Category: Industries, Textile, E -Commerce, Pharma, Service

Competition (Amendment) Bill, 2022

Why in News?

  • President Droupadi Murmu has given assent to the bill to amend the competition law and the changes seek to ensure regulatory certainty and foster a trust-based business environment.

What is the Competition Act, 2002?

  • The Competition Act, 2002, regulates competition in the Indian market and prohibits anti-competitive practices such as cartels, abuse of dominant market position, and mergers and acquisitions that may have an adverse effect on competition. The Act has been amended by the Competition (Amendment) Act, 2007.
  • The Competition Commission of India (CCI) is responsible for implementing and enforcing the Act.
  • The Competition Appellate Tribunal is a statutory body created in accordance with the Competition Act, 2002 to hear and regulate on appeals against any rules made, decisions made, or orders made by the Competition Commission of India.
  • The government replaced the Competition Appellate Tribunal with the National Company Law Appellate Tribunal (NCLAT) in 2017.

What are the Amendments to the Competition Act Proposed?

Penalties for Competition Law Violations:

  • The Bill amends the definition of “turnover” to include global turnover derived from all products and services by a person or an enterprise.
  • The amendment allows for the imposition of penalties for competition law violations based on a company’s global turnover, rather than just its turnover in India.

Timelines for Approving Combinations:

  • The Bill reduces the time limit for the CCI to form a prima facie opinion on a combination from 30 working days to 30 days.
  • The change aims to speed up the process of approving mergers and acquisitions in India.

Review of Regulations:

  • The Bill seeks to amend the Competition Act, 2002, to regulate mergers and acquisitions based on the value of transactions. Deals with transaction value of more than Rs 2,000 crore will require CCI’s approval.
  • The Bill proposes to reduce the timeline for the CCI to pass an order on such transactions from 210 days to 150 days.
  • The Bill decriminalizes certain offences under the Act by changing the nature of punishment from imposition of fine to civil penalties.
  • These offences include failure to comply with orders of the CCI and directions of the Director General related to anti-competitive agreements and abuse of dominant position.

What are the Benefits of the Competition (Amendment) Bill?

  • Promoting Ease of Doing Business: The amendments to the Competition Act aim to reduce regulatory hurdles and promote ease of doing business in India. The amendments are expected to provide greater clarity to businesses operating in India and reduce the compliance burden for companies.
  • Enhancing Transparency: The inclusion of global turnover in the definition of “turnover” aims to enhance transparency and accountability in the Indian market. The amendment ensures that companies cannot escape penalties for competition law violations by shifting their revenue to other countries.

NCLAT upholds penalty on Google

Why in News?

  • The National Company Law Appellate Tribunal (NCLAT) has recently upheld the ₹1,337 crore fine imposed on Google by the Competition Commission of India (CCI).
  • While holding that the CCI investigation did not violate principles of natural justice, the tribunal set aside certain directions issued by the CCI.

About the News:

  • The court quashed the directions relating to the non-monetary directives that would have forced the tech giant to allow uninstalling of Google’s pre-installed apps on Android devices.
  • The Tribunal also set aside directives that would have forced the company to allow developers of app stores to distribute their app store through Google Play Store.
  • Additionally, the Tribunal also set aside orders directing Google to allow app developers to distribute apps through side-loading, and not deny access to its play services Application Programming Interface (APIs) to disadvantage Original Equipment Manufacturers, app developers, and its existing or potential competitors.

What’s the issue?

  • CCI found that Google was dominant in the relevant market for licensable smart TV device operating systems in India.
  • It also said that prima facie mandatory pre-installation of all the Google applications under Television App Distribution Agreement (TADA) amounts to imposition of unfair conditions on the smart TV device manufacturers.
  • This is in contravention of Section 4(2)(a) of the Competition Act.
  • So, CCI imposed a penalty on Google for “abusing its dominant position” in markets related to the Android mobile device ecosystem. Google filed an appeal with the NCLAT against the CCI order which was declined by NCLAT.
  • Section 4 of the Act pertains to abuse of dominant position.

About Competition Commission Of India:

  • The Competition Commission of India (CCI) was established under the Competition Act, 2002 for the administration, implementation and enforcement of the Act, and was duly constituted in March 2009. Chairman and members are appointed by the central government.

Functions of the commission:

  • It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
  • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

About the Competition Act:

  • The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of Raghavan committee.
  • The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

 

SC Refuses to Entertain Plea on Google-CCI Issue

Why in News?

  • The Supreme Court of India has refused to entertain a plea by Google against NCLAT’s order refusing the interim stay on 1,337 crore penalty on Google. 

About the News:

  • The SC has granted Google 7 days to deposit 10% of the penalty imposed by the Competition Commission of India (CCI). The Indian companies have welcomed the SC’s stance against Google.  

What’s the issue?

  • CCI found that Google was dominant in the relevant market for licensable smart TV device operating systems in India. It also said that prima facie mandatory pre-installation of all the Google applications under Television App Distribution Agreement (TADA) amounts to imposition of unfair conditions on the smart TV device manufacturers. This is in contravention of Section 4(2)(a) of the Competition Act.
  • So, CCI imposed a penalty on Google for “abusing its dominant position” in markets related to the Android mobile device ecosystem. Google filed an appeal with the NCLAT against the CCI order which was declined by NCLAT.
  • Section 4 of the Act pertains to abuse of dominant position.

About Competition Commission Of India:

  • The Competition Commission of India (CCI) was established under the Competition Act, 2002 for the administration, implementation and enforcement of the Act, and was duly constituted in March 2009. Chairman and members are appointed by the central government.

Functions of the commission:

  • It is the duty of the Commission to eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
  • The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.

About the Competition Act:

  • The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of Raghavan committee.
  • The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India.

Amazon- Future Deal

Why in News?

  • The Amazon-Future Group Dispute over a ₹24, 731–crore merger deal with Reliance took an unexpected turn in the Supreme Court when the U.S.-based e-commerce giant proposed talks to possibly end the quarrel.

About the News:

  • The SC Bench adjourned the case to March 15, giving Future time to take a call on the Amazon’s proposal.
  • The apex court did not pass any orders on Amazon’s plea for ‘withholding’ proceedings in the company law tribunal and the Delhi High Court in connection with the dispute.

What’s the Issue?

  • Future Group and Reliance Industries Limited had signed a Rs 24,713-crore deal in August 2020 for Future Retail to sell its retail, wholesale, logistics and warehousing units to Reliance Retail and Fashionstyle.
  • Amazon is Future Group’s Indian partner.
  • Amazon says Future violated a partnership contract with the asset sale to its rival and wants to scuttle it, while the indebted Indian group says it would collapse if the transaction fails.

Why did Amazon Approach SIAC?

  • The parties in a deal usually sign a contractual agreement which specifies about:
  • The arbitral institution administering the arbitration.
  • The applicable rules.
  • The seat of arbitration.
  • In this case Amazon and Future Group have under their agreement agreed to refer their disputes to SIAC, with Singapore presumably being the contractual choice for the seat/place of arbitration.

How is the Dispute taken up at the SIAC? What is the Procedure to be followed?

  • Once a dispute is referred to arbitration, the process of appointment of the arbitral tribunal takes place.
  • Composition: Typically, in case of a three member tribunal, both the parties appoint one member each to the tribunal, while the third member is jointly appointed by the two nominees or, if they fail to agree, by SIAC.

Appointment of an Emergency Arbitrator:

  • Appointment of the arbitral tribunal usually takes time.
  • Therefore, under the rules of SIAC, parties can move SIAC to appoint an emergency arbitrator to get urgent interim relief, even as the process of appointment of the main Arbitral Tribunal is Underway.

What Happens when the Parties don’t comply with the Order Voluntarily?

  • Currently under Indian law, there is no express mechanism for enforcement of the orders of the Emergency Arbitrator.
  • But, the parties voluntarily comply with the Emergency Award.
  • However, if the parties don’t comply with the order voluntarily, then the party which has won the emergency award, in this case Amazon, can move the High Court in India under Section 9 of the Arbitration & Conciliation Act, 1996, to get similar reliefs as granted by the Emergency Arbitrator.

Why has Singapore become the Hub of International Arbitration?

  • Foreign investors investing in India typically want to avoid the rigmarole of the Indian courts.
  • Foreign investors feel that Singapore is neutral ground for dispute resolution.
  • Singapore itself over time has built a stellar reputation as jurisdiction driven by rule of law with international standards and high integrity. This gives comfort to investors that the arbitration process will be quick, fair and just”.
  • According to the 2019 annual report of SIAC, India was the top user of its arbitration seat with 485 cases being referred to SIAC, followed by Philippines at 122, China at 76 and the United States at 65.

Does India has any International Arbitration centre?

  • India now has its own international arbitration centre in Mumbai.

About Singapore International Arbitration Centre (SIAC):

It is a not-for-profit international arbitration organisation based in Singapore, which administers arbitrations under its own rules of arbitration and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.

Amazon- Future deal

Why in News?

  • The Competition Commission of India (CCI) has frozen its approval given in November 2019 to Amazon’s investment in a Future Group unit on the grounds that the U.S. e-commerce company had suppressed the scope and full details of its investment while seeking Regulatory Approval.

What are its Implications?

  • The CCI decision further roils the legal landscape as Amazon seeks to block the Future Group’s 2020 decision to sell its retail assets to Reliance Industries.

What’s the Issue?

  • Future Group and Reliance Industries Limited had signed a Rs 24,713-crore deal in August 2020 for Future Retail to sell its retail, wholesale, logistics and warehousing units to Reliance Retail and Fashionstyle.
  • Amazon is Future Group’s Indian partner.
  • Amazon says Future violated a partnership contract with the asset sale to its rival and wants to scuttle it, while the indebted Indian group says it would collapse if the Transaction Fails.

Why did Amazon Approach SIAC?

  • The parties in a deal usually sign a contractual agreement which specifies about:
  • The arbitral institution administering the arbitration.
  • The applicable rules.
  • The seat of arbitration.
  • In this case Amazon and Future Group have under their agreement agreed to refer their disputes to SIAC, with Singapore presumably being the contractual choice for the seat/place of arbitration.

How is the dispute taken up at the SIAC? What is the procedure to be followed?

  • Once a dispute is referred to arbitration, the process of Appointment of the arbitral tribunal takes place.
  • Composition: Typically, in case of a three member Tribunal, both the parties appoint one member each to the tribunal, while the third member is jointly appointed by the two nominees or, if they fail to agree, by SIAC.

Appointment of an Emergency Arbitrator:

  • Appointment of the arbitral tribunal Usually takes time.
  • Therefore, under the rules of SIAC, parties can move SIAC to appoint an emergency arbitrator to get urgent Interim relief, even as the process of appointment of the main Arbitral Tribunal is Underway.

What happens when the Parties don’t comply with the Order Voluntarily?

  • Currently under Indian law, there is no express mechanism for enforcement of the orders of the Emergency Arbitrator.
  • But, the Parties Voluntarily comply with the Emergency Award.
  • However, if the parties don’t comply with the order voluntarily, then the party which has won the emergency award, in this case Amazon, can move the High Court in India under Section 9 of the Arbitration & Conciliation Act, 1996, to get similar reliefs as granted by the Emergency Arbitrator.

Why has Singapore become the hub of International Arbitration?

  • Foreign investors investing in India typically want to avoid the rigmarole of the Indian courts.
  • Foreign investors feel that Singapore is neutral ground for dispute resolution.
  • Singapore itself over time has built a stellar reputation as jurisdiction driven by rule of law with international standards and high integrity. This gives comfort to investors that the arbitration process will be quick, fair and just”.
  • According to the 2019 annual report of SIAC, India was the top user of its arbitration seat with 485 cases being referred to SIAC, followed by Philippines at 122, China at 76 and the United States at 65.

Does India have any International Arbitration Centre?

  • India now has its own international arbitration centre in Mumbai.

About Singapore International Arbitration Centre (SIAC):

  • It is a not-for-profit international arbitration organisation based in Singapore, which administers arbitrations under its own rules of arbitration and the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules.

OIL PRICE FELL BELOW ZERO

Context:

  • Recently, the oil prices of West Texas Intermediate (WTI) fell to minus $40.32 a barrel in interlay trade in New York (the USA). It has the best quality of crude oil in the world.
  • It is the lowest crude oil price ever recorded below the zero mark while the previous lowest was recorded immediately after World War II (WWII).

Oil Pricing Around the World:

  • The Organization of the Petroleum Exporting Countries (OPEC) used to work as a cartel and fix prices in a favourable band. It is led by Saudi Arabia, which is the largest exporter of crude oil in the world (single-handedly exporting 10% of the global demand).
  • It could bring down prices by increasing oil production and raise prices by cutting production.The global oil pricing mainly depends upon the partnership between the global oil exporters instead of well-functioning competition.
  • Cutting oil production is a difficult decision, because restarting it is immensely costly and complicated. If a country cuts production, it risks losing market share if other countries do not follow the suit.

