• Medical Science:
  • Cures for genetic disorders.
  • Development of targeted therapies and treatments.
• Agriculture:
  • Creation of new plant varieties with desirable traits.
  • Increased crop yields and resistance to pests and diseases.
• Environmental Sustainability:
  • Bioplastics: Eco-friendly alternatives to traditional plastics (e.g., polylactic acid from corn starch).
  • Carbon Capture: Micro-organisms capture and convert CO2 into biofuels, reducing the need for CO2 storage.
• Synthetic Biology:
  • Design of novel organisms for specific functions.
  • Laboratory-grown organs for transplantation, reducing reliance on organ donors.
• Industrial Processes:
  • Replacement of chemical processes with biological ones, reducing pollution.
  • Production of sustainable materials and fuels.

BioE3 Policy Benefits for India:

• Economic Impact:
  • Expected $2-4 trillion from biomanufacturing over the next decade.
  • Prepares India for future economic opportunities in biotechnology.
• Research and Development:
  • Promotes competencies, research, and talent development.
  • Supports technology development and maturation.
• Biomanufacturing Hubs:
  • Establishes facilities for producing bio-products: chemicals, enzymes, functional foods, and more.
  • Focus areas: bio-based chemicals, smart proteins, precision therapeutics, climate-resilient agriculture, carbon capture, and marine/space research.
• Future Technologies:
  • Supports development of life support systems for space and innovative marine-based products.
  • Encourages collaboration among multiple government departments for effective implementation.

Why is it in the News?

It is important to recognize India’s progress in alleviating poverty based on norms established in the 1970s. However, there is a need to update the poverty threshold to reflect contemporary notions of a ‘decent standard of living’.

Context:

• The recent release of the Household Consumer Expenditure Survey (HCES) data by the National Sample Survey Office (NSSO) has sparked renewed debates on poverty estimation in India.
• According to estimates derived from the methodologies proposed by the Tendulkar and Rangarajan Committees, poverty levels have reportedly decreased significantly since 2011-12, with figures standing at approximately 6.3% and 10% respectively for the year 2022-23.

Evolution of Consumption-Based Poverty Measurement in India:

• India's consumption-based poverty measurement has evolved since its inception in the 1960s.
• The approach was first introduced by the 1962 Working Group and further refined by the 1979 Task Force.

The 1979 Task Force:

• The task force defined the poverty line as the per-capita consumption expenditure level that could satisfy the average daily calorie requirement of 2,400 kcal in rural areas and 2,100 kcal in urban areas.
  • This included associated non-food expenditures, and the monetary value of this norm became the foundation for subsequent poverty line revisions.

Tendulkar and Rangarajan Committees:

• These committees revisited the calorie norms and expenditure levels established by the 1979 Task Force.
  • However, they did not adequately address non-food components.
  • The committees argued that if expenditures on specific necessities meet nutritional requirements, they should also cover other essential non-food needs.

Implications of the estimates:

• The estimates indicate a notable decrease in poverty since 2011-12.
• However, some commentators advocate for a reassessment of the poverty line in light of changes in survey methodology.
• They contend that recent alterations in survey methodology in the Household Consumer Expenditure Survey (HCES) make previous methodologies unsuitable for analyzing HCES data.
• Surjit S. Bhalla, an economist and former member of the Economic Advisory Council, has provided comprehensive counterarguments to such assertions.
• Nevertheless, none of these discussions have addressed the suitability of current methodologies for monitoring poverty using consumption data.

Historical Background of Poverty Measurement:

• Early approaches: Consumption-based poverty measurement was initiated with a Working Group established by the Planning Commission in 1962 and further refined by a task force in 1979.
  • This task force meticulously outlined its rationale for establishing a poverty line specific to India.
• Definition of poverty line: It was delineated as the per-capita consumption expenditure required to fulfil average daily calorie needs (2,400 Kcal in rural areas, 2,100 Kcal in urban areas) along with associated non-food expenses.
  • This average calorie standard was derived from an analysis of the demographic and activity-based composition of the population during that period.
• The monetary value assigned to this standard became the foundation for subsequent revisions of poverty lines.
  • However, the fundamental methodology underpinning this calculation was not critically reassessed.

Reevaluating Poverty Measurement Norms in India:

• The Tendulkar and Rangarajan Committees acknowledged the evolving demographic and activity composition in India, leading them to propose adjustments to calorie norms and expenditure levels for poverty measurement.
  • However, these committees did not adequately reconsider the non-food components of the poverty line.
• At the core of their argument was the assertion that if spending within an expenditure class is sufficient to meet nutritional requirements, it should also be adequate to cover associated non-food needs.
  • This assumption is questionable in the context of modern India, as the country has undergone significant changes since the 1970s when the Task Force on Poverty was established.

Demographic and Educational Indicators in India Since the 1970s:

Several significant demographic and educational shifts have taken place in India since the 1970s:

• Life Expectancy: Life expectancy at birth has improved from 49.7 years in 1970 to 69.4 years in 2018, reflecting advancements in healthcare and overall quality of life.
• Ageing Population: The proportion of individuals aged 60 and above has grown from 6.1% in the 1970s to 10.1% by 2021.
  • This shift highlights the need for policies and programs that address the unique needs of an ageing population.
• Primary Education: The Gross Enrolment Ratio (GER) in primary education has experienced substantial growth, increasing from 62% in 1971 to universal enrolment today.
  • This progress demonstrates a stronger emphasis on ensuring access to basic education for all children.
• Higher Education: The Gross Enrolment Ratio for higher education has also seen significant growth, rising from below 6% in the 1970s to approximately 28% in recent years.
  • This development signals a greater focus on providing opportunities for advanced education and skill development.

Implications of Demographic and Educational Changes in India:

• The demographic and educational shifts observed in India since the 1970s have significant implications for out-of-pocket expenditures on health and education, as revealed by National Sample Survey (NSS) data. Key implications include:

Education Expenditures:

• The increase in primary and higher education enrolment has led to stiffer competition for aspirational jobs.
• This competition has driven higher spending on private tuition, leading to 'education poverty' among families with young children.
• Addressing this issue requires a change in the approach to education, as outlined in the National Education Policy (2020).

Health Expenditures:

• The rise in life expectancy and an ageing population have led to increased health expenditure needs, especially among the elderly.
• Changes in household composition and a growing elderly population living independently have further highlighted the need for better healthcare provisions.
• Political parties, like the ruling party with its Ayushman Bharat promise, recognize the importance of addressing these healthcare needs, indicating a potential shift in policy focus.

Elderly Population and Household Composition:

• The increase in life expectancy and decline in mortality rates have created a more age-diverse population with a larger elderly population.
• This ageing population necessitates greater attention to healthcare and financial support for the elderly, an issue that may not be adequately captured by current poverty measurement norms.

Redefining Poverty Norms for a Changing India:

• Current consumption-based poverty measures capture average population attributes but face limitations when accounting for increased population heterogeneity.
• As the population structure evolves, using averages to describe poverty becomes problematic.
  • For example: Elderly households may meet nutrition expenditure requirements but struggle with healthcare costs.
• Households with young children might cover food needs yet face challenges in meeting aspirational education expenses, like private tuition.
• These examples highlight how households could surpass extreme poverty thresholds yet lack resources for a decent living standard.
  • Consequently, updating poverty norms is essential to accurately capture the realities of diverse household needs.
• To achieve the Sustainable Development Goal of eradicating poverty in all forms, India must redefine its poverty norms, moving away from outdated standards based on 1970s data.
• By establishing fresh norms for the Amrit Kaal, India can better address the unique challenges faced by its population and make significant strides towards alleviating poverty.

Conclusion

India has made remarkable progress in alleviating poverty based on existing norms. However, to ensure a decent living standard for all citizens, it is crucial to update poverty measures to reflect current demographic and economic changes. By acknowledging the evolving needs of its population, India can continue making significant strides in poverty reduction and work towards a more inclusive and prosperous future.

Why is it in the News?

The current government policy, skewed towards consumers, unfavourably impacts farmers, necessitating a shift to enhance farmers' incomes.

Current State of India‘s Agricultural Exports:

• The current status of India's agri exports highlights a notable shortfall in achieving government targets.
• Despite aiming for $60 billion in 2022, actual exports in 2023-24 amounted to $48.9 billion, showing an 8% decrease from the previous year's $53.2 billion.
• Between 2004-05 and 2013-14, agricultural exports witnessed remarkable growth, expanding nearly fivefold from $8.7 billion to $43.3 billion.
• However, this growth trajectory slowed significantly in the period from 2014-15 to 2023-24, with an annual growth rate of merely 1.9%.
• Key exports include rice ($10.4 billion), marine products ($7.3 billion), spices ($4.25 billion), bovine meat ($3.7 billion), and sugar ($2.8 billion).

What is Agricultural Export Policy?

• The Agricultural Export Policy, commonly known as an agri-export policy, encompasses a range of governmental regulations, strategies, and incentives aimed at facilitating and encouraging the export of agricultural commodities from a specific nation.
• It encompasses diverse measures such as export subsidies, tariff adjustments, quality benchmarks, market access arrangements, financial support, and promotional efforts to assist agricultural producers and exporters in accessing global markets, enhancing their competitiveness, and broadening their export horizons.
• The Government of India introduced a comprehensive Agriculture Export Policy in December 2018, with the following objectives:
  • To diversify our export basket, and destinations and boost high-value and value-added agricultural exports, including focus on perishables.
  • To promote novel, indigenous, organic, ethnic, traditional and non-traditional Agri products exports.
  • To provide an institutional mechanism for pursuing market access, tackling barriers and dealing with sanitary and phytosanitary issues.
  • To strive to double India’s share in world agri exports by integrating with global value chains.
  • Enable farmers to get the benefit of export opportunities in overseas markets.

What is the Need for an Agri-Export Policy?

• Economic Contribution: India's agricultural exports, totalling around USD 53 billion in the fiscal year 2022-2023, constitute a significant portion of overall exports, yet the country's global share in agricultural exports remains low at 2.2% as of 2016.
• Food Security Enhancement: Despite catering to a substantial portion of the world's population with limited resources, a well-designed export policy can generate additional revenue to invest in bolstering food security and augmenting farmers' incomes.
• Inflation Control: Agricultural exports have the potential to stabilize domestic prices, benefiting consumers and producers, particularly during periods of abundant harvests.
• Job Creation: With approximately 45% of the workforce engaged in agriculture, promoting agricultural exports can foster employment opportunities, particularly in rural areas where agriculture is predominant.
• Balance of Payments Support: Agricultural exports significantly contribute to India's foreign exchange reserves, helping to offset trade deficits and maintain currency stability.
• Crop Diversity Utilization: India's diverse agricultural production offers substantial export potential, which can be tapped into through a well-structured export policy.
• Trade Relations Strengthening: Agricultural exports are pivotal in fostering and reinforcing trade ties with countries like the United States, Saudi Arabia, and the United Arab Emirates.
• Addressing Structural Challenges: The policy framework can effectively tackle obstacles such as low farm productivity, inadequate infrastructure, global price fluctuations, and limited market access.

What are the Challenges in India's Agri-Export Policy?

Several challenges hamper the effectiveness of India's agricultural export policy, requiring strategic interventions to unleash the sector's full potential:

• Restrictive Export Policies: Favoring domestic consumers over farmers often impedes the achievement of export targets.
  • Restrictions on commodities like Basmati rice, such as the Minimum Export Price (MEP) of USD 1,200, can limit export volumes.
• Subsidy-Centric Schemes: Increased subsidies during election periods, including food and fertilizer subsidies, strain fiscal discipline.
  • Populist measures like loan waivers and free power for farmers impact the financial health of the agricultural sector.
• Insufficient R&D Investment: Low investment in agricultural R&D, approximately 0.5% of agricultural GDP, hinders growth prospects.
  • Doubling or tripling R&D investments is essential for India to excel in agricultural production and exports.
• Quality and Standards: Maintaining consistent quality and meeting international standards is challenging.
  • Variability in quality, compliance issues, and difficulties in meeting Sanitary and Phytosanitary (SPS) Measures due to pests and diseases impede exports.
• Infrastructure: Inadequate infrastructure for storage, transportation, and processing results in post-harvest losses, reducing export competitiveness.
• Environmental and Sustainability Concerns: Balancing the growth of agricultural exports with environmental sustainability is crucial.
  • Over-exploitation of resources may have long-term consequences, necessitating careful resource management and sustainable practices.

Government Initiatives Promoting Agri-Export in India:

To unlock the full potential of India's agricultural exports, the government has launched several initiatives to enhance productivity, modernise infrastructure, and promote sustainable practices. Key schemes include:

• E-NAM (National Agriculture Market): A pan-India electronic trading portal, E-NAM enables farmers to sell directly to buyers, reducing intermediaries and ensuring fair prices.
  • E-NAM has integrated 1,000 wholesale markets and 585 mandis across 18 states and 3 Union Territories.
• National Horticulture Mission (NHM): Promoting sustainable horticulture practices, including organic farming and precision farming, NHM supports the establishment of over 100 Farmer Producer Organizations (FPOs) for horticultural products.
  • The mission also backs the production of high-value horticultural products for export.
• Market Access Initiative (MAI): Supporting export promotion activities, such as participation in trade fairs, capacity building, and market research, MAI has facilitated Indian exporters' participation in over 100 international trade fairs annually.
• Operation Greens: With an allocation of INR 500 crores in the Union Budget 2023-2024, Operation Greens stabilizes the supply and prices of essential agricultural commodities like fruits and vegetables.
  • The scheme reduces price volatility, ensures fair prices for farmers, and fosters sustainable agri-exports.
• Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA): With a budgetary allocation of INR 6,000 crores for the period 2020-2021 to 2024-2025, SAMPADA modernizes infrastructure for agro-processing clusters.
  • This reduces post-harvest losses and increases shelf life, improving the overall export potential.
• APEDA: Promoting the export of scheduled products, APEDA provides guidelines for sustainability and quality.
  • APEDA facilitated exports of agricultural products worth USD 22.17 billion during the financial year 2022-2023.
• Agri Export Zones (AEZs): AEZs provide infrastructure development and technology adoption for sustainable agri-exports.
  • Established for commodities like mangoes, grapes, and spices, AEZs have contributed to increased export volumes.
• Promotion of Organic Farming: Initiatives promoting organic farming for environmental sustainability and the export potential of organic products have resulted in increased organic farming area, reaching 3.90 million hectares in 2022-2023, with exports of organic products totalling USD 1.04 billion.

Way Forward for a Stable Agricultural Export Policy in India:

To establish a stable and prosperous agri-export policy in India, several strategic actions and considerations must be taken into account. These include:

• Prioritizing Farmer Welfare: Ensuring that farmers receive fair prices for their produce is crucial for the success of agricultural exports and the well-being of the farming community.
• Supporting Domestic Consumers: Implementing targeted income policies to support vulnerable populations and maintain food security for domestic consumers.
• Enhancing Productivity: Increasing agricultural productivity through investments in R&D, seeds, irrigation, fertilizers, and improved farming practices to bolster global competitiveness.
• Diversifying Export Basket: Expanding the range of agricultural exports, focusing on value-added products, and targeting a wide array of international markets to minimize reliance on a select few commodities.
• Quality Assurance: Implementing strict quality standards and certification mechanisms to ensure that exported agricultural products meet international norms.
  • Establishing uniform quality and standardization protocols is vital, particularly for horticultural items.
• Infrastructure Development: Investing in modern infrastructure, such as cold storage, processing facilities, transportation, and logistics, to reduce post-harvest losses and enhance export competitiveness.
  • Offering financial incentives, subsidies, and credit facilities can encourage investments in agriculture, infrastructure, and processing facilities.
• Technology Adoption: Promoting the use of advanced agricultural technologies, precision farming, and efficient irrigation techniques to boost productivity.
  • Encouraging the growth of agri-startups and fostering innovative solutions can enhance agricultural production and export efficiency.
• Environmentally Sustainable Practices: Encouraging sustainable farming practices, including organic farming, to ensure environmental sustainability in agriculture.
• Learning from Global Best Practices: Gaining insights from successful agricultural export policies and best practices in other countries can inform India's approach.
  • Strengthening diplomatic efforts to negotiate favourable trade agreements and reduce trade barriers will provide better access to international markets.

