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POVERTY AND SHARED PROSPERITY 2018

1. Shared prosperity

  • It is defined as the growth in the average income or consumption of the poorest 40 percent of the distribution in the population (the bottom 40).

  • It is examined by country rather than globally.

  • Introduced as one of two twin goals by the World Bank in 2013, along with ending extreme poverty, fostering shared prosperity embodies notions of economic growth and equity.

  • Irrespective of the prevalence of extreme poverty, this measure is meaningful as a gauge of how well prosperity is shared within each country.

  • The shared prosperity premium captures whether the bottom 40 are receiving a larger or smaller share of the overall pie.

 

Notable Observations

  • The percentage of people living in extreme poverty (less than $1.90 a day) globally fell to a new low. In the 25 years from 1990 to 2015, the extreme poverty rate dropped an average of a percentage point per year – from nearly 36% to 10%. But the rate dropped only one percentage point in the two years from 11% in 2013 to 10% in 2015.

  • More recently, South Asia has made impressive inroads against extreme poverty, helping to reduce the global rate further. The number of poor in South Asia dropped to 216 million people in 2015, compared to half a billion

  • in 1990. Between 1990 and 2015, the world experienced a 25-percentage point drop in extreme poverty against a 35 percentage-point drop in South Asia. This decline in extreme poverty is much faster than in the rest of the world.

  • Extreme poverty is becoming more concentrated in Sub-Saharan Africa because of the region’s slower rates of growth, problems caused by conflict and weak institutions, and a lack of success in channeling growth into poverty reduction.

  • About half of the world’s countries now have poverty rates below 3 percent, but the report finds that the world as a whole is not on track to achieve the target of less than 3 percent of the world living in extreme poverty by 2030.

  • These contrasting regional poverty trends have two important implications: o First, the primary focus of the international community’s efforts to eliminate the worst forms of deprivation must remain firmly in Africa and those few other countries elsewhere with very high poverty rates.

  • Also, the plight of billions of people living above US$1.90, who are still very poor by the standards of their own societies, should be taken care of.

 

New Measures of Poverty

  • To expand the understanding of poverty as a complex, multifaceted problem and identify pockets of people who are impoverished but have remained unnoticed, the World Bank introduces new measures of poverty. The new measures can enhance policy dialogue, particularly in middle-income countries, where extreme poverty is less prevalent, but where the higher poverty lines and the new multidimensional poverty measure reveal there is still much work to be done.

  • 1. A new multidimensional poverty measure: Similar to Global Multidimensional Poverty Index, it recognizes that access to education, health, electricity, water, sanitation, and physical and environmental security are critical for well-being.

  • It provides a global picture using comparable data across 119 countries for 2013 (representing 45 percent of the world’s population) combining consumption or income with measures of education and access to basic infrastructure services.

  • China and India are not a part of this exercise because of data availability.

  • 2. New Poverty lines of US$3.20 and US$5.50 per person per day, expressed in 2011 PPP. The value of these lines is derived from the typical poverty line in lower- and upper-middle-income countries, respectively.

  • Why higher set of Poverty Lines? Majority of people and most of the world’s poor now live in middle-income countries. To reflect this shift and the rise in what may constitute basic needs for many people new measures are introduced. These higher-valued poverty lines reflect social assessments of what defines minimum basic needs in countries at these income levels.

  • Poverty estimates on new sets of Poverty Lines- Nearly half the world (46 percent) lives on less than US$5.50 per day. Sub-Saharan Africa leads with 84.5% of its population living under $5.5 a day followed

 

Why Societal Poverty Line (SPL)?

  • The introduction of this measure is based on recommendations of the Atkinson Commission on Global Poverty.

  • The majority of the world no longer lives in low-income economies. For many countries, the social relevance of the International Poverty Line (IPL) has lessened over time as their economies have grown. This is largely due to the observance that needs change as the world becomes richer.

  • As countries grow richer, uniformity in the consumption bundle may not result in the same level of well-being everywhere. Fixing the consumption bundle could result in unequal assessment of people across the world in terms of their ability to function in society in a socially acceptable manner.

  • What constitutes a basic need can vary depending on a country’s level of consumption or income. In a poorer country, for example, participating in the job market may require only clothing and food, whereas someone in a richer society may also need internet access, a vehicle, and a cell phone. The cost of performing the same function may differ across countries depending on their overall level of income.

  • The concept of poverty itself is dependent on one’s social circumstances. What is a luxury in one society could be a necessity in another. Even if minimum physical needs are met, people cannot be said to lead flourishing lives if they are not able to conduct themselves with dignity in the society in which they live.

  • The Societal Poverty Line (SPL) reflecting how monetary definitions of poverty at the national level vary with the overall income in a society. o What is Societal Poverty Line? The SPL is a combination of the absolute IPL and a poverty line that is relative to the median income level of each country. Specifically, it is equal in value to either the IPL or US$1.00 plus half of daily median consumption in the country, whichever is greater.

 

Features of SPL

  • i. The value of the SPL will never be less than the IPL. But, after a certain point as countries get richer, the value of the SPL will increase as the consumption level of the median individual in that country increases.

  • ii. Although the SPL can change in real terms over time, it is constant in value across countries that are at the same level of median consumption or income. Because the SPL is constructed to reflect, on average, national poverty lines at different levels of median consumption or income, it provides a useful measure of global poverty that aligns well with national assessments of poverty.

  • iii. The proposed SPL is also relevant to SDG target 10.2 aimed at the social, economic, and political inclusion of all.

 

Poverty on the basis of SPL

  • i. Number of people who are poor stood at 2.1 billion as of 2015, .

  • ii. The percentage of societal poor in the global population has fallen steadily since 1990, but still at a much slower rate than the decline of extreme poverty. In 1990, the rate of societal poverty (45 percent) was about one-fourth greater than the rate of extreme poverty (36 percent).

 

4. Individual Level of poverty looking into intra-household inequality among various age-groups and gender.

  • The common approach assigns all individuals within a household to the same poverty status as the household. However, this masks potential differences in poverty among household members. Ignoring these decreases the effectiveness of common approaches to targeting poverty reduction interventions and the take-up of these interventions because they do not address the needs and constraints of the poorest individuals.

  • In the absence of poverty data on individuals, perceptions about differences in poverty by sex and age are rarely supported by evidence.

  • More reliable poverty estimates on individuals would facilitate a better understanding of the characteristics of poverty and its intergenerational transmission, the interventions appropriate for different types of individuals, and the more effective targeting of social protection and broader development programs. Such programs often rely on approaches targeted to households but may fail to reach potentially poor beneficiaries if many of these live in households not identified as poor.

  • Household composition, particularly the presence of dependents and the type of earners, influences gender differences in poverty over the life cycle.

  • Intrahousehold differences in consumption and poverty are widespread. In most cases, women and children are allocated a smaller share of the households’ resources than men.

  • The multidimensional poverty measure is de facto only partially individualized; only 30 percent of deprivations are measured among individuals. Multidimensional poverty is more prevalent among women than among men in all countries, with the largest gender gap in Iraq (54 percent versus 38 percent).

  • A significant gender gap in multidimensional poverty is also found in India.

 

Major observations on Individual level of Poverty

  • Women and children are often disproportionately affected by poverty, but with considerable variation across countries. Worldwide, 104 women live in poor households for every 100 men. However, in South Asia, 109 women live in poor households for every 100 men.

  • Women in poorer countries often withdraw from the labor force and lose their earning potential when they reach reproductive age. The gender gap in poverty rates is largest during the reproductive years when care and domestic responsibilities, which are socially assigned to women, overlap and conflict with productive activities. It is well documented that female labor force participation declines during women’s reproductive years, particularly if they have young children.

  • Resources are not shared equally within poor households, especially when it comes to more prized consumption items. Evidence also shows complex dynamics at work within households that go beyond gender and age divides. For example, a woman’s poverty level may be related to her position as mother versus wife of the household head.

  • Nearly one child in five lives in a poor household. Children are twice as likely as adults to live in poor households.

 

2. Fixed-Term Employment Rules

Background

  • As per the Industrial Employment (Standing Order) Act 1946, Fixed-term employment was initially made available only to apparel manufacturing sector in 2016 and then to Footwear manufacturing sector in 2017 through amendments.

  • Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018 in March notification allowed all industries to hire workers on contract with a fixed tenure.

