9 PM Daily Current Affairs Brief – February 6th, 2023

Mains Oriented Articles

GS PAPER - 1

Our growth needs deep analysis more than constant trumpeting

Source– The post is based on the article “Our growth needs deep analysis more than constant trumpeting” published in the mint on 6th February 2023.

Syllabus: GS1- Indian economy and growth

Relevance– Growth trends of Indian economy

News– A close look at trends of economy in global comparison raises some questions

Why is there confusion about India’s growth numbers?

There is controversy over the revised series at 2011-12 prices. There is a widely held view that GDP numbers in the revised series are overestimated.

The data from the informal sector accounts for a larger share of Indian GDP is available only with a time leg. Consequently, trends from the formal sector are projected into the informal sector while making provisional GDP estimates. These are subsequently revised once data from the informal sector is available.

The public debates in India revolve around headline figures of CSO. The international practice in analysing growth data is to look at output loss/gain relative to trend growth rate.

What can be analysed from comparison of average growth rate of 2014-22 of India with other Asian economies?

The fastest growing economy over the past seven years  was neither China nor India. It was Bangladesh.

Global attention is focussed on China deceleration due to Xi Jinping policies. He privileges security over economic growth. However, growth deceleration over this period is more for India as compared to China.

There is talk of an economic crisis in Pakistan. However, its average growth rate during the past four years was more than India.

During this period, Bangladesh overtook India in per capita income. India’s neighbours to the east and west had better average economic growth over the last four years.

Output loss of 18.2% of GDP over the last four years in India is very high. This is a substantial loss. It is significantly higher than China and other South Asian neighbours.

What needs to be done by economic policymakers?

There is a need for assessment of  large output loss.

Corrections are required in the GDP numbers based on the 2011-12 series.

There is a need to assess the output loss that can not be recovered.

Trends of downward shifts need to be studied. True extent of long term damage will be known once the data on the informal sector is finalised.

Steps needed to reverse the growth trend should be finalised.

GS PAPER - 2

The discrepancies in the latest AISHE report

Source– The post is based on the article “The discrepancies in the latest AISHE report” published in The Hindu on 6th February 2023.

Syllabus: GS2- Issues related to development and management of education

Relevance– Statistics about higher education in India

News– The All-India Survey on Higher Education 2020-21 report was released recently.

What is the basic difference of the current report with previous reports?

It had revised the Gross Enrolment Ratio in higher education retrospectively for the previous four years, by recalculating it based on population projections as per the 2011 Census. Previous reports had used projections based on the 2001 Census.

What are the discrepancies in the latest AISHE report?

A comparison of the population projections used in the AISHE 2020-21 report with the Census of India Report released in July 2020, shows variations.

There are sharp deviations in Tamil Nadu’s population projection used in the AISHE 2020-21 report between 2016 and 2020 and the population projection based on the CoI report.

The figures based on the CoI report show a gradual decline between 2016 and 2020. AISHE 2020-21 shows an increase for the first four years and a sharp drop in 2020.

In Himachal Pradesh, the projected population in the 18-23 age group for 2019 was revised upwards by 6% in the AISHE 2020-21 report compared to the AISHE 2019-20 report. However, the State’s GER for 2019 remained the same in both the reports.

Spy In The Sky – China’s espionage balloons or espionage ships are part of an aggressive strategy that can target India too

Source: The post is based on the article “Spy In The Sky – China’s espionage balloons or espionage ships are part of an aggressive strategy that can target India too” published in The Times of India on 6th February 2023.

Syllabus: GS 2 – India and its neighbourhood- relations.

Relevance: About Chinese espionage capabilities.

News: Recently, the US forces shot down a Chinese spy balloon off the US coast. There are reports that a second spy balloon is already flying over Central and South America. This has strained relations between the US and China and has larger implications for India-China relations.

Why Chinese espionage capabilities is a cause of worry for Global nations, particularly India?

a) The recent one wasn’t the first Chinese surveillance balloon to be detected but was the most sophisticated one. Hence, Chinese spy tech is getting increasingly sophisticated.

b) Last year’s docking of a Chinese spy ship masquerading as a research vessel at Sri Lanka’s Hambantota port was another example of Beijing’s growing espionage capabilities.

c) Chinese definitions of government and civilian assets are superficial. For instance, the Chinese mentioned the balloon as a weather-monitoring device and the 2020 investigation revealed a Chinese technology firm was harvesting data on more than 10,000 influential individuals in India.

