Answers: Mains Marathon – UPSC Mains Current Affairs Questions – October 3

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Q.1 NITI Aayog’s three-year action plan on agriculture raises hope as well as concerns.  Discuss. GS 2

Ans:

Recently, the NITI Aayog released the Action Agenda for the government, a roadmap for reforming various sectors of the economy including agriculture.   NITI Aayog’s Action Agenda forms a part of larger Vision Document which spans a seven year strategy and a 15 years vision till fiscal year 2031-32.

Hopes:

• Target of doubling farmers’ income by 2022.
• It will address the problems of increasing suicides & distress of the farmers
• Increasing productivity of land and water
• Reforming agri-markets on the lines of e-NAM
• Reforming tenancy laws
• Relief measures during natural disasters
• Shift to high value commodities: horticulture, animal husbandry, fisheries.

Concerns:

What are the reasons for not achieving desired results?

• The policy of minimum support prices (MSP) has not improved profitability of cultivation in the last few years.
• Farmers’ returns have done down in the case of most crops.
• The situation is worse for producers of basic vegetables like potatoes, onions and tomatoes.
•  Prices of these crops during the harvest time plunged to about Rs 2 per kg in the last season while the consumers were still paying Rs 15 to Rs 20 per kg.
•  Attempts to reform the Agricultural Produce Marketing Committee (APMC) markets on the lines of the model act of 2003, and now through the Agricultural Produce and Livestock Marketing Act, 2017, have not achieved much success.
• The e-NAM scheme, which is supposed to create an all India market, in order to ensure better prices to farmers, has not succeeded in its endeavour so far.
•  Inter-mandi and inter-state transactions are very rare

Q.2 What has prompted the sudden takeoff of Public issues and private placements of corporate bonds? Examine. Also, discuss the factors that led NBFCs to expand. GS 3

Reasons for increase in public issues and private placements of corporate bonds

• On the borrowing side: firms have taken to bond issues to source more of their requirements because bond markets have transmitted the recent fall in interest rates much more quickly and effectively than banks.
• In the last couple of years, it has been much cheaper for high-quality corporate borrowers to tap bond markets.
• On the lending side: retail savings flooding into mutual funds, insurance firms and pension funds have helped stoke the domestic institutional investors’ demand for bonds.
• These trends, taken with active efforts by the RBI, suggest that bond markets may continue to remain a leading source of credit to businesses, offering stiff competition to banks.
• The only caveat is that the bond market route is more accessible to large enterprises with good credit ratings, than SMEs or borrowers with low ratings.

Factors that led NBFCs to expand

• A Crisil study in 2016 noted that NBFCs had gained a 3 percentage point share of overall credit pie from banks in the last three years as a result of their mortgage and MSME lending push, and would continue to gain share over the next three years.
• Housing finance NBFCs have emerged as a major source of funds for real estate developers too, with financial institutions such as LIC, SIDBI, National Housing Bank and NABARD playing a complimentary role in funding other businesses.
• Two factors have helped NBFCs expand their lending activities at the cost of banks – their comfortable capital adequacy ratios and their ability to borrow at lower costs due to falling interest rates.
• In the last couple of years, NBFCs have been even more aggressive than corporates in tapping the bond markets for capital.
• They have also augmented their resources by borrowing from banks and institutional investors through securitisation deals.
• Lately, there is worry the sluggish property market will force NBFCs to tread more cautiously on loans against property.
• It is  important that rather than External Commercial Borrowings or short-term credit, it is the more durable FDI money that is meeting this need.
• It is essential to recognise that these cannot completely substitute for bank lending.

Q.3 Companies are looking outside their organizations to acquire skills and capabilities rather than building them in-house. In reference to the above context, discuss the reasons behind the fundamental shift occurring at the today’s industrial ecosystem. GS 3

Instead of adding skills and services in-house, companies are proactively partnering with other organizations

What is happening?

• There is a fundamental shift in industry today of ecosystems, rather than individual firms, competing with each other.
• Companies are looking outside their organizations to acquire skills and capabilities rather than building them in-house.
• This means that they are also integrating and partnering with other organizations more proactively than before.

What are the reasons behind this change?

• The rise of the new-age consumer who is more aware and has access to more information is the main push factor.
• Such awareness makes them extremely demanding, and at the same time not loyal to any one brand.
• This shift is putting immense pressure on organizations to take a holistic, long-term view in terms of revenue and create a sustainable business by increasing proximity with consumers.
• Everyone understands that technologies such as blockchain, cognitive, Artificial Intelligence (AI), robotics, etc., can do wonders for their business, developing in-house capabilities and continuously upgrading those can also become a distraction from the core business.
• Such understanding itself drives organizations to tie up with start-ups and companies excelling in specific areas to deliver these requirements.

Importance of digital technology

• While the operating expenses model of selling and buying services is not new, digital technologies today have made it possible to provide almost anything as a service.
• Organizations are making revenue by developing an ecosystem of companies (like those selling fertilizers, pesticides, farm equipment, insurance, etc.), for whom the farmer is the buyer and the “farm as a service” company providing easy access to these farmers by getting them on the platform.
  

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