  • But under the Industrial Employment Act, 1946, the central government can frame rules for industries belonging to the central sphere only i.e. for central PSUs and Private sector units in the civil aviation, banking and finance, telecommunications, insurance, ports, dock, and mines sectors only.

  • Also, Labour is a Concurrent List subject and without a Parliamentary ratification, States are not really obliged to follow these orders.

  • This created confusion in private sector firms which do not belong to central sphere and prevented them from taking the benefits of this reform.

  • In order to plug this gap, the Central Government has asked the states to issue separate notifications for the same.

 

What is fixed term employment?

  • FTE is a contract in which a company hires an employee for a specific period of time.

  • The employee is not on the payroll of the company.

  • Their payment is fixed in advance and is not altered till the term expires.

  • Such contracts are given out for temporary jobs and not for routine jobs. It cannot be used to replace existing employees who are on a long leave.

  • Such workers are entitled to all statutory benefits (work hours, wages etc.) available to a permanent worker in the same establishment. However, other benefits such as Provident Fund is not available to them.

  • The employers can terminate the contract on certain grounds (fraud, non-performance, etc.) even before the due date. The temporary worker having completed 3 months in service shall get 2 weeks’ notice before termination.

 

Benefits of Fixed-Term Employment:

  • Fixed wages and work conditions: The workers are ensured to have a fixed wage and work conditions from before. This provides them livelihood security for the given period.

  • Accountability: The workers are entitled to have statutory benefits. Therefore, they gain greater sense of accountability from the principal employer.

  • Forecast labour costs: The fixed term contract enables the business to forecast their labour costs. It also provides relief against protests related to salary hikes etc.

  • Short term Employment shortage: During peak seasons, industries face shortage of workers. Fixed-term employment will help them to hire and remove workers according to their requirements without extra legislative burdens. FTEs are particularly useful in executing specific projects, such as in the infrastructure sector, apparel, footwear and sections of the media.

  • Commercial Competitiveness: Due to in-built flexibility in hiring and firing the workers, the business will be able to safeguard its commercial competitiveness through finding suitable employees.

  • Work Environment: It will become better as workers working conditions would be better in terms of working hours, wages etc.

  • Middle men: The role of middle men in providing labour will be minimised henceforth.

  • Job Creation: FTE is expected to boost job creation, provided the cost of capital does not remain so low as to deter labour use.

  • Labour Reform: It can be considered a major labour law reform and a positive step towards ease of doing business as it removes restriction on firing.

 

Criticism against the move

  • Hire-and-fire: All central trade unions are protesting against the government’s policy of hire-and-fire. Trade unions will go unrecognised by the move.

  • Removal of Safety nets: The government has enabled the employers to sidestep even the minimum protection offered by the Factories Act 1948, Industrial Disputes Act 1947 and Contract Labour (Regulation and Abolition) Act 1970.

  • Undermines Job Regularisation: Collective bargaining talks for wage increase will not be possible. Business will have no incentive to regularise the jobs.

  • Against the earlier judgments of Supreme court: The courts have allowed FTE only in seasonal activities. The Supreme Court has ruled earlier that a fixed-term contract worker who had worked for 7 years should be regularised.

  • Industries will be converted into Sweatshops: The major reason of conflict of workers with management (e.g. in Maruti-Suzuki incident) is common issues of non-recognition of trade unions, temporary workers far outnumbering regular workers and paying them very low wages. The move will encourage the same.

 

What needs to be done?

  • The FTE conditions need to be defined clearly to make them acceptable to both employers and employees.

  • The present rules are silent about the minimum or maximum term of an FTE and the maximum permissible number of consecutive FTEs.

  • In China, a worker employed without an FTE for a year is deemed to be on an open-ended contract. She is considered a permanent employee after two successive renewals.

  • The norms should be arrived at in a transparent, consensual manner. Labour reforms will not be politically acceptable in the absence of a better social safety net.

  • Countries with flexible labour markets have superior and state-funded health and education facilities.

  • Since labour comes under Concurrent list, a suitable and well discussed legislation for FTE should come through Parliament.

 

3. National Council For Vocational Education & Training

  • Other recent government initiatives for Skill development

  • Indian Institute of Skills: The Union Cabinet has approved the setting up of Indian Institute of Skills (IISs) at different locations across the country in Public Private Partnership (PPP) mode.

  • Global Skills Park: It is an international skilling institute to provide students with international training methods in world class machinery, tools & equipment. The Asian Development Bank (ADB) has approved a $150 million loan to establish the first Global Skills Park in Madhya Pradesh.

  • The Cabinet approved the merger of National Council of Vocational Training (NCVT) and National Skill Development Agency (NSDA) into National Council for Vocational Education and Training (NCVET) for improving the outcome of the Skill India mission.

 

About NCVET

  • It will regulate functions of entities engaged in vocational education and training and establish minimum standards for functions of such entities.

  • The various functions of NCVET includes o Recognition and regulation of awarding bodies, assessment bodies and skill related information providers.

  • Approval of qualifications developed by awarding bodies and Sector Skill Councils (SSCs).

  • Indirect regulation of vocational training institutes through awarding bodies and assessment agencies.

  • Research and information dissemination.

  • Grievance redressal.

 

Benefits

  • This institutional reform will lead to improvement in quality and market relevance of skill development programs lending credibility to vocational education and training encouraging greater private investment and employer participation in the skills space.

  • This in turn will help achieve the twin objectives of enhancing aspirational value of vocational education and of increasing skilled manpower furthering the Prime Minister's agenda of making India the skill capital of the world.

  • This is also expected to facilitate the ease of doing business by providing a steady supply of skilled workforce to the industry and services.

 

4. National Level Entrepreneurship Awareness Campaign

About Udyam Abhilasha

  • The campaign is to promote entrepreneurship in the 115 aspirational districts identified by NITI Aayog. It would create and strengthen cadre of more than 800 trainers to provide entrepreneurship training to the aspiring youths across these districts thus encouraging them to enter the admired segment of entrepreneurs.

  • SIDBI has partnered with Common service centres, e-Governance Services India Limited, a Special Purpose Vehicle, set up by the Ministry of Electronics and IT for implementing the campaign.

  • Its objectives include:-

  • o To inspire rural youth in aspirational districts to be entrepreneurs by assisting them to set up their own enterprise.

  • o To impart trainings through digital medium across the country.

  • o To Create business opportunities for CSC VLEs.

  • o To focus on women aspirants in these aspirational districts to encourage women entrepreneurship.

  • o To assist participants to become bankable and avail credit facility from banks to set up their own enterprise.

  • CSC Village Level entrepreneurs (VLEs) would play the role of catalyst for these aspiring entrepreneurs. It would provide training, support to the aspirants to establish

  • new units by assisting them in availing loans and make them aware about various initiatives of Government of India like Pradhan Mantri Mudra Yojana and educate the youths in these districts on business literacy.

 

5. Agriculture Census

Other Details of report

  • The individual, joint and institutional holdings have shown a growth of 5.04 per cent, 7.07 per cent and 10.88 per cent, respectively.

  • Out of 36 States/UTs in the country, it was found that 14 States viz. Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Rajasthan, Tamilnadu, Telangana, Uttar Pradesh and West Bengal account for about 91.03% in terms of number of operational holdings and about 88.08% in terms of area operated in the country.

  • In a total of 146 million operational holdings in the country, the highest number of operational holders belonged to Uttar Pradesh (23.82 million) followed by Bihar (16.41 million) and Maharashtra (14.71 million).

  • At all India level, percentage increase in number of operational holdings in 2015-16 as compared to Agriculture Census 2010-11 worked out to 5.33% among states, the highest variation was found in the case of Madhya Pradesh (12.74%) followed by Andhra Pradesh (11.85%), Rajasthan (11.12%), Kerala (11.02%) etc.

  • Some states also showed decline in number of operational holdings. The sharpest fall has been in Goa (28.17%) and lowest in Manipur (0.09%). However, operated area has shown declining trends in most of the states.

  • With an average size of 5ha, Nagaland is home to India’s largest farms.

 

Analysis of the Agri-Census data

  • While farms got more fragmented between 2010-11 and 2015-16, holdings continue to be inequitably distributed.

  • The increase in farm land holdings, a consistent trend since the 1970s, has been slowing down in the past 20 years. In a positive development, there is a rise in the number of female land holders, a possible indicator of higher involvement in farm activities. The trend may reflect migration of men to cities for non-agricultural activities and also explain slowing down of land division as rural people seek alternate livelihoods.