Causes for the Oil Price Fall:

  • The Crude oil prices were already falling before the global lockdown due to the higher supply and lower demand.
  • The price was close to $60 a barrel at the start of 2020 and, by March-end, they were closer to $20 a barrel. The Problems arose when Saudi Arabia and Russia disagreed over the production cuts, required to keep prices stable.
  • Likewise, Saudi Arabia led oil-exporting countries started undercutting each other on price while producing the same quantities of oil.
  • The global spread of Covid-19 made it even worse as it sharply reduced the economic activity and the oil-demand, which made the Oil-exporting countries to cut production by 10 million barrels a day (the highest production cuts) and yet the demand for oil was reducing even further.
  • The supply demand mismatch resulted in exhausted storage capacities. The oil prices started falling steeply because the May contracts for WTI were due to expire on 21st April, 2020 which posed huge challenges for both the oil producers and the consumers (contractors/buyers).
  • The Producers started selling the oil at unbelievably low prices because shutting production would have been costlier to restart when compared to the marginal loss on May sales.The Consumers were facing the problem of storage. There is no space to store the oil even if they decided to buy and take the delivery.
  • Accepting the oil delivery, paying for the transportation and storage would have been costlier than the hit on contract price.
  • For both the holders of the delivery contract and the oil producers, it was less costly to pay $40 a barrel and get rid of the oil instead of storing it (consumers/buyers) or stopping production (producers). So this led to the negative WTI oil contract prices.

Impact of Oil pricing in India:

  • It does not have any direct impact on India because Indian crude oil basket does not comprise WTI and it only has Brent and oil from some of the Gulf countries.
  • But, the weakness in WTI reflects on the falling prices of Indian basket as well because oil is traded globally and has indirect impacts.
  • The fall of oil pricing will benefit India in two ways:
  1. 1.If the government passes on the lower prices to consumers, then individual consumption will be boosted whenever the economic recovery starts in India.
  2. 2.If both, central and the state, governments decide to levy higher taxes on oil, it can boost Government Revenues.

Way Ahead:

  • It was the WTI price for May in the US markets that went so low. Crude oil prices at other places fell but not too much. The prices for June and the coming months are pegged between $20 and $35 a barrel.The Investment budgets of exploration and production companies are expected to drop because of the low shale oil prices.
  • Normally, this should force oil exporting countries to cut back production and negate the excess supply, restoring balance in the oil markets but the possibility of recent events from happening again cannot be ruled out.Eventually, it would be the demand-supply mismatch (adjusted for how much can be stored away) that will decide the fate of oil prices.

TECHNICAL TEXTILES MISSION

Why in News?

  • The Cabinet Committee on Economic Affairs (CCEA) has approved the setting up of a National Technical Textiles Mission at a total outlay of ₹1,480 Crore.

Technical Textiles Mission:

  • Objective: To position India as a global leader in technical textiles and increase the use of technical textiles in the domestic market.
  • Implementation: For 4 years from 2020-2021.

Components of the National Technical Textiles Mission:

Component -l (Research, Innovation and Development):

  • Will focus on research and development at both, fibre level and application-based in geo, agro, medical, sports and mobile textiles and development of bio-degradable technical textiles.
  • Research activities will also focus on development of indigenous machinery and process equipment.
  • Will have an outlay of ₹1,000 crores.

Component -II (Promotion and Market Development):

  • Will be for promotion and development of market for technical textiles.
  • Will aim at average growth rate of 15-20% per annum taking the level of domestic market size to 40-50 Billion USD by the year 2024.

Component – III (Export Promotion):

  • Will focus on export promotion so that technical textile exports from the country reach from the ₹14,000 crore now to ₹20,000 crores by 2021-2022.
  • Ensure 10% average growth every year till the Mission ends.
  • An export promotion council for technical textiles will be set up.

Component- IV (Education, Training, Skill Development):

  • Will promote technical education at higher engineering and technology levels related to technical textiles and its application areas.

Significance of the Mission:

  • The Mission will focus on usage of technical textiles in various flagship missions, including strategic sectors. The use of technical textiles in agriculture, aquaculture, dairy, poultry, etc. JalJivan Mission; Swachch Bharat Mission; Ayushman Bharat will bring an overall improvement in cost economy, water and soil conservation, better agricultural productivity and higher income to farmers per acre of land holding in addition to promotion of manufacturing and exports activities in India.
  • The use of geo-textiles in highways, railways and ports will result in robust infrastructure, reduced maintenance cost and higher life cycle of the infrastructure assets.
  • Promotion of innovation amongst young engineer will be taken up by the Mission; along with creation of incubation centres and promotion of ‘start-up’ and Ventures’.
  • The research output will be reposited with a ‘Trust’ with the Government for easy and assessable proliferation of the knowledge.
  • A sub-component of the research will focus on development of bio degradable technical textiles materials, particularly for agro-textiles, geo-textiles and medical textiles.
  • It will also develop suitable equipment for environmentally sustainable disposal of used technical textiles, with emphasis on safe disposal of medical and hygiene wastes.
  • There is another important sub-component in the research activity aiming at development of indigenous machineries and process equipment for technical textiles, in order to promote ‘Make In India’ and enable competitiveness of the industry by way of reduced capital costs.

Current scenario of Indian Textiles segment:

  • Indian technical textiles segment is estimated at $16 billion which is approximately 6% of the $250 billion global technical textiles market.
  • The penetration level of technical textiles in India varies between 5% and 10% against the level of 30% to 70% in developed countries.
  • Indian textile industry is the 2nd largest manufacturer and exporter in the world, after China.
  • The share of textile and clothing in India’s total exports stands at a significant 13 % (2017-18).
  • The textile industry contributes to 7% of industry output in value terms, 2% of India’s GDP and to 15% of the country’s export earnings.

What are Technical Textiles?

  • Technical textiles are textiles materials manufactured primarily for technical performance and functional properties rather than aesthetic characteristics.
  • Technical Textiles products are divided into 12 broad categories (Agrotech, Buildtech, Clothtech, Geotech, Hometech, Indutech, Mobiltech, Meditech, Protech, Sportstech, Oekotech, Packtech) depending upon their application areas.

TELECOS ASKED TO PAY AGR DUES IMMEDIATELY

Why in News?

  • The Supreme Court has recently ordered the MDs and directors of few major telecoms to pay their AGR dues immediately.

What is AGR?

  • Adjusted Gross Revenue (AGR) is the usage and licensing fee that telecom operators are charged by the Department of Telecommunications (DoT).
  • It is divided into spectrum usage charges and licensing fees, pegged between 3-5 percent and 8 percent respectively.
  • Spectrum usage charges is the charge that is required to be paid by the licensees providing mobile access services, as a percentage of their Adjusted Gross Revenue (AGR).
  • The spectrum slabs/rates for the same are notified by the Government from time to time.

How AGR is Calculated?

  • The definition of AGR has been under litigation for 14 years.
  • While telecom companies argued that it should comprise revenue from telecom services, the DoT’s stand was that the AGR should include all revenue earned by an operator, including that from non-core telecom operations.
  • The AGR directly impacts the outgo from the pockets of telcos to the DoT as it is used to calculate the levies payable by operators.
  • Currently, telecom operators pay 8% of the AGR as licence fee, while spectrum usage charges (SUC) vary between 3-5% of AGR.

Why are Issues with Telecoms on Paying Huge Amount?

  • Telecom companies now owe the government not just the shortfall in AGR for the past 14 years but also an interest on that amount along with penalty and interest on the penalty.
  • While the exact amount telcos will need to shell out is not clear, as in a government affidavit filed in the top court, the DoT had calculated the outstanding licence fee to be over ₹92,000 cror
  • However, the actual pay-out can go up to ₹4 lakh crore as the government is likely to also raise a demand for shortfall in SUC along with interest and penalty.
  • Of the total amount, it is estimated that the actual dues is about 25%, while the remaining amount is interest and penalties.

What are the Concerns?

  • The telecom industry is reeling under a debt of over ₹4 lakh crore and has been seeking a relief package from the government.
  • Even the government has on various occasions admitted that the sector is indeed undergoing stress and needs support.
  • Giving a ray of hope to the telecom companies, the government recently announced setting up of a Committee of Secretaries to examine the financial stress in the sector, and recommend measures to mitigate it.

Way Forward:

  • To enhance the growth of the telecom sector, improve the quality of service, and generate resources for the Telecom Service Providers (TSPs), a new infrastructural policy is the need of the hour.
  • The government needs to provide an enabling environment for telecom operators. In order to achieve that, a long-term vision plan must be made accordingly.
  • Enhanced accessibility of the broadband services will enable the digital empowerment of India; hence adequate steps must be taken by the government to strengthen the overall telecom sector.

ORGANISED MANUFACTURING TO BOOST JOB GROWTH

Why in News?

  • There have been several reports, both official and by independent academics, that have painted a dark picture on the jobs front. A 2017-18 National Sample Survey Office’s (NSSO) survey pegged unemployment at a 45-year high.
  • It has been suggested that India’s unemployment woes can only be solved by boosting the Manufacturing Sector.

Highlights:

  • It has been argued that between the three broad sectors of the economy- agriculture, industry and services — it is the industry sector, and within industry, the manufacturing sector that has the highest potential to absorb the surplus labour in the economy. Agriculture, which engages almost half the Indian workforce, does not grow fast enough and is, as such, not remunerative enough to provide gainful employment to the millions who join India’s workforce each year.
  • Services is a fast-growing sector and pays well but it places far greater demands on job seekers in terms of skills and education. Often, the rural millions looking for a job find themselves inadequate in terms of delivering in the services sector.
  • Research shows that the employment elasticity, the ability to create new jobs with every additional increase in a sector’s growth, of the manufacturing sector is the highest.
  • Both UPA and NDA governments have tried to focus on boosting the growth in the manufacturing sector. For instance, in 2011, UPA came out with a new National Manufacturing Policy that aimed at raising the share of the manufacturing sector to 25% of the GDP by 2022.
  • The NDA too unveiled the Make in India initiative that focussed using manufacturing as the main platform to create jobs.
  • Despite such a focussed stand right through the past decade, manufacturing’s share is still under 17% of the GDP and the jobs situation in the country has only got worse.

The Current Situation:

  • An Analysis of the Indian manufacturing sector shows that manufacturing units in the organised sector are becoming more capital intensive, that is the capital-to-labour ratio is
  • In other words, instead of increasing the number of workers in a unit, owners are choosing to increase the amount of capital.
  • This trend holds true across the board including those sectors such as textiles and leather products that are considered “labour-intensive” and most capable of creating jobs and soaking up surplus labour.

Issues that needs to be Addressed:

  • Why are manufacturing owners increasingly preferring to substitute labour with capital? It is important to note that they continue to do so even when the return on capital is falling.
  • If this is the trend, how reasonable is it to assume that boosting manufacturing growth will create more jobs for the Indian youth.
  • To what extent the lack of significant labour reform is holding back manufacturing from achieving its potential to create jobs.

WEIGHING IN ON THE PUBLIC SECTOR PRIVATISATION DEBATE

Context:

  • While there is justification in selling loss-making units, the situation is more difficult to understand in the case of profit-making entities.

Different Modes of Privatization:

  • There seem to be broadly three positions with respect to the privatisation of public sector undertakings (PSUs).
  • The left position is “PSU is family silver (i.e.), selling for your own benefits, and should not be sold irrespective of its performance”.
  • The divergent stand is that “business is not the business of government”, which found resonance in the United Kingdom, and, of late, in India.
  • There is also the third position: Why privatise profit-making PSUs? Why do you sell the family silver? Bharat Petroleum Corporation Limited (BPCL) which is making handsome profits comes under this category.

What is the case of Loss-Making units?

  • Loss-making PSUs certainly merit privatisation — but no one would buy them with their huge debt and employee liabilities.
  • The government may even have to pay the buyer, as it happened in the case of the Delhi Discom privatisation.
  • Even then it may be worth it, since privatisation will stop fiscal flows to these PSUs.
  • Alternatively, there is the exit route through the new Insolvency and Bankruptcy Code.
  • Some of the major loss-making PSUs, Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited and Air India should go under the block as their losses are greater than their revenue. They are called as value subtracting enterprises.
  • Restructuring them and even ensuring an additional infusion of funds and other resources have not produced results.

 

When Privatization is More Needed?

  • Privatisation is not a default option; rather, it is resorted to only out of extreme necessity.
  • “Privatization is resorted not just when the firm makes losses, but only when the physical performance is so bad that the PSU becomes a political embarrassment to the Government.”
  • This may explain the hesitation to privatise some of the largest loss-making PSUs — Air India, the BSNL and MTNL — as the embarrassment threshold may not have been reached as yet.

What to be done after Privatization?