What should be done to address Chinese espionage capabilities?

a) All cooperation with Chinese civilian agencies and businesses needs to be seen with the security of the state, b) India needs to upgrade its hi-tech counter-espionage measures, and c) the Indian government is in urgent need to step up counter-intelligence cooperation with the US and other likeminded democracies to counter China’s plans.

GS PAPER - 3

Scientists’ take on the Union Budget 2023-24

Source: The post is based on an article “Scientists’ take on the Union Budget 2023-24” published in The Hindu on 6^th February 2023.

Syllabus: GS 3 – Budget

Relevance: announcement made in the Budget 2023-24 for science and technologies.

News: The article discusses how various science and tech organizations can play the role on the announcement made in the Budget 2023-24 and concerns associated with it.

How can different organizations help in the applications of measures announced in the Budget 2023-24?

Council of Scientific and Industrial Research (CSIR) – CSIR has a presence on all focus areas of this year’s budget. For example, it plays an important role in green hydrogen research and development (R&D) under the National Hydrogen Mission.

It focuses on National Mission to eliminate Sickle Cell Anaemia Mission by 2047 announced in the budget.

It also has an ongoing AI programme to augment AI application in several areas. A new programme has been launched to promote innovation in pharmaceuticals.

Ministry of Science and Technology – The budget allocated ₹2,000 crore more to the Ministry of Science and Technology than the previous budget. This is an added advantage for the development in the field of science and tech.

Department of Biotechnology (DBT) – The budget focuses on green growth and biotechnology plays a major role in finding sustainable solutions for this.

DBT is developing a policy framework for ‘high-performance biomanufacturing’ to have world-class facilities and workforce in synthetic biology-based manufacturing practices.

It will bring improvements in healthcare’s S&T with a focus on ‘One Health’.

It will operationalise the Tuberculosis Genomic Surveillance for drug-resistance. It is also developing a programme to genetically characterise minor millets.

However, there are also issues with this year’s budget.

What are the issues with the budget?

The current level of S&T expenditure is inadequate if India wants to compete at the international level in knowledge generation. Only 0.36% of the budget has been allocated to the Ministry of S&T.

The budget for Departments of Biotechnology and of Scientific & Industrial Research have been reduced, adjusting for inflation. The budget for the Department of Space has also been cut by 8%. 

Moreover, the New Education Policy 2020 recommends increasing the education spending to 6% of GDP. However, education has only received 2.5% of this budget.

What can be the course of action?

The government needs to have better implementation procedure for the measures announced in the budget.

Along with those, there is also need to – a) push agritech, millet research to get nutritional benefits in the long run, b) open up select Indian Council of Medical Research labs for research to the public and private sector, c) support education and research on biomedical devices, pharma and AI interdisciplinary.

Certainly, uncertainty has declined – on world economy

Source– The post is based on the article “Certainly, uncertainty has declined” published in The Business Standard on 6th February 2023.

Syllabus: GS3- Economy

Relevance– Global economic prospects and impact on India

News– Over the past year, global macroeconomic stability has improved, which sets the stage for good growth from 2024.

What was the situation of the world economy one year ago?

The World economy was in trouble. The foundations of price stability were under question and central banks globally raised rates.

Sharp global tightening triggered difficulties for the world economy.

Russia attacked Ukraine. China followed the policy of zero Covid through repression.

What are the prospects of the global economy in current times and near future?

Inflation targeting regime of developed countries has worked well. Monetary tightening caused some trouble. Higher interest rates led to difficulties of cryptocurrencies, start-ups in India, and the price corrections in tech giants like Amazon and Google.

There is restoration of macroeconomic stability in the global economy. Supply chains have significantly corrected, assisted by China’s return to production.

The workforce in developed markets is getting back to work. By 2024, we can expect normal values of inflation, interest rates, and asset prices.

Russia’s invasion of Ukraine looked dangerous initially. The Russian success would have led to other wars, like Chinese attacks on Taiwan.

The radical uncertainty has subsided as the weakness of the Russian state has been revealed.  Russia’s failure in Ukraine has improved deterrence against future invasions by big powers.