  • The figures show landholdings have doubled in past 45 years (from 71 million in 1970-71 to 146 million in 2015-16), resulting in decline in average size of farms by more than 50% — a real worry for policy-makers as this makes agriculture unremunerative for farmers.

  • Similarly, there is decrease in the operated area from 159.59 million hectares in 2010-11 to 157.14 million hectares in 2015-16, showing a decrease of 1.53% - it means diversion of farm land for non-agriculture activities during the period.

  • The number of small holdings in the country has grown in five years, due to fragmentation of land, while that of medium and large holdings have gone down.

 

Reasons for land fragmentation

  • Natural population growth

  • Inadequate growth in off-farm employment opportunities to absorb the surplus workforce.

  • Rise of nuclear families leading to division of family landholdings

  • High indebtedness which leads to selling of a patch of land while repayment

 

Problems associated with fragmentation of Land holdings

  • Small scale of production: It inhibits the ability of farmers to reap economies of scale in agricultural operations and invest in mechanisation. It further leads to decline in productivity and thus declining land capability.

  • Low Prices: Further the small and marginal farmers have low bargaining power, since they have very little marketable surplus and are price takers in the market.

  • Low income: As per NSSO Survey (2012-13) the median agricultural incomes were about Rs. 19,250 or about Rs 1600 per month in 2012-13.

  • Indebtedness: As per Economic Survey-2016-17, there is an inverse relationship between indebtedness and the size of land holding. In Bihar and West Bengal, more than 80% of agricultural households with marginal landholdings are indebted.

  • The existence of a large number of small and marginal farmers, close to 126 million according to the Agri-Census, means it is challenging for the government’s extension arms to reach them with new technology and farm support schemes.

 

What is Agriculture Census?

  • Agriculture Census in India is conducted at five-year intervals to collect data on structural aspects of farm holdings. The basic statistical unit for data collection is 'Operational Holding'.

  • The first census was conducted with reference year 1970-71. So far, nine censuses have been done and this is the 10th in series.

  • It is carried in three phases: In the first phase of the census, data on primary characteristics like number of operational holdings and area operated by different size classes (marginal, small, semi-medium, medium and large), social groups, (SC and ST and others), gender (male/female), types of holding etc. is collected.

  • In the second phase of the census, detailed data on characteristics of operational holdings such as land use, irrigation status, tenancy particulars are collected based on samples from 20% of villages in each tehsil.

  • While in the third and final phase, data on the pattern of input use by operational holdings is collected. This is also known as Input Survey.

  • Operational holding has been defined as all land used wholly or partly for agricultural production and is operated as one technical unit by one person alone or with others without regard to the title, legal form, size or location.

  • Total operated area, which includes both cultivated and uncultivated area provided part of it is put to farm production during the reference period.

  • Further, these 126 million farmers together owned about 74.4 million hectares of land —or an average holding of just 0.6 hectares each—not enough to produce surpluses which can financially sustain their families, explaining the rising distress in Indian agriculture.

  • Overall it makes farmers prone to all sort of agricultural risks including Production risks, Climatic risks, Price risks, Credit risks, Market risks, and Policy risks.

 

Way Forward

  • Scale-up the farms: There are various ways such as land pooling, land leasing and contract farming etc. All this should be done within proper legal mechanism.

  • Model Land Leasing Law: NITI Aayog has formulated a Model Agricultural Land Leasing Act, 2016 to both recognize the rights of the tenant and safeguard interest of landowners. A dedicated cell for land reforms was also set up in NITI Aayog.

  • Diversify Agriculture: Horticulture products must also be included along with traditional wheat and rice farming. Schemes like Mission for Integrated Development of Horticulture (MIDH) and Operation Greens would help farmers in this regard.

  • Sustainable prices: Schemes like GrAM (Gramin Agriculture Markets) and eNAM would be bringing a competitive price discovery model for smallest of the farmers.

  • Development of manufacturing sector: This will ensure the surplus workforce to be absorbed into the productive work and will reduce the pressure on agricultural land. Development of MSMEs should be a part of this as they employ most of the non-farm workers. India is currently in the process of formulating a new Industrial Policy aimed at making India a manufacturing hub by promoting ‘Make in India’.

  • Development of Rural sector: a comprehensive rural development strategy that focuses on rural infrastructure to create off-farm rural employment opportunities, reduce labour mobility costs, increase education and skills in combination with measures regarding land consolidation and better land management, and finally improve the functioning of land markets, in particular the rental markets, may be the best means to address the problem of land fragmentation. Such a cross-sectoral approach would be more likely to contribute successfully to farm consolidation and farm development and, in general, to an improvement in rural household welfare.

 

6. Pradhan Mantri Fasal Bima Yojana (Pmfby)

  • About Pradhan Mantri Fasal Bima Yojana (PMFBY)

  • It aims at supporting sustainable production in agriculture sector by way of:

  • Providing financial support to farmers suffering crop loss/damage rising out of unforeseen events

  • Stabilizing the income of farmers to ensure their continuance in farming

  • Encouraging farmers to adopt innovative and modern agricultural practice

  • Ensuring flow of credit to the agriculture sector.

  • Government modified operational guidelines for Pradhan Mantri Fasal Bima Yojna (PMFBY).

 

Need for modification in Guidelines

  • Gaps in assessment of crop loss: There was lack of trained outsourced agencies, scope of corruption during implementation and the non-utilisation of technologies like smart phones and drones to improve reliability of sampling.

  • Inadequate and delayed claim payment: Insurance companies, in many cases, did not investigate losses due to a localised calamity and, therefore, did not pay claims.

  • Massive profits for insurance companies: Insurance companies have been charging high actuarial premium rates and gaining huge profits for them.

  • Coverage only for loanee farmers: PMFBY remains a scheme for loanee farmers – farmers who take loans from banks are mandatorily required to take insurance. Like previous crop insurance schemes, PMFBY fails to cover sharecropper and tenant farmers.

  • Poor capacity to deliver: There had been no concerted effort by the state government and insurance companies to build awareness of farmers on PMFBY. Insurance companies have failed to set-up infrastructure for proper implementation of PMFBY. There is still no direct linkage between insurance companies and farmers. Insured farmers receive no insurance policy document or receipt.

 

New provisions guidelines of PMBFY

  • Provision of Penalties:

  • The Government has decided to incorporate the provision of penalties for States and Insurance Companies for the delay in settlement of insurance claims

  • The farmers will be paid 12% interest by insurance companies for the delay in settlement claims beyond two months of prescribed cut-off date. State Governments will have to pay 12% interest for the delay in release of State share of subsidy beyond three months of prescribed cut-off date submission of requisition by insurance companies.

  • Evaluation of Insurance Companies: The new operational guidelines has made a Standard Operating Procedure (SOP) for evaluation of insurance companies and remove them from the scheme if found ineffective in providing services.

 

Role of Gram Sabhas

  • Gram Sabhas across the country have been asked to inform farmers about the enrollment and benefits of Pradhan Mantri Fasal Bima Yojna (PMFBY) at the beginning of the Rabi season.

  • The Ministry of Agriculture and Farmers’ Welfare had requested the Ministry of Panchayati Raj and the state governments to include this as an agenda in the upcoming Gram Sabhas.

  • This is as part of the awareness initiatives taken up at various levels by the Govt and Insurance Companies.

  • Horticulture: The Government has also decided to include perennial horticultural crops under the ambit of PMFBY on a pilot basis.

  • Wild Animal attack: The scheme provides add on coverage for crop loss due to attack of wild animals, which will be implemented on a pilot basis.

  • Standing crop and post-harvest loses: Losses due to localised perils (Hailstorm, cloud burst,natural fire, landslide & inundation) and Post-Harvest losses due to specified perils, (Cyclone/Cyclonic rain & Unseasonal rains) shall be assessed at the affected insured field of the individual insured farmer.

  • Definition of major crops: Definition of Major Crops, Unseasonal rainfall and Inundation incorporated for clarity and proper coverage. For defining a crop as a major crop for deciding the Insurance Unit level, the sown area of that crop should be at least 25% of Gross Cropped Area in a District/ Taluka or equivalent level

  • Aadhar Number: Aadhaar number will be mandatorily captured to avoid duplication of beneficiaries.

