Answers: Mains Marathon – UPSC Mains Current Affairs Questions – January 2, 2018

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Q.1) Highlight the important areas on which India should concentrate for a successful “Make in India 2.0”. (GS-3)

Introduction:

• The Government of India is soon to announce the foreign trade policy review.
• A shift in India’s manufacturing and export strategy has been signalled.

Important areas to be concentrated for a successful “Make in India 2.0”:

• If the manufacturing in India needs to continue then there is a need to give a thrust to the exports.
• Increasing the price of crude could reduce our competitiveness sizably and affect the export of the country.
• The appreciation in the rupee takes its hit straight away on the exports while increasing the imports and widening the current account deficit.
• Even though India has done well in Ease of Doing Business, but its cross border trade quantity is very low.
• India should make a stronger bond with China for it is the chief supporter of free trade.
• The Centre should also back labour-intensive sectors and it should be of low technology and low cost.
• The real reforms for should be made in the district and state level that has to drive employment.
• There should be a global brand for exports.
• The government should also keep a strict check on price rise.

What are the other sectors has been proposed for Indian export business?

• At present India is exporting:
• Engineering goods,
• Capital good and
• Gems and jewellery
• But now, there is a need to focus on the sub-sectors of the present export sectors:
• Automobiles and automobile components under engineering goods.
• Labour intensive sectors in manufacturing and also in exports.
• Textile sector has a lot of potential.

Way ahead:

• The government needs to put in money to push infrastructure if exports have to be increased.
• Improvement in warehousing infrastructure would also counter inflation concerns due to seasonal factors such as poor monsoon rains.
• India needs to adopt an open, stable and reliable export policy.

Q.2) Discuss the hurdles India is facing in achievement of self-reliant defence manufacturing? What needs to be done to achieve the aim of attaining self-reliance in design development and manufacturing in defence sector? (GS – 3)

Introduction:

• India’s defense sector is at a very crucial juncture in its expansion cycle driven by modernization plants, increased focus on security and India’s growing attractiveness as a market for defense manufacturing.
• In terms of manufacturing the market is dominated by defense public sector undertakings and ordnance factories which have not performed to the expectations so far.

What are the hurdles in defence manufacturing in India?

• The root cause of the failure of defence manufacturing in India is the systematic failure.
• There is a lack of accountability or what can be called as structural deficiency.
• The private sector is yet to be benefitted from the reforms of Make in India scheme for they aren’t given concrete orders to move ahead with the scheme
• There is no complete privatisation of defence PSUs.
• The designing capability in defence sector is only limited to small and medium projects handled locally.

What needs to be done?

• The government has taken several steps over the years to fire upthe defence manufacturing sector with anaim to become self-reliant.
• The main key to manufacture defence weapons is to have a design of own.
• In this regard, IDDM (Indigenously Designed and Developed and Manufactured Equipment) encourages indigenous designing and production.
• Several othersteps such as relaxation in offset policy and FDI norms have also beentaken to attract foreign players.
• Strategic partnership policy has alsobeen rolled out to create capacity inthe private sector on a long-term basis.
• The military must be made responsible for any and every defence related projects undertaken.
• The government should make sure that private sector has a definite role to play in defence.
• There must be allowance to export from private firms.

Q.3) Moody’s has upgraded the India’s credit rating. What are the factors behind India’s credit rating upgradation and why these credit ratings cannot be said accurate? (GS–3)

Introduction:

• Moody’s has upgraded the GOI’s rating as local and foreign currency issuer from Baa3(with a positive outlook) to Baa2 (with a stable outlook).
• This is an upgrade from previous lowest credit rating to a rating with moderate credit risk of medium grade.

Factors behind India’s credit rating upgradation:

• The upgrade is the consequence of recent rise of India in World Bank’s Ease of Business Index from 130 (in 2017) to 100 (in 2018).
• Higher ranking in this index implies simpler regulations for businesses and stronger protection of property rights.
• Similar to a person applying for a bank loan with good credit profile, good Moody’s ratings make it cheaper for Indian companies to raise a loan from abroad.
• It reduces the interest cost regime (viz. cost of capital gets cheaper), which is helpful for entrepreneursas well.
• Many recent government reforms like GST, Insolvency Actbeing put into action and announcement of bank recapitalization (which increases bank’s ability to lend) have taken place.
• This gives a sense of support to foreign investorsthat a code is present and it is being implemented by the government.
• Moody’s is looking as a positive signal for the path which has been set for growth and development
• As an impact of this upgrade, market also reacted positivelyshowing a boost in SENSEX and NIFTY as well as appreciation in rupee. This shows a boost of confidence in the market.

Reasons behind why credit ratings cannot be said accurate:

• It may have some positive things like creation of more jobs, but fiscal deficit of the nation needs to be looked at.
• Rating agencies look at long-term stability of policies.
• These ratings do not look at short term uncertainties which are part of discussions for a common voter in an upcoming election
• Rating agencies see how quickly the government can correct any shock or depressions.