  • There is no point in converting a public monopoly to a private monopoly; it will only result in inefficiency being replaced by private profits.
  • Privatisation must be accompanied by competition in the post-privatized scenario.
  • However, the government will face a dilemma. If high price is needed, it should allow a monopoly situation post-privatisation, and if it wants competition and low price for consumers, it should be content with a modest sale price, as the post-privatisation valuation of the firm critically depends on the market structure post-privatisation.
  • If that is to be competitive, other PSU national oil companies such as the IOC and HPCL should also be privatized.
  • Similarly, LPG and kerosene subsidies can be handled by direct benefit transfer, which is already in vogue in the case of LPG.

SWADESH DARSHAN SCHEME

Why in News?

  • The Cabinet approves the release of funds for 10 projects of the Swadesh Darshan Scheme sanctioned in 2018-19.

Swadesh Darshan Scheme:

  • The scheme was launched by the Union Tourism Ministry with the objective to develop theme-based tourist circuits in India.
  • These tourist circuits will be developed on the principles of high tourist value, competitiveness and sustainability in an integrated manner.
  •  The scheme was launched in 2015.
  •  It is a Central Sector Scheme (which means 100% sponsored by the GOI).
  •  Under the Scheme 15 circuits have been identified for development namely Himalayan Circuit, North East Circuit, Krishna Circuit, Buddhist Circuit and Coastal Circuit, Desert Circuit, Tribal Circuit, Eco Circuit, Wildlife Circuit, Rural Circuit, Spiritual Circuit, Ramayana Circuit, Heritage Circuit, Tirthankar Circuit and Sufi Circuit.

Objectives of the scheme:

  • To position tourism as a major engine of economic growth and job creation.
  • Develop circuits having tourist potential in a planned and prioritized manner.
  •  Promote cultural and heritage value of the country to generate livelihoods in the identified regions.
  • Enhancing the tourist attractiveness in a sustainable manner by developing world-class infrastructure in the circuit/destinations.
  • Follow community-based development and pro-poor tourism approach.
  •  Creating awareness among the local communities about the importance of tourism for them in terms of increased sources of income, improved living standards and overall development of the area.
  • To create employment through the active involvement of local communities.
  •  Harness tourism potential for its effects on employment generation and economic development.
  • To make full use of the potential and advantages in terms of available infrastructure, national culture and characteristic strong points of each and every region throughout the country by the development of theme-based circuits.
  •  Development of tourist facilitation services to enhance visitor experience/satisfaction.

Tourist Circuit:

  • A Tourist Circuit is defined as a route having at least three major tourist destinations which are distinct and apart.
  •  Circuits should have well-defined entry and exit points. A tourist who enters should get motivated to visit most of the places identified in the circuit.
  • A Circuit could be confined to a State or could be a regional circuit covering more than one State/Union Territory. These circuits may have one dominant theme and other sub-themes.

INITIATIVES FOR PROMOTING LEATHER INDUSTRY

Why in News?

  • The government aims at the development of infrastructure for the leather sector, address environment concerns specific to the leather sector, facilitate Additional Investments, Employment Generation and increase in production.

Merchandise Exports from India Scheme (MEIS):

  • MEIS was introduced in the FTP from 01.04.2015, providing rewards for exporters of specified goods.
  • The objective of the MEIS is to offset infrastructural inefficiencies and associated costs involved in exporting goods/products which are produced/manufactured in India.
  • The scheme incentivizes exporters in terms of Duty Credit Scrips at the rate of 2, 3, 4, 5, 7 % of FOB Value of exports realized.
  • Goods and Service Tax (GST) Rates for selected leather industry items have been reduced.
  • Duty-Free Import of Inputs: Enhancement of duty-free limit (Basic Customs duty exemption) for import of critical import by manufacturer exporters of footwear and other leather products.
  • Interest equalization rate was enhanced from 3% to 5% for Micro Small and Medium Enterprises units
  • Removal of Animal Quarantine clearance for most of the categories of finished and crust leathers imported into India
  • In order to promote Green Tanning, the Union Budget 2017-18 announced the reduction of Basic Customs Duty on Vegetable Tanning Extracts.

Indian Footwear, Leather & Accessories Development Programme:

  • Human Resource Development (HRD) sub-scheme: HRD sub-scheme provides assistance for Placement Linked Skill Development training to unemployed persons and skill up-gradation training to employed workers.
  • Integrated Development of Leather Sector (IDLS) sub-scheme: IDLS sub-scheme incentivizes investment and manufacturing including job creation by providing backend investment grant/subsidy at 30% of the cost of new Plant and Machinery to Micro, Small & Medium Enterprises (MSMEs).
  • Establishment of Institutional Facilities sub-scheme: The sub-scheme provides assistance to Footwear Design & Development Institute (FDDI) for up-gradation of some of the existing campuses of FDDI into “Centres of Excellence” and establishing 3 new fully equipped skill centres alongside the upcoming Mega Leather Cluster.
  • Mega Leather, Footwear and Accessories Cluster (MLFAC) sub-scheme: The MLFAC sub-scheme provides infrastructure support to the Leather, Footwear and Accessories Sector by the establishment of Mega Leather, Footwear and Accessories Cluster.
  • Leather Technology, Innovation and Environmental Issues sub-scheme: Under this sub-scheme, assistance is provided for upgradation/installation of Common Effluent Treatment Plants (CETPs) at 70% of the project cost.
  • Promotion of Indian Brands in Leather, Footwear and Accessories Sector sub-scheme: Under this sub-scheme, the eligible units approved for Brand Promotion are assisted.
  • Additional Employment Incentive for Leather, Footwear and Accessories Sector sub-scheme: Under this sub-scheme, employers’ contribution of 3.67% to Employees’ Provident Fund for all new employees in Leather, Footwear and Accessories sector, are provided for enrolling in EPFO for first 3 years of their employment.

RATNA STATUS TO CPSES

Why in News?

  • The criteria laid down by the Government for grant of Maharatna, Navratna and Miniratna status to Central Public Sector Enterprises (CPSEs) is given below:

Criteria for Grant of Maharatna status to CPSEs:

  • Having Navratna status
  • Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations
  • An average annual turnover of more than Rs. 25,000 crore during the last 3 years
  • An average annual net worth of more than Rs. 15,000 crore during the last 3 years
  • An average annual net profit after tax of more than Rs. 5,000 crore during the last 3 years
  • Should have significant global presence/international operations.

Criteria for Grant of Navratna Status to CPSEs:

  • The CPSEs which are Miniratna I, Schedule ‘A’ and have obtained ‘excellent’ or ‘very good’ MOU rating in three of the last five years and having composite score of 60 or above in following six selected performance indicators are eligible to be considered for grant of Navratna status.
    • Net Profit to Net worth: 25
    • Manpower Cost to total Cost of Production or Cost of Services: 15
    • PBDIT to Capital employed: 15
    • PBIT to Turnover: 15
    • Earning Per Share: 10
    • Inter Sectoral Performance: 20

Criteria for grant of Miniratna status to CPSEs:

  • Miniratna Category-I status: – The CPSEs which have made profit in the last three years continuously, pre-tax profit is Rs.30 crores or more in at least one of the three years and have a positive net worth are eligible to be considered for grant of Miniratna-I status.
  • Miniratna Category-II status: – The CPSEs which have made profit for the last three years continuously and have a positive net worth are eligible to be considered for grant of Miniratna-II status.

INDUSTRIAL RELATIONS CODE BILL, 2019

Context:

  • The Industrial Relations Code Bill, 2019 bill has been recently introduced in the Lok Sabha.

Background:

  • As a part of its ease of doing business initiative, the government has decided subsuming a total of 44 labour laws into four codes — on wages, social security, industrial safety and welfare and industrial relations.
  • The Four codes of Labour laws are as:
  1. 1.Code on Wages Bill
  2. 2.Code of Occupational, Safety, Health and Working Conditions Bill, 2019
  3. 3.Code on Industrial Relations
  4. 4.Code on Social Security
  • As part of its commitment to simplify and consolidate labour rules and laws under four codes, the Union Cabinet has already cleared the Occupational, Safety, Health and Working Conditions Code and the Code on Wages Bill.

About the Industrial Relations Code Bill, 2019:

  • The Industrial Relations Code proposes to amalgamate the following laws into a single code:
  1. 1.The Trade Unions Act, 1926
  2. 2.The Industrial Employment (Standing Orders) Act, 1946
  3. 3.and The Industrial Disputes Act, 1947.
  • It is the Third out of Four Labour Codes that have got approval from the cabinet.

Key Features of the Bill:

  • Seeks to allow companies to hire workers on fixed-term contract of any duration.
  • Has retained the threshold on the worker count at 100 for prior government approval before retrenchment, but it has a provision for changing ‘such number of employees’ through notification.
  • Provides setting up of a two-member tribunal (in place of one member) wherein important cases will be adjudicated jointly and the rest by a single member, resulting speedier disposal of cases.
  • Has vested powers with the government officers for adjudication of disputes involving penalty as fines.
  • Introduces a feature of ‘recognition of negotiating union’ under which a trade union will be recognized as sole ‘negotiating union’ if it has the support of 75% or more of the workers on the rolls of an establishment.
  • As several trade unions are active in companies, it will be tough for any one group to manage 75% support, hence taking away their negotiating rights. In such a case, a negotiating council will be constituted for negotiation.
  • Underlines that fixed-term employees will get all statutory benefits on a par with the regular employees who are doing work of the same or similar nature.
  • Under the code, termination of service of a worker on completion of tenure in a fixed-term employment will not be considered as retrenchment.
  • Proposes setting up of a “re-skilling fund” for training of retrenched employees. The retrenched employee would be paid 15 days’ wages from the fund within 45 days of retrenchment.

THE INDUSTRIAL RELATIONS CODE BILL, 2019

Why in News?

  • The Union Cabinet on Wednesday approved The Industrial Relations Code Bill, 2019.

About the Bill:

  • The Industrial Relations Code Bill, 2019 proposes to amalgamate The Trade Unions Act, 1926, The Industrial Employment (Standing Orders) Act, 1946, and The Industrial Disputes Act, 1947.
  • Apart from offering some degree of flexibility on government permissions for retrenchment, the most important aspect of the Bill is that it presents the legal framework for ushering in the concept of ‘fixed-term employment’ through contract workers on a pan-India basis.
  • Currently, companies hire contract workers through contractors.
  • With the introduction of fixed-term employment, they will be able to hire workers directly under a fixed-term contract, with the flexibility to tweak the length of the contract based on the seasonality of industry.
  • These workers will be treated on a par with regular workers during the tenure of the contract.
  • The move to include it in a central law will help in wider reach, and states are expected to follow similar applicability.
  • The government had tried a move last year to apply fixed-term employment across “central sphere establishments” (which are establishments under the authority of the central government, Railways, mines, oilfields, major ports, or any other central public sector undertaking) in all sectors, but it failed to elicit the desired results as states did not notify similar provisions for it.
  • The Bill now ensures a pan-India impact of this move.

What are the Changes Made in the Bill?

  • The threshold required for government permission for retrenchment has been kept unchanged at 100 employees, as against the proposal for 300 employees in an earlier draft of the Bill, which was opposed by trade unions.
  • Instead, the government has now provided flexibility for changing the threshold through notification.
  • The rigidity of labour laws about laying off labour has often been cited by industry as the main reason limiting scalability and employment generation.
  • At present, any company having 100 workers or more has to seek government approval for retrenchment.
  • The provision of fixed-term employment, which helps in the flow of social security benefits to all workers along with making it easier for companies to hire and fire, in The Industrial Relations Code Bill.
  • Last year, the government had included the category of ‘Fixed Term Employment Workman’ for all sectors in the Industrial Employment (Standing Orders) Act, 1946.
  • This was only applicable to ‘central sphere’ establishments, and the states did not follow suit.

Challenges Regarding the Bill:

  • While industry has welcomed the changes, others have said that the unclear provision regarding retrenchment would lead to uncertainty and discretionary behaviour during implementation by the central or state government.
  • “The moment flexibility is provided for the applicability and then it leaves the matter to the discretion to the appropriate government (states or Centre). Then the clause can be misused.
  • Any discretion in law leads to uncertainty, lack of clarity, discriminatory implementation, and provides scope for unnecessary usage.
  • The government should be clear whether to increase the threshold or retain the threshold and face the consequences.
  • Also, fixed-term employment needs to be introduced with adequate safeguards, otherwise it runs the risk of encouraging conversion of permanent employment into fixed-term employment, he said.

Response from the Industry:

  • Industry has welcomed the Bill since it has met their demand of providing flexibility in retrenchment.
  • If there is more employment in the organised sector, industry would demand flexibility.
  • The original laws were made at a time when one would join and retire from the same company.
  • Earlier, there were so many interpretations, and simplifying so many laws into four Codes is a good thing.
  • There is no intention of industry to exploit labour, but one cannot run the company to create employment — it has to be commercially viable.
  • Today we are competing with global players so there should be a level playing field. We want to protect employment as much as possible, when there is commercial viability.
  • There is no unending amount of money available with anyone of us to continue to employ labour when business is not viable.
  • Fixed-term employment will help in keeping salaries and facilities to workers such as PF, gratuity, and medical benefits, the same as those for permanent labour
  • Inclusion in the central law will also help in applicability of fixed-term employment uniformly across the country.