  • Budget allocation: Separate Budget Allocation for Administrative expenses (atleast 2% of budget of scheme).

  • Non Loanee Farmers: The insurance companies are given a target of enrolling 10% more non-loanee farmers than the previous corresponding season. Non-loanee farmers can approach designated Common Service Centres (CSC), banks and insurance agents for insuring their crop or directly enroll on the portal.

  • Awareness: The insurance companies will have to mandatorily spend 0.5% of gross premium per company per season for publicity and awareness of the scheme.

  • Rationalization of premium subsidy release process: Release of upfront premium subsidy will be made at the beginning of the season and it has been rationalized to reduce the delay in settling the claims of farmers.

  • Time frame for the claim: The farmers will get 72 hours to intimate individual claims against the existing 48 hours. This can be done through any of the channels provided under the Scheme and directly on the portal of PMFBY.

  • Capping of the Premium Rate: Earlier, there was a provision of capping the premium rate which resulted in low claims being paid to farmers and it was done to limit Government outgo on the premium subsidy. This capping has now been removed and farmers will get claim against full sum insured without any reduction.

  • Grievance redressal Mechanism: In case of any grievance, the farmers can access dedicated grievance redressal authorities. Revised operational guidelines provide for appointment of District Level Grievance Redressal Officer and creation of State and District Grievance Redressal Cells for fast redressal of grievances.

  • Use of technology: Smartphones should be used to capture and upload data of crop cutting to reduce the delays in claim payments to farmers and Remote sensing to reduce the number of crop cutting experiments.

 

7. Rural Haats In Gram Scheme

  • More on News

  • In total, infrastructure in around 22,000 rural haats is to be upgraded and modernised with a corpus of almost Rs 20 billion spread over 2-3 years.

  • Of this in the first phase, Centre has identified around 1,878 rural haats, which includes, the maximum around 564 haats in Andhra Pradesh, followed by 188 in Gujarat, 186 in Rajasthan, 182 in Tamil Nadu and 176 in Gramin Agricultural Markets (GrAMs)-Budget 2018-19 Announcement

  • Develop and upgrade existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs).

  • Physical infrastructure to be strengthened using MGNREGS and other Government Schemes.

  • PMGSY (Phase-III) to be used for strengthening road linkages from habitations to GrAMs.

  • Setting up of Agri–Market Infrastructure Fund with a corpus of Rs. 2000 crore to

  • Develop and upgrade agricultural marketing infrastructure in 22,000 GrAMs

  • GrAMs to be linked to e-NAM.

  • GrAMs to be outside the APMC Act regulation.

  • Telangana.

 

Rural Haats Existing in the Country

  • Ownership: These are owned by Local Bodies (Panchayats/councils), Agricultural/ Horticultural Departments of State Governments, Cooperatives, Marketing Boards/APMCs and Private Sector.

  • Quantity: As per information provided by State Agricultural Marketing Boards/State Governments, there are 22941 Rural Haats

  • Under local Bodies including Councils- 11811

  • Under Marketing Board/APMCs- 1274

  • Under Private sector (Trust, individuals, etc.)- 9856

  • However, State Marketing Boards provided only numbers without other information like location, etc on village haats under local bodies and under private sector.

 

Functioning of Rural Markets

  • The rural markets which are multi commodity in nature are first contact point of market where farmer –producers sell their surplus to local consumers.

  • In some of these markets livestock is also assembled for sale in bigger markets. Also non farm products for daily needs are sold.

  • In Rural Markets, trade is characterized by direct sales of small quantities of produce by producers to village traders and by retail sales to rural consumers.

  • Besides goods, that are not produced locally, are brought by smaller; occasional traders to retail to local population.

 

Why Upgrade Rural Markets into GrAMs?

  • As per the recommendations of Ashok Dalwai Report on doubling farmers’ income, the rural periodic markets need to be upgraded into a function that enables aggregation and transportation from village level to wholesale market.

  • It has been advised to build on the available infrastructure to establish large number of primary rural agricultural markets to provide the following two services:

  • Direct marketing between producers and consumers

  • Aggregation platforms for the small lots of farmers

  • These markets, through their interconnections, are a farmer’s main connection point with the inter and intra regional marketing system. Under GrAMs, infrastructure and business linkages with markets will get a boost. This will also ensure participation of small and marginal farmers to markets especially eNAM.

  • Lower Prices: The ruling prices in these primary markets are invariably much lower. Price variations are attributed to lack of infrastructure such as storage, transport, etc.

  • Due to lack of infrastructure, many times the farmer is forced to sell at harvest time, at low prices, only to buy back in off season at higher prices.

  • There is an increasing awareness amongst the rural population about advantages of selling their produce at market points to secure competitive prices.

  • Rising Production: Awareness, coupled with increase in Agricultural & Horticultural production, will generate larger arrivals in Rural Markets. Handling of larger turnovers will necessitate providing appropriate infrastructure facilities at these markets.

 

Issues in developing GrAMs:

  • Parallel Acts: The issue in developing Rural periodic markets are the parallel acts i.e. which administer the ownership and operation of these markets. For example- multiplicity of regulatory Acts- Agricultural Produce market act 1972, Panchayat Act and Municipal Act etc. acting in parallel has resulted in absence of unidirectional development.

  • Role of Private sector: The upgradation of rural markets will require greater role of public and private sector in providing enabling environment for growth, enhancing market facilities and market information. A PPP model for developing these markets needs to be developed.

  • Capacity building and awareness creation: Capacity building and awareness building of farmers and traders about marketing is required to be in place. Empowering farmers with information, services and linkages through training will help in bringing the desired change in rural markets faster.

 

8. Fisheries & Aquaculture Infrastructure Development Fund

  • Why in news

  • The Cabinet Committee on Economic Affairs chaired by the Prime Minister has given its approval for creation of special Fisheries and Aquaculture Infrastructure Development Fund (FIDF).

 

Features of FIDF

  • Funding: The approval entails an estimated fund size of Rs.7,522 crore, comprising Rs.5,266.40 crore to be raised by the Nodal Loaning Entities (NLEs), Rs. 1,316.6 crore beneficiaries contribution and Rs.939.48 crore budgetary support from the Government of India.

  • Nodal Loaning Entities: National Bank for Agriculture and Rural Development (NABARD), National Cooperatives Development Corporation (NCDC) and all scheduled Banks shall be the Nodal Loaning Entities.

  • Financing investment activities: FIDF would provide concessional finance to State Governments/UTs and State entities, cooperatives, individuals and entrepreneurs etc., for taking up of the identified investment activities of fisheries development.

 

Benefits of FIDF

  • Rise in production: To augment fish production to achieve its target of 15 million tonne (MT) by 2020 set under the Blue Revolution; and to achieve a sustainable growth of 8% -9% thereafter to reach the fish production to the level of about 20 MT by 2022-23.

  • Employment opportunities: It will give employment to over 9.40 lakh fishers/fishermen/fisher folk and other entrepreneurs in fishing and allied activities.

  • Rise in Investment: The credit facilities will help attract investment in creation and management of fisheries infrastructure facilities.

  • Innovation: Facilitate adoption of new technologies such as Open sea cage farming.

 

9. DRAFT POLICY ON MARICULTURE

About Mariculture

  • Mariculture is a specialised branch of aquaculture involving the cultivation of economically important marine plants and animals in the sea or any other water body having tidal influence and includes onshore facilities like hatcheries, nursery rearing and grow out systems using seawater. It is generally practiced in the sea up to 12 nm from the coast and also in water bodies which have a salinity regime close to seawater.

 

Status and Opportunities of Mariculture in India

  • In India, the marine capture fisheries is characterised by increased and excessive fishing effort, overexploitation of certain resources from the inshore fishing grounds and increased conflicts among different stakeholders in the sector.

  • Further, India needs to produce about 18 million tonnes of fish by 2030 as compared to the 10 million tonnes that we produce through capture and culture today. This would necessitate increasing our aquaculture production from about 4.9 million tonnes now to 12 million tonnes.

  • Hence, steps for the emergence of a mariculture production sector is the only option for meeting the demand for fish in the coming years. Considering this it is stated in the National Policy on Marine Fisheries 2017 that “Mariculture if carried out can play an important role in increasing fish production from the coastal waters.”

  • Also, development of a mariculture sector also strengthens the Blue Revol ution policy of GOI.