President Xi Jinping has stepped back from aggressive behaviour and stepped away from the lockdowns that attempted zero covid. China’s vaccine nationalism has harmed the legitimacy of the regime.

Things are very difficult in China right now, but there are signs of restoration of normalcy. The Xi regime would continue to play the nationalism card in overcoming domestic unpopularity. But, the experience of Russia in Ukraine will shape its behaviour.

These three factors have helped calm financial markets. The volatility today is lower than last year. This restoration of macroeconomic stability can create conditions for a period of sustained growth starting from 2024.

What is the way forward for businesses in India?

It is more feasible to make business plans because things are looking stable now.

India has a workforce that is more tech-savvy. This is a good time for business building.

Hydropower projects in the Himalaya should be reconsidered given recent crisis

Source: The post is based on an article “Hydropower projects in the Himalaya should be reconsidered given recent crisis” published in The Indian Express on 6^th February 2023.

Syllabus: GS 3 – Environment

Relevance: environmental impact of hydropower project and alternative to it.

News: Joshimath land subsidence has raised concerns over the hydropower projects in Himalayas. This article discusses the impact and alternatives to hydropower.

What is a hydropower?

It is a renewable source of energy. It is often considered green energy because it generates electricity from the natural flow of water without releasing any emissions. It does not rely on fossil fuels.

However, it also brings concerns and threats to the environment, especially in the Himalayan region.

What are the concerns with the Hydropower projects?

Most countries in the Himalayan region, including India have built or are planning to build hydropower projects in the Himalaya. The Indian government has identified hydropower as a key renewable energy source.

However, the construction of the hydropower in Himalayas brings various concerns.

The concerns are – a) can bring conflicts over water resources in the region, b) can disrupt the flow of rivers, leading to changes in water temperature and chemistry, c) dams can also cause erosion, landslides, and sedimentation which can have a negative impact on the local environment, d) Dams also disrupt the migration patterns of fish and other aquatic species and impact the local wildlife, e) large-scale dams displace local communities, affecting their livelihoods and cultural heritage and impacting the overall well-being of the local population.

Therefore, it is beneficial to look for alternatives to hydropower projects.

What can be the alternative to hydropower?

Micro hydro is a small-scale hydroelectric power generation system that generates up to 100 kilowatts (kW) of electricity.

These systems use the energy of falling water to generate electricity. They can be used for various applications such as powering homes, businesses, and small communities.

They are less expensive to build and maintain than large hydroelectric dams and have a smaller environmental footprint.

They can be located even in inaccessible areas where it is difficult to transmit electricity from larger power stations and can provide a reliable source of energy to communities that are not connected to the grid.

They can be used to minimise the ecosystem’s negative impact and provide sustainable energy solutions. However, even they have some impact on the environment but the impacts are less when compared to large hydropower dams.

India’s just energy transition is more than a coal story

Source– The post is based on the article “India’s just energy transition is more than a coal story” published in The Hindu on 6th February 2023.

Syllabus: GS3- Infrastructure: Energy

Relevance– Issues related to clean energy transition

News– Just Energy Transition Partnership (JET-P) is emerging as the key mechanism for multilateral financing by developed countries to support an energy transition in developing countries.

India is considered the next candidate for a JET-Partnership.

What are the issues with Just Energy Transition Partnership?

Energy transitions could give rise to intra-generational, intergenerational, and spatial equity concerns. Transitions affect fossil-dependent jobs, disrupt forms of future energy access.

It shrinks the State’s capacity to spend on welfare programmes. Thus, it increases the existing economic inequities between coal and other regions.

Existing JET-P deals pay limited attention to intra-generational inequity, such as job losses. Among the three JET-P deals signed so far, only South Africa’s deal mentions a ‘just’ component.

What are the difficulties faced by India in JET-P negotiations?

These have remained stalled over coal ‘phase-down’ and how to operationalise India’s just transition. The emphasis on coal phase-down disregards the crucial difference in energy transition between industrialised and emerging economies.

India’s transition requires significant simultaneous growth in energy demand. The Central Electricity Authority projects a near doubling of electricity demand by 2030. India cannot afford to put its development on hold while decarbonising.

What are the steps taken by India for clean energy?

India has set the goal of 450 GW renewable energy capacity addition and 43% RE purchase obligation by 2030. These targets are supported through complementary policy and legislative mandates like Energy Conservation (Amendment) Act and missions like National Green Hydrogen Mission.