SHRINKAGE IN IIP RECORDED THE LOWEST IN 8 YEARS

Why in News?

  • According to official data released recently, Industrial activity in September contracted sharply by 4.3%, a historical low, driven by major slowdowns in the capital goods, mining, and manufacturing sectors.

Historical Shrinkage:

  • The contraction in the Index of Industrial Production (IIP) in September was compared with the contraction of 1.1% in August. The Index had grown 4.3% in September of the previous year.
  • “This is the first time after November 2012 that all three broad-based sectors have contracted and the lowest monthly growth in the 2011-12 base year series. “In the old (2004-05) base, IIP in October 2011 contracted by 5%.”
  • Various SectorsGrowth rate in September (%)Growth rate in August (%)
    Capital Goods SectorDecreased by 20.7Decreased by 21
    Mining SectorDecreased by 8.5Increased by 0.1
    Manufacturing SectorDecreased by 3.9Decreased by 1.2
    Electricity SectorDecreased by 2.6Decreased by 0.9
    Consumer Durables SectorDecreased by 9.9Decreased by 9.1
    Consumer Non-durables SectorDecreased by 0.4Increased by 4.1
  • “The Indian economy is presently facing a structural growth slowdown originating from declining household savings rate, and low agricultural growth”.
  • “Low agricultural growth is feeding into low agricultural and non-agricultural wage growth in rural areas, which is impacting rural demand adversely.”

About IIP:

  • IIP is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period of time, with respect to a chosen base period.
  • It is compiled and published on a monthly basis by the Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation with a time lag of six weeks from the reference month.
  • Base year for IIP is 2011-2012 (Earlier 2004-05) i.e. it is calculated on the basis of their share of GDP at factor cost during 2011-12.
  • The revised IIP (2011-12) reflects the changes in industrial sector and also aligns it with base year of other macroeconomic indicators like Wholesale Price Index (WPI) and Gross Domestic Product (GDP).
  • IIP covers 865 (Older series 682) items comprising :

1.Manufacturing (809 items, Older series 620 items) – 77.63%

2.Mining (55 items, Older Series 61 items) – 14.37%

3.Electricity (1 item) – 7.99%

  • The eight Core Industries comprise nearly 40.27 % of the weight of items included in IIP. They are :

1.Coal (10.33%)

2.Crude oil (8.98%)

3.Natural gas (6.88%)

4.Refinery products (28.04%)

5.Fertilizers (2.63%)

6.Steel (17.92%)

7.Cement (5.37%)

8.Electricity (19.85%)

EIGHT CORE SECTORS SHRINK 0.5% IN AUGUST

Why in News?

  • The eight core sectors that form the bellwether for the Indian economy slumped in August to their lowest growth in four years and four months as per the Index of Eight Core Industries.

About the Slump:

  • The index for these industries contracted 0.5%, the weakest since April 2015. Growth in five sectors of the Index of Eight Core Industries fell into the negative zone in August.
  • Within the Index, the coal sector saw the sharpest contraction, with the sector contracting 8.6% in August 2019 compared with a contraction of 1.6% in the previous month. This is the sector’s worst performance in three years.
  • It is an indication of a continuing slowdown and weak demand in the system. The core sectors reflect demand from the power and infrastructure sectors, where the government’s own demand is important and public sector spending has been also low.

About Index of Eight Core Industries (ICI):

  • It is monthly production volume index considered as lead indicator of monthly industrial performance. It measures performance of production in selected eight core industries viz. Natural Gas, Coal, Crude Oil, Fertilizers, Petroleum Refinery Products, Steel, Cement and Electricity.
  • It is compiled and released by Office of Economic Adviser (OEA), Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry.
  • The eight infrastructure sectors, constitute 40.27% of total index of industrial production (IIP)
  • Base year taken as reference for ICI is 2011-12.

Components of Eight Core Industries (ICI)

S.NoEight core IndustriesContribution to IIPDescription
1. Coal4.38 %It includes coal production excluding coking coal.
2.Crude Oil5.22 %It includes total crude oil production.
3.Natural Gas1.71 %It includes total natural gas production.
4.Refinery Products5.94%It includes total refinery production (in terms of crude throughput).
5.Fertilizers1.25%It includes production of Urea, Calcium Ammonium Nitrate (CAN), Ammonium Sulphate (A/S), Diammonium Phosphate (DAP), Ammonium chloride (A/C), Complex Grade Fertilizer and Single superphosphate (SSP).
6.Steel6.68%It includes production of alloy and non-alloy steel only.
7.Cement2.41%It includes production of both large plants and mini plants.
8.Electricity10.32%It includes actual electricity generation of thermal, nuclear, hydro, imports from Bhutan

What is IIP?

  • Index of Industrial Production (IIP) is a composite indicator measuring changes in the volume of production of a basket of industrial products over a period of time, with respect to a chosen base period. Currently, the base year is 2011-12.
  • It is computed and published by the Central Statistical Office (an office under the Ministry of Statistics and Programme Implementation) on monthly basis with a time lag of six weeks from the reference month.

APPRENTICESHIP (AMENDMENT) RULES, 2019

Why in News?

  • Central government has notified changes in Apprenticeship Rules (1992) with an aim to increase skilled manpower in the country, and raise monetary compensation of apprentices.

Key Highlights:

  • As per the notified Apprenticeship (Amendment) Rules, 2019, the hiring limit of apprentices has been raised to 15 per cent of total strength of an establishment.
  • Minimum stipends have been doubled to between Rs 5,000 and Rs 9,000 per month.
  • The stipend for graduate apprentices or degree apprentices has been increased to Rs 9,000 per month.
  • For school pass outs, between Class 5th and 9th, the stipend has been increased to Rs 5,000 per month.
  • The Centre has also lowered the size limit of an establishment with a mandatory obligation to engage apprentices on an optional basis from 40 to 30, and reduced the size-limit of an establishment wanting to engage apprentices from 6 to 4.

Data:

  • In India, less than 0.1% of the employed workforce or just 0.3 million people are apprentices.
  • In comparison, the UK has 1.5% or 0.5 million, China has 2.5% or 20 million, and Germany has 5% or 2.5 million apprentices.

Significance:

  • The new rules will allow smaller companies to hire more trainees and give more youths an opportunity to get into the apprenticeship fold.
  • Though it will add to the cost of firms, the government believes apprenticeship is one of the most sustainable models globally for skill training as it allows the youth to earn while they learn.

GOVERNMENT TO SUPPORT INDIA’S IT INDUSTRY

Why in News?

  • Union Minister of Commerce & Industry and Railways, held a meeting with senior managers of IT companies in New Delhi

IT Industry Challenges:

  • India’s IT industry contributed 7.7% to the country’s GDP in FY 2017 and is expected to contribute 10% of India’s GDP by 2025.
  • The United States account for 2/3rds of India’s IT services exports.
  • India is the largest exporter of IT services in the world and exports dominate the Indian IT industry and constitutes about 79% of the total revenue of the industry.
  • India’s IT service sector is now gearing up to be the digital partner of intelligent automation like smart algorithms, bots and AI tools, which are fast becoming a part of every industry and an increasingly digital world.

    Challenges and support:

  • The representatives of the companies informed that although the Chinese IT services market is the third largest in the world India’s investments and business have not been able to grow in China.
  • This is due to various non-tariff barriers and challenges faced by Indian companies to set up their entity in China. Market access issues that create hurdles for Indian companies to open their business in China was also discussed.
  • Government of India will give all support for the global growth of India’s flagship industry and will make all efforts to facilitate the IT service industry and for that it is ready to engage with China and also Japan and Korea
  • Commerce and Industry Minister urged India’s IT services companies to explore other markets and not be inhibited in operating in countries that are non-English speaking.

INDIA’S R&D EXPENDITURE ECO-SYSTEM REPORT

Why in News?

  • A special session was held to discuss India’s Research and Development (R&D) expenditure eco-system report during the Global launch of Global Innovation Index (GII) – 2019 in New Delhi. The report has been compiled by Economic Advisory Council to the Prime Minister (PMEAC).

Highlights:

  • Investments in R&D are key inputs in economic growth. The impact of this is proven on productivity, exports, employment and capital formation.
  • India’s investment in R&D is a fraction of India’s GDP. It has remained constant at around 0.6% to 0.7% of India’s GDP.
  • This is below the expenditure of countries like the US (2.8), China (2.1), Israel (4.3) and Korea (4.2). Government expenditure, almost entirely the Central Government, is the driving force of R&D in India which is in contrast to the advanced countries where private sector is the dominant and driving force of R&D spend.
  • The report is to address the data gaps in compiling R&D data so that up to date data on R&D is available in order to reflect India’s true rank globally.
  • To examine expenditure trends in various sector and their short coming.
  • To lay down the road map for achieving the desire target of R&D spend by the year 2022.

Recommendations:

  • There is a need for greater participation of State Governments and private sector in overall R&D spending in India especially in application-oriented research and technology development.
  • The growth in R&D expenditure should be commensurate with the growth of GDP and should reach at least two percent of GDP by 2022.

NATIONAL MANUFACTURING COMPETITIVENESS PROGRAMME

Why in News?

  • National Manufacturing Competitiveness Programme (NMCP) aima to support the Micro, Small and Medium Enterprises (MSMEs) in their endeavor to become competitive.

Objectives:

  • The objective of NMCP is to develop global competitiveness among Indian MSMEs.
  • This programme targets at enhancing the entire value chain of the MSME sector through the following components:
  • Lean Manufacturing Competitiveness Scheme for MSMEs;
  • Promotion of Information & Communication Tools (ICT) in MSME sector;
  • Technology and Quality Up gradation Support to MSMEs;
  • Design Clinics scheme for MSMEs;
  • Enabling Manufacturing Sector to be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QTT);
  • Marketing Assistance and Technology Up gradation Scheme for MSMEs;
  • National campaign for building awareness on Intellectual Property Rights (IPR);
  • Support for Entrepreneurial and Managerial Development of SMEs through Incubators.
  • Bar Code under Market Development Assistance (MDA) scheme.

FOOD PROCESSING INDUSTRY

Context:

  • World   Food   India   2019   will   be   the   biggest   gathering   of   all   global   and   domestic stakeholders in Food Processing Sector.

World Food India:

  • The government initiated biennial event- World Food India to promote food processing sector at global level.
  • WFI 2019 will be held from 1-4th November 2019 in New Delhi and will position India as Food Processing Destination of the World.
  • The tagline of the event will be “Forging Partnerships for Growth”.

 

Why there is need to focus on Food Processing Industry:

  • India produces more fruits & vegetables in comparison to food grains. There is huge loss of Fruits and Vegetable due to perishable nature of it.
  • As   per   APEDA   (Agricultural   and   Processed   Food   Products   Export   Development Authority),  India  loses  Rs.  13,000  to  15,000  Crore  every  year  on  waste  of  fruits  and vegetables.
  • Non availibity of Storage facility is issue, only 2% of the perishable produce has that Facility.

Scope for Food Processing Industry:

  • Due to Increase in Standard living of people– there is demand for quality food , Packed food.
  • Packaging increases shelf life of food.
  • farmers also shifting production towards horticultural crops to cash in on growing demand of packaged food.
  • food, it can be customized to suit the nutritional requirements of groups such as the elderly, pregnant women, infants, young children and athletes.
  • Food processing industry is sun rise industry.
  • Indian  Food  Processing  Industry  has  grown  tremendously  recording  11%  growth  rate, which is twice the pace of Global Industry.

Global Market:

  • Global Food processing industry market valued around USD 3.4 trillion.
  • Only  6  percent  of  processed  foods  are  traded  across  borders  compared  to  16  percent  of major bulk agricultural commodities.
  • There is room for India to capture this space in international market.

Issues in Food Processing Industry:

  • Productivity of Food product is quite low compared to international standard. Supply Chain Issue – Backward and Forward Linkage Gap.
  • Certification infrastructure gap.

Government Initiative:

  • The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastage, increasing farmers income and creating employment opportunities particularly in rural sector.

NEED FOR INDUSTRIAL POLICY IN INDIA

Why in News:

  • The economic developments in the recent times in India demand a dedicated industrial policy to boost manufacturing.
  • In this backdrop, here is an overview of the inevitable role played by industrial policies elsewhere and the need for India to have one.

Why is manufacturing significant?

  • No major country has managed to reduce poverty or sustain growth without manufacturing- driven economic growth.
  • This is primarily because productivity levels in manufacturing sector are much higher than in either agriculture or services.
  • Manufacturing is a key engine of economic growth because it – offers economies of scale
  • embodies technological progress
  • generates forward and backward linkages that create positive spill-over effects in the economy

How is it approached elsewhere?