 

Key features of the Policy:

  • Mariculture Area Development: It has mooted mariculture zones by demarcating special areas in the sea. Satellite remote sensing data and GIS will be used to identify potential zones.

  • Mariculture Systems and Species: The policy allows farming exotic and genetically modified species in closed mariculture systems after stringent risk assessment and monitoring.

  • Seed and Feed: In order to address the seed and feed scarcity, innovative schemes will be developed.

  • It seeks to provide additional livelihood options to the coastal communities.

  • Leasing Policy: Referring to the security of the mariculture enterprises in the open sea waters, the policy has made provisions for leasing the water bodies and regulating the activities.

October Indian Economy

10. Fourth Industrial Revolution

World Economic Forum

  • It was established in 1971 as a not-for-profit foundation and is headquartered in Geneva, Switzerland.

  • It is the International Organization for Public-Private Cooperation and the Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas.

 

World Economic Forum Centre for the Fourth Industrial Revolution Network

  • The global network of Centres for the Fourth Industrial Revolution brings together governments, leading companies, civil society and experts from around the world to co-design and pilot innovative approaches to the policy and governance of technology.

  • Its vision is to shape the development and use of technology in ways that maximize the benefits and minimize the risks.

  • The network will develop, implement and scale up agile and human-centred pilot projects that can be adopted by policy-makers, legislators and regulators worldwide.

  • World Economic Forum launches Centre for Fourth Industrial Revolution in India.

 

More on the news

  • The centre would be based in Maharashtra and it has selected drones, artificial intelligence and blockchain as the first three projects.

  • It will work in collaboration with the government on a national level to co-design new policy frameworks and protocols for emerging technology alongside leaders from business, academia, start-ups and international organizations.

  • NITI Aayog will coordinate the partnership on behalf of the government and the work of the centre among multiple ministries.

 

Impacts of Fourth Industrial Revolution

  • It was coined by Klaus Schwab in 2016. It fuses physical, digital and biological spheres, and is transforming global production systems. Advanced technologies, such as the internet of things, artificial intelligence, blockchain, robotics and additive manufacturing, are changing the future of manufacturing. Its impacts include-

  • If harnessed correctly, this technological change can bring about immense economic opportunities including new and better ways of doing business, the creation of new industries, new and better-quality jobs, higher GDP growth, and improved living standards.

  • Workplaces and organizations become "smarter" and more efficient as machines, and humans start to work together, and the use of connected devices enhance supply chains and warehouses.

  • There is also the capacity to reduce costs significantly, to reduce the necessity for businesses to have a physical presence, and to create opportunities for new, small-scale producers to enter the increasingly globalised markets.

  • There is a destruction effect as technology-fuelled disruption and automation substitute capital for labour, forcing workers to become unemployed or to reallocate their skills elsewhere. It will be accompanied by a capitalization effect in which the demand for new goods and services increases and leads to the creation of new occupations, businesses and even industries.

  • A McKinsey report estimates that, by the year 2030, at least one-third of the activities of 60% of all the occupations could be automated and globally, up to 375 million people may need to change jobs or learn new skills within the next 12 years.

 

Fourth Industrial Revolution and India

  • Opportunities for India

  • India can play a pivotal role in shaping the global fourth Industrial revolution due to the benefits of a better demographic dividend (By 2020, the median age in India will be just 28, compared to 37 in China and the US).

  • India can reap maximum benefits of its expansion in telecommunication sector, huge increase in data usage and availability due to government initiatives like Digital India campaign, Start-up India and the Atal Innovation Mission etc.

  • Artificial intelligence (AI) can be used effectively to reduce poverty, improve the lives of farmers and make the lives of the differently abled simpler. AI has vast applications across sectors – ranging from medicine to criminal justice, to manufacturing, to finance.

  • With the right mix of accelerators – including regulatory frameworks, educational ecosystems and government incentives – India can lead the Fourth Industrial Revolution while simultaneously enhancing the quality, equity and sustainability of its own growth and development outcomes.

 

Challenges for India

  • Apart from shrinking jobs, India’s large number of low skilled youth will also face major challenges in big industries as well as MSMEs because product cycles will become very short and this will lead to a lot of uncertainty and unpredictability.

  • Small scale manufacturing faces deep infrastructural problems as well as inadequate access to credit which will be a hinderance in benefiting from the changes.

  • The highly educated and technically skilled people will command huge salaries in large manufacturing enterprises using robotics and artificial intelligence which will create a huge income gap between the skilled and the unskilled workforce.

 

Way forward

  • With the right mix of accelerators - including regulatory frameworks, educational ecosystems and government incentives - India can lead the fourth industrial revolution, while simultaneously enhancing the quality, equity and sustainability of its own growth and development outcomes. Among various steps required, following are some important ones-

  • Companies should invest in their technical infrastructure and data analysing capabilities. All businesses must be making a move to be smart, connected organizations or they will soon fall behind the competition.

  • Education and training systems need to adapt to better prepare people for the flexibility and critical thinking skills they will need in the future workplace.

  • India needs to strike the right balance between vocational and new digital industrial skills, boosting education in data science and coding but also providing greater training in traditional manufacturing skills.

  • India must take a pragmatic approach to quickly boost traditional manufacturing while adopting new digital industrial technologies that will secure long-term competitiveness.

 

11. Bali Fintech Agenda

  • What is Fintech?

  • Fintech (financial technology) is used describe new tech that seeks to improve and automate the delivery and use of financial services.

  • At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones.

  • The International Monetary Fund (IMF) and the World Bank launched the Bali Fintech Agenda.

 

About Agenda

  • The Bali Fintech Agenda is a set of 12 policy elements established to help member countries harness the benefits and opportunities of rapid advances in financial technology (fintech), while at the same time also managing the risks that arise.

  • The Agenda proposes a framework of high-level issues that countries should consider in their own domestic policy discussions and aims to guide staff from the two institutions in their own work and dialogue with national authorities.

  • The 12 elements are distilled from members' own experiences and cover topics relating broadly to enabling fintech, building the foundations of the digital economy, ensuring financial sector resilience, addressing risks, promoting international cooperation, improve cross-border payments and remittance transfer systems.

  • It provides a framework to support the Sustainable Development Goals, particularly in low-income countries, where access to financial services is low.

 

Fintech in India

  • According to EY’s Fintech Adoption Index 2017, India has the second highest fintech adoption rate in the world.

  • With a range of options, including e-wallets, lending and insurance, the variety of services provided in this sector are immense and have changed the way consumers carry out their daily transactions.

  • Fintech in India is especially advantageous, since the country boasts of an unrivalled youth demographic which is rapidly growing. Furthermore, smartphone penetration is likely to witness an upsurge - from 53% in 2014 to 64% by 2018.

  • The financial services market in India is primarily untapped, with 40% of the population having no association with any bank and more than 80% of the transactions carried out through cash. This represents an opportunity for Fintech start-ups to massively spread their wings in different segments.

 

Challenges in India

  • Adoption of Fintech: Adoption becomes complicated in an economy like India’s which is dominated by micro, small and medium enterprises (MSMEs). Going digital for payments can be complicated.

  • Cost involved in Integration: Integrating with Fintech doesn’t come cheap. The cost can be prohibitive for MSMEs.

  • Regulatory framework: Regulatory uncertainty in the fintech sector is posing a major challenge. This would require “the modification and adaptation of regulatory frameworks to contain risks of arbitrage, while recognizing that regulation should remain proportionate to the risks.” The regulatory framework for entering in Indian market and performing as one is highly restrictive in nature.

  • Infrastructure: Poor infrastructure in terms of Internet Connectivity, unbanked population and low financial literacy level are another hindrance.

  • Cash Dependency: The conservative approach of users and merchants to deal in cash is really hard to change. Since it’s not part of financial life but a way to their financial transactions.

  • Frauds: Transaction can easily turn into fraud by tech people aware of glitches in software.

  • Lack of government support: Lack of government support and some sort of Incentives for protecting the Interest of Fintech in India is demoralizing the start and entrepreneurs at very basic level.

  • Lack of investors: Fintech do not get the required seed capital and other required investment on time which make their operations and functioning really below the mark.

 

Way forward

  • Focusing on the end user: QR codes have been viewed by fintech companies as a way to acquire merchants at a low cost. End customers are either unfamiliar with navigating the app, or the person sent to make the purchase does not have a smartphone, does not own and control a bank account, or both. Fintech providers have to consider this audience while developing a payment solution.