Conclusion

To ensure India's continued growth in global agricultural trade, a stable export policy is crucial, embodying dynamism, responsiveness, and adaptability. It must prioritize agricultural sustainability, environmental responsibility, and farmer welfare, securing India's position in international trade. Balancing economic growth with farmer well-being and environmental concerns is key to unleashing India's agricultural potential. Forward-looking policies and innovative solutions will strengthen the agri-export sector, fostering a prosperous and sustainable future for all.

Why is it in the News?

Finance Minister Nirmala Sitharaman on Wednesday said the government's focus on capital expenditure and infrastructure development has directly benefited state-run companies and led to substantial growth in their stock performance.

Context:

• In a democratic system, robust opposition plays a vital role in upholding accountability and fostering balanced governance.
• However, the absence of an effective opposition can impede democratic processes, resulting in unfounded criticisms and ineffective checks and balances.
• Prime Minister Narendra Modi's government has encountered such obstacles, especially concerning its oversight of public sector enterprises (PSEs).
• Thus, it is imperative to evaluate the performance of PSEs during the Modi administration, juxtaposing it with historical contexts, and elucidating the government's strategic initiatives aimed at their revitalization.

Strategic Divestment Initiatives by the Modi Government:

• The divestment strategy adopted by the Modi government involves a well-thought-out approach to balance fiscal objectives and national interests.
• This is exemplified through the decisions made regarding Air India and Bharat Petroleum Corporation Ltd (BPCL).
• Air India Privatisation: Air India's transition from a loss-making entity reliant on government subsidies to a privately-owned enterprise signifies a strategic move to enhance efficiency and competitiveness in the aviation sector.
  • Privatisation aims to inject agility and market responsiveness into Air India's operations, fostering growth and profitability amidst intense industry competition.
  • Post-privatisation, Air India's ambitious expansion plans underscore its renewed focus on capturing market opportunities and improving financial performance.
• Retaining Stake in BPCL: Contrary to Air India, the government's decision to maintain ownership of Bharat Petroleum Corporation Ltd (BPCL) reflects strategic considerations linked to energy security and sectoral importance.
  • BPCL's extensive retail network and expertise in areas like ethanol blending align with the government's objectives in sustainable energy transition.
  • By retaining control over BPCL, the government ensures influence over critical sectors while leveraging the company's capabilities to advance national priorities such as sustainability and energy resilience.
• Strategic Decision-Making: The government's divestment strategy goes beyond immediate financial gains, considering broader strategic implications and long-term national interests.
  • Factors like sectoral significance, market dynamics, and alignment with development goals inform divestment decisions, ensuring they contribute to India's economic growth and strategic objectives.
  • Through a strategic divestment approach, the government aims to strike a balance between fiscal imperatives and broader developmental priorities, driving sustainable and inclusive growth.

An In-depth Review of PSE Performance During the Modi Era:

• Under Prime Minister Narendra Modi's leadership, Public Sector Enterprises (PSEs) have experienced notable growth and transformations across various sectors. This comprehensive analysis showcases the strides made by PSEs under the current administration:
• Financial Sector: The Modi government's intervention and reforms revitalized public sector banks (PSBs), inherited with significant non-performing assets (NPAs).
  • PSBs reported their highest-ever profits and lowest-ever NPAs in the fiscal year 2022-23, indicating a substantial improvement in their financial health and investor trust.
• Oil and Gas Sector: Oil India Ltd, an upstream oil company, achieved its highest-ever crude and natural gas production, contributing to India's energy security.
  • Indian Oil Corporation Limited (IOCL) reported record-high refinery throughput, sales volume, and net profit, highlighting its operational efficiency and market competitiveness.
• Energy Generation: Bharat Petroleum Corporation Limited (BPCL) achieved its highest-ever profit for the first nine months of any fiscal year, demonstrating resilience and adaptability in a dynamic market.
  • Coal India registered its highest-ever production, underscoring the government's emphasis on maximizing domestic coal output to meet growing demand.
• Infrastructure Development and Expansion: National Thermal Power Corporation (NTPC) set a new record for the highest-ever electricity generation in a year, strengthening India's power infrastructure.
  • PSEs like Indian Railways and Ports have undertaken ambitious plans to modernize and expand infrastructure capacity, supporting economic growth and development.

Notable Differences Between the Current Government's Strategy and Results and Those of its Predecessors:

• Comparing the current government's approach to managing Public Sector Enterprises (PSEs) with that of its predecessors reveals significant differences:
• UPA Era Mismanagement: During the UPA regime, PSEs were frequently subjected to political interference and corruption, resulting in inefficiency and stagnation.
  • Sectors like Indian Railways faced systemic challenges, such as bureaucratic hurdles and lack of accountability, leading to suboptimal performance and reduced contributions to the economy.
• Corruption and Cronyism During Past Administrations: The UPA era was tainted by major corruption scandals, damaging the credibility of PSEs and eroding public trust in the government's capacity to manage public resources.
  • Political-corporate alliances further undermined the integrity and efficiency of PSEs, compromising their capacity to serve the public interest.
• Policy Paralysis and Inefficiency: The UPA government's policy paralysis and administrative inefficiencies hindered innovation and growth in the public sector.
  • Delayed projects and bureaucratic obstacles led to missed economic opportunities and job creation constraints.
• Modi Government's Transformative Reforms: The Modi government has pursued a reform agenda to revitalize and enhance the competitiveness of the public sector through strategic vision, decisive action, and an emphasis on transparency and accountability.
  • Prime Minister Modi's leadership has emphasized accountability and performance, with measures to streamline decision-making processes, reduce red tape, and hold PSEs accountable.
  • Proactive governance and strategic initiatives, including divestment, strategic partnerships, and infrastructure investments, have unlocked new growth opportunities, improved operational efficiency, and positioned PSEs for long-term success in a global market.

Conclusion

• The governance of Public Sector Enterprises (PSEs) under Prime Minister Modi's leadership marks a transformative era characterized by forward-thinking reforms, efficient management, and a clear vision for national development.
• In the face of opposition critique, the government's strategic interventions have successfully positioned PSEs as significant contributors to India's growth trajectory, ultimately fostering a brighter and more prosperous future for the nation and its citizens.
• Through a combination of bold decision-making, transparency, and a commitment to accountability, the Modi government has revitalized the public sector and enhanced its competitiveness.
• By addressing the challenges inherited from previous administrations, the current leadership has demonstrated its dedication to promoting sustainable growth and development while effectively managing PSEs for the greater good of the country.

Why is it in the News?

A new provision in the Income-Tax Act from Budget 2023-24 ensures prompt payments to MSMEs however, it's causing a problem: large companies are cancelling orders from registered MSMEs and giving them to unregistered ones.

Context:

• The Union Budget 2023-24 brought in a fresh provision in the Income-Tax (IT) Act to ensure timely payments to micro, small, and medium enterprises (MSMEs) within 45 days of supplying goods or services.
• Yet, this measure has led to an unusual issue: big corporations are cancelling orders from registered MSMEs and redirecting them to unregistered ones.

What is the Latest Tax Compliance Guidelines for MSMEs:

• In India, businesses typically record expenses as they occur (accrual basis), regardless of whether payment has been made.
• However, under Section 15 of the MSMED Act 2006 and the newly enacted Section 43B(h) of the IT Act, businesses are obligated to settle payments with MSME Registered Enterprises within 15 days or up to 45 days if stipulated in an agreement.
• Failure to adhere to this regulation results in the inability to deduct these payments as expenses in the same fiscal year, potentially increasing taxable income and business taxes.
• Moreover, delayed payments to MSME-registered units incur interest liabilities, placing the responsibility on the payer to fulfil outstanding dues.

What is MSME?

• MSMEs are Micro, Small, and Medium Enterprises that are usually involved in the manufacture and production of goods and commodities.
• These business enterprises are the backbone of a country’s development and provide holistic development to the rural and urban population of the country.
  • The MSME sector in India makes a contribution of around 30% to the nation’s GDP.
  • Moreover, it contributes about 40% to the total exports of India, and
  • It provides more than 110 million job opportunities in the country.
• The Government of India introduced the MSME under the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006.
  • MSMEs are managed under the Ministry of MSMEs.
• The objective of MSMEs is to primarily engage in manufacturing, processing, production, and preservation of goods and commodities.
• These business enterprises play an important role in the socio-economic development of the country.
• Thus, the importance of MSME in the growth and development of India is vital.

MSME Classification:

• Businesses are classified as micro, small or medium enterprises based on their turnover and the sector they operate in (manufacturing/services).

Types of MSME:

According to the Micro, Small and Medium Enterprises Development (MSMED) Act 2006, MSMEs are of 2 types:

• Manufacturing Enterprises: Business enterprises that are involved in the manufacturing of goods, as stated under Schedule I of the IDRA 1951, are categorised as MSMEs.
  • Additionally, all business enterprises that contribute value to the finished products by making use of plants and machinery also come under MSMEs.
• Service Enterprises: Business enterprises that provide services and come under the category of ‘enterprises’ as stated in the MSMED Act are service enterprises and come under MSMEs.
  • However, individual service providers do not qualify as service enterprises.

Importance of MSME in the Indian economy:

• Export: MSMEs’ contribution to the exports from India was recorded at 45.56% till Sept. 2023.
  • Such high volumes of exports facilitate international trade and contribute to industrial growth within the country.
• Employment: MSMEs create employment in rural and urban areas of the country.
  • These business enterprises are the second largest employment sector in India after agriculture.
  • By setting up units in rural and underdeveloped areas, MSMEs contribute to the better living standards of people from lower socioeconomic and rural areas as well.
• Innovation: MSMEs bring innovation to various processes in the manufacturing of goods and commodities.
  • They provide the necessary skills, tools, and technology for automation and advancement in their sectors.
  • It contributes to the overall technological upgradation of the country and promotes research and development.
• Entrepreneurship: MSMEs promote inclusiveness in the country by facilitating the entry of aspiring entrepreneurs in various sectors.
  • They promote healthy competitiveness among entrepreneurs, which fuels industrial growth.

Challenges faced by the MSME sector in India:

• Financial: Access to finance is a significant hurdle for MSMEs, with only 16% receiving timely finance.
  • This forces them to rely on their own resources, hindering their growth prospects.
  • Even larger firms struggle to access cheaper credit from formal banks.
• Regulatory issues: MSMEs face challenges with tax compliance and labour law changes, which have proven costly.
  • Despite attempts to make the sector more competitive, compliance with regulations and tax registration remains difficult, leading to low capital and business closures.
• Infrastructure: India's infrastructure is crucial for the MSME sector, especially in the outsourcing industry.
  • However, inadequate infrastructure affects their efficiency and ability to compete globally, limiting their growth potential.
• Low productivity & Lack of innovation: MSMEs may lack high productivity but offer value through cost efficiency and providing goods at lower prices.
  • However, their small-scale production and low margins put them at a disadvantage compared to larger firms.
  • Indian MSMEs often rely on outdated technologies and lack entrepreneurs who embrace new tools and technologies.
  • This hampers their productivity and competitiveness, especially when compared to larger firms in sectors like e-commerce and call centres.
• Technical changes: MSMEs have faced significant technical changes over time, impacting their growth potential.
  • Changes in land ownership rights have led to mismanagement and reduced productivity, highlighting the need for adaptability.
• Competition & Skills: MSMEs face fierce competition from larger firms, exacerbated by the rise of e-commerce and globalization.
  • While competition is not new, MSMEs struggle to withstand the pressure in areas such as agriculture, garments, and tourism.
  • MSMEs lag behind in terms of skills compared to their counterparts in other countries.
  • Dependence on informal workers with limited technical skills hampers productivity and forces smaller firms into low-skilled jobs, hindering long-term growth.
• Lack of professionalism: Many Indian MSMEs lack professionalism, making them vulnerable to corruption and abuse of power.
  • This significantly impacts their business productivity and overall growth.
• Lack of standardized policies: India lacks consistent MSME policies, resulting in inconsistent development and entrepreneurship promotion programs.
  • While progress has been made in Delhi, nationwide efforts are necessary for Indian firms to compete globally.

Government MSME Schemes and Policies in India:

• FIRST: Keeping in view the crucial role MSMEs play in the development of the country, the central government announced the launch of FIRST (Forum for Internet Retailers, Sellers, and Traders).
• The program aligns with the government’s Digital India movement and educates and informs MSMEs about opportunities to become self-reliant and digitally capable.
• MSME Innovation Scheme: Under this scheme, MSMEs can enjoy reimbursement of the cost of Intellectual Property Rights applications for new ideas and designs.
  • The programme provides financial and other resources to MSMEs to encourage innovation.
• CGTMSE: The Credit Guarantee Trust Fund for Micro and Small Enterprises scheme provides financial assistance of up to ?2 Crore to new businesses.
• CLCSS: The Credit Linked Capital Subsidy Scheme provides capital subsidies to MSMEs operating in the khadi, village, and coir sectors.
  • The subsidy allows these businesses to acquire technological innovation and upgradation.
• ASPIRE: ASPIRE, or A Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship, fosters innovation and entrepreneurship in rural and agricultural sectors by establishing advanced technology networks.
• Pradhan Mantri Mudra Yojana (PMMY): The PMMY scheme provides loans up to Rs. 10 lakhs to MSMEs.
  • The scheme has three categories of loans: Shishu (up to Rs. 50,000), Kishore (up to Rs. 5 lakhs), and Tarun (up to Rs. 10 lakhs).
  • The loans do not require collateral and are available to both new and existing MSMEs.
• Stand-Up India: The Stand-Up India scheme provides loans up to Rs. 1 crore to SC/ST and women entrepreneurs for setting up new ventures in the manufacturing, services, or trading sectors.
  • The scheme aims to promote entrepreneurship among these communities and provides support through the entire loan process.

Way Forward:

• Creating awareness about government schemes and initiatives: Stakeholders should take active measures to educate MSMEs about the various schemes and initiatives launched by the government to promote SME financing.
  • This will help MSMEs take advantage of these schemes and secure financing for their businesses.
• Developing innovative financing solutions: Financial institutions should develop innovative financing solutions that cater to the unique needs of MSMEs.
  • These solutions can include alternative credit scoring mechanisms, digital lending platforms, and other innovative solutions that reduce the reliance on collateral and traditional credit histories.
• Encouraging private-public partnerships: Private-public partnerships can be a powerful tool to promote SME financing.
  • Governments and private sector companies can work together to develop financing solutions that are tailored to the needs of MSMEs.
• Reducing the cost of credit: High interest rates on loans can be a significant barrier for MSMEs to secure financing.
  • Stakeholders should take measures to reduce the cost of credit for MSMEs, which will make it easier for them to invest in their businesses and drive growth.
• Leveraging technology: Technology can play a crucial role in improving SME financing.
  • Stakeholders should leverage technology to develop digital lending platforms, credit scoring mechanisms, and other solutions that can reduce the cost and time involved in securing financing.

