1. Technical textiles and PLI scheme
UPSC Syllabus: Prelims: important government initiative, Mains: GS Paper III – Indian economy
Sub Theme: Textile sector | UPSC
Context: Union cabinet recently approved PLI (Production linked Incentive) scheme for textile Industry. With a total budgeted outlay of ₹10,683 crore, the government has designed the scheme with a view to providing a big fillip to the man-made fibres and technical textiles segments of the industry.
Significance of Textile Industry to Indian Economy:
- 2nd largest employer after Agriculture, providing employment to nearly 45 million people
- Contributes to 4% of India’s GDP
- Exports 1/3rd of production earning 12% of forex
- Women Empowerment- Women contributes about 70% of the Workforce
- Inclusive Growth- Most of the textile units are MSMEs giving employment to Rural semi-skilled labour
|Textile Industry are based on
|PLI scheme for Textile Industry:
Under PLI, the Centre will subsidise eligible manufacturers by paying incentives on incremental production
(Thus, the incentive is based on a combination of investment and turnover)
Why Emphasis on Manmade fibres?
- Scarcity of raw cotton:
- India has the largest under Cotton cultivation but in production, India is world’s 3rd largest after China and China
- After partition, long staple cotton growing areas went to Pakistan. Although efforts were made to improve the production, its supply has always fallen short of the demand. As a result, long staple cotton demand is met by imports
- Increase exports:
- Textiles exports have remained largely stagnant over the last 7 years
- The share of man-made fibre-based textile products out of total exports is just 1/3rd (In contrast, it is 80% for China).
So man-made fibre based textile products can be promoted to improve exports
- Regain dominant status in Global textile trade: In recent years, countries like Bangladesh and Vietnam have gained a sizeable share in the man-made fibre segment of the global textile trade and made Indian textile products uncompetitive in the global market
Potential benefits of the scheme:
- It will lead to fresh investment of more than Rs.19,000 crore and a cumulative turnover of over Rs.3 lakh crore
- It will create additional employment opportunities of more than 7.5 lakh jobs in this sector.
- As the textiles industry predominantly employs women, the scheme will empower women and increase their participation in formal economy.
|Mega Investment Textiles Parks (MITRA) scheme:
The Government, in Budget 2021-22, has proposed a scheme of Mega Investment Textiles Parks (MITRA) to enable the textile industry to become globally competitive, attract large investments, boost employment generation and exports
2. Falling consumption demand in the economy
UPSC Syllabus: Prelims and Mains GS paper III: Indian GDP trends
Sub Theme: consumption patterns | UPSC
Weaking Consumer demand
In recent times there has been fundamental policy debate about the nature of the economic slowdown in India. Correctly diagnosing the root cause for India’s slow growth rate in the recent past is critical to finding the right policy solutions. So, It is worthwhile to analyse the key drivers of the Economic growth to find out the root cause of economic slowdown
|Expenditure Method of GDP= C+I+G+ (X-M)
C= private consumption expenditure measured by PFCE (private final Consumption expenditure)
I= Investment made by the Business measured by GFCF (gross fixed capital formation)
G= Govt spending measured by GFCE (Govt final consumer expenditure)
X-M= Net exports (exports-Imports)
- Private Final Consumption Expenditure:
- Private final consumption expenditure (PFCE) includes final consumption expenditure of (a) households and (b) non-profit institutions serving households (NPISH) like temples
- In India, the PFCE accounts for around 55% of total GDP in a year and is the biggest driver of economic growth.
- Gross fixed capital formation:
- Gross fixed capital formation (GFCF) refers to the aggregate of gross additions to fixed assets like construction, machinery and equipment etc and increase in stocks of inventories. This is also referred to as Change in stocks.