  • Ensure solution for better alternative: The availability of small change, which is often refused by banks owing to high storage and transportation costs, inevitably finds its way to small merchants and households, and is used for low-value transactions. Fintech needs to tap the market by ensuring easy small transactions.

  • Identify and empower change agents: Fintechs could offer business value to merchants for encouraging end customers to pay digitally. A dedicated helpline or interactive voice response service (IVRS) for merchants can help address ongoing issues with using the QR-UPI solution.

  • Establish clear business and customer value: Many businesses, which operate in the low-income space, have low profit margins. However, digital financial solutions can lower costs or increase revenue at a marginal cost, driving business value. Hence understanding the need of market becomes really important.

  • Create an Enabling Policy Environment: The creation of a 'regulatory sandbox' - a 'safe space' for businesses and startups to co-create innovative products, services and business models, without any immediate regulatory consequences and also providing cyber security becomes important.

  • Access to Risk Capital: This is critical to fund innovative ideas and startups. It can be addressed by developing funding mechanisms, including the government setting up a fund of funds or by instituting a matching fund concept along with the private sector.

 

12. Draft Electronic Policy

ESDM Sector in India

  • The ESDM sector in India consists of the following six segments –Semiconductor design and manufacturing; Electronic components manufacturing; Information technology (IT) systems and hardware; Telecom products and equipment; Consumer electronics; and Strategic electronics.

  • India allows 100 percent FDI through the automatic route in the ESDM sector.

  • The Indian Government attaches high priority to electronics hardware manufacturing and it is one of the important pillars of both “Make in India” and “Digital India” programmes of Government of India.

  • Besides the economic imperative, focus on electronics hardware manufacturing up to the Chip level is required due to the growing security concerns.

  • Indian electronics hardware production has increased from INR 1,90,366 crore in 2014-15 to an estimated INR 3,87,525 crore (~USD 59 Billion) in 2017-18, registering a Compound Annual Growth Rate (CAGR) of 26.7%, as against a growth rate of 5.5% in 2014-15.

  • According to an ASSOCHAM report, electronic imports by India may touch $300bn by 2020.

 

Need for National Policy on Electronics

  • The electronics hardware manufacturing sector faces lack of level playing field vis-à-vis competing nations on account of several disabilities which render domestic electronics hardware manufacturing uncompetitive.

  • These inter-alia includes lack of adequate infrastructure, supply chain and logistics; high cost of finance; inadequate availability of quality power; inadequate components manufacturing base; limited focus on R&D by the industry and high degree of market access, leading to limited value addition.

 

Initiatives taken for ESDM sector in India

  • Electronics Manufacturing Clusters (EMC): In order to overcome disadvantages due to infrastructure, EMC was launched which encouraged entities, including State Government entities, to provide good quality infrastructure and logistics within a cluster.

  • Modified Special Incentive Package scheme (M-SIPS): In order to compensate for disadvantages in domestic manufacturing, M-SIPS was launched which provides for capital subsidy of 25% for Electronics Industry located in non-SEZ area and 20% for those in SEZ areas.

  • Preferential Market Access: It is a scheme guaranteeing preference for locally manufactured products during procurement (minimum 30%) for government projects.

  • Electronics Development Fund (EDF): In order to promote startups and innovation and also to achieve an ambitious target of ‘Net Zero Imports’ by 2020, EDF was launched which is a fund of funds which invests in Venture funds, which in turn invests in ventures.

  • Phased Manufacturing Programme (PMP): PMP for mobile handsets and related sub-assemblies/ components manufacturing has been implemented with the objective of progressively increasing the domestic value addition for establishment of a robust Cellular mobile handsets manufacturing eco-system in the country.

  • The Merchandise Export from India Scheme (MEIS): MEIS offers export incentives of up to a maximum of five percent on locally manufactured products like refrigerating equipment compressors, fully automatic washing machines, and color television sets.

  • With the demand for electronics hardware expected to rise rapidly to about USD 400 Billion by 2023-24, India cannot afford to bear a huge foreign exchange outgo on import of electronics alone. Therefore, promoting domestic electronics hardware manufacturing, with high value addition is of critical importance.

  • Implementation of the Schemes/ Programmes under the aegis of NPE 2012 has successfully consolidated the foundations for a competitive Indian ESDM value chain. The Government now seeks to build on that foundation to propel the growth of ESDM industry in the country.

 

Highlights of draft of the National Electronics Policy, 2018

  • Mobile Handsets: The policy targets production of one billion mobile handsets by 2025, valued at $190 billion including export of 600 million mobile handsets valued at $110

  • First National Electronic Policy 2012

  • It provided the road map for the development of Electronics System Design and Manufacturing (ESDM) sector in the country.

  • It had proposed creation of 200 electronic manufacturing clusters (EMCs) by 2020 that will house entire ecosystem for development and production of specific category of products.

  • billion and improving ease of doing business for ESDM industry.

  • have been sanctioned with the project outlay of $550 million including $225 million from the government. It aims to facilitate cost effective loans for EMC.

  • The policy proposes to push development of core competencies in all the sub-sectors of electronics including electronic components and semiconductors, defence electronics, automotive electronics, industrial electronics, strategic electronics and fabless chip design.

  • The draft proposes suitable direct tax benefits, including inter-alia investment-linked deduction under Income Tax Act for electronics manufacturing sector.

  • It proposes to provide support to skilled manpower in ESDM sector, export led growth, policy support and special package of incentives for highly capital intensive projects.

  • The policy aims to also push the startup ecosystem in emerging technology areas such as 5G, Internet of Things, artificial intelligence and machine learning, and their applications in areas such as defence, agriculture, health, smart cities and automation.

  • It also proposes replacing the M-SIPS (Modified Special Incentive Package Scheme) with schemes that are easier to implement such as interest subsidy and credit default guarantee, etc., in order to encourage new units and expansion of existing units in electronics manufacturing sector.

  • Environment: It aims to promote research, innovation and support to industry for green processes and sustainable e-Waste management, including safe disposal of e-Waste in an environment friendly manner, development of e-Waste recycling industry and adoption of best practices in e-Waste management.

  • Global Presence: It focuses to become a global leader in the Electronics Manufacturing Services (EMS) segment by promoting progressively higher value addition in manufacturing of electronic products.

  • Governance Structure: Create specialized governance structures within the Government to cater to specific needs of the ESDM sector, in view of fast changes in technology and business models.

 

13. Data Localisation

About Data Localisation Policy

  • Data localisation is a concept that the personal data of a country’s residents should be processed and stored in that country. Some directives may restrict flow entirely, while others more leniently allow for conditional data sharing or data mirroring – in which only a copy has to be stored in the country.

  • As of now, much of cross-border data transfer is governed by individual bilateral “mutual legal assistance treaties” (MLATs). The MLAT process was envisaged as a cooperation mechanism for criminal investigations by law enforcement agencies (LEAs) in exceptional circumstances. Over time, MLATs have proven to be ill-suited to handle large number of requests or provide immediate or time-bound access to critical information.

  • In early April, the RBI issued a circular mandating that payment data be stored only in India by October 15. This covered everyone from Mastercard and Visa to WhatsApp Payments and PayTM.

 

Need of Data Localisation

  • Digital data in India was around 40,000 petabytes in 2010; it is likely to shoot up to 2.3 million petabytes by 2020 — twice as fast as the global rate. If India houses all this data, it will become the second largest investor in the data centre market and the fifth largest data centre market by 2050.

  • “Data is the new oil” provides a backbone to much of the localisation drive. In the home of the largest open Internet market in the world, companies like PhonePe claim that national wealth creation relies on in-house data storage.

  • The e-commerce policy took on a similar stance, championing domestic innovation, and the data protection report also mentioned harnessing India’s digital economy through data localisation.

  • India has the second-highest fintech adoption rate in the world, creating multiple opportunities for payments companies — both national and international. This also translates into a growing volume of user and transaction data, coupled with the challenges of data breach and fraud.

  • The Indian government is of the view that if data is stored outside the sovereign boundaries of the country, the RBI’s ability to “monitor payments activity” is curtailed.

  • India’s law enforcement agencies security agencies are backing the RBI’s push for data localisation owing to difficulties in carrying out cross-border probes.