Fiscal incentives through production-linked incentives are provided. Market mechanisms like the upcoming national carbon market supports these efforts.

What is the basic requirement for clean energy transition in India?

Accelerating the pace of Renewable Energy deployment is needed to match the pace of demand growth. In 2021-22, coal power served one-third of the new demand.

Meeting India’s 2030 target requires accelerating non-fossil capacity addition from 16 GW a year in 2022 to 75 GW a year by 2030.

What is the way forward to achieve it?

Shifting energy demand patterns– This is low hanging fruit. It will enable faster RE capacity addition.

Solarisation of agricultural electricity demand; electrification of diesel-powered MSMEs and decentralised RE for residential cooking and heating are some of the steps needed for shift in energy demand patterns.

Components of clean energy– Domestic manufacturing of clean energy components is critical to sustain JET, build energy self-sufficiency. Indian components are 20% costlier than Chinese components.

Giving preference to domestic components without addressing cost competitiveness may slow down the pace of deployment.

The way around this is to look for markets outside India as part of a JET-Partnership and to reduce the cost gap through economies of scale.

Optimal use of coal power– There is a need to have a relook at the current use of coal resources to enhance efficiencies until the period of phase-down. One option is to optimise use of coal-fired power plants closer to coal mining areas rather than based on energy demands.

This would enable coal to be used more efficiently because transportation of coal is more energy-intensive . It would also lead to cheaper power and indirectly reduce emissions due to more efficient use of coal.

The investment requirements for this transition are beyond the means of domestic capacity of developing countries. Any future JET-P deal must consider this broader framework for financing and supporting an energy transition.

India’s G-20 presidency is an opportunity at hand to negotiate a deal for itself while also shaping international cooperation on just energy transitions.

Green growth push – New initiatives have long-term potential

Source: The post is based on the article “Green growth push – New initiatives have long-term potential” published in the Business Standard on 6th February 2023.

Syllabus: GS 3 – Environment and Bio-diversity Conservation.

Relevance: About the green growth push in the Budget 2023-24.

News: The Union Budget has focussed on many green growth push initiatives that can lead to an environmentally conscious lifestyle.

What are the initiatives in the budget that focus on the green growth push?

Green growth has been listed among the seven priorities of the Budget for 2023-24.

Read more: Major thrust planned for green energy

The other initiatives include a) incentivising the use of green hydrogen and biofuels; b) conserving natural ecological safeguards like mangroves and wetlands; c) introducing concepts like green credit; and d) striving for an appreciable reduction in sources of pollution through measures like replacing polluting vehicles with non-polluting ones and chemical fertilisers with organic manures.

What is the rationale behind the announced green growth push initiatives in the Budget?

Read here: Going green – The Budget can help India transition out of its dependence on fossil fuels

-The bulk of the Energy Transition Fund would be at the disposal of the oil-marketing companies to enable them to switch to new and renewable sources of energy.

-The allocation of funds for the National Green Hydrogen Mission is expected to make India a net exporter of green hydrogen.

What are the advantages of the government’s green growth push?

The government’s heavy expenses will be paid back sooner and have the potential to pay lasting dividends. For instance, in the solar-energy sector, the payback time in the case of alternative sources of energy is rapidly shrinking due to the constant inflow of cost-effective and more efficient technologies.

Bajra Boosters – Policies promoting millets will not work unless governments address farmers’ incentives

Source: The post is based on the following articles

“Bajra Boosters – Policies promoting millets will not work unless governments address farmers’ incentives” published in The Times of India on 6th February 2023.

“India’s promotion of millets is great but will likely fail” published in the Live Mint on 6th February 2023.

Syllabus: GS 3 – Major crops-cropping patterns in various parts of the country.

Relevance: About promotion of millets.

News: In the recent budget speech, Finance Minister praised millets as noble food and mentioned the government’s initiatives for the promotion of millets.

What are Millets?

Must read: What are Millets?

Why promotion of millets deserves a special push?

The modern world is a slave to sugary foods: Glucose is a simple form of sugar. The faster food becomes sugar, the more appealing it is to consumers. Hence, rice and wheat succeeded faster. They have killed or diminished the lives of hundreds of millions of people by injecting them with too much sugar.