  • In the U.S. and Europe, the approach towards manufacturing shifted after the 2008 financial crisis.
  • Even the erstwhile proponents of neo-liberal policies started strategic government efforts to revive their industrial sectors.
  • They, notably, defied in principle their own prescriptions for free markets and trade. The European Union too identified sector-specific initiatives to various industries.
  • The United Nations Conference on Trade and Development (UNCTAD) finds that over 100 countries have, within the last decade, articulated industrial policies.

What is the case with India?

  • India still does not have in place a dedicated manufacturing policy.
  • Programmes as “Make in India” focusses on increasing foreign direct investment and ease of doing business.
  • While important, they may not constitute an industrial policy per se.
  • The contribution of manufacturing to GDP in 2017 was only about 16%. This signals a stagnation since the economic reforms began in 1991.
  • Significantly, this is in sharp contrast with the major Asian economies.
  • E.g. Malaysia roughly tripled its share of manufacturing in GDP to 24%, Thailand’s share
  • increased from 13% to 33% (1960-2014).
  • In contrast, in India, manufacturing has never been the leading sector other than during the Second and Third Plan periods.

How does an industrial policy help?

  • It is widely agreed that government intervention is crucial in the case of market failures which may include –
  • Deficiencies in capital markets, usually as a result of information asymmetries Lack of adequate investments inhibiting exploitation of scale economies
  • Imperfect information with respect to firm-level investments in learning and training
  • Lack of information and coordination between technologically interdependent investments Given the present economic situation in India, these are good reasons why an economy- wide planning mechanism is needed.
  • However, the Indian state should shift away from the “command and control” approach
  • that was the case in pre-1991 days.

Why is an industrial policy crucial for India now?

  • Investments – There is the need to coordinate complementary investments.
  • The East Asian States largely managed this role of industrial policy successfully.
  • This is essential especially when there are significant economies of scale and capital market imperfections.
  • While preventing coordination failures on the one hand, it is also essential to avoid competing investments in a capital-scarce environment.
  • As, excess capacity leads to price wars, thereby adversely affecting profits of firms.
  • These, in turn, may lead to bankruptcy of firms or slowing down investment, both happening often in India (E.g. the aviation sector.)
  • Even worse, price wars in the telecom sector in India have slowed profits (even caused losses).
  • This hampers investment in mobile/Internet coverage of rural India where access to mobile phones and broadband Internet needs rapid expansion.
  • Human capital – Industrial policies are needed to address externalities such as subsidies for industrial training.
  • In fact, industrial policy was reinforced by state investments in human capital in most East Asian countries.
  • General academic as well as vocational education/training was aligned with the industrial policy.
  • However, a lack of human capital has been a major constraint upon India in attracting foreign investment.
  • Organising – The state can play the role of organiser of domestic firms into cartels in their negotiations with foreign firms or governments.
  • This role of government is particularly relevant in the 21st century after the big business revolution of the 1990s.
  • As, post 1990 is marked with mega-mergers and acquisitions among transnational corporations.
  • Notably, a key objective of China’s industrial policies since the 1990s has been to support the growth of such firms.
  • E.g. Lenovo computers, Haier home appliances, and mega-firms making mobile phones Production capacity – In India, the medium/middle scale enterprises are largely missing in the overall share, a shortfall of failure of industrial strategy.
  • This was more because of reservation of products exclusively for production in the small- scale and cottage industries (SSI) sector.
  • Large firms were largely excluded from India’s 1956 Industrial Policy Resolution onwards.
  • E.g. by the end of the 1980s, 836 product groups were in the “reserved” category produced
  • only by SSIs, which encouraged informal enterprises.
  • In 2005, there were still 500 products in this category, 15 years after the economic reforms were launched.
  • Thereafter the reservation of products of small firms was cut sharply to 16 products.
  • But by then, small scale and informality had gotten entrenched in Indian manufacturing.
  • In this context, an industrial policy should balance between the industrial capacity installed and the production efficiency/capacity.
  • Choosing too small a scale of capacity can mean a 30-50% reduction in production capacity.
  • Structural change – In a fast-changing market, losing firms will block structural changes as the above that are economically beneficial but make their own assets worthless.
  • East Asian governments prevented such firms from undermining the structural changes. Moves such as orderly capacity-scrapping between competing firms and retraining programmes to limit such resistance were taken.
  • An industrial policy in place in India could facilitate the process when structural change is needed. Jobs – The share of manufacturing in total employment fell from 12.8% to 11.5% over 2012 to 2016.
  • A well drafted industrial policy can go a long way in creating jobs in the economy.
  • Exports – Increasing export of manufactures will need to be another rationale for an industrial policy.

What does the East Asia industrial experience show?

  • The growth in manufacturing in East Asian countries was primarily founded upon export- oriented manufacturing.
  • They employed the surplus labour released by agriculture, thus raising wages and reducing poverty rapidly.
  • This outcome came from a conscious, deliberately planned strategy (with Five Year Plans). The growing participation of East Asian countries in global value chains (GVCs) was a natural corollary to the industrial policy.
  • They had graduated beyond simple, manufactured consumer goods to more technology- and skill-intensive manufactures for export.
  • In contrast, India has been practically left out of GVCs.

What does India’s own IT success imply?

  • The government’s role had been crucial in the success story of India’s IT industry.
  • The government invested in creating high-speed Internet connectivity for IT software parks. This significantly enabled integration of the Indian IT industry into the U.S. market.
  • Also, the government allowed the IT industry to import duty-free both hardware and software.
  • Moreover, the IT industry was able to function under the Shops and Establishment Act.
  • So they were not subject to the 45 laws relating to labour and the regulatory burden these impose.
  • Importantly, the IT sector had the benefit of low-cost, high-value human capital created by public investments earlier in technical education.
  • These concerted measures offer insights to the potential for industrial policy and the critical State’s role in manufacturing growth in India.
  • The government has to replicate the approach now, suited to the manufacturing sector, with an industrial policy.

Cement prices stay steady at Rs. 334 per bag in March

All India prices of cement remained steady at Rs. 334 per bag during March despite increases in southern and eastern regions.

South and eastern regions witnessed a price hike of Rs. 5 per bag while prices declined by Rs. 1-11 per bag in north, central and west. Since January, cement prices in the south had increased by Rs. 45 per bag.

The Cement Industry in India is one of the basic industries in India. The organised production of cement in India was started in 1904 in Madras (Now Chennai). It is basically weight-losing industry. So, the localization of the industry is in area of raw materials. Its major raw materials are coal, limestone and gypsum. Since the largest reserves of limestone are in Madhya Pradesh, the maximum development of this industry has been in this state. Recently, sea shells, sludge obtained from chemical fertilizers and slag obtained from iron and steel industry are also used as raw materials besides limestone.

India’s Cement Industry is the second largest producer of cement in world. It plays an important role in development of a country and contributes very high in Indian GDP. A significant factor which aids the growth of this sector is the ready availability of the raw materials for making cement, such as limestone and coal.

8 Core Industries

  • Core industry can be defined as the main industry. In most countries, there is a particular industry that seems to be the backbone of all other industries and it qualifies to be the core industry.
  • In India, there are eight core sectors comprising of
    1. Refinery products (28.04%)
    2. Electricity (19.85%)
    3. Steel (17.92%)
    4. Coal (10.33%)
    5. Crude oil (8.98%)
    6. Natural gas (6.88%)
    7. Cement (5.37%)
    8. Fertilisers (2.63%)
  • These eight Core Industries comprise nearly27%of the weight of items included in the Index of Industrial Production (IIP), which measures factory output.
  • Index of Eight Core Industries is released by Ministry of Commerce and Industry.

GST a poll issue in MSME hubs

The adverse impact of the rollout of the Goods and Services Tax (GST) regime in July 2017 on the micro, small and medium enterprises (MSMEs) has become a key issue in the election season.

The 18% GST on job-working engineering units had pushed several micro and small industries out of business. The units need to pay the tax every month. But they get payments from larger units for the job work after three or four months.

GST

  • The Goods and Services Tax bill, touted to be India’s biggest tax reform, will simplify the current system of taxation. The bill will convert the country into a unified market by replacing all indirect taxes with one tax.
  • Brining all tax under single umbrella, Various Taxes like Excise Duty, Value Added Tax (VAT), Central Sales Tax, Luxury Test and Entry Tax, etc. will all be included under a single roof by GST.
  • The very important Feature of GST bill is that instead of collection of Taxes at every step, it will be collected in one step. Goods and Services will be treated equally and will be taxed similarly.

Benefits of GST

  • Subsume all indirect taxes at the centre and the state level.
  • One-Country-One-Tax.
  • Reduce the cascading effect of taxes on taxes.
  • Increase productivity and transparency, increase tax-GDP ratio.
  • Reduce/Eliminate tax evasion and corruption.

Status of MSMEs?

  • Unorganised MSMEs have grown faster than organised peers because of lower cost structures stemming from tax avoidance, and not having to pay social security benefits to employees and excise duty (if turnover is less than Rs 1.5 crore).
  • GST is expected to provide a boost to this segment because of lower tax incidence.
  • Last fiscal, MSMEs were expected to record on-year top line growth of 14 to 16%.
  • The impact of demonetisation has been severe in the second half and they would have closed the year with an increase of just 6 to 8%.
  • As the effects of demonetisation fade, growth will pick up in the current fiscal and “Make in India” is promising in leading this sector.
  • Though growth is expected to be strong this fiscal, cheaper imports, especially from China, remain a challenge.

Impacts of GST on MSME?

  • Organised players with the ability to hold their price-lines, or pass on any increase in cost to customers, will be able to maintain or improve profit margins.
  • Organised players will benefit and record moderate growth given the thrust on digitisation and lower tax rates under GST.
  • Unorganised players catering mostly to the non-OEM (Original equipment Manufacturer) replacement market will be forced to move into the organised domain.
  • GST will have a marginally negative impact because of higher tax rates expected.
  • A unified market would create more competition in an already crowded and price-sensitive arena with a large number of unorganised players.

Assam Oil Hub To Southeast Asia

In News

  • With the Centre planning to raise the capacity of the four Assam refineries from the existing 7 million tonnes per annum (MTPA) to 16 MTPA approximately in the next 10 years, the state is also set to become the petroleum hub for Southeast Asia.

About:

  • The government has drawn up a plan to raise the capacity of Assam’s four refineries to 16 MTPA. With more quantity of crude oil to be pumped into the state from Nigeria and West Africa, Assam will become India’s petroleum hub for the entire Southeast Asian region.
  • The Centre, in its Hydrocrabon Vision 2030 for the Northeast, has envisaged investing Rs 1.30 lakh crore in the petroleum sector in the region in the next 14 years, of which Rs 80,000 crore will be invested in Assam alone. In the current financial year, we are investing about Rs 6,000 crore in Assam.
  • The Hydrocarbon Vision 2030 for Northeast also envisages to increase the storage capacity for petroleum products and LPG within the region, for which a network of 5,000 km of pipelines was also in the offing.
  • While Assam’s crude oil reserves being limited, the requirement of the four refineries – Digboi, Numaligarh, Guwahati and Bongaigaon – will be met through the import from Nigeria and West Africa. The imported crude oil will be pumped into these refineries through the Paradip-Haldia-Barauni-Guwahati pipeline.
  • The petroleum ministry agreed to the Assam government’s proposal for allotment of more natural gas to two existing power plants of the state which are currently undergoing major machinery replacement.

India to Reduce Dependence on Imports of API

In News:

India is taking several steps to reduce its dependence on imports of active pharmaceutical ingredients (APIs), a commonly used raw material for drugs, by manufacturing it within the country.

Explained:

  • Domestic drug manufacturers, which mostly import APIs from China, has seen a sharp spike in the prices of these raw materials after the Chinese government shut down many API producing plants owing to environmental concerns.
  • This had prompted pharmaceutical lobby group to demand for hike in prices of medicines that are currently under the price control.
  • The fourth international conference on pharmaceuticals and medical devices-‘India Pharma 2019 & India Medical Devices 2019’
  • Currently, domestic pharmaceutical industry is valued at over $34 billion with half of the earnings coming from exports. India is also one of the leading producers of generic drugs in the world.

What is API?

  • The aforementioned API is the primary ingredient. Other ingredients are commonly known as “excipients” and these substances are always required to be biologically safe, often making up a variable fraction of the drug product.
  • Active pharmaceutical ingredients or APIs can be defined as the chemicals used to manufacture pharmaceutical drugs.
  • The active ingredient (AI) is the substance or substances that are biologically active within the drug and is the specific component responsible for the desired effect it has on the individual taking it. Any drug or medication is composed of two components. The first is the API – which is the central ingredient.
  • The second is known as the excipient, which is the inactive substance that serves as the vehicle for the API itself.
  • If the drug is in a syrup form, then the excipient is the liquid that has been used to make it as such.