Conclusion

MSMEs are vital to India's economy, driving exports, employment, innovation, and entrepreneurship. Although they face financial, regulatory, and infrastructure hurdles, fostering a supportive environment through awareness, innovative financing, partnerships, cost reduction, and technology can empower MSMEs to overcome challenges and significantly contribute to India's socio-economic growth.

Why is it in the News?

2024 is an election year across the world and newly elected governments need to focus on the all-important sustainability issue.

Context:

• The United Nations Summit on Sustainable Development Goals (SDGs) held in September in New York presented a chance to assess progress toward the lofty Agenda 2030 goal.
• The COVID-19 pandemic and other worldwide crises have made progress towards these goals difficult, despite the fact that they are part of a framework that has been widely agreed upon.
• It is critical to evaluate the state of SDG implementation, investigate critical areas that call for immediate attention, talk about the results of academic studies on the SDGs' political influence, and suggest ways to advance sustainable development.

What is Sustainable Development?

• Sustainable development entails fostering development that fulfils present needs while safeguarding the capacity of future generations to meet their own needs.
• Coined by the Brundtland Commission in its 1987 report, "Our Common Future," this definition remains widely embraced.
• Embracing sustainable development involves collaborative endeavours aimed at constructing an inclusive, sustainable, and resilient future for both humanity and the environment.

What is the Progress and Emerging Challenges in SDG Implementation?

• Slow Progress and Growing Concerns: The path toward achieving the Sustainable Development Goals (SDGs) has been marred by sluggish progress and mounting concerns, casting doubt on the world's ability to attain the 2030 targets.
  • Despite initial optimism following the adoption of Agenda 2030 by the UN General Assembly in 2015, reports indicate inadequate progress and deviation from the intended trajectory.
  • While there were modest improvements noted between 2015 and 2019, particularly in areas like poverty reduction and access to essential services, they fell significantly short of the necessary benchmarks outlined in the agenda.
• Challenges Amplified by Global Crises: The onset of the COVID-19 pandemic and other global crises has compounded the hurdles in SDG achievement.
  • The pandemic, in particular, has triggered profound socioeconomic repercussions, disrupting economies, widening inequalities, and propelling millions into poverty.
  • The diversion of resources and attention toward addressing immediate health and economic exigencies has further impeded advancements toward long-term sustainable development objectives.
• Concerns Over Environmental Sustainability: A notable concern arises from the insufficient emphasis on goals related to environmental sustainability and biodiversity conservation.
  • Critical objectives such as sustainable consumption and production, climate action, and marine and terrestrial biodiversity preservation have been overlooked, jeopardising the welfare of present and future generations.
  • Neglecting these environmental imperatives not only undermines progress toward specific SDGs but also poses existential threats to humanity and the planet.
• Fragmented Approach to SDG Pursuit: Furthermore, the prevailing approach to SDG pursuit often disregards the interconnected and indivisible nature of the goals.
  • The SDGs are interlinked, with progress in one goal intricately linked to advancements in others.
  • Yet, the disjointed strategies adopted by many nations and stakeholders fail to acknowledge these interconnections, leading to isolated efforts unlikely to yield substantive outcomes.
  • Without a holistic and cohesive approach to sustainable development, achieving the overarching objective of harmonising human well-being with environmental health remains elusive.

International Promises and Real-World Execution:

Renewed Pledges from International Leaders:

• Amidst these developments, the UN SDG Report 2023 underscored five critical areas necessitating immediate attention:
  • The government's commitment to seven years of accelerated, sustained, and transformative actions to fulfil SDG promises;
  • Concrete, comprehensive, and targeted governmental policies to eradicate poverty, mitigate inequality, and combat environmental degradation, prioritising the empowerment of women, girls, and marginalised communities;
  • Enhancement of national and subnational capacities, institutional accountability, and governance mechanisms to expedite progress;
• Reaffirmation of the international community's commitment to provide assistance and mobilise resources for developing nations, alongside fortifying the UN development system.
• Acknowledging the gravity of the situation, world leaders reiterated their commitments and pledged intensified efforts to achieve the SDGs, envisioned as the global pathway out of crises by 2030.
• However, the extent to which these global declarations translate into action at the grassroots level remains uncertain.

Challenges in National Implementation:

• Despite governments' global vows, significant disparities often exist between rhetoric and practical implementation on the national stage.
• Political considerations, competing agendas, and resource limitations can impede the effective execution of SDG-related policies.
• Furthermore, inadequate coordination and coherence among various government departments and administrative tiers may lead to fragmented initiatives, diminishing the overall efficacy of SDG implementation efforts.

Academic Perspectives and Suggestions:

• Limited Political Influence: The research highlights that while the SDGs have sparked discussions and prompted some normative and institutional adjustments, their direct political impact at national and local levels remains constrained.
  • Despite international endorsement, the SDGs have yet to yield significant political outcomes in many nations, underscoring the necessity for a nuanced understanding of the factors shaping SDG implementation and the pathways for driving political transformation.
• Systemic Strategies for SDG Achievement: The study underscores the significance of embracing a systemic approach to unlock the transformative potential of the SDGs.
  • This entails identifying and managing trade-offs while maximising synergies across diverse goals.
  • By addressing interconnected challenges comprehensively, policymakers can capitalise on synergistic effects and enhance the efficacy of their interventions.
    • For instance, initiatives promoting renewable energy can simultaneously advance climate action (SDG 13), foster economic growth (SDG 8), and improve access to clean water and sanitation (SDG 6).
• Customised Implementation Approaches: Moreover, the study stresses the importance of tailored strategies for SDG implementation tailored to regional and national contexts.
  • Cookie-cutter solutions are unlikely to succeed given the varied socio-economic, political, and environmental landscapes in which the SDGs are being pursued.
  • Instead, policymakers should identify context-specific entry points and leverage existing resources and capacities to drive progress.
  • This may involve targeting specific sectors or geographic areas requiring interventions and engaging marginalized communities to ensure their voices and needs are addressed.
• Pragmatic Steps to Enhance Implementation: Additionally, the study provides pragmatic recommendations for bolstering SDG implementation.
  • These encompass strengthening governance frameworks and accountability mechanisms, mobilising financial resources, fostering innovation and technology dissemination, and nurturing partnerships among governments, civil society, the private sector, and other stakeholders.
  • By adopting a multi-faceted approach addressing political, economic, social, and environmental dimensions, policymakers can foster an enabling environment for transformative change.

Conclusion

The evaluation of SDG advancement highlights the imperative for swift and collaborative measures to overcome prevailing hurdles and hasten advancement. As 2024 heralds elections in numerous nations, incoming administrations have a chance to elevate sustainability as a focal point and harmonise domestic policies with the SDGs. By infusing sustainability tenets into governance structures and policy formulations, governments can play a pivotal role in expediting SDG attainment.

Why is it in the News?

The latest report from the International Labour Organization (ILO), titled 'Safeguarding Workers in a Changing Climate', underscores the pressing necessity to ensure the resilience of labour in the face of climate change.

Context:

• The International Labour Organisation (ILO) recently released a report titled "Ensuring Safety and Health at Work in a Changing Climate," highlighting the urgency of climate-proofing labour practices to protect workers' well-being.
• As the planet experiences warming, workplace environments evolve, and the ILO emphasizes the need to update occupational safety and health (OSH) regulations to address emerging risks.
• According to the report, over one-third of the global population is exposed to extreme heat each year, resulting in nearly 23 million work-related injuries.
  • The ILO urges an overhaul of existing OSH laws and protections, as they have not kept pace with climate change-related hazards, leading to increased worker mortality and morbidity.

What Are the Emerging Climate-Related Risks?

• The International Labour Organization (ILO) has identified six primary impacts of climate change:
  • Excessive heat
  • Ultraviolet (UV) radiation
  • Extreme weather events
  • Workplace air pollution
  • Vector-borne diseases
  • Agrochemicals
• These hazards can result in various health issues such as stress, stroke, and exhaustion. Particularly vulnerable to these risks are workers in sectors like agriculture, construction, urban conservation, transportation, and tourism.
• Of significant concern is the rising prevalence of gig employment globally, which is particularly susceptible to heat-related conditions.
  • In India, gig workers, including ride-hailing app drivers, food and grocery delivery personnel, home repair technicians (electricians, plumbers, AC mechanics), and courier service employees, constitute approximately 1.5% of the total workforce, a figure projected to reach 4.5% by 2030 according to a Nasscom study.
• In the Indian context, the collective impact of these segments suggests that approximately 80% of the country's workforce, projected to be 600 million by 2023, is vulnerable to heat-related hazards.
• This staggering figure exceeds the entire current population of South America by 180 million.

Which Sectors Bear the Brunt of Climate Impact?

Agriculture Sector:

• Globally, agriculture stands out as the most heat-vulnerable sector, particularly in developing nations where informal farm labourers toil without adequate weather protection.
• In India, where agriculture and allied activities employed about 45.76% of the workforce in 2022-23 according to Union Agriculture Minister Arjun Munda, there's a concerning trend of decline from levels three decades ago.
• NSSO data from July 2018 to June 2019 reveals that nearly 90% of Indian farmers own less than two hectares of land, with incomes hovering around ?10,000 monthly on average.
• The situation is even direr in states like Jharkhand, Odisha, and West Bengal, where farmers' earnings can be as low as ?4,895, ?5,112, and ?6,762 respectively.
• Additionally, half of India's farmers are burdened with debt and lack access to modern agricultural technology, impeding their ability to adapt to a warming climate.
• Many communities have already adjusted work schedules to avoid peak heat hours, while the ILO recommends increased hydration facilities, breaks, and shaded rest areas in plantations.

Micro, Small and Medium Enterprises (MSME) Sector:

• Following agriculture, India's MSME sector employs over 123 million workers, accounting for about 21% of the workforce.
• Despite its significant contribution to exports and manufacturing output, the sector's pervasive informality has led to minimal oversight of worker conditions by state Occupational Safety and Health (OSH) departments, rendering workers highly susceptible to heat-related risks.

Building & Construction Sector:

• The building and construction industry, with around 70 million workers constituting almost 12% of India's workforce, faces unique challenges exacerbated by urbanization.
• Workers in this sector contend with the urban heat island effect, heightened by rapid urban growth.
• Moreover, they are disproportionately exposed to physical injuries and air pollution-related health hazards, such as asthma, given the alarming pollution levels in many Indian cities.

Legislation Safeguarding Worker Rights in India:

• Central Laws: Integral to ensuring workplace safety in India are the Factories Act, the Workmen Compensation Act, and the Building and Other Construction Workers Act.
  • These laws encompass various facets of labour rights and welfare, addressing conditions within factories and providing compensation for work-related injuries.
• Occupational Safety, Health, and Working Conditions Code, 2020 (OSH Code, 2020): Introduced in 2020, the OSH Code represents a comprehensive effort to consolidate and revise existing legislation pertaining to workplace safety.
  • Its primary objective is to streamline and strengthen the legal framework governing occupational safety and health nationwide.
  • By amalgamating disparate regulations into a unified code, it aims to establish a more cohesive and effective system for ensuring workplace safety across diverse sectors and industries.

State Laws in Tamil Nadu and Maharashtra:

• Tamil Nadu: Tamil Nadu formulated its regulations under the Factories Act as early as 1950.
  • These regulations stipulate a maximum wet bulb temperature of 30°C on shop floors and outline requirements for adequate air circulation.
  • However, they lack specific provisions for thermal comfort tailored to varying activity levels or modern cooling solutions, indicating a need for updated standards.
• Maharashtra: Similarly, Maharashtra devised its rules under the Factories Act in 1963. Like Tamil Nadu, these regulations address maximum wet bulb temperatures and air circulation standards.
  • Nevertheless, they also lack detailed provisions for contemporary cooling methods or adjustments for thermal comfort aligned with evolving production processes, underscoring the necessity for modernization.

Challenges in Addressing Heat Hazards:

• Regulatory Ambiguity: Existing regulations lack specificity regarding thermal comfort standards and the integration of air conditioning in workplaces.
  • There's a pressing need to update regulations to accommodate modern cooling technologies and ensure the well-being and safety of workers.
• Impact of the Gig Economy: The burgeoning gig economy in India exacerbates workers' vulnerability to heat-related risks.
  • Many gig workers, comprising a substantial portion of the workforce, often operate without adequate protections or support systems to mitigate extreme heat conditions.
• Pressures on Labor Unions: Labour unions face mounting pressures from management and bureaucratic entities, often prioritizing industry interests over worker welfare.
  • This dynamic can result in the neglect of worker safety concerns pertaining to heat hazards and other climate-related risks.
• Effluent and Byproduct Management: The disposal of effluents and byproducts poses significant health risks, particularly with fluctuating temperatures, necessitating robust management strategies to safeguard worker health.
• Silicosis in Mining and Quarries: The escalating prevalence of silicosis, stemming from silica exposure in mines and quarries, presents a profound occupational health challenge that demands urgent attention and intervention.
• Shortcomings in Labor Inspection Departments: Vacancies and a lack of expertise within labour inspection departments undermine effective oversight of workplace safety measures, hindering the enforcement of regulations and exacerbating risks for workers.

Way Forward:

• Modernize Regulatory Frameworks: Revamp existing regulations to include clear guidelines on thermal comfort and air conditioning standards in workplaces.
  • Integrate innovative cooling technologies to ensure the safety and well-being of workers.
• Empower Labor Unions: Strengthen labour unions and equip them with the resources needed to advocate for worker welfare and safety.
  • Foster collaboration among unions, management, and governmental bodies to effectively tackle heat hazards.
• Enhance Labor Inspection Mechanisms: Boost staffing and training within labour inspection departments to enhance oversight of workplace safety.
  • Conduct regular inspections and rigorously enforce safety regulations to shield workers from climate-related risks.
• Invest in Research and Development: Allocate funding for research initiatives focused on developing climate adaptation strategies tailored to various industries.
  • Support studies assessing the efficacy of interventions and technologies in mitigating heat hazards and other climate-related risks.
• Raise Awareness and Education: Launch awareness campaigns to educate workers, employers, and the public about the health implications of climate change.
  • Provide training programs on heat stress management and preventive measures to bolster resilience in vulnerable sectors.

Conclusion

Amidst the challenges posed by climate change, safeguarding workplace safety and health emerges as a critical imperative. The ILO report highlights a pressing call for a globally accepted regulatory framework to fortify workplaces against climate-related risks and safeguard workers. Achieving this necessitates concerted action from governments, industries, and workers alike to address evolving hazards and uphold the well-being of workers amidst the changing climate landscape.

Why is it in the News?

Centre has been meeting its capex targets, but the trajectory of private sector and state governments is less certain.

Context:

• Policymakers in India are grappling with the imperative task of revitalizing the investment cycle. Despite the central government's success in meeting capital expenditure (capex) targets, uncertainty clouds the trajectory of investments from the private sector and state governments.
• Thus, a comprehensive examination of India's current investment landscape is essential, scrutinizing key indicators and trends to identify the hurdles and prospects in reigniting the investment momentum.

Overview of Investment Patterns:

• Fluctuating Investment Rates: The investment rate, representing gross fixed capital formation as a percentage of GDP, has shown variability in recent years.
  • After dropping to 27.2% in 2020-21, there has been a slight improvement, with the rate climbing to 31.3% in 2023-24 from 30.8% in the preceding fiscal year.
  • This increase suggests a possible resurgence in investment sentiment and activity, albeit starting from a relatively low level.
• Composition of Investments: Delving Deeper: Yet, a closer examination of investment composition reveals noteworthy nuances.
  • A significant part of the recent uptick in capital formation stems from dwelling construction, supported by government initiatives to bolster the housing sector.
  • While housing investments spur economic growth and job creation, diversification is essential for sustainable and equitable development.
• Declining Investment in Plant and Machinery: Of particular concern is the diminishing share of investments in plant and machinery, crucial for fostering productivity, innovation, and competitiveness across sectors.
  • The allocation of investment to plant and machinery declined from 36% in 2017-18 to 30.7% in 2022-23, indicating a potential shift in investment priorities or hurdles in attracting investments in manufacturing and industrial domains.