On the other hand, millets turn into glucose inside body slowly. This is also why they are considered healthy.

Millets, like rice and wheat, have a high ratio of carbohydrates. But they also have fibre. The amount of fibre present in millet slows the conversion of food into glucose.

Note: After the stomach converts food into glucose and releases it into the bloodstream, the pancreas release insulin, which sends glucose to the cells for energy, reducing the sugar level in the blood. But when a person releases a high amount of glucose into the bloodstream for several years, the cells begin to defy the hormone and do not absorb as much glucose as they are supposed to.

As a result, many destructive things occur. Organs marinate in high blood sugar for hours, which damages them; the excess sugar is eventually converted into fatty acids and stored in the fat cells of various body parts. 

Read here: Multidimensional benefits associated with enhancing millet cultivation

How government is promoting millets?

-In 2013, the government launched a crop diversification programme to shift acreage away from paddy in the original Green Revolution regions, Punjab, Haryana and western UP. Later, the Haryana government even offered a cash subsidy of Rs 7,000/acre to shift cultivation to alternate crops.

Read here: Centre, States to join hands to promote millets consumption and  Centre formulates action plan to promote exports of millets and value-added products of millets

What should be done to promote millets?

Inclusion of millets in Public Distribution System and MSP: The government has to guarantee a floor price for millets. This will disincentivise rice and wheat cultivation.

The world’s largest food security scheme covering about 800 million people is giving more attention to rice and wheat. This has to shift in favour of the promotion of millets.

Read here: A region-specific strategy and their introduction in mid-day meals could boost millets cultivation

 

MSMEs: Significance, Challenges and Solutions – Explained, pointwise

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Introduction

The year 2023 has started on an optimistic note. The economy seems to be on the path of recovery post the challenges posed by the COVID-19 pandemic and the Russia-Ukraine War, although global uncertainties remain. The Industrial sector has received much attention especially the role of large businesses in economic recovery. However the Micro, Small and Medium Enterprises (MSME) sector is more crucial as MSMEs are the largest employers in India outside of agriculture. The Union Budget 2023-24 has introduced several enabling provisions for the growth of the MSMEs. However, MSMEs continue to face several challenges. Addressing these challenges can ensure not only faster overall economic growth, but also make the growth process more sustainable and inclusive.

What are the MSMEs?

MSME (Micro, Small, and Medium Enterprise) are regulated under the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. MSMEs are managed under the Ministry of MSME.  Earlier, MSMEs were categorised based on the amount invested in plant and machinery/equipment. With revised regulations effective from July 2020, annual turnover has also been added as a criteria. The classification criteria are: (a) Micro Enterprise: Investment in Plant and Machinery or Equipment is less than INR 1 crore and Annual Turnover is less than INR 5 crore; (b) Small Enterprise: Investment in Plant and Machinery or Equipment is less than INR 10 crore and Annual Turnover is less than INR 50 crore; (c) Medium Enterprise: Investment in Plant and Machinery or Equipment is less than INR 50 crore and Annual Turnover is less than INR 250 crore.

Statutory Bodies: The Ministry of MSME heads 5 statutory bodies

Khadi and Village Industries Commission (KVIC): It is a statutory organisation engaged in promoting and developing khadi and village industries for providing employment opportunities in rural areas, thereby strengthening the rural economy.

The Coir Board: It is a statutory body established for promoting overall development of the coir industry and improving living conditions of workers in the industry.

National Small Industries Corporation Limited (NSIC): It was established in 1955. It is responsible for promoting, aiding and fostering growth of micro and small enterprises in the country, generally on commercial basis.

National Institute for Micro, Small and Medium Enterprises, (NI-MSME): It was established in 1960. It is responsible for enterprise promotion and entrepreneurship development, enabling enterprise creation, performing diagnostic development studies for policy formulation, etc.

Mahatma Gandhi Institute for Rural Industrialisation (MGIRI): The objectives of the Mahatma Gandhi Institute for Rural Industrialisation (MGIRI) are to accelerate rural industrialisation for sustainable village economy, empower traditional artisans, encourage innovation through pilot study and R&D for alternative technology using local resources.

These bodies are responsible for aiding MSMEs with respect to Government schemes and policies.

What is the significance of MSMEs?