Cement Industry is happy as MFN status to Pakistan Withdrawn

In News:

  • Cement manufacturers are happy after India decided to withdraw most favoured nation (MFN) status to Pakistan and also slap 200% duty on imports from that country in the wake of the Pulwama terror attack.

Explained:

  • This move would impact USD 488.5 million worth of goods that Pakistan exports to India.
  • India granted the MFN status to Pakistan way back in in 1996. The MFN status was accorded under World Trade Organization’s (WTO) General Agreement on Tariffs and Trade (GATT).
  • One of the major items of import from Pakistan is cement and the Centre’s action would erase the price advantage that the neighbouring country had enjoyed for quite some years.
  • Cement industry sources had estimated imports from Pakistan in the range of 40,000 to 50,000 tonnes annually. With Islamabad enjoying the MFN status (now withdrawn), Pakistani cement enjoyed a price advantage of almost Rs. 100 for a bag of 50 kg.
  • According to top industry sources, Thoothukudi and Kochi ports have been the access points for import of cement from Pakistan.
  • Compared with the India-made cement, it ranks very low in quality
  • And also, allowing import of cement from Pakistan at a subsidized rate when the Indian firms have built up huge capacity, goes against the Make-in-India concept
  • A combination of factors, including imports from Pakistan, has seen a general sluggishness in cement demand. Not surprisingly, the demand sluggishness, especially in the south, has hurt the cause of the cement industry.
  • Concerns over cement imports from Pakistan had often be articulated to the authorities in the past from competition as well security perspective. The economic action against Islamabad in the wake of terrorist attack in Pulwama, would address the twin concerns of security and quality of cement imports from that country

Most Favoured Nation (MFN):

According to WTO, Most-favoured-nation (MFN) status is all about treating other people equally. Under the WTO agreements, countries cannot normally discriminate between their trading partners. In the WTO, MFN Status means non-discrimination i.e. treating virtually everyone equally. As per WTO website, “Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.” – This principle is known as most-favoured-nation (MFN) treatment, according to WTO.

Disinvestment Proceeds touch Rs. 53,558 Crore

In News:

  • The government’s disinvestment proceeds have touched Rs 53,558 crore so far in the current fiscal, as against the full year budget target of Rs 80,000 crore.

Explained:

  • As much as Rs 10,000 crore came in from Bharat-22 ETF and, another Rs 5,379 crore from the sale of Specified Undertaking of Unit Trust of India (SUUTI) stake in Axis Bank.
  • The government has sold as much as 3 per cent stake in Axis Bank held via SUUTI through an offer for sale (OFS) and raised about Rs 5,300 crore.
  • Besides, the additional offering or Bharat-22 Exchange Traded Fund (ETF) garnered about Rs 10,000 crore to the exchequer.
  • The issue got bids worth Rs 49,528 crore, with foreign investors pouring in Rs 38,000 crore and retail buyers Rs 2,000 crore. Share buyback by Indian Oil Corporation (IOC) fetched Rs 2,647 crore to the disinvestment kitty, while BHEL, NHPC and Cochin Shipyard garnered Rs 992 crore, Rs 398 crore and Rs 137 crore, respectively.
  • NLC share buyback garnered Rs 990 crore, while NALCO and KIOCL got Rs 260 crore and Rs 205 crore, respectively. Besides, strategic disinvestment of HSCC fetched Rs 285 crore. OFS of Coal India earned Rs 5,218 crore while sale of units of CPSE ETF garnered Rs 17,000 crore. Besides, sale of Bharat-22 ETF has fetched Rs 8,325 crore in June 2018.
  • The initial public offer (IPO) of PSUs RITES, IRCON, MIDHANI and Garden Reach Shipbuilders, fetched over Rs 1,700 crore. The government has fixed disinvestment target of Rs 80,000 crore for the current fiscal ending March. For next fiscal, the target has been set at Rs 90,000 crore.

Bharat ETF:

  • The central public sector enterprises (CPSEs) that are part of the ETF include ONGC, IOC, SBI, BPCL, Coal India and Nalco. Other constituents include Bharat Electronics, Engineers India, NBCC, NTPC, NHPC, SJVNL, GAIL, PGCIL and NLC India. Only three public sector banks — SBI, Indian Bank and Bank of Baroda — figure in the Bharat-22 index.

DGTR to Revisit Anti-Dumping Rules

In News:

  • Amid mounting complaints from the domestic steel industry after Chinese steel product imports surged 8 per cent in the 12 months to March 2018, despite nearly 80 per cent of these products being covered under anti-dumping duty, the Department of Commerce is attempting a course correction.

Explained:

  • The concerns raised by the domestic steel lobby focus largely on the Chinese non-alloy steel being imported in the country that is presumably being misdeclared as alloy steel, which otherwise is value-added and expensive steel.
  • The Directorate General of Trade Remedies (DGTR) in the Department — entrusted with using trade remedial methods under relevant framework of WTO arrangements — is scrambling to commission a study for an impact assessment of India’s anti-dumping measures and is learnt to have approached the Delhi-based Indian Institute of Foreign Trade for this study.
  • The fresh study commissioned by the DGTR in the steel sector comes at a time when despite an across-the-board tariff hiking spree by the NDA government — covering over 400 items ranging from apples and almonds to cell phone parts and solar panels during the last 24 months — there is sobering realisation that pointed interventions such as anti-dumping duties in sectors such as steel and solar panels have largely failed in achieving results.
  • The complaints by the steel industry, which have been included as a submission before the parliamentary standing committee on commerce, cite the non-review of the anti-dumping duty in the backdrop of the fact that the raw material prices have gone up multiple times over the last 24 months.
  • Even as the cost of domestic steel production, based on which the anti-dumping duty reference price mechanisms have been formulated, are now completely different, nothing has been done to revise or rationalise the anti-dumping duty imposed for some time now, the industry has petitioned.
  • At the time of notification of existing anti-dumping duties in the steel sector, the DGAD had then considered the international prices vis-à-vis the prevailing domestic prices at that time and the reference price had been arrived at accordingly. Over time, steel prices have appreciated globally.
  • Incidentally, the DGTR has initiated 888 investigations against imports from various countries so far, mainly pertaining to China, the EU, Republic of Korea, Chinese Taipei, Thailand, the US, Indonesia, Japan and Malaysia.
  • The DGTR, after completing the investigation, came to the conclusion that increased imports of solar cells, whether or not assembled in modules or panels into India, have caused “serious injury” and also “threaten to cause serious injury” to the domestic producers in India.
  • The DGTR recommended imposition of safeguard duty on imports of solar cells for two years vide final findings dated July 16, 2018. Imports from developing nations other than China and Malaysia were exempted from the Safeguard Duty up to certain limits.

Govt., to cut process time for Stake Sale in 35 CPSES

In News:

  • With 35 Central Public Sector Enterprises (CPSEs) being lined up for strategic sale, the Finance Ministry is planning to streamline processes to cut down the time for the outright sale of such state-owned companies.

Explained:

  • Taking from the example of the ongoing strategic sale of Pawan Hans (A mini ratna government of India enterprise), the Department of Investment and Public Asset Management (DIPAM) is keen that the long-drawn sale process of CPSEs be simplified so that more than one company could be taken up for the sell-off simultaneously.
  • Government is going to correct the procedure (for strategic sale). It is a bit long and long winding, which was okay initially as government had to take a lot of precautions. Now also government will take precaution, but now government has experience and understands how to go ahead.
  • NITI Aayog recently submitted to the DIPAM the fifth list of CPSEs, profitable as well as non-profitable, which can go in for a strategic sale. This takes the total number of CPSEs identified for strategic disinvestment to 35.
  • The companies which have been shortlisted for strategic sale include Air India, Air India subsidiary AIATSL, Dredging Corporation, BEML, Scooters India, Bharat Pumps Compressors, and Bhadrawati, Salem and Durgapur units of steel major SAIL.
  • The other CPSEs for which approvals are in place for outright sale include Hindustan Fluorocarbon, Hindustan Newsprint, HLL Life Care, Central Electronics, Bridge & Roof India, Nagarnar Steel plant of NMDC and units of Cement Corporation of India and ITDC

Policy on strategic disinvestment:

  • Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs upto 50 per cent or more, alongwith transfer of management control.
  • To be undertaken through a consultation process among different Ministries/Departments, including NITI Aayog.
  • NITI Aayog to identify CPSEs for strategic disinvestment and advice on the mode of sale, percentage of shares to be sold of the CPSE and method for valuation of the CPSE.
  • The Core Group of Secretaries on Disinvestment (CGD) to consider the recommendations of NITI Aayog to facilitate a decision by the Cabinet Committee on Economic Affairs (CCEA) on strategic disinvestment and to supervise/monitor the process of implementation.

Pawan Hans:

  • Helicopter services provider Pawan Hans is a joint venture between the government and ONGC. The government holds 51 per cent stake while state-owned ONGC owns the remaining 49 per cent shareholding. Pawan Hans has a fleet of 46 choppers.

Manufacturing PMI rises to 53.9 in January

In News:

  • The country’s manufacturing sector activity edged higher in January as companies continued to scale up production and employment, driven by the fastest rise in factory orders since December 2017, according to a monthly survey.

Explained:

  • The Nikkei India Manufacturing Purchasing Managers’ Index (PMI) increased from 53.2 in December to 53.9 in January, indicating stronger improvement in the health of the goods producing sector.
  • This is the 18th consecutive month that the manufacturing PMI remained above the 50-point mark. According to the survey, the increase in factory orders was the strongest seen in 13 months. Besides, favourable economic conditions, strengthening demand and sales growth also picked up in January.

What is Purchasing Managers’ Index (PMI)?

  • For India, the PMI Data is published by Japanese firm Nikkei but compiled and constructed by Markit Economics (for the US, it is the ISM). The variables used to construct India’s PMI for manufacturing sector are: Output, New Orders, Employment, Input Costs, Output Prices, Backlogs of Work, Export Orders, Quantity of Purchases, Suppliers‟ Delivery Times, Stocks of Purchases and Stocks of Finished Goods.
  • Similar variables are used for the construction of services PMI. A manufacturing PMI and a services PMI are prepared and published by the two.

What it means to Economy?

  • In terms of composition, we can say the PMI is a sentiment tracking index. As indicated earlier, an indicator of the economic health of the manufacturing sector, the Purchasing Managers’ Index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment
  • A reading over 50 on this survey-based index indicates expansion, anything below it reflects contraction.

How PMI is different from IIP?

  • The popular index that measures growth in the industrial sector as far as India is concerned is the CSO prepared Index of Industrial Production. IIP shows the change in production volume in major industrial subsectors like manufacturing, mining and electricity. Similarly, the IIP also gives use based (capital goods, consumer goods etc) trends in industrial production. It covers broader industrial sector compared to PMI.
  • But compared volume-based production indicator like the IIP, the PMI senses dynamic trends because of the variable it uses for the construction of the index.
  • For example, new orders under PMI show growth oriented positive trends and not just volume of past production that can be traced in an ordinary Index of Industrial Production. Inventory level shows recessionary or boom trends. Employment scenario is also sentimental indicator. Hence, the PMI is more dynamic compared to a standard industrial production index

Some other key Benefits than other Indicators:

  • Timeliness- Monthly publication with PMI data released in advance of comparable official economic data (IIP, GDP estimate, etc.)
  • Comparability- Standardised data collection across economies, allowing for direct comparisons
  • Factual-Based on responses to questions on actual business conditions, rather than opinion or confidence-based measurements
  • Extensive coverageMore than 20,000 companies surveyed monthly across over 30 major developed and emerging economies

Unemployment Data Based on Draft Report

NITI Aayog officials debunk media report of 6.1% Joblessness:

  • The government’s think tank NITI Aayog debunked claims that unemployment in 2017-18 was at a 45-year high. The NITI Aayog said the report of the National Sample Survey Office (NSSO), cited as the source for the report, was in fact a draft and not approved by the government.

Mirrors 1972:

  • According to the NSSO’s periodic labour force survey —the unemployment rate was 6.1% in 2017-18. The only year of comparable data when the unemployment rate was higher was in 1972-73. It was at 2.2% in 2011-12.
  • The NSSO report is a matter of much controversy, with the two external members of the National Statistical Commission citing the delay in its release as a major reason for their resignations.
  • The data reportedly showed that joblessness was higher in urban India (7.8%) than in rural India (5.3%). Within this, it stood at 17.4% for rural males and 13.6% for rural females. In urban India, joblessness was at 18.7% among males and a huge 27.2% among females.
  • Importantly, the data reportedly showed that the labour force participation rate (LFPR), the measure of people working or looking for jobs, declined from 39.5% in 2011-12 to 36.9% in 2017-18. This phenomenon — of unemployment rising while the LFPR dipped — is a cause for serious worry, explaining that it probably shows that people are simply giving up on finding jobs and have stopped seeking work.
  • National Sample Survey Office and its Functions
  • NSSO recently released data on unemployment in India. It was the 68th round of the Employment and Unemployment Situation among Major Religious Groups in India report.