Private Sector Investment:

• Insights from CMIE Data: Examining private sector investment trends often involves analyzing data provided by the Centre for Monitoring the Indian Economy (CMIE), offering valuable insights into the investment intentions and actions of private enterprises.
• Mixed Signals in Investment Intentions: Recent CMIE data reveals a nuanced picture of private sector investment in India.
  • While new investment announcements dipped to Rs 27.1 lakh crore in 2023-24 from the previous year's Rs 39 lakh crore, they still represented the second-highest figures in a decade.
  • However, it's essential to recognize that these announcements signify intentions rather than realized investments, potentially leading to disparities between planned projects and actual investments.
• Prevalence of Private Sector Intentions: The bulk of investment intentions—around 85%—originated from the private sector, underscoring its pivotal role in driving investment dynamics.
  • Furthermore, foreign companies contributed 11% of the total investment intentions, reflecting a certain degree of confidence in India's business landscape among international investors.

Analyzing Investment Trends Across Sectors:

• Power Sector Dynamics: Investment inflows into the power sector have surged, reflecting a strategic focus on bolstering infrastructure, particularly in renewable energy projects like solar and wind power, driven by initiatives such as the Production Linked Investment (PLI) scheme.
  • This expansion not only enhances energy security and environmental sustainability but also stimulates job creation and technological advancements.
• Transportation Sector Insights: Investment intentions in transportation services, notably aviation, have risen sharply due to ambitious expansion plans by major airlines.
  • While these investments promise improved connectivity and economic growth, concerns persist about reliance on imported aircraft, emphasizing the need for initiatives to foster domestic manufacturing and technological capabilities.
• Diverse Industry Investment Trends: Various industries, including chemicals, machinery, metals, and automotive sectors, have attracted substantial investment commitments, reflecting a broad spectrum of opportunities for private sector investment.
  • However, the absence of significant investments in consumer goods industries raises questions about the depth and breadth of sectoral investments.
• Challenges in Consumer Goods: Consumer goods industries face challenges such as excess capacity, subdued demand, and high inflation, which dampen investment enthusiasm despite government incentives like the PLI scheme.
  • Lingering issues in job creation and rural demand further contribute to the subdued investment outlook in this segment.
• Impact of State Government Spending: Reduced capital expenditure by state governments in 2022-23 to meet fiscal targets poses a challenge to the investment cycle, given their significant contribution to overall investments.
  • Budgetary constraints in state governments have a ripple effect on the broader investment landscape in the country.

Way Forward:

• Promoting Sustainable Growth: While the rise in capital formation is encouraging, ensuring its sustainability and fostering long-term growth hinges on achieving a balanced distribution of investments across sectors.
  • Over-reliance on specific industries, like construction, may impede the economy's adaptability and hinder innovation and technological progress.
• Policy Imperatives for Investment Stimulus: Effective policy measures are imperative to stimulate private sector investment and cultivate a favorable investment environment.
  • Streamlining regulatory frameworks, bolstering infrastructure, fostering innovation and entrepreneurship, and addressing sector-specific hurdles can incentivize private enterprises to invest in vital areas crucial for fostering economic growth and advancement."

Conclusion

Revitalizing India's investment cycle demands collaborative action from public and private stakeholders. Despite promising sectors, obstacles like sectoral disparities, muted consumer demand, and fiscal limitations at the state level impede a comprehensive rebound. Tackling these hurdles via tailored policies to spur demand, foster sectoral variety, and bolster the investment environment will be pivotal for nurturing enduring economic progress and advancement.

Why is it in the News?

India is reportedly poised to replace the minimum wage with the living wage system, with the transition anticipated to occur by next year.

Context:

• India is reportedly considering shifting from the minimum wage to the living wage by 2025.
• India has approached the International Labour Organization (ILO) to help it chalk out a framework to assess and operationalize the living wages.
• India has asked the ILO to help it in “capacity building, systemic collection of data and evidence of the positive economic outcomes resulting from the implementation of living wages”.
  • Earlier in March, the United Nations agency forged an agreement on the living wage, which was also endorsed by its governing body.
• India, a founding member of the ILO and a permanent member of its governing body since 1922, passed the Code on Wages in 2019.

What is the Current Wage System in India?

• National Floor Level Minimum Wage (NFLMW): Established under the Code on Wages 2019, the NFLMW is determined by the government, requiring establishments to set minimum wages not below this level.
• Flexibility in Minimum Wage Standards: Section 5 of the Code on Wages 2019 prohibits employers from setting wages below the NFLMW, though states have the discretion to revise minimum wage rates as needed.
• Presently, the National Floor Wage stands at Rs 178 per day.

What’s a Living Wage?

• The International Labour Organization (ILO) defines the living wage as the level of remuneration “necessary to afford a decent standard of living for workers and their families, taking into account the country's circumstances and calculated for the work performed during the normal hours of work”.
• This decent standard of living includes being able to afford food, water, housing, education, healthcare, transportation, clothing, and other basic needs including a provision for contingencies, says the Global Living Wage Coalition.
• The goal of a living wage is to ensure the employees get an income enough for satisfactory living standards as well as reduce poverty.

What is Minimum Wage?

• Minimum wage refers to the legally mandated lowest level of compensation that employers must pay employees for their work over a specified period.
• While minimum wage endeavors to prevent low pay, living wage extends beyond by ensuring income is adequate to meet necessities like food, shelter, clothing, and other essentials, addressing the risk of workers falling below the poverty line despite earning minimum wages.
• In India, minimum wage calculation factors in variables such as the state of employment, the skill level of the worker, the nature of their job, and other pertinent factors.

Living Wage vs Minimum Wage:

• Definition: A living wage is the income required to meet basic needs and maintain a decent standard of living, while minimum wage is the lowest legally mandated compensation for workers.
• Purpose: A living wage seeks to address the risk of workers falling below the poverty line, while minimum wage aims to prevent low pay.
• Mandatory vs Voluntary: Minimum wages are legally required, whereas living wages are voluntary unless the government sets the minimum wage at the living wage level.
• Calculation: Living wages consider basic necessities and a decent standard of living, while minimum wages factor in variables like skill level, state of employment, and job nature.

Pros and Cons of Living Wages:

• Living wage is a divisive issue. Proponents of the living wage say people get paid more, leading to a rise in employee satisfaction.
• A boost in employee morale is likely to result in higher productivity.
• It also saves recruitment and training costs for companies as employee turnover falls.
• On the other hand, critics of the concept say companies may cut back on hiring if forced to pay increased wages, creating more job losses.
• Opponents also argue that imposing a living wage means creating a wage floor, which would hurt the economy by impacting businesses, especially those that cannot pay hiked salaries.

How Does Living Wage Benefit India?

• India has over 500 million (50-crore) workers, of which 90 percent are in the unorganized sector, noted ET.
• The national floor level minimum wage (NFLMW) – an amount below which no state government can fix the minimum wage – was Rs 178 per day or more depending on the location in 2023.
  • This was set at Rs 176 per day in 2017 and has not been changed since then.
• Currently, some states pay workers in the unorganized sector even below the NFLMW.
• The Code on Wages, 2019 was passed by Parliament states that the minimum wage cannot be fixed below the national wage floor.
• However, this code, which is binding on all states, is yet to be implemented.
• If India replaces the minimum wages with living wages, workers are expected to earn more.
• According to the ILO, the living wage has to be calculated following its principles and wage-setting process.

Conclusion

India's pursuit of the Sustainable Development Goals by 2030 hinges on strategic shifts, such as transitioning from minimum to living wages, to uplift millions from poverty while safeguarding their welfare. This is particularly pertinent against the backdrop of escalating income inequality, highlighting the imperative for a revamped wage system. As poverty rates decline yet inequality persists, a more equitable approach to wages becomes paramount, underscoring India's commitment to inclusive growth and social justice.

International Labor Organization (ILO):

• The International Labor Organization (ILO) is a specialized agency of the United Nations, founded in 1919 to promote social and economic justice through the establishment of international labor standards.
• The ILO operates with a unique tripartite structure, allowing governments, employers, and workers to engage in dialogue and decision-making on labor matters.

Key Roles and Functions:

• Setting International Standards: The ILO develops and adopts international labor standards in the form of conventions and recommendations, covering areas such as freedom of association, collective bargaining, child labor, forced labor, and non-discrimination.
• Technical Assistance and Capacity Building: The organization provides support to member states in enhancing their labor administration, labor inspection, employment policies, and social protection systems.
• Monitoring and Supervision: The ILO monitors the application of international labor standards in member states, offering guidance and assistance in their implementation.
• Research and Knowledge Sharing: The organization conducts research, collects data, and disseminates information on labor-related topics, facilitating evidence-based policy-making and dialogue.
• The ILO plays a critical role in promoting decent work, social justice, and labor rights worldwide, fostering cooperation among its 187 member states to address labor-related challenges and achieve sustainable development.
• The ILO headquarters are located in Geneva (Switzerland).

Why is it in the News?

In recent years, the combination of unpredictable weather patterns and rapid economic growth has resulted in significant spikes in electricity demand, posing a challenge to reliably meet the escalating requirements.

Background:

• India has grappled with the looming threat of electricity shortages in recent years, particularly exacerbated by rising temperatures amplifying the power demand.
• While discussions on this matter typically revolve around the deficit in domestic thermal coal and the need for imports, a more thorough investigation uncovers intricate challenges concerning logistics and regulatory interpretation.
• Therefore, it is imperative to delve into these dimensions, shedding light on the complexities of the situation and seeking solutions to tackle the root causes.

What are the Primary Causes of Domestic Thermal Coal Shortages?

• Transportation Infrastructure Deficiencies: A critical challenge lies in the inadequacy of transportation infrastructure, notably the railway network, which predominantly facilitates coal transportation across India.
  • Despite substantial coal production, the limited capacity of railways often hampers timely delivery to power plants, contributing to delays and inefficiencies in the coal supply chain.
• Geographical Disparities: Complicating matters, the distribution of coal mines and power plants across diverse regions adds another layer of complexity to logistics.
  • Power plants situated far from coal mines encounter heightened logistical hurdles, facing difficulties in securing a consistent coal supply due to increased transportation time and costs.
• Storage and Handling Limitations: Insufficient storage and handling infrastructure at both mines and power plants exacerbate challenges in managing demand and supply fluctuations.
  • Inadequate storage capacity can lead to stockpiling issues, exacerbating delays and hindering efficient coal delivery.

Balancing Alternative Domestic Sources and Imports:

• Exploration of Alternative Domestic Sources: While alternative coal sources, like auctions organized by Coal India Ltd., present a viable domestic option, they often receive less attention compared to imports.
  • These auctions enable power plants to procure coal domestically, albeit potentially at higher prices, yet remain overlooked in favor of imported coal.
  • However, auctions offer a feasible alternative, particularly for plants not hindered by logistical constraints in accessing coal from auction sites.
• Narrow Focus on Imports: The discourse tends to prioritize imports as the default solution for coal shortages, neglecting the potential of domestic alternatives and failing to consider the broader implications of heavy reliance on imported coal.
• Cost Implications: Importing coal entails additional costs, including transportation, handling, and import duties, resulting in higher variable costs for coal-based electricity.
  • These expenses are often transferred to consumers through elevated electricity tariffs, burdening both households and industries.
• Regulatory Interpretation: Misinterpretation of Ministry of Power advisories recommending coal imports as mandates further blur the distinction between alternative sources and imports.
  • While these advisories may propose importing a certain percentage of coal, they should not be perceived as obligatory requirements but rather as guidelines to be tailored to each power plant's unique circumstances.
• Less Emphasis on Domestic Procurement Enhancement: The emphasis on imports sidelines opportunities to improve domestic coal procurement and distribution processes.
  • Addressing logistical hurdles and streamlining administrative procedures could enhance the efficiency and reliability of India's domestic coal supply chain, potentially reducing the reliance on costly imports.

Regulatory Frameworks Influencing Responses to Electricity Shortages and Coal Procurement Strategies:

• Clarifying Advisory Interpretations: An ongoing challenge in regulatory considerations involves clarifying interpretations of advisories from government entities like the Ministry of Power.
  • While these advisories may offer recommendations for addressing coal shortages, particularly through import suggestions, they should not be misconstrued as mandates.
  • Misinterpretation can lead to unnecessary costs and burdens on consumers, as power plants may feel compelled to comply with import recommendations, disregarding potentially viable domestic alternatives.
• Forward-Thinking Regulatory Decision-Making: Regulatory bodies overseeing electricity generation and distribution must adopt a forward-thinking approach to decision-making.
  • This entails comprehensive assessments of regulatory measures' implications on stakeholders, including consumers, power producers, and distribution utilities.
  • Analysis should weigh the costs and benefits of various coal procurement strategies, encompassing factors like transportation costs, import duties, and environmental impacts.
• Customized Approaches for Diverse Plant Settings: Recognizing the varied challenges among power plants regarding coal shortages, regulatory bodies should tailor measures to each plant's specific circumstances.
  • Pit-head plants, closer to coal mines, may have easier access to domestic coal and encounter fewer logistical constraints compared to plants situated farther away, necessitating heavier reliance on imports.
  • Regulatory interventions should thus be nuanced and adaptable rather than uniformly applied.
• Balancing Cost-Efficiency and Reliability: Regulators face the critical task of balancing cost and reliability in electricity supply.
  • While imports may offer prompt solutions to coal shortages, they incur substantial costs affecting consumers.
  • Therefore, regulators must meticulously evaluate the potential cost savings of domestic procurement against the reliability and security of imported coal supply, ensuring transparency and equity in decision-making.
• Long-Term Planning and Sustainability Integration: Regulatory considerations should encompass long-term planning and sustainability objectives alongside immediate coal shortage mitigation.
  • While addressing immediate needs is crucial, regulators must also contemplate the broader ramifications of coal procurement strategies on energy security, environmental sustainability, and renewable energy transition.
  • This necessitates a forward-looking approach aligning short-term actions with long-term sustainability objectives, facilitating India's transition to a resilient and sustainable energy framework.

Conclusion

Addressing electricity shortages in India necessitates a nuanced approach that considers both logistical hurdles and regulatory complexities. While importing coal may offer a temporary solution, it does not tackle the fundamental logistics inefficiencies. India can better navigate the challenges of power generation by addressing root causes and implementing tailored solutions, ensuring a more effective response to evolving weather patterns and increasing demand for electricity

Why is it in the News?

One significant event during the 13th Ministerial Conference (MC13) of the World Trade Organization (WTO) in Abu Dhabi was the inability to ratify the agreement concerning investment facilitation for development (IFD). Despite garnering backing from over 70% of the membership, approximately 120 member countries, the agreement remained unadopted.

Context:

• The recent 13th Ministerial Conference (MC13) of the World Trade Organisation (WTO) in Abu Dhabi unfolded a notable occurrence as the agreement on investment facilitation for development (IFD) failed to gain adoption.
• Despite substantial backing from approximately 120 member countries, the IFD Agreement encountered resistance, particularly from India and South Africa.
• In light of these events, it becomes imperative to delve into India's opposition to the IFD Agreement and its apprehensions regarding its alignment with WTO principles, especially concerning the intertwining of investment with trade and the procedural aspects of negotiation surrounding the agreement.