Contribution to GDP and Exports: In 2020-21, MSMEs accounted for 26.8% of Gross Value Added (GVA). The contribution of MSMEs in exports stood at 42.6% (April 2022-August 2022).The contribution of Manufacturing MSME Gross Value Added (GVA) contributed 38.4% of India’s total Manufacturing GVA (2020–21).

As Indian economy is poised to reach US$ 5 trillion status, the Ministry of MSME has set a goal of increasing its contribution to GDP to 50% by 2025.

Rural Development: 51% of MSMEs are located in rural areas. In contrast to large corporations, MSMEs have aided in the industrialization of rural areas at a low capital cost. The sector has made significant contributions to the rural socioeconomic growth while also supplementing major industries.

Creation of Employment: MSMEs are India’s largest employer outside of agriculture. They employ over 11.1 crore people, or 45% of all workers, and have low capital and technology requirements. MSMEs are key to the Make in India mission.

Simple Structure: Given India’s middle-class economy, MSMEs offers the flexibility of starting with limited resources under the owner’s control. As a result, making decisions becomes easier and more efficient . A large corporation, on the other hand, requires a specialist for every departmental function due to its complex organisational structure.

Innovation Promotion: They support local resource mobilisation, capacity building, industrial development in rural areas, and give aspiring entrepreneurs a chance to develop innovative products. It has enormous potential for connecting India’s MSME base with large corporations. Multinational corporations are increasingly purchasing semi-finished and auxiliary products from small businesses.

Social Inclusion: According to the Annual Report of The Ministry of MSMEs (2021-22), the socially backward groups owned almost 66.27% of MSMEs. In rural areas, almost 73.67% of MSMEs were owned by socially backward groups.

Source: Annual Report, Ministry of MSMEs (2021-22)

MSMEs can play a significant role in creating an inclusive and sustainable society. They encourage balanced regional development, gender equity, and the use of banking services and products. In light of the information presented above, MSMEs can become the ‘growth engine of the nation‘.

What are the challenges faced by MSMEs?

Financial Constraints: This is a significant impediment for the MSME sector. Only 16% of SMEs have timely access to finance, forcing small and medium-sized businesses to rely on their own resources.

Lack of Formalisation: Almost 86% of the country’s manufacturing MSMEs are unregistered. Only about 1.1 crore of the 6.3 crore MSMEs are registered with the Goods and Services Tax (GST) regime, and the number of income tax filers is even lower. As a result of limited availability and access to data, as well as legacy underwriting methods, the credit requirement of Indian MSMEs’ have largely gone unmet.

Access to Technology: Majority of MSMEs use outdated technology that prevents them from keeping up with the modern world. Adoption of new technology and training employees is difficult and expensive, especially in manufacturing where both physical equipment and software are involved. Lack of access to IT education contributes to the technological gap. Another significant factor is a lack of awareness, which reduces willingness to invest in advanced technology solutions.

Skill Development: Skilled employees are critical for business growth. Multinational corporations (MNCs) recognise this and place on-the-job training at the heart of their operations. Unfortunately, small-scale businesses fail to upskill their workforce, causing them to suffer unknowingly.

Creativity: Businesses are becoming more knowledge-based, and their success and survival are inextricably linked to their creativity, and innovation. To remain competitive, MSMEs must learn and incorporate the process of innovation into their daily operations. However, they lack the resources and capacity to undertake innovations.

Competition: Because of increased competition, Indian MSMEs are finding it difficult to sell their products in both domestic and international markets. Small-scale enterprises face stiff competition from global counterparts as well as domestic giants due to their massive scale of operation (large corporations). While the government does provide protection for such small-scale businesses, competition remains largely one-sided.

Red-Tapism: MSMEs require various approvals and entrepreneurs are forced to navigate various government departments in order to obtain construction permits, enforce contracts, pay taxes, start a business, and trade across borders. In addition, regulatory risks and policy uncertainty limit scaling-up of MSMEs.

What steps have been taken to support MSMEs?

Credit and Financial

Prime Minister’s Employment Generation Programme: The scheme, implemented by the KVIC, aims to generate employment opportunities in rural and urban areas by setting up new self-employment ventures/projects/micro enterprises. The programme also aims to provide continuous sustainable employment to prospective artisans and unemployed youth and increase the wage-earning capacity of artisans and contribute to the growth of rural and urban employment.