Key findings of the survey: 

  • The unemployment rate in urban areas reduced from 4.5% in 2004-05 to 3.4% in 2011-12, the unemployment rate in urban areas reduced from 4.5% in 2004-05 to 3.4% in 2011-12.
  • According to the survey, which was conducted in 2011-12, the unemployment rate across all the religious groups in rural areas was on the lower side than those in urban areas for both males and females.
  • The most peculiar finding of the survey is that Christians which are supposed to be a better off community have the highest rate of unemployment in both rural (4.5%) and urban (5.9%) areas in 2011-12. The rate in urban areas for Christians stood at (8.6%) in 2004-05 while the rural rate stays constant.
  • While the unemployment rate in rural areas has decreased for Sikhs (from 3.5 to 1.3%) – now the lowest across all religious groups – it has slightly increased for Muslims (from 2.3 to 2.6%). At 3.3%, Hindus have the lowest unemployment rate in urban areas.
  • Self-employment is the major source of income for almost half the households, across all religious groups, in rural areas, followed by casual labour.
  • In urban areas, the proportion of households deriving major income from regular wage or salary earnings is the highest. Half the Muslim households in urban areas have self-employment as major source of income, the highest among all religions, while regular wage or salary earnings was the highest for Christians with 45.8 per cent households.

What does the Survey Indicate?

  • The survey confirms the apprehensions shown by many experts that India is facing rural distress. As survey clearly indicates that all religious groups registering an increase in unemployment in rural areas.
  • The report states that the unemployment rate is 1.7% in rural and 3.4% in urban areas. In its previous report of 2013, unemployment rate was 1.5% in rural and 4.8% in urban areas.

Why do Christians have largest unemployment rate?

  • Unemployment level in India is highest among those people who are richer and more educated. The reason is that poor people can’t afford to stay unemployed, and hence, opt for any kind of work, irrespective of the nature of the job. The better off have the capacity to be unemployed as they look for the right job. Christians are the most educated group, hence unemployment rate is higher among them
  • Among the persons of age 15 and above, the proportion of people who are not literates was the lowest for Christians. Also, the proportion of persons with educational level secondary and above is highest for Christians.

Key Terms:

NSS SURVEY

  • The quinquennial Employment and Unemployment surveys of National sample Survey (NSS) are the primary sources of data on various indicators of labour force at National and State levels. These are used for planning, policy formulation, and decision support and as input for further statistical exercises by various Government organizations, academicians, researchers and scholars. NSS surveys on employment and un-employment with large sample size of households have been conducted quinquennially from 27th. Round (October 1972 – September 1973) of NSS onwards. These surveys provide data on various indicators of labour force at National and State levels

How is unemployment measured in India?

  • The National Sample Survey Organization (NSSO) provides three different estimates of employment and unemployment based on different approaches / reference periods used to classify an individual’s activity status. These are the:
  • Usual status approach with a reference period of 365 days preceding the date of survey Current weekly status approach with a reference period of 7 days preceding the date of survey. Current daily status with each day of the 7 days preceding date of survey as the reference period.
  • In order to find out whether an individual is employed or unemployed it needs to be 1st determined whether h/she belongs to the ‘Labour Force’ or not, which in turn depends on the Activity Status of the individual during the chosen reference period.
  • Activity Status refers to the activity situation in which the individual is found during the reference period with respect to his participation in economic or non-economic activities.
  • The NSSO defines following 3 broad Activity Status i) Working (engaged in an economic activity) i.e. ‘Employed’ ii) Seeking or available for work i.e. ‘Unemployed’ iii) Neither seeking nor available for work. All those individuals having a broad activity status as i) or ii) above are classified as being in the Labour Force and those having activity status iii) are classified as outside the Labour Force. Thus labour force constitutes of both employed and unemployed. Labor force (also called work force) is the total number of people employed or seeking employment in a country or region. One is classified as ‘not in labour force’, if he or she was engaged in relatively longer period in any one of the non-gainful activities.
  • Unemployment rate is the percent of the labor force that is without work.
  • Unemployment rate = (Unemployed Workers / Total labor force) X 100
  • The NSSO collected employment data based on ‘usual status (UPS)’ only up to its 8 rounds.  However, since the beginning of the 27th round (1972-73), quinquennial(5-yearly) surveys were being conducted by NSSO to collect employment-unemployment data based on all the three approaches of UPS, CWS and CDS.

FMCG Sector to Clock Double – Digit Growth

In News:

  • According to the latest study by market research firm Nielsen, the FMCG industry is expected to grow between 11% and 12% in 2019, which is a tad lower than the 13.8% growth in 2018.

Explained:

  • Though, the growth is likely to be lower than that of the previous year, which saw the sector benefit from the overall health of the economy and lower inflation.  Incidentally, the FMCG industry growth in the fourth quarter of 2018 was quite buoyant at 15.9%
  • The growth in the current year will be primarily on the back of conducive macroeconomic environment, rural consumption and sustained benefits of GST regime and election impact, according to the study.
  • According to report, it suggests that the first half of the year (Jan.-Jun) will have decent double-digit growth, while industry growth in the second half will taper down to high single digits. Similar trends will be witnessed across the key super group of product categories viz Food, Personal Care & Home Care

FMCG:

  • Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 per cent of FMCG sales in India. Growing awareness, easier access and changing lifestyles have been the key growth drivers for the sector.
  • The urban segment (accounts for a revenue share of around 55 per cent) is the largest contributor to the overall revenue generated by the FMCG sector in India.
  • However, in the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India.
  • Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 per cent of total rural spending

Governments Efforts:

  • Number of mega food parks ready increased from 2 between 2008-14 to 13 between 2014-18.
  • Preservation and processing capacity increased from 308,000 during 2008-14 to 1.41 million during 2014-18.
  • The number of food labs increased from 31 during 2008-14 to 42 during 2014-18

Schemes:

  • SAMPADA
  • MEGA FOOD PARK SCHEME
  • AGRO PROCESSING CLUSTER SCHEME
  • INTEGRATED COLD CHAIN AND VALUE ADDITION INFRASTRUCTURE

India replaces Japan to Become Second-Largest Crude Steel Producer

In News:

  • India has replaced Japan as the world’s second-largest steel producing country, while China is the largest producer of crude steel, accounting for more than 51 percent of production, according to World Steel Association.

Explained:

  • The global steel body, in its latest report said, China’s crude steel output jumped 6.6 percent to 928.3 million tonnes in 2018 from 870.9 MT in 2017.
  • China’s share increased from 50.3 percent in 2017 to 51.3 percent in 2018. “India’s crude steel production in 2018 was at 106.5 MT, up 4.9 percent from 101.5 MT in 2017, meaning India has replaced Japan as the world’s second-largest steel producing country. Japan produced 104.3 MT in 2018, down 0.3 percent compared to 2017
  • Global crude steel production reached 1,808.6 MT in 2018 from 1,729.8 MT in 2017, a rise of 4.6 percent
  • Others in the top 10 steel producing countries include the U.S., at the fourth position as the country produced 86.7 MT of crude steel in 2018, South Korea (72.5 MT, fifth place), Russia (71.7 MT, sixth), Germany (42.4 MT, seventh), Turkey (37.3 MT, eight), Brazil (34.7 MT, ninth) and Iran (25 MT, tenth).
  • Among other countries, Italy produced5 MT of crude steel in 2018, France (15.4 MT) and Spain (14.3 MT), Ukraine (21.1 MT).

World Steel Association:

  • The World Steel Association (worldsteel) is a non-profit organisation with headquarters in Brussels, Belgium
  • The World Steel Association is one of the largest industry associations in the world. Its members represent around 85 percent of the world’s steel production, including over 160 steel producers with nine of the 10 largest steel companies, national and regional steel industry associations, and steel research institutes.

Indian Steel plants:

FDI Grew 18% in FY18

In News:

  • Foreign direct investment (FDI) during the previous fiscal grew 18 per cent to Rs 28.25 lakh crore, data from the Reserve Bank of India (RBI) shows.

Explained:

  • FDI increased by Rs 4,33,300 crore, including revaluation of past investments, during 2017-18 to reach Rs 28,24,600 crore in March 2018 at market value, according to RBI data on ‘Census on Foreign Liabilities and Assets of Indian Direct Investment Companies, 2017-18’.
  • The RBI said as many as 23,065 companies responded to the latest round of the census, of which, 20,732 firms had FDI or ODI (Overseas direct investment) in their balance sheet in March 2018. Overseas direct investment (ODI) by Indian companies has increased by 5 per cent to Rs 5.28 lakh crore. “FDI companies witnessed a substantial increase in other investment liabilities, largely due to the increase in trade credit,
  • The census showed that Mauritius continued to be the largest source of FDI in India (19.7 per cent) followed by the US, the UK, Singapore and Japan.In case of overseas investment by Indian companies, Singapore (17.5 per cent) was the major destination, followed by the Netherlands, Mauritius and the US. 

What Is FDI (Foreign Direct Investment)?

  • Foreign direct investment (FDI) is when a company owns another company in a different country. FDI is different from when companies simply put their money into assets in another country—what economists call portfolio investment.
  • With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology. A lot of economists really like FDI, especially when it’s flowing from rich countries into poorer countries. The idea is that when international companies come in, they can either shake up an existing industry, because they’re bringing competition for the domestic companies that already exist, or can create entirely new industries. FDI can also strengthen local economies by creating new jobs and boosting government tax revenues.

Lithium Ion GIGAFACTORY

In News:

  • State-owned Bharat Heavy Electricals Limited (BHEL), one of India’s largest power generation equipment manufacturers, is in talks with Libcoin consortium to build Indian government’s first lithium-ion gigafactory as part of “Make in India” programme.

Explained:

  • Libcoin is a consortium comprising Magnis Energy, Duggal Family Trust and Charge CCCV s(C4V) and has plans to build large lithium-ion battery gigafactories globally.
  • Development of the gigafactory would initially start with the construction of a 1-gigawatt hour lithium-ion battery plant, which would be scaled up to 30 GWh in due course, with this, India has finally taken steps into its energy security and clean energy commitment to the world.
  • This project will bring energy independence by replacing oil imports with abundant renewable. This project also includes “Made by India, for India”, with focus on core-cost components manufactured domestically. It will also create integrated manufacturing ecosystem resulting in self-reliance and lower cost.
  • India is one of the largest markets in the world for lithium-ion batteries and to potentially build one of the world’s largest lithium-ion battery gigafactories
  • Various Indian cities including Delhi have been struggling to cut down their pollution level for last several years and electric transportation has been considered as one of the viable approaches to cut down emission.
  • The number of electric cars in the world already hit million-mark last year and the International Energy Agency has projected almost 140 million electric cars globally by 2030, if countries meet Paris climate accord targets, in which India has already committed to actively participate.

Lithium Ion Battery:

  • Lithium, it’s the lightest metal on the periodic table, and the one most willing to donate its electrons (the most powerful reducing agent) — you really can’t find an element that’s more suitable for creating light weight, high energy density batteries.
  • From portable electronics like the smartphone in your pocket, to high performance electric cars like the Tesla Model S, lithium ion batteries are currently the most promising chemistry on the market for meeting our renewable energy storage needs. Let’s take a closer look at lithium ion batteries.

Advantages of Lithium Ion bateeries:

  • High energy density – potential for yet higher capacities.
  • Does not need prolonged priming when new. One regular charge is all that’s needed.
  • Relatively low self-discharge – self-discharge is less than half that of nickel-based batteries.
  • Low Maintenance – no periodic discharge is needed; there is no memory.
  • Specialty cells can provide very high current to applications such as power tools.

Govt. Plans Technology Centres for MSME

In News:

  • The Ministry of Micro, Small and Medium Enterprises (MSME) will develop 20 technology centres, along with extension centres across the country in another 3-5 years, according to the ministry

Explained:

  • These Centres would come up at an investment of Rs. 200 crore each. There are plans to have about 100 extension centers, each at an investment of Rs. 20 crores. The aim is to ensure that maximum [number of] units are benefited from the facilities
  • As many as 18 tool rooms are operational in the country and 15 more are in different stages of development or have started functioning. These tool rooms are specific to electronics, general engineering and high-end engineering sectors.
  • They have modern technology machinery and testing equipment and the services are offered to industries at a competitive price.
  • With the development of technologies such as virtual reality and augmented reality, the manufacturing units in the MSME sector need to have access to these.
  • The Ministry is creating trained manpower in virtual reality through the National Small Industries Corporation (NSIC). It has also developed training modules that use virtual reality and these will be launched across the country through the NSIC

NSIC:

  • National Small Industries Corporation (NSIC), is an ISO 9001-2015 certified Government of India Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME). NSIC has been working to promote, aid and foster the growth of micro, small and medium enterprises in the country.
  • NSIC operates through countrywide network of offices and Technical Centres in the Country. In addition, NSIC has set up Training cum Incubation Centre managed by professional manpower.