What is the IFD agreement?

• The Investment Facilitation for Development (IFD) Agreement is a legally binding framework that aims to enhance investment flows and promote transparency in regulatory processes.
  • Finalized in November 2023, the agreement is the result of plurilateral negotiations initiated by 70 countries under the Joint Statement Initiative at the WTO in 2017.
• Despite initial opposition from some countries, including India, the IFD Agreement gained significant support, with 120 nations pushing for its inclusion as a plurilateral agreement within Annex 4 of the WTO Agreement.
  • Although the WTO is primarily a multilateral trade organization, the allowance for plurilateral agreements under Article II.3 of the WTO Agreement sets the stage for binding commitments among participating WTO member countries.

Key objectives of the IFD Agreement include:

• Regulatory Transparency: Increasing openness in investment policies and procedures to instill confidence and predictability in the investment landscape.
• Streamlined Administrative Procedures: Simplifying investment-related processes and reducing red tape to attract and facilitate foreign investment inflows.
• By creating a stable and transparent environment for international investments, the IFD Agreement aims to contribute to economic growth and development, catalyzing cooperation among participating WTO members without imposing obligations on non-signatory countries.

What are India’s Concerns?

• India's resistance to the Investment Facilitation for Development (IFD) Agreement stems from concerns regarding its alignment with the WTO framework and the process undertaken to integrate it into the WTO rulebook.
• Given the WTO's dispute settlement mechanism, which solely permits state-to-state legal claims, incorporating Investor-State Dispute Settlement (ISDS) appears infeasible.
• This challenge contributed to India and South Africa's significant efforts to prevent the IFD Agreement from becoming an official component of WTO regulations.

India's primary apprehensions surrounding the IFD Agreement:

• Integrating Investment into the WTO: India questions the compatibility and relevance of investment policies within the WTO's scope, particularly when considering existing platforms dedicated to investment negotiations.
• Process-related Concerns: India argues that the procedure for incorporating the IFD Agreement into the WTO rulebook must be carefully scrutinized, ensuring adherence to established protocols and consensus-building among all member nations.
• While the actual content of the IFD Agreement does not appear to be India's primary concern, the nation's stance underscores the importance of considering the broader implications of such agreements within the global trade and investment landscape.
  • As the international community navigates the complexities of investment facilitation and regulatory reform, the debate surrounding the IFD Agreement will continue to shape the future of multilateral cooperation and the evolution of the WTO's mandate.

Is Investment a Suitable Component of the WTO Framework?

• India posits that investment's integration into the World Trade Organization (WTO) may not inherently translate to increased cross-border trade, contrasting with scholarly perspectives emphasizing the interconnectedness of trade and investment.
• Citing the Organisation for Economic Co-operation and Development (OECD), it is highlighted that a substantial portion—70%—of international trade occurs within global value chains, underscoring the symbiotic relationship between trade and investment.
• Contemporary free trade agreements like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership exemplify this integration, featuring comprehensive investment provisions encompassing facilitation and protection measures.
• Intriguingly, India's recent trade pact with the European Free Trade Association, despite including investment provisions focused on facilitation and promotion, underscores a pragmatic approach to incorporating investment elements, albeit with limitations.

Negotiating Process of the IFD Agreement:

• India has emphasized the absence of a negotiating mandate regarding investment discussions.
• India contends that the WTO's General Council's decision in 2004 ruled out talks on the nexus between trade and investment, a facet categorized under the 'Singapore issues' introduced during the 1996 WTO Singapore ministerial conference.
• These discussions were explicitly excluded from the Doha round of negotiations initiated in 2001.
• Additionally, India has pointed to the 2015 WTO Nairobi ministerial decision, which stipulates that launching negotiations on new issues multilaterally necessitates unanimous agreement among all member states.
• India argues that since consensus wasn't reached among all nations to commence negotiations on an IFD Agreement, the ensuing negotiations and the resultant text presented for adoption are deemed illegitimate.

Key Questions Surrounding the IFD Agreement:

• India's assertion of a negative mandate against initiating negotiations on the trade and investment relationship raises two critical queries warranting clarification.
• Firstly, does this negative mandate extend to all facets of investment, including facilitation?
  • Notably, the shelved investment agreement proposed during the 1996 Singapore ministerial primarily addressed market access and investment protection, leaving ambiguity regarding whether the negative mandate encompasses all investment-related aspects within the WTO.
• Secondly, does the negative mandate solely pertain to launching negotiations on new issues in a multilateral context?
  • The inquiry arises as to whether this prohibition extends to negotiations commenced on a plurilateral basis.
  • The negotiations for an IFD agreement were instigated on a plurilateral, not multilateral, basis.
• Although Article X.9 of the WTO Agreement stipulates that adding an agreement to the existing set of Plurilateral Agreements listed in Annex 4 necessitates consensus exclusively, the agreement lacks provisions mandating consensus for initiating negotiations for a Plurilateral Agreement.

Way forward:

• As the primary regulatory body for international trade, the World Trade Organization (WTO) is responsible for updating existing rules and establishing new ones.
  • However, reaching a consensus on decision-making within the WTO remains a significant challenge, often leading to legislative deadlock.
• In this context, Preferential Agreements (PAs), such as the proposed Investment Facilitation for Development (IFD) Agreement, can serve as catalysts for reinvigorating the WTO's legislative function.
  • By fostering cooperation among subsets of WTO members, Preferential Agreements (PAs) can help circumvent the challenges of consensus-building within the broader organization.
• As India continues its ascent to become the world's third-largest economy, it is increasingly critical for the nation to reassess its defensive posture toward PAs.
  • By recognizing the potential benefits of agreements like the IFD, India has the opportunity to demonstrate leadership on the global stage, support the revitalization of the WTO's legislative function, and contribute to a more collaborative and effective approach to international trade regulation.

Conclusion

The failure to ratify the IFD agreement at MC13 underscores the formidable challenges encountered by the WTO in navigating intricate matters such as investment facilitation. It underscores the divergent perspectives among member nations regarding the scope and nature of the WTO's role in governing global economic interactions. Closing these divergences becomes imperative for the WTO to adeptly address the evolving landscape of international trade and investment

Why is it in the News?

Recently, the Ministry of Earth Sciences (MoES) organized a consultative workshop in New Delhi today on the Blue Economy Pathways study report status.

Context:

• The Ministry of Earth Sciences (MoES) has collaborated with the World Bank to conduct a technical study and compile a report titled 'India’s Blue Economy: Pathways for resource-efficient, inclusive, and resilient growth in India.'
• This report aims to explore global best practices in Blue Economy implementation, develop an ocean accounting framework, enhance institutional capacity, and propose innovative finance mechanisms in alignment with India's Blue Economy Policy framework.

What is the Blue Economy?

• The blue economy, or the ocean economy, is a term used to describe the economic activities associated with the oceans and seas.
• The World Bank? defines the blue economy as the “sustainable use of ocean resources to benefit economies, livelihoods, and ocean ecosystem health”.
• The activities? commonly understood to represent the blue economy include maritime shipping, fishing and aquaculture, coastal tourism, renewable energy, water desalination, undersea cabling, seabed extractive industries and deep sea mining, marine genetic resources, and biotechnology.
• The blue economy is estimated to be worth more than US$1.5 trillion? per year globally.
• It provides over 30 million jobs and supplies a vital source of protein to over three billion people.

How do the Oceans Contribute to Sustainable Development?

• There is a Sustainable Development Goal (SDG) dedicated to oceans: number 14, ‘Life Below Water?’ aims to conserve and sustainably use the oceans, seas, and marine resources.
• It sets out seven targets for a sustainable ocean economy by 2030. So far, progress toward reaching these goals has been limited?.
• There have been some small improvements in the sustainability of fisheries and an expansion of Marine Protected Areas (MPAs), but these cover only around 7.5% of the oceans.

How are the Oceans Governed?

• Governance of the ocean and the blue economy is both complex and potentially difficult to implement, which has led to fragmented approaches to the sharing of marine resources between nations and impeded understanding of the environmental impacts of the blue economy.
• Ocean-related regulations apply to Exclusive Economic Zones (EEZs), which include territorial waters, archipelagos, and the area of sea that extends 200 nautical miles out from countries’ coastlines.
• The remaining area is called the High Seas? (or ‘open ocean’) and accounts for 64% of the world’s oceans.

Importance of the Blue Economy:

• Economic Prosperity: The Blue Economy offers substantial avenues for economic advancement across various sectors including fisheries, aquaculture, tourism, maritime transport, renewable energy, and biotechnology.
• Sustainable Resource Management: It advocates for the responsible and sustainable utilization of marine resources such as fish stocks, minerals, and energy sources, ensuring their availability for present and future generations.
• Renewable Energy Development: By fostering the exploration of renewable energy sources like offshore wind, wave, and tidal energy, the Blue Economy reduces reliance on fossil fuels, thereby combating climate change.
• Tourism Boost: Coastal and marine tourism serves as a cornerstone of the Blue Economy, stimulating revenue generation, and job creation, and bolstering local economies in coastal areas.
• Climate Change Mitigation: Healthy oceans play a pivotal role in regulating the planet's climate.
  • Through conservation efforts and sustainable practices, the Blue Economy aids in mitigating climate change impacts by preserving coastal ecosystems and reducing carbon emissions.
• Biodiversity Protection: Through the promotion of sustainable practices and responsible resource management, the Blue Economy contributes to the conservation of marine biodiversity, safeguarding endangered species and habitats.

Challenges Facing the Blue Economy:

• Pollution and Environmental Degradation: India's coastal regions confront significant pollution stemming from industrial discharge, untreated sewage, agricultural runoff, and plastic waste.
  • This pollution adversely impacts marine ecosystems, biodiversity, and the long-term sustainability of marine industries.
• Overexploitation of Marine Resources: Illegal, unreported, and unregulated (IUU) fishing practices exacerbate resource depletion, leading to diminished fish stocks and jeopardizing the livelihoods of coastal communities.
• Climate Change Impacts: The effects of climate change, such as rising sea levels, ocean acidification, and alterations in oceanic conditions, pose threats to fisheries, aquaculture, coastal infrastructure, and marine biodiversity.
• Maritime Security Challenges: India's maritime security faces multifaceted challenges including piracy, illegal trafficking, maritime terrorism, and territorial disputes, necessitating robust security measures.
• Limited Institutional Capacity and Infrastructure: Effective management and sustainable development of the blue economy require robust institutional frameworks, governance mechanisms, and infrastructure.
  • However, India grapples with capacity constraints, inadequate funding, bureaucratic inefficiencies, and regulatory gaps, hindering optimal resource management and development.

India's Blue Economy:

• India's Blue Economy, encompassing its vast coastline and Exclusive Economic Zone (EEZ), holds immense potential for driving sustainable growth and development.
• With a coastline stretching 7,517 km and an EEZ covering over two million square kilometers, India is endowed with abundant living and non-living resources.
• Although currently contributing approximately 4% to the nation's GDP, India's Blue Economy is projected to experience significant expansion with improved mechanisms and infrastructure.
  • Furthermore, the coastal economy plays a crucial role in sustaining the livelihoods of over four million fisherfolk and other coastal communities.

Four key industries are poised to propel India's Blue Economy forward:

• Fishing: Leveraging the rich marine resources to enhance fisheries production and promote sustainable fishing practices.
• Aquaculture: Developing innovative techniques to foster the cultivation of aquatic organisms, contributing to food security and livelihood opportunities.
• Ports: Investing in port infrastructure and capacity building to facilitate maritime trade, cargo handling, and logistics efficiency.
• Shipping: Strengthening the shipping industry to support global commerce, transportation, and connectivity while ensuring environmental sustainability

Government Initiatives Promoting Blue Economy:

• Sagarmala Programme: The Sagarmala Programme, a flagship initiative, focuses on modernizing India's ports, improving port connectivity, and driving port-led development.
  • It prioritizes logistics optimization, coastal shipping promotion, and the establishment of coastal economic zones to stimulate economic expansion and employment generation.
• National Policy Framework: The government has devised a comprehensive National Policy Framework for the Blue Economy, outlining a strategic path for the sustainable development and management of marine resources.
  • It aims to integrate sectors like fisheries, aquaculture, shipping, tourism, and renewable energy to foster holistic growth.
• National Marine Fisheries Action Plan (NMFAP): This plan encompasses strategies to enhance fishery resources assessment, upgrade infrastructure and technology in the fisheries sector, and encourage aquaculture development.
• Integrated Coastal Zone Management (ICZM): The government has initiated the Integrated Coastal Zone Management Program to foster sustainable development and conservation of coastal ecosystems.
• Blue Economy Cell: The Ministry of Earth Sciences has instituted a dedicated Blue Economy Cell to streamline research, policy formulation, and implementation of Blue Economy endeavors.
• Marine Spatial Planning (MSP): India is actively developing Marine Spatial Planning frameworks to ensure the efficient and sustainable utilization of marine space.

Conclusion

India's Blue Economy is on the brink of substantial expansion in the coming years.

With the government's proactive Blue Economy Mission, there's potential for this sector to emerge as a key economic driver, contingent upon effective policy implementation.

Aligned with the government's broader vision outlined in the 'Vision of New India by 2030', the Blue Economy policies are geared towards securing enduring economic benefits, fostering job creation, promoting equity, and safeguarding environmental sustainability.

Why is it in the News?

A recent World Bank Group report highlighted that women globally earn only 77 cents for every dollar earned by men, underscoring the persistent gender pay gap where women, on average, earn less than men.

Context:

• The World Bank Group's recent report sheds light on the persistent issue of the gender pay gap, revealing that women globally earn only 77 cents for every dollar their male counterparts earn.
• This disparity has been a contention, with critics sometimes questioning its existence.
  • However, the International Labour Organisation regards the gender pay gap as a tangible indicator of inequality between men and women.
• While various reports present different figures, it is crucial to acknowledge the underlying factors that contribute to this gap and work towards eradicating them to achieve equitable pay for all individuals, regardless of gender.

How is the Gender Pay Gap Calculated?

• The International Labour Organization (ILO) defines the gender pay gap as the difference between the average wage levels of all working women and men in the labor market, whether they are paid a monthly salary, hourly wage, or daily wage.
  • It is crucial to note that this gap does not exclusively represent the wage disparity between men and women with similar qualifications and job responsibilities.
  • Rather, it encompasses the overall earnings difference between all working women and men.
• While the concept of "equal pay for equal work" advocates for equitable compensation for men and women with the same qualifications and job duties, the gender pay gap reflects broader income disparities.
• There is no single, universally agreed-upon method for calculating the gender pay gap.
  • Different organizations and studies may produce varying figures due to their distinct approaches.
• Understanding the various factors contributing to the gender pay gap and addressing them through appropriate policies and initiatives is vital for achieving gender equality in the workforce and ensuring fair compensation for all workers.

Methodological Differences and the Persistence of the Gender Pay Gap:

• The variation in reported gender pay gaps can be attributed to the distinct methodologies employed by different organizations and studies.
  • For instance, Pew Research used hourly wages to calculate the disparity. At the same time, the US Bureau of Labor Statistics utilized weekly wages, considering only full-time workers, defined as those working at least 35 hours per week.
  • Such differences in approach can lead to varying estimates of the gender pay gap.
• Despite these discrepancies in methodology, it is essential to recognize that the gender pay gap is a persistent issue in most countries and industries.
  • While the extent of the gap may differ across studies, the underlying reality is that income disparities between men and women continue to be a prevalent challenge.