 

Challenges in Data Localisation

  • Misuse of Data: Critics not only caution against state misuse and surveillance of personal data, but also argue that security and government access is not achieved by localisation. Even if the data is stored in the country, the encryption keys may still remain out of the reach of national agencies.

  • Cyber Security: Businesses in India were most at risk to cyber security attacks. This can put data of citizens in danger.

  • Increase of conflicts: This may be perceived as a protectionist policy which may lead to other countries following suit and increased conflict over data sharing.

  • Access to data: Technology experts argues that the physical location of data is irrelevant. Data can be accessed from a server in Bengaluru or Boston just as easily. In fact, having a mirror of data in India may actually increase the cost of operation and compliance.

  • Cloud Computing Softwares: Cloud computing softwares have taken advantage of the economies of scale and an infrastructural architecture across the world. Thus, when there is a threat presumed in one part of the world, the algorithm would move the data to another location or even in multiple locations. However, this flexibility may be hampered due to data localization.

 

Future of Data Localisation in India: A Balanced Approach

  • Data localisation rules are not motivated by a single national or private interest. Various simultaneous factors contribute to national strategies on restricting cross-border data flows or establishing controls for transfer of information.

  • Technological sovereignty goes beyond the idea of economic competition and builds on the idea that advancements in the technological capacity of one nation threaten the national sovereignty of another. This stems from the growing perception that nations that are able to localise technological development and control data flows will fare better in the Internet governance order.

  • Data localisation or restrictions on movement of data are primarily understood in terms of their economic value or as a geopolitical strategy that helps nations consolidating information security and sovereignty online. However, it is equally important to think about the consequences of such policies on democracy and human rights particularly in this time of growing public debate about the use and commercialisation of individual data.

 

14. Insurance Sector In India

Insurance Regulatory and Development Authority (IRDA)

  • Established in 1999 under the IRDA Act

  • Responsible for regulating, promoting and ensuring orderly growth of the insurance and re-insurance business in India.

 

Insurance Sector in India

  • The Indian Insurance Sector is basically divided into two categories – Life Insurance and Non-life Insurance.

  • Both the Life Insurance and the Non-life Insurance is governed by the IRDAI (Insurance Regulatory and Development Authority of India).

  • Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. The Non-life Insurance sector is also termed

  • Insurance gap: It is a measure of the total value of assets divided by the value of assets that are protected by an insurance cover.

  • Insurance penetration: It is the ratio of the total premium underwritten in a particular year to the GDP of the country or industry. It was 3.49% in 2016-17.

  • 'Penetration' states the value of total premiums in relation to GDP, while 'Gap' measures the total cost not covered by insurance policies.as General Insurance.

  • In India, the insurance gap has widened from $19.7 billion in 2012 to $27 billion in 2018, even though non-life insurance penetration has improved marginally from 0.7 per cent of Gross Domestic Product (GDP) in 2012 to 0.9 per cent as of 2018.

  • The Indian insurance market is a huge business opportunity. India currently accounts for less than 1.5 per cent of the world’s total insurance premiums and about 2 per cent of the world’s life insurance premiums despite being the second most populous nation.

  • India’s life insurance sector is the biggest in the world with about 360 million policies which are expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the next five years. The insurance industry plans to hike penetration levels to five per cent by 2020.

  • India had also increased FDI limit to 49 per cent from 26 per cent in insurance sector to increase the

 

Govt’s Initiatives for Insurance

  • National Health Protection Scheme launched under Ayushman Bharat to provide coverage of up to Rs 500,000 to more than 100 million vulnerable families for secondary and tertiary care hospitalization.

  • Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) to cover all poor households will bring the security of insurance benefits to the marginalised sections, giving basic economic protection in cases of death or injury through accidents of a family member.

  • Prime Minister Jan Dhan Yojana (PMJDY) proposes to bring 60-crore basic accounts within its fold and providing services of micro insurance and unorganised sector pension schemes through these accounts, which will further bolster the economic security of lower income groups.

  • Pradhan Mantri Fasal Bima Yojana (PMFBY) provides crop insurance to farmers against any losses to their crops.

 

Role of Insurance

  • Provide safety and security: Insurance provide financial support and reduce uncertainties in business and human life.

  • Generates financial resources: It generate funds by collecting premium which are further invested in government securities and stock. It also helps in providing Employment opportunities leading to capital formation.

  • Promotes economic growth: It generates significant impact on the economy by mobilizing domestic savings. It provides capital into productive investments especially for long-term investment needs. It enables to mitigate loss, financial stability and promotes trade and commerce activities those results into economic growth and development.

  • Spread of financial services in rural areas: IRDA Regulations provide certain minimum business to be done in rural areas, in the socially weaker sections.

  • Spreading of risk: Insurance facilitates spreading of risk from the insured to the insurer. A large number of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out of funds of the insurer.

 

Challenges in Insurance Sector

  • Low Awareness: A huge part of Indian population does not use health insurance to finance their medical expenditures. A large majority of people in India believe that health insurance is not a worthy investment and therefore, avoid buying such insurance products.

  • Poor Distribution: Distribution outside large cities is poor. There are large parts of the country where access to general insurance is limited. The reason insurers and distributors do not build a presence in small towns is that it is unviable.

  • Fewer product innovations: While many essential products to mitigate risk are available, there are gaps in the insurance product portfolio that leaves large risks uninsured.

  • Pricing: Insurers have been focusing on growing sales even if that creates a distortion in pricing for individuals.

  • Perception by influencers: Another major challenge is posed by the media and influencers. Often, the life insurance industry is portrayed in a negative manner and hence the consumers become skeptical of the life insurance industry. The result is that, they may not purchase life insurance, even though a legitimate need exists.

 

Way forward

  • Promote Awareness: It is necessary to promote more awareness among public about benefits of insurance. It can be raised through videos, social media, ads, organizing campaigns etc.

  • Multiple Channels of Distribution: This is a key determinant of success for companies which creates larger database. Linking insurance with allied finance products like housing loan, mutual fund investment in companies, banks credit cards etc are the new channels for life insurance.

  • Huge Untapped Market: Middle class people are having more awareness than the lower class and high class people. The demographics and macro-economic factors in India are diverse and insurance systems have to be aligned to other programmes in the country in order to target every section.

  • Better regulation: Regulatory policies can be made to ensure that insurance companies focus more on insurance targets than profitability.

  • Use of Technology: Stakeholders will have to leverage Internet and other technology options to provide single window service so as to cross-sell and retain customers. It will also be easier and cheaper for them to process requests, claims settlement process, complaints and payments online.

 

15. Direct Tax Collection

​​What is a Direct Tax?

  • These are the taxes, paid directly to the government by the taxpayer. Under the direct tax system, the incidence and impact of taxation fall on the same entity, which cannot be transferred to another person.

  • It is termed as a progressive tax because the proportion of tax liability rises as an individual or entity's income increases.

  • Examples- Income tax, corporate Tax, Dividend Distribution Tax, Capital Gain Tax, Security Transaction Tax.

  • The system of Direct taxation is governed by the Central Board of Direct Taxes (CBDT). It is a part of the Department of Revenue in the Ministry of Finance.

  • Recently, government stated that, there has been significant improvement in direct tax collection in the last few years.

 

Trends of Direct Tax collection

  • There has been a growth of more than 80% in the number of returns filed in the last four financial years and direct tax-GDP ratio rose to 5.98% in FY 2017-18, the highest it has been in the last 10 years.

  • Further, the number of persons filing income tax returns also increased by about 65% during period from 2014-2018.

  • Moreover, Direct Tax-GDP ratio rose to 5.98% in FY 2017-18, which is highest in the last 10 years. This shows a sign of improvement of Tax-Buoyancy (See Box) in the economy.

 

Reasons for increase in Direct Tax collection

  • Growing Economy: Countries’ national income level has been improving over the next few years and its transition into middle-income economy has led to increase in Tax Base.

  • Demonetisation: Demonetisation has removed the anonymity attached to cash deposit in banks. Thus giving rise to an inquiry, whether the amount deposited is in consonance with the depositor’s income.

  • Goods and Service Tax: Under the GST provisions business entities have to disclose their annual turnover, this

 

Tax Buoyancy

  • It is calculated as a ratio of percentage growth in tax revenues to growth in nominal GDP for a given year.

  • It is an important indicator of the efficiency and responsiveness of tax revenue mobilisation to GDP growth.