- The GFCF is nothing but a measure of the money spent by businesses when they make investments, and it accounts for 33% of all GDP. 2nd major driver of GDP
- PFCE, the biggest driver of the GDP, indirectly influences the next biggest driver— the Gross Fixed Capital Formation (GFCF). If consumer demand slows down, it robs the businesses of any incentive to boost productive capacities by making fresh investments
these two biggest drivers of economic growth which together account for 88% to 89% of all GDP in India
- Government spending (GFCE):
- The third driver of GDP is government spending (GFCE), and it accounts for 10%-11% of all GDP
- It is typically counter cyclical
when the rest of the economy is doing well — consumers are demanding lots of goods and businesses are investing in new capacities to furnish such demand — the government should try to limit its spending in such a manner that it does not hurt (or “crowd out”) private sector firms from accessing credit and markets. But when consumer demand is weak, and firms are holding back (justifiably) from making fresh investments, the government should ramp up its spending to jump-start the economy and, hopefully, “crowd in” the private sector in the growth process.
- Net exports:
net exports or the net effect of India’s demand for imports and the Rest of the World’s demand for our products (exports) — is quite small in India’s case because of huge quantity of imports
so, from the above explanation it is quite evident that “Private Final Consumption Expenditure” is the key factor of demand and driver of GDP as well.
- private consumption expenditure grew at an annual rate of 8.2% between 2004-05 and 2011-12
- Then, between FY12 and FY20 (that is, just before Covid hit India), its annual growth slowed down to 6.8%
- Covid-induced lockdowns in FY 2020-21 destroyed the already weakening demand and reduce the growth of private expenditure to below 5%
As a result of this weak consumer demand, investment by corporates also declined, hitting the GDP growth rate to all time low
Govt response to revive the post covid Economy:
- Pradhan Mantri Garib Kalyan Yojana:
- Provision of Free rice, wheat and pulses to 80 cr people
- Increase in MNREGA wages
- 20 crore women Jan Dhan account holders to get Rs 500 per month
- Relief measures for MSMEs:
- Infuse Rs 50,000 in equity in MSMEs through a Fund of Funds
- Rs 3 lakh crore collateral-free loans
- Revised MSME definition
- Budget 2021: Capital expenditure hiked by 34.5% to Rs 5.54 trillion in FY22 to enhance Infrastructure spending, since Infrastructure sector spending has good fiscal multiplier effect and crowds in private investment to revive the economy
- Support to state govts to increase spending:
- Relaxed borrowing limits for state govts under specific conditions
- Scheme of Financial Assistance to States for Capital Expenditure
- Extension of PLI scheme to 10 more sectors to attract more investments and create employment opportunities
- National Monetisation plan to raise resources for increased social and infrastructure spending
3. Why farmers rejecting new MSP
UPSC Syllabus: Prelims and Mains GS paper III: Indian economy
Sub Theme: MSP | UPSC
Union Cabinet had announced an increase in Minimum Support Price (MSP) for Rabi crops, to ensure maximum remunerative price for farmers and also encourage them to sow a wide variety of crops. However, farmers rejected the enhanced MSP, particularly for wheat, which is considered as one of the main Rabi crops of the country, as too little.
Minimum support price:
- Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices.
- Objective: The major objectives are
- To support the farmers from distress sales and to procure food grains for public distribution.
(In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, govt. agencies purchase the entire quantity offered by the farmers at the announced minimum price.)
- To induce the farmers to make capital investment for the improvement of their farm and to motivate them to adopt improved crop production technologies to step up their production and thereby their net income. In the absence of such a guaranteed price, there is a concern that farmers may shift to other crops causing shortage in these commodities.
- MSPs are announced by the Government of India at the beginning of the sowing season for 24 notified crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP)
- Currently announced for 24 commodities including
- 7 cereals (paddy, wheat, barley, jowar, bajra, maize and ragi)
- 5 pulses (gram, arhar/tur, moong, urad and lentil)
- 8 oilseeds (groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and Niger seed)
- raw cotton
- raw jute
- virginia flu cured (VFC) tobacco.
Method of Calculation of MSP:
The CACP takes into account of the following factors while recommending the MSP for a commodity
- Cost of production
- demand and supply
- price trends in the market, (both domestic and international)
- Inter-crop price parity;
- Terms of trade between agriculture and non-agriculture;
- A minimum of 50 percent as the margin over cost of production
- likely implications of MSP on consumers of that product
Cost of production is an important factor that goes as an input in determination of MSP, but it is certainly not the only factor that determines MSP.