What are the Root Causes of the Gender Pay Disparity?

• The gender pay gap can be attributed to several interconnected factors that perpetuate income inequality between men and women.
• Firstly, women's lower labor force participation rate is influenced by prevailing gender stereotypes and societal expectations about gender roles.
  • The International Labour Organization (ILO) reveals that the global labor force participation rate for women stands at just under 47%, compared to 72% for men.
  • In India, the 2011 Census reported a workforce participation rate of 25.51% for women, against 53.26% for men.
• Secondly, even when women join the workforce, they are often concentrated in lower-paying sectors or job roles.
  • The ILO's Women in Business and Management report found that fewer women occupy management and leadership positions, particularly at higher levels.
  • They are more likely to work in support functions such as human resources and financial administration, leading to a lower average salary compared to male managers.
• A Georgetown University survey in 2013 further highlighted that the top 10 highest-paying professions, primarily in engineering and computer science, were dominated by men, while women were overrepresented in the 10 lowest-paying professions, such as arts and education.
• Additionally, women are more likely to work part-time due to limited full-time employment opportunities and family responsibilities.
  • In 73 countries, based on 2018 data, women outnumbered men as part-time workers.
  • The ILO explains that part-time work often lacks proportional benefits to full-time positions, impacting women's overall remuneration over time.
• Other institutional and socioeconomic factors, such as the traditional view of men as breadwinners, lower investments in women's education, and concerns over safety in commuting and the workplace, also contribute to the gender pay gap.
• Addressing these underlying issues and promoting gender equity in the workforce is essential to bridging the gender pay gap and achieving fair compensation for all individuals.

Understanding the Implications of the Gender Pay Gap:

• Analyzing the gender pay gap through various demographic factors reveals patterns that provide valuable insights into income disparities between men and women.
  • For example, women in their mid-30s and 40s often experience a decline in earnings compared to men in similar positions and professions.
• Critiques of the 77% statistic argue that it overlooks the "motherhood penalty," where unmarried women earn 95 cents or more for every dollar a man makes.
  • This penalty suggests that women face career growth setbacks when they take breaks to raise children, highlighting an area requiring attention to promote equal opportunities.
• The 2023 Sveriges Riksbank Prize in Economic Sciences winner, Claudia Goldin, extensively researched pay equality and argued that traditional gender roles force men to "step up" in their careers while women "step back" for family responsibilities.
  • This dynamic ultimately disadvantages both genders, as men miss out on family time, and women sacrifice their careers.
• Efforts to close the gender pay gap, such as implementing maternity and paternity leave policies and flexible work arrangements, have shown promise in reducing income disparities.
• However, the pace of progress varies, emphasizing the need for continued attention and innovation in promoting equal opportunities for all workers.

Conclusion

The gender pay gap continues to pose significant challenges across nations and industries. Examining demographics and career stages reveals important patterns that underline disparities between men's and women's earnings. Addressing inequalities, such as the "motherhood penalty," and transforming traditional work structures are vital for achieving equal opportunities. While policies like parental leave and flexible work arrangements have shown promise, sustained commitment to innovation and reform is crucial for fostering lasting progress and a more equitable professional environment.

Why is it in the News?

Financial inclusion awareness programmes must give special attention to women in households not headed by women.

Context:

• Financial inclusion is a key driver for realizing a more sustainable and inclusive future, as it directly influences the achievement of eight out of the 17 United Nations' Sustainable Development Goals (SDGs).
• Despite its importance, inequalities continue to exist, with India's subpar performance in the Global Gender Gap Report 2023 underscoring significant gaps in the economic realm.
• To address these disparities, particularly for women in India, it is vital to conduct a comprehensive evaluation of the complex aspects of financial inclusion.
• Insights can be drawn from multiple sources such as the World Bank's Global Findex Database and the National Family Health Survey (NFHS), ultimately paving the way for targeted interventions and improved financial access for all.

What is Financial Inclusion?

• Financial inclusion is a method of offering banking and financial services to individuals.
• It aims to include everybody in society by giving them basic financial services regardless of their income or savings.
• It focuses on providing financial solutions to the economically underprivileged.
• The term is broadly used to describe the provision of savings and loan services to the poor in an inexpensive and easy-to-use form.
• It aims to ensure that the poor and marginalized make the best use of their money and attain financial education.
• With advances in financial technology and digital transactions, more and more startups are now making financial inclusion simpler to achieve.

The Role of Financial Inclusion in Advancing Women's Empowerment:

• Financial inclusion not only facilitates women's access to bank accounts but also drives broader economic participation and empowerment.
• By offering women avenues for savings, credit, and investment, financial inclusion empowers them to manage risks, build assets, and seize socio-economic opportunities.
• In doing so, it bolsters women's resilience to economic uncertainties, fosters greater household welfare, and promotes economic stability, thereby illustrating its pivotal role in driving gender equity and sustainable development.

Insights from NFHS Data on Women's Financial Inclusion Progress:

• The NFHS data offers a comprehensive understanding of the multi-faceted dimensions of financial inclusion among women in India.
• Over the past two decades, several indicators point towards a significant improvement in women's economic empowerment and access to financial services including:

Financial Autonomy and Decision-making:

• A notable aspect highlighted by the NFHS surveys is the increasing financial autonomy among women.
• There has been a marked shift towards greater control over financial resources, with more women possessing self-operated bank accounts and playing an active role in financial decision-making within their households.
• This trend signifies a positive step towards women's economic independence, contributing to their overall empowerment and well-being.

Awareness and Utilization of Micro-Credit Programs:

• Micro-credit schemes have emerged as a key facilitator of financial assistance for women entrepreneurs and small business owners in rural India.
• The NFHS data indicates a growing awareness of these programs among women, with an increasing number utilizing micro-credit facilities to support their economic activities.
• This underscores the importance of targeted interventions and support mechanisms in promoting women's access to formal credit sources, fostering entrepreneurship, and generating income at the grassroots level.

Access and Utilization of Formal Banking Services:

• An analysis of factors such as education, occupation, and household characteristics reveals key determinants of women's financial inclusion.
• The NFHS data emphasizes the pivotal role of education in enabling women's awareness and utilization of financial services.
• Similarly, occupation and access to electronic media also significantly influence women's access to formal banking channels and digital financial tools.
• These insights underscore the need for targeted interventions and policy measures to address disparities and barriers, ensuring inclusive financial access, particularly among marginalized and vulnerable groups of women.

Advances in Global Financial Inclusion and India:

• Financial inclusion has become a key enabler of economic growth and development worldwide, with India demonstrating substantial progress in this arena.
• According to the World Bank's Global Findex Database, there has been a significant increase in adult ownership of bank accounts globally between 2011 and 2020.
• India's commendable growth of 42 percentage points during this period exemplifies the success of targeted interventions promoting financial access, particularly for marginalized communities such as women.
• This upward trend emphasizes the importance of continued efforts in fostering inclusive financial systems to ensure sustainable development and shared prosperity.

The Influence of Government Initiatives on Financial Inclusion:

• India's commitment to advancing financial inclusion has resulted in substantial progress, particularly in reducing the gender gap in account ownership.
  • The introduction of the Pradhan Mantri Jan Dhan Yojana (PMJDY) in 2014 played a pivotal role in this achievement, offering universal access to banking services, including savings accounts, remittances, and overdrafts to underserved communities such as women in rural and urban areas.
  • By January 2024, PMJDY had facilitated the opening over 28 crore accounts for women, significantly contributing to bridging the gender gap in financial access.
• Furthermore, government initiatives like the Deendayal Antyodaya Yojana and the National Rural Livelihood Mission (DAY-NRLM) have been instrumental in fostering women's economic empowerment and participation in the formal financial sector.
  • These schemes provide opportunities for skill development, entrepreneurship training, and access to credit, enabling women to establish and sustain livelihoods.
• In addition, social protection programs such as the Pradhan Mantri Awas Yojana and Pradhan Mantri Matru Vandana Yojana offer financial assistance and support during critical life stages such as pregnancy and homeownership.
  • Collectively, these initiatives have played a vital role in promoting women's economic independence and overall well-being, underscoring the importance of continued efforts towards inclusive financial systems.

Challenges and Way Forward:

• While significant progress has been made in advancing financial inclusion, several challenges remain, requiring concerted efforts and multi-stakeholder collaboration to address. Key areas of focus include:
• Enhancing Financial Literacy: Despite the expansion of banking services, a significant proportion of the population, particularly in rural and marginalized communities, lack adequate knowledge and understanding of financial products and services.
  • By promoting targeted education and awareness campaigns, we can empower individuals to make informed financial decisions and fully utilize available resources.
• Bridging the Digital Divide: The potential of digital financial services to enhance access and convenience is immense.
  • However, disparities in internet connectivity, smartphone ownership, and digital literacy create barriers to their effectiveness.
  • Expanding digital infrastructure and promoting digital literacy initiatives are critical to ensuring equitable access to digital financial services for all segments of society.
• Promoting Inclusivity of Marginalized Communities: Systemic barriers continue to hinder the meaningful participation of marginalized communities, including women, minorities, and persons with disabilities in the financial ecosystem.
  • These barriers are multifaceted, encompassing social, cultural, and economic factors.
  • To overcome these challenges, tailored interventions and affirmative action programs are necessary, fostering an enabling environment that promotes their inclusion and empowerment.
• Advancing through Collaboration: A collaborative approach involving multiple stakeholders, including government agencies, financial institutions, civil society organizations, and grassroots initiatives, is indispensable in advancing financial inclusion.
  • By coordinating efforts, leveraging resources, and implementing holistic solutions, we can collectively navigate the path ahead, overcoming challenges, and ensuring inclusive and sustainable financial systems for all.

Conclusion

Advancing financial inclusion for women in India is essential for fostering inclusive growth and sustainable development. While initiatives like PMJDY and DAY-NRLM have made significant strides, concerted action is necessary to tackle remaining disparities and fully leverage women's economic potential. By emphasizing education, digital literacy, and tailored awareness initiatives, India can unlock fresh opportunities for women's economic empowerment, thereby advancing the agenda of inclusive growth and prosperity.

Why is it in the News?

Increasing women’s representation in green jobs will lead to benefits such as boosting a low-carbon and environmentally sustainable economy

Context:

• The worldwide movement towards low-carbon development presents India with a distinctive opportunity for progress.
• Nevertheless, this transition brings forth a gender disparity challenge, as men tend to transition to green jobs more rapidly than women.
• Hence, it's crucial to delve into the gender aspects of India's green transition, highlighting the imperative for women's empowerment and gender equality in climate initiatives.

What are Green Jobs?

• Green jobs represent a category of employment directly benefiting the planet and contributing to overall environmental well-being.
• These roles are geared towards mitigating the negative environmental impact of various economic sectors and advancing the creation of a low-carbon economy.
• Occupations involving renewable energy, resource conservation, and the promotion of energy-efficient practices fall under this umbrella.
• The International Labour Organization characterizes green jobs as 'decent jobs that contribute to the preservation or restoration of the environment.'
• They encompass diverse sectors such as manufacturing, construction, renewable energy, energy efficiency, and automobiles, historically characterized by lower female representation.

Gender Disparity in Green Jobs:

• Globally, men tend to transition to green jobs at a faster pace than women.
• Despite India's significant increase in renewable energy capacity by 250% between 2015 and 2021, women constitute only 11% of workers in the solar rooftop sector.
• The Annual Survey of Industries 2019-20 reveals that women workers are predominantly concentrated in industries like apparel, textile, leather, food, and tobacco.
• According to a Confederation of Indian Industry (CII) 2019 report, men make up 85% of the workforce in sectors such as infrastructure, transport, construction, and manufacturing.
• A 2023 study by the Skill Council for Green Jobs indicated that 85% of green skills training was provided to men, with over 90% of women expressing belief that social norms hinder their participation in such training.
• Restrictive social norms contributing to this disparity include perceptions that women are unsuitable for certain technical roles, safety concerns, lower representation in science, technology, engineering, and mathematics (STEM) subjects, and familial constraints.

Advantages of Women's Engagement in Green Jobs:

• Addressing Gender Bias in the Labour Market: Increased representation of women in green jobs acts as a potent remedy to entrenched gender biases in the labor market.
  • By entering traditionally male-dominated sectors like manufacturing, construction, and renewable energy, women challenge stereotypes and reshape societal perceptions of gender roles.
• Expanded Economic Opportunities: Women's greater involvement in green jobs opens up expanded economic avenues for them.
  • Participation in sectors such as renewable energy and energy efficiency enables women to access high-growth industries, fostering both economic growth and personal financial stability.
  • Beyond economic benefits, engagement in green jobs offers opportunities for women's advancement in technical and social spheres, exposing them to innovative technologies, sustainable practices, and networking opportunities.
• Empowerment of Women's Agency: The transition to green jobs empowers women by granting them agency over their economic destinies.
  • In roles contributing to environmental preservation or restoration, women find alignment with a broader sense of purpose, fostering a deeper connection to their work and its societal impact.
• Contribution to Long-Term Gender Empowerment: Participation in green jobs extends beyond immediate economic gains, contributing to the enduring empowerment of women.
  • By breaking into historically imbalanced sectors, women pave the way for future generations, inspiring young girls to pursue careers in STEM fields.
• Promotion of Environmental Stewardship: Women's involvement in green jobs resonates with their recognized role as custodians of the environment.
  • With a nuanced understanding of the interconnectedness of social and ecological systems, women offer unique perspectives to the development and implementation of sustainable practices within green industries.

Way Forward:

• Addressing Data Gaps: Rectifying the lack of data is imperative to understand the landscape of women's participation in green jobs in India.
  • Initiatives should focus on mapping emerging areas for green growth and collecting sex-disaggregated data on green jobs to enhance women's engagement.
  • Conducting gender analysis, gathering gender statistics through periodic labor force surveys, and mobilizing additional resources can shed light on the present and future impact of low-carbon transitions on women workers and entrepreneurs. 
• Supporting Women Entrepreneurs: Gender-targeted financial policies and products tailored to the needs of women entrepreneurs can catalyze their entry into the green transition market.
  • Measures such as collateral-free lending, financial literacy training, and establishing supportive networks are crucial to unlock their potential.
  • Developing appropriate tools to assess creditworthiness, facilitate loan disbursement, and reduce operational costs for women-owned businesses is essential.
• Promoting a Gender-Just Transition: A comprehensive strategy for a gender-just transition encompasses employment, social protection, reduction of care work burden, and skill development.
  • Collaboration among government, private sectors, and stakeholders is essential to harness innovation, technology, and finance for women entrepreneurs and workers.
  • Businesses must prioritize gender justice to mitigate barriers and promote equitable job opportunities for a fair transition.

Conclusion

As India navigates its green transition, prioritizing women's empowerment and gender equity in climate actions is essential for unlocking the co-benefits of a low-carbon and environmentally sustainable economy. Bridging the gender gap in green jobs requires concerted efforts to address social norms, collect gender-disaggregated data, and implement inclusive policies. This is not only an economic imperative but a crucial step towards building a socially equitable and inclusive future for all.

Why is it in the News?

India's gross domestic product (GDP) growth for the third quarter (October-December) of the fiscal year 2023-24 has surpassed expectations, coming in at 8.4% compared to the estimated 6.7%.

News Summary:

• India's economy saw a growth of 8.4% in the December quarter compared to the same period last year, surpassing the 7.6% growth recorded in the previous quarter and the forecast of 6.7% as per a Reuters poll of economists.
• Further, the NSO pegged a higher GDP growth rate of 7.6% for the entire fiscal year, up from the initial estimate of 7.3%.
• To comprehend India’s unexpected growth, it is imperative to delve into the diverse aspects of the country's economic landscape, and evaluating the factors underpinning this surprising growth is equally crucial, including consumption patterns, savings dynamics, and investment trends.