Credit Linked Capital Subsidy Scheme: Its objective is to facilitate technology upgrade among MSEs (Micro and Small) by providing capital subsidy of 15% (on institutional finance of up-to Rs 1 crore availed by them) for induction of well-established and improved technology in the specified 51 sub-sectors/products.

Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE): It provides collateral-free credit to the micro and small enterprise sector.

Special Credit Linked Capital Subsidy Scheme (SCLCSS): This scheme will help enterprises in the services sector meet various technology requirements. It also has a provision to grant 25% capital subsidy for procurement of plant & machinery and service equipments through institutional credit to MSMEs owned by SC/ST entrepreneurs without any sector specific restrictions on technology upgradation.

Raising and Accelerating MSME Performance (RAMP): The scheme aims at strengthening institutions and governance at the Centre and State, improving Centre-State linkages and partnerships and improving access of MSMEs to market and credit, technology upgradation and addressing issues of delayed payments and greening of MSMEs..

Mudra Loan Scheme: It was launched in April, 2015 for providing loans up to INR 10 lakh to the non-corporate, non-farm small/micro enterprises. It encompasses 3 financing loans: Tarun (loans up to INR 10 Lakhs), Kishore (loan up to INR 5 Lakhs), Shishu (loan up to INR 50,000).

Skill Development and Training

A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship (ASPIRE): The objectives of this scheme are to create new jobs, promote entrepreneurship culture in the country, promote innovation in the MSME sector.

Entrepreneurship and Skill Development Programmes (ESDP): Under this, the Ministry of MSME has been organising several programmes focussing on the process of improving skills and knowledge of entrepreneur, and enhancing the capacity to develop, manage and organise a business venture.

Infrastructure

Scheme of Fund for Regeneration of Traditional Industries (SFURTI): The objectives are to organise traditional industries and artisans into clusters to make them competitive and provide support for their long-term sustainability, enhance marketability of products of such clusters, build innovative products, improve technologies etc. The scheme cover three types of interventions, e.g., soft intervention wherein activities are held to build general awareness, counselling, skill development, etc.; hard intervention which includes creating common facility centers, raw material banks, etc.; and thematic intervention on brand building, new media marketing, e-commerce initiatives, research and development, etc.

Scheme for Micro & Small Enterprises Cluster Development Programme (MSE-CDP): The Ministry of MSME has adopted the cluster development approach as a key strategy for enhancing productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs). The programme includes activities such as support funding for setting up Common Facility Centres (CFC) and Infrastructure Development Projects (IDP).

Technology Upgrade and Competitiveness

Financial Support to MSMEs in ZED Certification: The scheme promotes Zero Defect and Zero Effect (ZED) manufacturing among MSMEs. It provides ZED Assessment for their certification to encourage MSMEs to constantly upgrade their quality standards in products and processes, promote adaptation of quality tools/systems and energy-efficient manufacturing, and drive manufacturing by adopting the Zero Defect production processes and without impacting the environment.

Support for Entrepreneurial and Managerial Development of SMEs through Incubators: The objective of the scheme is to promote and support the creativity of MSME enterprises and encourage adoption of the latest technologies in manufacturing as well as knowledge-based innovative MSMEs.

Digitalisation: Government initiatives such as the Digital Saksham and the interlinking of the Udyam, e-Shram, National Career Service (NCS), and Atmanirbhar Skilled Employee-Employer Mapping (ASEEM) portals show the promise of targeted digitalisation schemes.

Services

Building Awareness on Intellectual Property Rights (IPR) for MSMEs: It has been launched to promote awareness about IPRs among MSMEs by assisting them in technology upgrade and enhancing competitiveness and effective utilisation of IPR tools.

Trade, Import and Export for MSMEs: MSME support and development organisation, National Small Industries Corporation (NSIC), will assist MSMEs working with the Agricultural and Processed Food Products Export Development Authority (APEDA) across multiple areas. APEDA members will get access to NSIC schemes, which would help them address issues pertaining to technology adoption, skills, product quality and market access.

Miscellaneous

In June 2022, the Union Government announced a new initiative called ‘Promotion of MSMEs in North Eastern Region and Sikkim‘. Its main purpose is to stimulate MSMEs in the North East by establishing mini-technological centres, developing new and existing industrial estates, and promoting tourism.