Farmers Objections to the MSP:
- Rise in MSP is less than Inflation:
Farmers argue that, apart from lentils and Mustard, none of the announced MSPs increased beyond the prevailing inflation of 6% (CPI) in the last 3 months
- Formula to calculate the cost of production:
|A2+FL method||C2 method|
While Govt uses A2+FL method to calculate cost of production, farmers have been demanding to use C2 method which is more comprehensive than A2+FL and also recommended by MS Swaminathan committee.
- Unimportant factors:
several unimportant factors like International markets, Inter crop price parity etc. are being considered by the government to determine MSP
Other flaws with the present MSP regime:
- MSP distorts the market driven prices and artificially increase the Agri commodity prices and make our Agri products uncompetitive in Global market
- Often the govt doesn’t procure after the market option has been exploited by the farmer, rather it itself became a parallel market
- MSP makes futuristic promises based on the present market scenario
- Reach of MSP procurement is limited in terms of both crops and the geographical area. Though every year MSPs are announced for 24 crops before the sowing season begins, actual procurement at MSP is restricted to
- few crops such as paddy and wheat and
- few states where FCI network is good
To overcome the above challenges, GOI has launched PM-AASHA (Annadata aay sanrakshan abhiyan)
4. Battle of Saragarhi
UPSC Syllabus: Prelims and Mains GS paper I: Indian modern history
Sub Theme: important events | UPSC
September 12 marks the 124th anniversary of the Battle of Saragarhi that has inspired a host of armies, books and films, both at home and abroad. What makes this battle unique? Why is it considered one of the finest last stands in the military history of the world?
What is the Battle of Saragarhi?
The Battle of Saragarhi is considered one of the finest last stands in the military history of the world. Twenty-one soldiers were pitted against over 8,000 Afridi and Orakzai tribals but they managed to hold the fort for seven hours. Though heavily outnumbered, the soldiers of 36th Sikhs (now 4 Sikh), led by Havildar Ishar Singh, fought till their last breath, killing 200 tribals and injuring 600.
In his book The 36th Sikhs in the Tirah Campaign 1897-98 – Saragarhi and the defence of the Samana forts, Punjab Chief Minister and military historian Capt Amarinder Singh writes that at the very outset of the battle, these soldiers knew they were looking at certain death but they did not flinch. “They could have surrendered, yet they didn’t and displayed unparalleled bravery.”
What was Saragarhi, and why was it important?
Saragarhi was the communication tower between Fort Lockhart and Fort Gulistan. The two forts in the rugged North West Frontier Province (NWFP), now in Pakistan. were built by Maharaja Ranjit Singh but renamed by the British. Though Saragarhi was usually manned by a platoon of 40 soldiers, on that fateful day, it was being held by only 21 soldiers from 36th Sikh (now 4 Sikh) and a non-combatant called Daad, a Pashtun who did odd jobs for the troops.
Saragarhi helped to link up the two important forts which housed a large number of British troops in the rugged terrain of NWFP.
Fort Lockhart was also home to families of British officers. The wife of the commanding officer of 36th Sikh, Lt Col John Haughton, was at the fort till May 1897 when she went home to deliver a baby.
Battle of Saragarhi: What transpired on that day?
Around 9 am that day, the sentry at Saragarhi saw a thick haze of dust and soon realised that it was caused by a large army of tribals marching towards the fort. He estimated their number between 8,000 and 15,000.
The tribals wanted to isolate the two forts by cutting off the lines of communication between them.
Within minutes of sighting the tribal army, Sepoy Gurmukh Singh, 23, sent a message through the Morse code to commanding officer Lt Col Houghton, saying, “Enemy approaching the main gate…need reinforcement.”
Unfortunately, the Pathans had cut the supply route between Fort Lockhart and Saragarhi. Houghton radioed back, “Unable to breakthrough, hold position.” Sepoy Gurmukh Singh conveyed this message to platoon commander Havildar Ishar Singh. Fully aware of the consequences, the braveheart responded with a stoic, “Understood.”
Capt Amarinder says, “The soldiers at Saragarhi knew it was their last day, yet they didn’t flinch.”