What are the Factors Driving India’s Growth Surplus?

• Enhanced Economic Momentum: Initially estimated at 7.3 percent, the GDP growth set a promising tone for the fiscal year.
  • However, the subsequent second advance estimate, incorporating third-quarter data, surpassed expectations.
  • This signals a bolstered economic momentum, notably fueled by increased net taxes contributing significantly to the growth trajectory.
• Impact of Rising Net Taxes and Subsidies: An essential aspect of this growth narrative is the comparison between gross value added (GVA) and GDP growth.
  • While GDP growth stands impressively at 7.6 percent, GVA, excluding net tax effects, registers a slightly lower 6.9 percent.
  • This nuanced distinction underscores the influence of net taxes and subsidies on overall economic performance.
  • Furthermore, with an average growth rate of 8.2 percent for the first three quarters, extrapolations suggest a projected fourth-quarter growth of approximately 5.9 percent.
• Effective Policy Measures and Financial Resilience: Despite GDP figures still below pre-pandemic levels, concerted domestic efforts and policy initiatives have steered the economy toward a 7 percent growth trajectory.
  • A significant factor contributing to this progress is the reinforced state of banking and corporate balance sheets, indicative of the efficacy of strategic policy interventions.

Assessment of Challenges and Expected Downturn:

• Impact of High-Interest Rates: The enduring prevalence of high interest rates presents a formidable obstacle to sustained economic advancement.
  • Elevated interest rates have the potential to deter borrowing and investment, thereby affecting both consumer expenditure and corporate expansion initiatives.
  • This concern is further compounded by the limited effectiveness of monetary policy, given that inflation projections persist above the Reserve Bank of India's (RBI) 4% target.
• Normalisation of Net Tax Effects: The current fiscal period has significantly contributed to GDP growth from the escalation of net taxes (taxes minus subsidies).
  • However, there is an anticipation that the net tax influence on GDP will revert to normal levels in the upcoming year.
  • This normalization implies that the impetus provided by the net tax element to the economic growth rate may diminish, potentially leading to a slowdown.
• Influence of Global Economic Conditions: India's economic performance is intricately intertwined with global economic circumstances.
  • Uncertainties prevailing in the global market, such as trade tensions, geopolitical dynamics, and external disruptions, could trigger spill-over ramifications on India's economy.
  • Consequently, external factors beyond the nation's jurisdiction may exert influence on the overall economic outlook.

Private Consumption, Household Savings, and Evolving Trends:

• Disparities in Growth: The growth disparity between rural and urban areas is notable, with rural consumption likely trailing urban consumption.
  • This discrepancy can be attributed primarily to the disproportionate impact of high food inflation on rural households.
  • The sluggish growth of agriculture, at a mere 0.7%, underscores the challenges faced by the rural economy, where food inflation significantly affects discretionary spending.
• Impact of Food Inflation: High food inflation has exerted a considerable influence on consumption patterns, particularly in rural regions.
  • Nominal food consumption spending surged by 13% last year, indicative of the inflationary pressure on essential commodities.
  • This trend is expected to persist, impacting purchasing power and discretionary spending across both rural and urban landscapes.
• Shifting Consumption Patterns: Household consumption expenditure data reflects a gradual shift towards non-food items over time, mirroring rising per capita income and evolving consumer preferences.
  • This transition underscores the necessity to recalibrate weights in the consumer price index basket, which currently reflects consumption patterns from 2011-12.
• Household Savings: Disaggregated data reveals that household savings constitute a substantial portion, comprising 61% of total savings in the economy.
  • Despite its prominence, the share of household savings in GDP declined to 18.4% in 2022-23, indicating changing trends in savings composition.
  • Household savings are further categorized into financial and physical savings, with financial savings, including bank deposits and securities, witnessing a significant decline to 5.3% of GDP in 2022-23.
  • Conversely, physical savings, driven by borrowings for assets like houses, have increased, reflecting evolving preferences and market dynamics.

Analysis of Investment Trends: Public, Corporate, and Household:

• Private Corporate Investment Patterns: The data indicates a stagnant trajectory in private corporate investments, with no clear signs of revival evident in the fiscal year 2022-23.
  • This stagnation raises concerns, as private sector investments play a pivotal role in propelling economic growth, fostering job creation, and stimulating innovation.
• Public and Household Investment Dynamics: In contrast to private corporate investments, both public and household investments have exhibited substantial growth during the fiscal year 2022-23.
  • Public investments, often influenced by government policies and infrastructure projects, contribute significantly to economic development.
  • On the other hand, household investments, encompassing expenditures on residences and durable goods, serve as indicators of consumer confidence and economic stability.

Way Forward:

• Mitigating Policy Uncertainty: The government must mitigate policy uncertainty and streamline compliance costs.
  • A stable and foreseeable policy landscape is indispensable for fostering private-sector investments.
  • Addressing these concerns is paramount to cultivating an environment conducive to long-term corporate strategizing and sustained economic expansion.
• Encouraging a Comprehensive Revival of Private Investments: Recognizing the pivotal role of a comprehensive revival of private investments in sustaining high growth rates over the medium term is imperative for the government.
  • While the government's emphasis on infrastructure development and targeted initiatives like the Production-Linked Incentive (PLI) scheme has yielded positive outcomes, a more holistic approach is warranted to invigorate investments across diverse sectors of the economy.

Conclusion

India's unexpected GDP growth, underpinned by resilient domestic fundamentals and strategic policy emphasis, necessitates a nuanced examination of various economic facets. As India traverses through these multifaceted dimensions, focused attention on private corporate investments, consumption trends, and savings dynamics emerges as pivotal for achieving sustained and inclusive economic progress. Furthermore, the government's role in ensuring policy stability and minimizing compliance burdens emerges as a decisive factor in unlocking the full potential of India's economic prowess.

Why is it in the News?

India’s policymakers must free themselves from Western-dominated theories of economics and in this, local solutions are the way to solve global systemic problems.

What is Economic Growth?

• Economic growth denotes the expansion of a nation's economy over a defined duration.
• This expansion is commonly quantified by the aggregate output of goods and services within the economy, known as gross domestic product (GDP).

Key Points:

• GDP Measurement: Gross domestic product serves as the primary metric for assessing economic growth, reflecting the overall economic activity within a nation.
  • GDP represents the total monetary value of all finalized goods and services generated within a country's borders during a specified timeframe.
• Definition of Economic Growth: Economic growth signifies the sustained increase in a country's real national income and per capita income over an extended period.
  • This progression indicates an expansion in the nation's economic output and its citizens' earning potential.
• Long-term Perspective: Economic growth is characterized by its longitudinal nature, emphasizing continuous advancement in a nation's economic prosperity over time.
  • It underscores the importance of sustained increases in productivity, income levels, and overall economic well-being.

Current Economic Analysis:

• GDP as a Benchmark: Gross Domestic Product (GDP) growth has emerged as the predominant yardstick for evaluating the overall well-being of economies worldwide.
  • It serves as a comprehensive measure of a nation's economic output, encompassing the total value of goods and services produced within its borders over a specific period.
• Paradigm Shift: There has been a notable shift in economic ideology, prioritizing the expansion of the economic "pie" before addressing issues of income distribution.
  • This paradigmatic change has supplanted previous socialist models that emphasized addressing socio-economic disparities at the grassroots level.
• Historical Economic Focus: Since the liberalization of India's economy in 1991, successive governments have placed considerable emphasis on fostering GDP growth as a primary driver of economic development.
  • This policy orientation has underscored the significance of achieving robust GDP expansion as a cornerstone of national economic policy.
• Projected Growth Trajectory: The First Advance Estimates of National Income for the fiscal year 2023-24 indicate a projected Real GDP growth rate of 7.3 percent for India.
  • This forecast, as outlined in the Macro-Economic Framework Statement 2024-25, reflects the anticipated trajectory of India's economic growth in the near term.
• Global Economic Projections: According to the International Monetary Fund (IMF), India is poised to ascend to the rank of the third-largest economy globally by 2027, measured in terms of market exchange rate.
  • Additionally, the IMF anticipates a substantial increase of 200 basis points in India's contribution to global economic growth over the next five years.

Addressing Challenges and Considerations:

• Beyond GDP: Limitations in Assessing Well-being: Gross Domestic Product (GDP) fails to comprehensively measure a nation's overall standard of living or well-being.
  • It overlooks critical aspects that contribute to general welfare, such as environmental sustainability and quality of life indicators.
• External Costs and Trade-offs: While GDP growth may signify increased economic output, it can also entail adverse consequences, including environmental degradation and societal trade-offs.
  • For instance, heightened industrial activity may lead to environmental harm or infringe upon individuals' leisure time.
• Socioeconomic Inequality: The distribution of GDP among a country's populace significantly impacts its citizens' quality of life.
  • India's economic progress, marred by increasing inequality, underscores the importance of addressing disparities in wealth distribution to foster inclusive growth.
• Unemployment Challenges: Despite remarkable GDP growth, India grapples with persistent challenges in providing adequate employment opportunities.
  • The discrepancy between economic expansion and job creation highlights the need for targeted interventions to address unemployment concerns.
• Reimagining Economic Progress: Rethinking traditional metrics of economic success is imperative to address the multifaceted challenges facing nations today.
  • Embracing alternative indicators that prioritize sustainability, social equity, and inclusive growth can pave the way for a more holistic approach to economic development.

Inclusive and Sustainable Development:

• Traditional economic models advocate for linear development paths, prioritizing urbanization and industrialization.
• However, India's slow progress in these areas raises concerns, especially amidst global climate challenges.
• The reliance on fossil fuels for growth further complicates matters, requiring a reevaluation of development paradigms.
• India must pioneer inclusive and environmentally sustainable growth models to address these challenges effectively.
• This necessitates a shift towards alternative pathways that prioritize both economic advancement and environmental stewardship.
• By fostering innovation and collaboration, India can lead the way towards a more sustainable future for itself and the world.

Fossil Fuels and the Modern Economy:

• ??Fossil fuels play a crucial role in the global economy, serving as vital resources for various sectors.
• These include coal, oil, and natural gas, which contribute significantly to the production and distribution of essential materials for modern society, including steel, concrete, plastics, and food.
• While fossil fuels have fueled industrialization and economic growth, their adverse effects on both human health and the environment raise significant concerns.
• Balancing their economic importance with the need for sustainable alternatives poses a challenge for modern society.

Way Forward:

• Addressing the Global Climate Crisis: India must confront the pressing challenge of the global climate crisis while simultaneously advancing its own economic growth to bridge the gap with developed nations.
• Embracing a New Paradigm: India should strive to forge a new paradigm of progress that prioritizes inclusive and environmentally sustainable growth, benefiting both its citizens and the global community.
• Diversifying Economic Perspectives: Policymakers in India ought to liberate themselves from the dominance of Western economic theories, fostering a more diverse and contextually relevant approach to economic development.
• Harnessing Rural Potential: Rural India has the potential to serve as a hub of innovation, generating novel solutions in institutions and policies conducive to inclusive and sustainable growth, with relevance beyond national borders.
• Local Solutions for Global Challenges: Systems science underscores the efficacy of locally crafted solutions, collaboratively developed by communities in their own locales, as effective remedies for global systemic issues such as climate change and inequitable economic growth.
• Prioritizing Economic Development: A concerted focus on economic development is essential, encompassing efforts by policymakers and communities to enhance the standard of living and economic conditions across the country.
• Holistic Approach to Development: Economic development encompasses not only material prosperity but also the overall quality of life of the population, encompassing factors such as education, healthcare, and nutrition.
• Enhancing Living Standards: The advancement of a nation's economic development correlates with improvements in the living standards of its people, reflecting better access to education, healthcare, and other essential amenities.

Why is it in the News?

Recently, the government of India has approved the amendment in the Foreign Direct Investment (FDI) policy for the space sector.

Context:

• India’s space industry, though nascent compared to global leaders such as the US, Russia, and China, has made significant strides in cutting-edge technologies, as evidenced by successful missions like Chandrayaan-3, Aditya-L1, and XpoSat.
• These achievements have not only demonstrated India’s economic prowess in space technology but have also positioned the Country favourably on the global map.
  • However, the sector faces challenges, particularly in funding.
• Despite the sector’s expansion from 10 to 150 startups within three years, the absence of a substantial domestic investor pool interested in space ventures, which are inherently slow to yield returns, has hindered growth.
• The only other way out was to look at Foreign Direct Investment (FDI) policy.
• According to experts, “India stands at a critical juncture in its space journey.
• With strategic investments in infrastructure and manufacturing, alongside fostering innovation and education, India can achieve its goal of a US$44 billion space economy by 2033, enhancing its position as a global leader in space technology and services.

What is the Current Status of India’s Space Sector?

• India's expertise in the space sector is globally acknowledged, with achievements ranging from cost-effective satellite construction to launching foreign satellites.
• Aligned with its commitment to the Geneva Conference on Disarmament (1979), India advocates for the peaceful and civilian utilization of outer space, opposing any militarization efforts.
• The Indian Space Economy is valued at approximately $8.4 billion, constituting around 2-3% of the global space economy.
• ISRO stands as the 6th largest space agency globally, boasting an impressive success rate.
  • India also ranks 5th worldwide in the number of private space companies, with over 400 such entities.
• Budgetary Allocation: The Department of Space has witnessed a nominal 4% increase in its allocation in the Interim Union Budget for 2024-25, rising from ?12,545 crore to ?13,043 crore.
• Future Projections: Implementation of the Indian Space Policy 2023 could propel the Indian space economy to reach $44 billion by 2033.
• Growth in Space Start-Ups: The number of Space Start-Ups has surged from just 1 in 2014 to 189 in 2023, as reported by the DPIIT Start-Up India Portal.
  • Investment in Indian Space Start-Ups has concurrently risen to $124.7 million in 2023.

Key Changes in FDI Policy:

• With the privatization of space launches, India aims for a significant five-fold increase in its share of the global launch market.
• The recent changes in the FDI policy reflect a more welcoming approach to foreign investment.
• Specifically, the satellite sector which used to have strict rules has now been split into different parts each with its own limits on how much foreign investment is allowed.
• Launch Vehicles and Associated Systems/Subsystems: Foreign investment up to 49% is permitted under the automatic route with government approval mandated for anything beyond this threshold.
  • This includes activities related to the establishment of spaceports for spacecraft launches and receptions.
• Satellite Manufacturing and Operation: The automatic route allows for up to 74% FDI covering satellite manufacturing, operation, satellite data products and both the Ground Segment and User Segment.
  • Approval from the government is required for FDI exceeding 74% in these activities.
• Manufacturing of Components and Systems/Subsystems: Foreign investors are now allowed to invest up to 100% in manufacturing components and systems for satellites, ground segments and user segments through the automatic route.
• The decision to liberalize FDI norms in the space sector stems from a strategic vision outlined in the Indian Space Policy 2023.
• By fostering a more investor-friendly environment the government aims to tap into the potential of non-government entities (NGEs) encouraging them to invest in Indian companies within the space domain.
• This move is expected to drive technological advancements, scale up operations globally and boost India's position in the global space economy.