Panel Pulls up Govt. for Diverting Coal Cess

In News:

  • The 42nd standing committee on energy in its report on stressed gas-based power plants tabled in Parliament January 2019 has pulled up the government for diverting coal cess to compensate States for revenue loss post-GST, and recommended financial support to the stressed gas-based power projects in the country from National Clean Energy Fund (NCEF).

What is NCEF (National Clean Energy Fund)?

  • The NCEF was created out of cess on coal at Rs. 400 per tonne to provide financial support to clean energy initiatives and an Inter-Ministerial Group chaired by the Finance Secretary was constituted to approve the project/schemes eligible for financing under NCEF. The Fund is designed as a non-lapsable fund under Public Accounts and with its secretariat in Plan Finance II Division, Department of Expenditure, Ministry of Finance.

Issue:

  • The coal cess collected from 2010-11 to 2017-18 amounts to Rs. 86,440.21 crore, out of which only Rs. 29,645.29 crore has actually been transferred to the NCEF. The amount financed from NCEF for projects is only Rs. 15,911.49 crore, or only about 18% of the total amount collected as coal cess.
  • The Committee stated in its report that the fund should be used for its intended purpose i.e. to support clean energy initiatives and it should not be diverted to compensate GST losses.
  • According to report, diversion of this fund to unrelated activities reflects poorly on our commitment towards cleaner environment and shows government’s apathy towards clean energy projects. Since it is levied on coal as that is a polluting fuel, the amount collected should be used to promote cleaner fuel.
  • It also recommended that financial support be extended to gas-based power projects from the NCEF.

Scenario in gas-based power plant:

  • Out of India’s total installed capacity of about 345 GW of power, gas-based capacity is about 25 GW or 7.2% of the total. However, its share in terms of generation is only 3.8% as 14,305.30 MW of gas-based capacity is stranded due to non-availability of domestic gas and unaffordability of imported gas. The consequence is that a large amount of assets in this sector have turned ‘non-performing’ or ‘unproductive’It is high time to understand the real benefits of gas-based projects which can be used as peak-based plants as also for ancillary services. As demand for energy is picking up due to government’s efforts in electrifying all households, revival of gas-based plants will help provide clean energy.”
  • The revival will also help all these plants service outstanding debt of Rs. 50,000 crores with banks

Industrial Growth Falls to 17-Month Low

In News:

  • Industrial output growth dropped to a 17-month low of 0.5 percent in November on account of contraction in manufacturing sector, particularly consumer and capital goods.

Explained:

  • Factory output as measured in terms of the Index of Industrial Production (IIP) had grown by 8.5% in November 2017, as per data released by the Central Statistics Office (CSO)
  • The previous low was in June 2017, when IIP growth contracted by 0.3 per cent. The growth for October 2018 was revised upwards to 8.4 per cent from 8.1 per cent.
  • During the April-November period, industrial output grew 5 per cent as compared to 3.2 per cent in the same period of the previous fiscal.
  • The manufacturing sector, which constitutes 77.63 per cent of the index, recorded a contraction of 0.4 per cent in November as against a growth of 10.4 per cent a year ago.

Index of industrial production:

  • Index of Industrial Production (IIP) measures the quantum of changes in the industrial production in an economy and captures the general level of industrial activity in the country.
  • It is a composite indicator expressed in terms of an index number which measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to the base period.
  • The base year is always given a value of 100. The current base year for the IIP series in India is 2011-12. So, if the current IIP reads as 116 it means that there has been 16% growth compared to the base year. IIP is a short-term indicator of industrial growth till the results from Annual Survey of Industries and National Accounts Statistics are available. However, IIP is considered to be one of the lead indicators for short-term economic analysis because of its strong relationship with economic fluctuations in the rest of economy. Most of services, like transport, storage, communication, real estate, insurance and banking are industry dependent and are considerably influenced by industrial performance. Index of Industrial Production is compiled and published every month by Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation with a time lag of six weeks from the reference month. i.e., at the time of release of IIP data, quick estimates for the relevant month along with revised and final indices of previous two months respectively, (on the basis of updated production data) are released.

Private Consumption, A $6 Trillion Opportunity

In News:

  • Domestic private consumption that accounts for a major portion of India’s gross domestic product (GDP) is expected to develop into a $6 trillion growth opportunity that would make India the world’s third-largest economy by 2030, says a latest study by the World Economic Forum (WEF).

Background:

  • Currently it is at $1.5 trillion. The potential, however, offers both challenges and opportunities as India would have to address critical societal issues, including skill development and employment of the future workforce, socio-economic inclusion of rural India and creating a healthy and sustainable future for its citizens
  • With an annual GDP growth rate of 7.5%, India is currently the world’s sixth-largest economy.
  • By 2030, domestic private consumption, which accounts for 60% of the country’s GDP, is expected to develop into a $6 trillion growth opportunity,” said a report titled Future of Consumption in Fast-Growth Consumer Market – India by the WEF.
  • If realized, this would make India’s consumer market, the third-largest in the world, behind the U.S. and China. According to the WEF, the future of consumption in India in 2030 is anchored in rising incomes and a broad-based pattern of growth and benefit sharing.
  • It believes that the growth of the middle class would lift nearly 25 million households out of poverty and further, India would have 700 million millennial and Gen Z consumers (Most of Generation Z have used the Internet since a young age and are comfortable with technology and social media), who have grown up in a more open and confident country.
  • The study, however, added that the potential would only materialize if business and policy-makers pursue an inclusive approach towards the economic and consumption growth.

Study identified three critical societal challenges that need to be addressed:

  • According to the study, with nearly 10-12 million working-age people expected to emerge in India over the next decade, the country faces a huge challenge in providing the workforce with the right skills. More than one-half of Indian workers will require reskilling by 2022 to meet the talent demands of the future
  • Second, India will have to manage socio-economic inclusion of rural India as, by 2030, 40% of Indians will be urban residents.
  • Physical connectivity, digital connectivity and financial inclusion income is constraining the spending and well-being of rural dwellers, and these ‘access-barriers’ need to be addressed to ensure social and economic inclusion in India over the next decade.
  • Finally, business and policy-makers will have to take the initiative on improving health and liveability for India’s citizens by providing them with access to affordable healthcare, promoting sustainable development, and seeking solutions to urban congestion.

Panel asks Government to ease norms for Cargo movement, Improve Logistics sector

In News:

  • Bibek Debroy-led Logistics Development Committee has suggested creation of an independent logistics department within commerce ministry entrusted with the responsibility to develop a national logistics plan with a long-term perspective (five to 10 year) and yearly operational plans with constant review and monitoring.

Explained:

  • Government must reduce rail freight tariff structures on select pilot routes, introduce one nation, one permit, one tax system and incentivize trucking industry besides introducing a new institutional framework in order to improve India’s logistics sector which in turn will help improve the ease of doing business in the country according high-level committee
  • Comprehensive recommendations are a part of the committee’s report submitted to Prime Minister on a roadmap to make India one of the most efficient and effective places for doing trade in a time bound manner. The committee has laid out an action plan for all related ministries with time-lines for better monitoring the progress.
  • Outlining a twin-pronged strategy to give a boost to India’s logistic sector, the committee has suggested policy changes at the border as well as behind the border of trade to fasten movement of cargo in the country
  • Rail freight tariff structure (both slabs and absolute tariff rates) be reduced and rationalised at least on select pilot routes like Delhi-JNPT, Delhi-Mundra, etc and facilitate running of time-tabled freight trains for some select pilot rain routes to provide trade superior rail transport services and arrest the fall in its freight modal mix
  • Outlining the need for supporting the truck industry, the committee has suggested that government amend the existing regulations to make road transport experience seamless and efficient and incentivise trucking industry to move towards formal and organised operators. “Introduce the one nation, one permit, one tax system and amend the provisions of the Motor Transport Workers Act to incentivise trucking industry to increase its scale and size.
  • Highlighting the challenges pertaining to trade facilitation at the border, the committee has suggested doing away with physical examination, to be resorted only in exceptional cases, and shift towards fully facilitated ‘trust-based’ clearance process.
  • Create a fully automated paperless trade environment, set up a single window digital portal integrating all stakeholders and monitor key outputs across all major trade gateways
  • Government has set an ambitious target to realise a quantum jumps in doing business and logistics performance index (LPI)ranks within next two-three years. India has slipped from 35th position in 2016 to 44th position in the World Bank Logistics Index released in 2018.
  • The LPI is the weighted average of the country score in six dimensions like efficiency of clearance process, quality of trade and transport infrastructure, ease of arranging competitively priced shipments, competence and quality of logistics services, ability to track and trace consignments and timeliness of shipments in reaching destination.

Hardware exports poised to Grow 7-8%

In News:

  • Hardware exports are poised to reverse the declining trend of the past few years with a 7-8% growth this fiscal, according the Electronics and Computer Software Export Promotion Council (ESC)

Explained:

  • The growth is coming on the back of traction for products in new areas, “specially in the areas of power electronics, UPS systems, electronic energy meters.
  • Hardware exports touched a peak of $7.2 billion a couple of years ago. Last year, it was around $6 billion attributing the decline to shutting down of large facilities such as those by Nokia for cellphone manufacturing in Chennai. Some larger players were likely to relocate their factories from China to India in the backdrop of the ongoing U.S.-China trade war. It would also help to mitigate low export base was a function of the level of ease of doing business and the perception about India being a difficult country to do business.
  • Nasscom had projected the software and services exports to grow 7-9% in 2018-19 to $137 billion. IT exports in 2017-18 were $126 billion. India Soft 2019 will bring over 500 foreign ICT buyers from 60 countries. Close to 250 Indian IT firms and over 20 foreign IT companies of various hues and sizes will display their products and solutions to the discerning buyers. More and more foreign companies are showing interest in taking part in the show, because of its unique appeal and focus on small and medium IT segment

GDP to Grow at 7.2% for FY19

In News:

  • The government has projected GDP growth for the full year 2018-19 to come in at 7.2%, which implies that growth in the second half of the year would slow significantly to 6.8% from the 7.6% clocked in the first half of the year, according to the first advance estimates of national income for 2018-19 released by the Ministry of Statistics.

Explained:

  • The Indian economy is estimated to grow at 7.2 per cent in financial year 2018-19, the fastest in three years, primarily on the back of higher industrial growth, with growth estimated to improve for manufacturing and construction sectors, the first advance estimates released by Central Statistics Office (CSO)
  • This growth estimate for the entire year is slower than the Reserve Bank of India’s forecast of 7.4%
  • Five out of eight sectors are estimated to record a higher growth in 2018-19 compared with previous financial year. GVA growth for manufacturing sector is estimated to rise to 8.3 per cent in 2018-19 from 5.7 per cent in 2017-18, while that for construction sector is estimated at 8.9 per cent, sharply up from 5.7 per cent in previous financial year.
  • There is an indication of a slowdown in the second half, but not for such a slowdown. Some of the slowdown seems to be in the services sector, particularly in those sectors with a larger weight such as transport and communications, and financial services. Otherwise, there doesn’t seem to be a reason for the slowdown. A growth rate of 7-7.2% for the second half might have been more realistic
  • The advance estimate says that the growth in the agriculture sector would be 3.8% in 2018-19, faster than the 3.4% in the previous year. The manufacturing sector is estimated to grow at 8.3% in 2018-19 compared with 5.7% in 2017-18.

Core sector growth slows to 16-month low in November

In News:

  • Core sector growth slowed to 3.5% in November, the slowest in 16 months, from 4.8% in October, due in large part to a slowdown in the coal, cement and electricity sectors.

Explained:

sectorNov 2018Oct 2018
coal
3.7
11.3
Cement
8.8
18.4
Steel
6
2.6
Crude Oil
3.5
-5
Natural gas
0.5
-0.9
Refinery Products
2.3
1.3
Fertilizer
-8.1
-11.5
Electricity
5.4
10.9
Growth in percentage

 

What is core sector?

  • Core industry can be defined as the main industry of the economy. In most countries, there is particular industry that seems to be backbone of all other industries and it qualifies to be the core industry. In India, there are eight core sectors comprising of coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity. The electricity has the maximum weight of 10.32% followed by Steel (6.68%), Petroleum Refinery (5.94%), Crude Oil production (5.22 %), Coal production (4.38 %), Cement (2.41%), Natural Gas production (1.71 %) and Fertilizer production (1.25%). These eight Core Industries comprise nearly 40% of weight of items included in Index of Industrial Production (IIP), which measures factory output.
  • The Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP) and released by DIPP (min of commerce and industries).

 

Categories

Current Affairs Calendar

M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031

Quick Navigate

Social Connect