 

Crowding Out Effect

  • It describes the idea that large volumes of government borrowing push up the real interest rate, making it difficult or close to impossible for individuals and small companies to obtain loans. makes direct tax evasion a difficult task.

  • Use of Digital platform: The increase in the use of information being collected digitally by the tax department increased the efficiency in tax collection and helps in checking of tax evasion.

  • Hassle Free Refund: Small and medium taxpayers are getting easy tax refunds. This has boosted the taxpayer confidence in taxation system of the country, thus resulting into higher tax collection.

  • Government Initiatives had also contributed to sound rate of Direct Tax collection, these initiatives include;

  • Income Declaration Scheme: It offers an opportunity to tax defaulters to disclose their income under the Income Tax Act.

  • Aaykar Setu: It is an app to help users, to understand the various nuances of direct taxes, file income tax, apply for PAN, check TDS statement etc.

  • Project Insight: It will monitor high-value transactions with use big data analytics to find out any discrepancy between a taxpayer’s income and expenses.

  • Increased surveillance from linking Aadhar to Permanent Account Number (PAN) and to bank accounts.

  • A task force has been constituted under Arbind Modi for drafting a new direct tax legislation.

 

Significance of Direct tax collection

  • High Tax buoyancy: It is an important metric to know the expected level of government borrowings from the debt market. Higher tax buoyancy would mean the government would borrow less — keeping interest rates lower — while giving room for corporates also to borrow at lower rates thus reducing crowding out effect (See box) in the economy.

  • Fiscal Health: High rate of direct tax collection increases spending capacity of government on social sectors such as education and health, without compromising the fiscal prudence in the economy.

  • Maintaining Inflationary Trends: High rate of direct tax collection helps in maintaining the optimum interest rate in the economy, which in turn assists in maintaining the inflationary pressure.

  • Lower Indirect tax: Higher direct tax collections could lower the tax burden on the poor by creating fiscal space for a reduction in GST rates.

 

16. Road Safety

Road Accidents in India

  • Pedestrians, cyclists and two-wheeler occupants are the most vulnerable road users. Nearly 133 two-wheeler occupants and nearly 10 cyclists killed were killed daily in road accident in 2017.

  • In 2017, approx. 1.47 lakh people died in road deaths which is equivalent to the population of many small cities in India.

 

Why road safety remains a challenging task?

  • Pedestrians are the most vulnerable road users as they have lesser protection in case of road accidents. Adding to this motorist have little respect for the rights of pedestrians.

  • Designated footpaths are routinely encroached by parked vehicles and shops especially in urban area, force the pedestrians to walk on roads.

  • There is a lack of motivation for road safety implementation measures among enforcement agencies. Additionally, low number of prosecutions of lawbreakers on roads further increase the problems.

 

Government steps for road safety

  • Draft National Action Plan aimed at halving number of road accident deaths by 2020.

  • Pradhan Mantri Surakshit Sadak Yojana launched with initial funding of about Rs 2,000 crore which will eliminate dangerous spot form highways.

  • Recently government made it mandatory for two-wheeler from April 2019 onward to have Anti-Break lock System in order to improves control over the vehicle at the event of emergency braking.

  • Government had signed the Brasilia declaration in 2015, committing to reduce road accident and fatality by half.

 

Motor Vehicles (Amendment) Bill, 2017

  • Provisions for Non-Motorised Transport and pedestrian bicycle infrastructure.

  • It Sets up a National Road Safety Board that will advise the government on road design and motor vehicle safety.

  • It adds new provisions that allow the Centre to recall vehicles that pose a danger to users.

  • It has the provision of protection of Good Samaritan.

  • There is a lack of helping hand approach among people at the time of accidents. This is due to consequential legal hearing and repeated appearances in the police station for investigation.

  • It has pointed out that road infrastructure in India suffers from poor design quality, poor visibility and it overlooks road engineering which is inalienable part of road safety.

  • Road Safety is a State Subject, this make difficult to meet the global road safety standards for instance World Health Organisation (WHO), recommended countries to have a national urban maximum speed limit of 50 km/hour. Some states like Uttar Pradesh fall below this bracket with a 40 km/hour limit while those in Andhra Pradesh and Maharashtra can go up to 65 km/hour.

 

Suggestions to improve road safety

  • Pedestrian

  • o There is a dire need to segregate pedestrian road users from other vehicles to reduce conflict.

  • o Safe system approach of World Health Organisation recognised that people role in road safety cannot be

 

Impact of Road Accidents

  • Economics Cost: Planning Commission of India, stated that over 3% of India’s GDP is lost to road accidents annually, and this amounted to 3.8 lakh crore rupees in 2014.

  • Social Cost: Loss of family member, especially earning member leads to poverty and social distress. Moreover, disabilities occurred in accident leads of loss of human productivity coupled with stigma.

  • Administrative cost: Traffic management, enforcement of law, resource costs (clearance of damage property), and insurance administration. eliminated completely by penalisation methods, rather the policy approach should be shifted towards education and awareness for all the strata of society.

 

Road

  • The various study highlighted that instead of expending or widening the roads, application of scientific methods such as construction of central barriers, road-side crash barriers can effectively minimise road accidents/fatality.

  • Road Safety Action Plan mooted by Asian Development Bank stressed the need of optimal mobility of traffic, promotion of traffic circulation, building the rush-hour lanes, and self-explained roads.

 

Vehicles

  • Voluntary fleet modernisation programme is need of hour. Despite of its initial aim of reducing pollution, it will facilitate the minimisation of road accident due to lack of safety measures in old vehicles.

  • Additionally, launching Bharat New Vehicle Safety Assessment Programme on line of star labelling, can effectively minimise the accidents.

 

Government

  • Recently, Karnataka Good Samaritan and Medical Professional (Protection and Regulation during Emergency Situations) Bill, 2016, has been assented by The President, similar law should be enacted by other states. This legislation would give both legal and financial protection to good Samaritans and ensure immediate medical assistance for victims within the 'golden hour'.

  • Providing more teeth to the traffic police infrastructure by hiring more personnel, installing cameras, and prosecuting lawbreakers can tame the menace of aggressive driving.

  • Adopting Vision Zero approach in road safety governance. The Vision Zero approach pegs human life and health above all other transportation challenges.

 

17. Nobel Prize In Economics

  • What is unique about this year’s Nobel Prize winners?

  • This year’s Nobel Prizes have been awarded to Economic theories with direct political and practical implications. Both the Laureates life work goes against the traditional model of growth and development. e.g. Growth model of Nobel Laureate Robert Solow which provides a relationship between growth of workforce and capital with long term economic growth.

 

Nobel Winners’ Work

William Nordhaus

  • Nordhaus believes that climate change can be addressed by ensuring correct pricing of polluting resources like fuel through government interventions e.g. higher taxes on petrol, diesel.

  • His models that integrated population growth, fossil fuel use, income growth, and global warming became the basis for most calculations of the costs and benefits of various anti-global warming interventions.

  • First person to create an “integrated assessment model”, a quantitative model that describes the interplay between economy and climate.

  • Putting a price on carbon is the main tool for alleviating climate change.

 

Paul Romer

  • Technological innovation and skilling of workforce are the real sources of sustainable growth.

  • Proposes the “endogenous growth model” where technological progress is seen as the outgrowth of businesses and other entities investing in research and development.

  • A market led economy may undersupply technological innovations

  • He recommended the use of subsidies, patents and other forms of government intervention to encourage

  • economic growth through increased investment in technology.

 

18. Global Competitive Index 4.0

About Global Competitive Index (GCI) 4.0

  • It is a composite indicator that assesses a set of factors that determine an economy's level of productivity widely considered as the most important determinant of long-term growth.

 

Key Findings

  • In the index U.S. toped the position, followed by Singapore and Germany at the second and the third positions respectively.

  • Among the BRICS economies, China topped the list at 28th place with a score of 72.6, ahead of India (score of 62.0, ranked 58th), the Russian

  • Federation (65.6, 43rd), South Africa (60.8, 67th), and Brazil (59.5, 72nd).

 

Observations for India and its neighbouring countries

  • India, remained the South Asia's main driving force for competitiveness and its rank rose by five places from 2017, the largest gain among G20 economies.

  • Top performers in the upper and lower middle-income brackets, such as China and India, are catching up with or even outperforming the average among high-income economies

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