Recent Advancements in the India’s Space Sector:

• Indian Space Policy 2023: This policy delineates the roles and responsibilities of entities like ISRO, NewSpace India Limited (NSIL), and private sector players with the aim of bolstering involvement from research, academia, startups, and industry.
• Strategic Proposals by SIA: The Space Industry Association – India (SIA-India) has recommended in its Pre-Budget Memorandum for FY 2024-25 a substantial increase in India's space budget.
• Defence Space Agency (DSA): India inaugurated its Defence Space Agency (DSA) alongside the Defence Space Research Organisation (DSRO), tasked with developing space-based weapons to counter adversaries.
• Defence Space Mission Launch: The Indian Prime Minister unveiled the Defence Space Mission during the Defence Expo 2022 in Gandhinagar.
• Expansion of Satellite Manufacturing: India's satellite manufacturing sector is forecasted to grow to USD 3.2 billion by 2025, up from USD 2.1 billion in 2020.
• SAMVAD Program: ISRO introduced the SAMVAD Student Outreach Program at its Bengaluru facility, aimed at fostering space research among young minds.
• The objective is to bolster India's expanding space program, encourage private sector participation, drive technological innovation, and position the nation as a prominent player in the global space landscape.

Importance of Foreign Direct Investment (FDI) in the Space Sector:

• Advancement in Space Missions: India's achievements in space missions have positioned it as a reliable provider of cost-effective space solutions globally, with FDI expected to further enhance technological capabilities and expand operations.
• Boost to Manufacturing: Encourages the establishment of manufacturing facilities within India, aligning with the government's 'Make In India' initiative and bolstering domestic manufacturing capabilities.
• Private Sector Engagement: FDI facilitates greater private sector involvement in India's space endeavours, transitioning from ISRO-driven initiatives to leveraging space technology for commercial applications and fostering industry participation.
• Integration into Global Value Chains: Expected to integrate Indian companies into global value chains, enabling them to contribute significantly to the global space economy.
• Technology Uptake and Global Collaboration: FDI promotes the absorption of advanced technology and facilitates global integration, enabling companies to enhance product sophistication, scale operations globally, and increase their share in the global space economy.
• Enhanced Business Environment: FDI policy reforms improve the Ease of Doing Business in India, attracting greater FDI inflows and fostering investment, income, and employment growth.
• Stimulus for Research and Innovation: FDI in the space sector stimulates technology transfer, fosters research collaborations, and encourages innovation, driving advancements in space technology and applications.

What are the Challenges?

• Limited Investor Engagement: Investors show limited interest in the later stages of space tech development, likely due to perceived high risks and long-term investment horizons.
• Talent Shortage: The space tech sector faces a shortage of skilled professionals, highlighting the need for expanded talent development initiatives.
• Policy Ambiguity: Ambiguous policies in the space sector create uncertainty, necessitating clear and consistent regulatory frameworks to attract foreign investment.
• Streamlining FDI Procedures: Simplification of foreign direct investment processes is essential to remove barriers and encourage investor participation in the space industry.
• High Capital Requirements: Space technology ventures demand substantial capital investments, posing challenges for startups and smaller enterprises in accessing necessary funds.
• Competition Concerns with ISRO: Foreign investors express reservations due to competition concerns with ISRO, highlighting the importance of addressing perceived conflicts of interest to instil investor confidence.

Conclusion

The amendment in the FDI policy on the space sector heralds a new era of growth and opportunity for India’s space industry. By opening doors to foreign investment, India aims to leverage private sector participation to enhance its space capabilities, drive innovation, and foster economic development. The policy reform underscores India’s commitment to becoming a global leader in space exploration and technology.

Why is it in the News?

Farmers have resumed protests without a specific trigger, unlike their previous march against contentious farm laws. Their main demand is a legal guarantee for Minimum Support Prices (MSP).

Context:

• The renewed protest by farmers, advocating for a legal assurance of Minimum Support Prices (MSP), underscores the enduring battle for agricultural sector stability.
• Amidst this, it's crucial to delve into the intricacies of MSP, address prevailing misconceptions, and explore the advantages of formalising this system.

What is the Minimum Support Price (MSP)?

• MSP (Minimum Support Price) is the cost at which the government buys crops from the farmers, to guarantee farmers against any sharp fall in agricultural income.
• It is declared by the Government based on the proposal of the Commission for Agricultural Cost and Prices (CACP), at the start of the planting season.
• This mechanism aims to protect small and marginal farmers from financial losses and ensure an adequate supply of food grains for public distribution across India.
• Since its inception in 1966-67 for wheat, the MSP framework has expanded to cover various essential food crops, facilitating their availability to the public through subsidized rates under the public distribution system.
  • However, only a small percentage, approximately 6% or less, of farmers are able to sell their produce at prices higher than the MSP.

Is the MSP Different in different states?

• Because of the variety in irrigation and wages, the expense of a similar yield changes from one state to another.
• However, there is no draft of the local Minimum Support Price, so there is one MSP for the whole country.

Significance of Minimum Support Price: 

• Fixed Remunerations: The farmers are financially insured against the impulses of price fall in the market.
  • It gives security to farmers from crop loss and price uncertainty.
• Help in Decision Making: MSPs are reported toward the start of the planting season, this assists farmers with settling on the best choices of crop that they should plant.
  • This development data assists the farmer with settling on the best choice with regards to which yield to plant for the most extreme monetary advantage inside the restrictions of his agricultural land size, environment, and irrigation framework.
• Crop Diversification: The MSP declared by the Government of India without precedent for 1966-67 for wheat has reached out to around 24 crops at the present.
  • This has urged the farmers to develop these different crops to maximize their agricultural income.
• Price Limitations for Private Purchasers: MSP conveys a value message to advertise that if vendors don’t offer higher than MSP costs the farmer may not sell them his produce.
  • In this manner, it goes about as an anchor or benchmark for agricultural produce.
  • It guarantees the market costs won’t be radically lower than the Minimum Support Price.
• Commercial Crops: MSP is utilized as an instrument to boost the creation of explicit food crops which is short in supply.
  • MSP spurs farmers to develop commercial crops and expand creation on a commercial basis.
• Purchasing Power Enhancement: MSP provides fixed amounts in framers’ hands which makes them financially stable.
  • It helps in upgrading the buying limit and updating the style of living of farmers and their families.

Challenges in Implementation of MSP:

• Selective Intervention and Limited Coverage: Despite the annual announcement of MSP for 23 crops, actual implementation tends to be selective, primarily focusing on major crops like rice and wheat.
  • This limited coverage undermines the broader objective of ensuring stability across various agricultural commodities.
• MSP Implementation Bias: The unequal application of MSP, favouring specific crops, marginalizes farmers cultivating other essential commodities.
  • This bias exacerbates regional disparities and impacts the economic well-being of farmers engaged in non-major crop cultivation.
• Disconnect Between Market Price and MSP: The disparity between market prices and MSP poses a significant challenge, as government intervention is triggered primarily when market prices fall below the MSP.
  • Inconsistent intervention exacerbates uncertainties for farmers, leading to financial distress during market downturns.
• Perceived Government Apathy: Farmers perceive a lack of genuine interest or urgency from the government in effectively implementing MSP.
  • This perceived apathy breeds distrust and frustration among farmers, fueling demands for a legal guarantee to ensure consistent and widespread implementation.
• Political Hesitation and Decision-Making Delays: While there is political consensus supporting a legal guarantee for MSP, successive governments have hesitated to formalize this mechanism.
  • Delayed decision-making perpetuates uncertainties in the agricultural sector, undermining the effectiveness of MSP as a stabilizing force.

What Does a Legal Guarantee of MSP Mean and What Obstacles in Legalising MSP?

• It means that anyone paying less than the price set by the government for crops could be criminally charged.
  • Currently, there is an MSP for 23 crops.
  • However, the highest procurement by the government is of wheat and rice.

• According to experts, if MSP is legally guaranteed, the government will have to pay it regardless of supply and demand dynamics.
  • At the moment, about 60 per cent of the total field crop production in India comes from wheat and paddy.
• Fiscal Concerns: Misconceptions regarding the fiscal implications of guaranteeing MSP have posed obstacles to its legalization.
  • Despite the political consensus, concerns over perceived excessive fiscal burdens have deterred governments from formalizing MSP.
• Prevalent Misconceptions: There is a prevalent misconception that legalizing MSP necessitates government procurement of all agricultural produce, which is inaccurate.
  • Government intervention is required only when market prices dip below MSP, and it does not entail the procurement of the entire marketable surplus.
• Misunderstanding of Procurement Costs and Subsidies: The cost of procuring rice and wheat is often misconstrued as the cost of the MSP program, whereas it primarily serves as a subsidy to consumers rather than farmers.
  • For other crops, government procurement is not a cost unless sold with a subsidy, with the actual cost being the difference between economic cost and issue price.

Potential Advantages of Legalising MSP:

• Ensuring Uniform Implementation: Formalizing Minimum Support Prices (MSP) establishes a clear legal framework, ensuring consistent application across all crops.
  • This move addresses current issues of selective intervention, providing farmers with a dependable safety net.
• Promoting Inclusive Agricultural Growth: Expanding MSP coverage to various crops ensures that price stability benefits all segments of the farming community.
  • Small and marginal farmers cultivating diverse crops can access MSP protection, fostering inclusive agricultural development.
• Reducing Farmer Vulnerability: Formalizing MSP reduces farmers' susceptibility to market fluctuations by guaranteeing a minimum income for their produce.
  • This assurance enables farmers to navigate uncertainties with confidence, knowing that government intervention is assured during price downturns.
• Boosting the Rural Economy: A secured MSP contributes to farmers' economic well-being, leading to increased rural income.
  • This upliftment stimulates the rural economy by generating demand for goods and services, fostering growth across multiple sectors.
• Clarifying Consumer Subsidies: Formalization helps distinguish between procurement costs and consumer subsidies, often conflated as MSP program expenses.
  • This clarity aids policy discussions and ensures targeted subsidy allocation, benefiting both farmers and consumers.
• Facilitating Strategic Government Operations: A legal framework empowers the government to conduct strategic operations in domestic and international markets.
  • Through controlled sales during periods of high market prices, the government can manage inflation, ensuring price stability for consumers.

Conclusion

The legalization of MSP presents a holistic remedy to the agricultural sector's woes.

Beyond ensuring uniform application, it fosters diversification, inclusivity, and economic robustness, ultimately benefiting farmers and bolstering rural prosperity. By dispelling misconceptions and tackling apprehensions, policymakers can pave the way toward a more secure and prosperous future for our farmers.

Why is it in the News?

India will aim to become a ‘developed nation’ by 2047, with an economy of $30 trillion in its 100th year of independence, which will be propelled by radical policy changes and reforms in governance by 2030.

News Summary:

• The 'Viksit Bharat @2047' document, which outlines this vision, is nearing completion, following its inception in December 2021 by Prime Minister Narendra Modi.
• Ten sectoral groups of secretaries (SGoSs) were entrusted with the task of preparing sector-specific visions, and these are nearly finalized.
• Niti Aayog will consolidate these sectoral visions into a single comprehensive document by December, following consultations with SGoSs and thought leaders, including industry leaders.
• Prime Minister Modi is expected to unveil this vision document in December or January.

What is the Current State of the Indian Economy?

• India’s economy was $3.5 trillion in FY23, but currently with a GDP of $3.7 trillion, it is estimated to be the 5th largest economy in the world and according to some projections, India's GDP will surpass that of Germany and Japan by 2030.
• The country’s per capita income was estimated at around $2,500 in FY23.
• Nations with per capita income beyond a threshold of $17,000 are considered as developed.
• This rapid rate of economic expansion would result in India becoming the second-largest economy in the Asia-Pacific region.

NITI Aayog Vision India@2047 Document:

• The process of shaping the Vision India@2047 document commenced in December 2021.
• To ensure comprehensive coverage, ten groups of secretaries were assembled, each focused on distinct sectors such as rural and agriculture, infrastructure, social vision, welfare, technology, governance, security, foreign affairs, and more.
• This document will provide a blueprint for achieving the ambitious goal of transforming India into a $30-trillion developed economy by 2047, with a per-capita income ranging from $18,000 to $20,000.
• It will encompass a range of crucial elements, including re-engineering government processes, implementing reforms, and streamlining the efforts of various ministries and departments to eliminate redundancy.
• Expect insights into India's global involvement in areas like trade, investment, technology, capital flows, and research and development.
• Furthermore, the document will shed light on which Indian companies are poised to lead on the global stage and the strategic approach for nurturing the ecosystem required to realize this vision.
• It will also delve into matters related to human capital development, leveraging the nation's vast market size, and addressing regional disparities.
• The vision document will also provide a roadmap, delineating where India aims to be in 2030 and, ultimately, in 2047."

What are the obstacles ahead in implementing the Vision India@2047?

• NITI Aayog is assisting Gujarat and Andhra Pradesh in preparing their vision documents in order to bring them into compliance with the national vision document.
• While other states, such as Uttarakhand, Goa, Tamil Nadu, and Uttar Pradesh, are working on their own documents.
• Middle-income trap: The plan will include safeguards to make sure the economy stays out of the "middle-income trap".

What is the middle-income trap?

• According to the World Bank, the term "middle-income trap" describes a scenario in which a nation with a middle-class income is unable to make the transition to a high-income economy because of growing expenses and a decrease in its competitiveness.
• It's when per capita income reaches around $5,000 to $6,000, and then progress slows down.
• Low-income countries often tend to transition faster to middle-income levels, driven by low wages, cheap labour and basic technology catch-up.
• However, only a few countries manage to achieve high-income status.

What are the reasons for the middle-income trap?

• An example of what is known as the "middle-income trap" is when labour wages become so high that a middle-income nation is unable to compete on a global scale in the production of standardized, labour-intensive goods.
• But because of its relatively low productivity, it is also unable to compete on a large enough scale in higher value-added activities.
• As a result, growth is slowing, wages are stagnant or falling, and the informal economy is expanding.

Countries that are stuck in the middle-income trap:

• Historically, some evidence suggests that Latin American and Middle Eastern countries suffered middle-income traps for at least four or five decades.
• According to a World Bank report, out of 101 middle-income countries in 1960, only 13 countries achieved high-income status by 200
• The most recent examples are Brazil and Mexico, which were touted to transition to developed economies but failed to achieve the same success as Japan or some countries in Eastern Europe.

What Strategies Can Help India Overcome Middle-Income Traps?

• Investment: India should aim for an investment-to-GDP ratio of 35%. Achieving this goal requires boosting savings to 32% of GDP.
• In the fiscal year 2022, savings and investment rates were 30.2% and 29.6%, respectively, indicating the need for further growth.
• Balancing Fiscal Consolidation with Growth: India faces a challenge with a general public debt of 83% of GDP and high fiscal deficits.
• Balancing fiscal consolidation while meeting targets set under the Fiscal Responsibility and Budget Management (FRBM) framework is crucial.
• Structural Reforms: The Asian Development Bank (ADB) emphasizes the need for structural reforms in India to address issues like structural bottlenecks, declining investment, and an increasing current account deficit.
• Notable reforms include the Insolvency and Bankruptcy Code (IBC), which has strengthened the country's banking systems.
• Education and Skill Development: Skill development is vital for enhancing labour productivity and promoting inclusive growth.
• Recent reports suggest that employability among young people needs improvement, emphasizing the importance of education and skill enhancement programs.
• Research, Development, and Innovation: Innovation plays a significant role in transforming India's economy. India's progress in the Global Innovation Index reflects its potential.
• Initiatives like the CoWin platform for monitoring vaccination programs and the development of data ecosystems through platforms like UPI and Aadhaar are driving India's growth.
• Climate Change Adaptation: India should focus on developing and customizing adaptation technologies and solutions to address climate-induced vulnerabilities.
• This includes addressing challenges in agricultural production, food security, disaster risks, resource access (water, power, coastal resources), and human health in the face of climate change.