In November 2021, NITI Aayog released a discussion paper to introduce new financial entities called ‘Digital Banks‘ that would fundamentally aim to bridge the current credit gap among India’s MSMEs and get them into the formal financial fold.

Support by Private Sector

The Small Industries Development Bank of India (SIDBI) has inked a pact with Google to pilot social impact lending with financial assistance up to INR 1 crore at subsidised interest rates to micro enterprises. To reinvigorate the Indian MSME sector, Google India Pvt. Ltd. GIPL, will bring a corpus of US$ 15 million for micro enterprises as a crisis response related to COVID-19.

Digital freight forwarder Freightwalla, launched a shipment tracking service for MSME exporters and importers based on predictive analytics to help businesses tackle risks associated with shipment delays and improve supply chain efficiency.

Bombay Stock Exchange (BSE) announced that it has collaborated with the All-India MSME Association (AIMA MSME) to encourage and promote the listing of MSMEs and start-ups.

Meta India has announced the launch of online resource centre ‘Grow Your Business Hub‘, to help MSMEs find relevant information, tools and solutions curated to cater to their business goals.

What more should be done to support MSMEs?

First, There is a need to push for for Digitisation of MSMEs. Owing to problems like the dearth of proper infrastructure, finance, and limited knowledge, the MSME sector has been slow in going digital. Digitising the sector could help in enhancing efficiency and reliability, cutting costs, and keeping up with latest technological trends.

Second, The National Logistics Policy can also be used to boost the competitiveness of MSMEs. The NLP aims to reduce logistics costs as a percentage of GDP from 13-14 percent to 8%, putting the country on par with developed nations. While lower costs will encourage more MSMEs to use logistics services powered by technology.

Third, with the advent of online e-commerce platforms, MSMEs have got access to a channel to expand their markets. However, to meet the growing demand for e-commerce in suburban and rural areas, they will require assistance. To that end, the Government could enlist India Post as a technologically advanced last-mile delivery partner capable of facilitating cash-on-delivery transactions at competitive rates.

Fourth, similarly, the unparalleled reach of Indian Railways can be leveraged to quickly and cost-effectively ship goods to the most remote parts of the country. This can expand the reach of products manufactured by MSMEs.

Conclusion

MSMEs can play a vital role in growth of the economy as India enters the Amrit Kaal phase. They can help in inclusive and balanced development and make India a global manufacturing hub. The Government has been supporting the MSMEs through various initiatives, the need is to focus on the implementation and realizing the outcomes.

Syllabus: GS III, Indian Economy; GS III, Changes in Industrial Policy and their effects on industrial growth.

Source: Indian Express, The Hindu, IBEF, PIB

The tax gambit – Government should not stop nudging people towards safe, long-term savings

Source: The post is based on the article “The tax gambit – Government should not stop nudging people towards safe, long-term savings” published in The Hindu on 6th February 2023.

Syllabus: GS 3 – Government Budgeting.

Relevance: About new income tax system.

News: During the budget speech, the government introduced the new income tax system.

What is the new income tax system?

Read here: New tax regime gives spending flexibility

The new system was based on the thought that the individual is the best judge of his/her income.

What are the advantages of the new income tax system?

Read more: New income tax regime: A nudge on income tax mustn’t become a shove

Why new income tax system’s idea of the individual is the best judge of his/her income is flawed?

Though, the statement is individually valid the lower income earners will not benefit a lot from the system. This is because, a) Lower income earners do not save enough to avail of the tax exemptions and end up paying higher rates, b) India’s low literacy and financial literacy levels will make taxpayers’ mix of consumption and savings complicated, c) Adult humans do not behave as rationally as economists and invest in inflation-beating investments, d) Financial products are routinely mis-sold to those not equipped to understand market nuances and the risks embedded, e) India’s retail participation in stocks may have risen in recent years, but not everyone can handle the risks of equity markets or avoid being tricked by influencer-operators.

Above all, there are no universal social security and health benefits in India. The old exemption-based regime helps guide families towards some level of prudent asset allocation to cope with life’s uncertainties.

What should be done to make the new income tax system comprehensive?

Before taking away the old tax regime the government must ensure adequate financial literacy efforts and crack down on unethical selling practices of stocks, insurance and other financial products. Further, if such a state is achieved then the government should revisit the idea of mandatory contributions to provident funds and pensions.

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