1 June 20224

GS 3 : Indian Economy – Changes in industrial policy and their effects on industrial growth

India’s real GDP for FY24 grew by 8.2%, exceeding projections and accelerating from FY23’s 7% growth, driven by significant manufacturing sector expansion and robust services performance. The National Statistical Office’s provisional estimates highlighted strong economic momentum despite weather-related disruptions in agriculture.

Importance of Manufacturing Sector in India

• Contributes approximately 15% to India’s GDP and employs around 12% of the workforce.
• Diverse industries include textiles, pharmaceuticals, automobiles, and consumer durables.
• Key driver of economic growth and essential for India’s industrial development.

Challenges Faced by India’s Manufacturing Sector

• Inadequate tech-based infrastructure and skilled manpower.
• Limited access to credit, particularly for MSMEs.
• Shortage of skilled labour hindering sector growth.
• Complex regulations and poor supply chain management.
• Intense competition from other countries and dependence on foreign imports.

Recent Government Initiatives for Industrial Sector Growth

• Production-Linked Incentive (PLI) scheme to boost domestic manufacturing.
• PM Gati Shakti for multimodal connectivity infrastructure.
• Bharatmala Project to improve connectivity in North East India.
• Start-up India to promote a culture of entrepreneurship.
• Make in India 2.0 to transform India into a global manufacturing hub.
• Atmanirbhar Bharat Campaign to reduce import dependence.

Way Forward for Indian Manufacturing Sector

• Investing in infrastructure to attract more investment and businesses.
• Promoting export-oriented manufacturing to tap into new markets.
• Fostering innovation through research and development.
• Improving access to finance for SMEs and MSMEs.
• Streamlining regulations to reduce burdens on businesses.
• Encouraging skill development to address labour shortages and increase competitiveness.

GS 3 – Indian Economy – Issues relating to Planning

The Indian government’s fiscal deficit for 2023-24 stood at 5.6% of GDP, surpassing earlier estimates of 5.8%, attributed to increased revenue collection and reduced expenditure, as per official data released by the Controller General of Accounts.

Fiscal Deficit:

• Definition: Fiscal deficit refers to the difference between the government’s total expenditure and its total revenue excluding borrowing.
• Calculation: It is calculated as Total Expenditure – Total Revenue (excluding borrowing).
• Importance: Fiscal deficit indicates the extent to which a government must borrow to meet its expenditure needs.
• Funding: Fiscal deficit is often funded through borrowing from domestic or international sources.

Impact of Higher Fiscal Deficit

• Increased Borrowing: Higher fiscal deficit leads to increased government borrowing, which can put upward pressure on interest rates.
• Inflationary Pressure: Increased government borrowing can fuel inflationary pressures in the economy.
• Crowding Out: Higher government borrowing can crowd out private investment by competing for available funds in the market.
• Debt Burden: High fiscal deficits can lead to a higher debt burden, increasing the risk of default and impacting long-term economic stability.
• Credit Rating: Persistent high fiscal deficits can lead to a downgrade in a country’s credit rating, making borrowing more expensive and challenging.

Fiscal Reduction and Management Act, 2003:

• FRBM Act Overview: Enacted in 2003 to ensure fiscal discipline, transparency, and accountability in government spending.
• Fiscal Deficit Reduction: Mandates reduction of fiscal deficit to below 4.5% by 2025-26.
• Elimination of Revenue Deficit: Requires elimination of revenue deficit, which is the excess of government expenditure over revenue.
• Medium-term Fiscal Strategy: Government to formulate and implement a medium-term fiscal strategy outlining plans for deficit reduction over three years.
• Annual Fiscal Reports: Government obligated to present annual fiscal responsibility statement to Parliament.

GS 2 : International Relations

Highlights:

• India is seeking to advance into Mongolia to secure coking coal and critical minerals like copper and rare earth elements, aiming to reduce dependence on Chinese imports.
• Joint working groups with the Mongolian embassy have been established to explore collaboration opportunities.
• Evacuation of minerals poses a challenge, as India is reluctant to route through China, prompting exploration of alternative routes through Russia.
• Proposals include forming a consortium of state-run companies to set up required evacuation infrastructure.
• Mongolia is building a washing station for coking coal with a 2024 deadline, offering potential for coking coal exports to India.
• Joint venture tie-ups for copper mining are also being considered by the Mines Ministry.

GS 3 : Enviroment : Conservation, Environmental Pollution & Degradation

KAZA 2024 Summit

At the KAZA 2024 Summit in Livingstone, Zambia, delegates reiterated the urge for member states to withdraw from CITES because they seek approval to trade their plentiful ivory and wildlife items.

Key Objectives of KAZA 2024 Summit :

• Conservation: Promote the sustainable management and conservation of wildlife across the five member states: Angola, Botswana, Namibia, Zambia, and Zimbabwe.
• Economic Benefit: To explore ways to monetize abundant wildlife resources, particularly elephants, to fund conservation efforts and benefit local economies.

Dominant Issues:

• At the 19th meeting of the CITES conference in Panama in 2022, KAZA states and five other southern African countries advocated for opening up trade in ivory and elephant products.
• Southern African countries, including those in the KAZA region, argue that their large elephant populations contribute to habitat loss and human-wildlife conflict.
• Despite repeated requests, CITES delegates rejected the proposal, leading to frustration among African countries.
• Ten countries, including KAZA states and others like Eswatini, Lesotho, Mozambique, South Africa, and Tanzania, declared a dispute with CITES. They criticized CITES for straying from its founding principles and adopting ideologies over science-based conservation strategies.

Way forward:

• Lobbying for Change: Advocacy for a more equitable and science-based approach to wildlife trade regulations within international frameworks like CITES.
• Regional Cooperation: Enhance collaboration among member states to develop joint conservation strategies and share best practices for managing human-wildlife conflicts.
• Diversification of Revenue Streams: Explore alternative sources of funding for conservation efforts, such as ecotourism, carbon credits, and sustainable agriculture.

About the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES):

• It is an international agreement adopted in 1973 (entered into force in 1975) between governments.
• Aim: To ensure that international trade in wild animals and plants does not threaten their survival.
• Headquarters: Geneva, Switzerland.
• Although CITES is legally binding on the Parties – in other words, they have to implement the Convention–it does not take the place of national laws.
• Representatives of CITES nations meet every two to three years at a Conference of the Parties (COP) to review progress and adjust the lists of protected species, which are grouped into three categories with different levels of protection:

1. Appendix I: Includes the world’s most endangered plants and animals, such as tigers and gorillas. International commercial trade in these species, or even parts of them, is completely banned, except in rare cases such as scientific research.
2. Appendix II: Contains species like corals that are not yet threatened with extinction, but which could become threatened if unlimited trade were allowed. Also included are “look-alike” species that closely resemble those already on the list for conservation reasons. Plants and animals in this category can be traded internationally, but there are strict rules.
3. Appendix III: Species whose trade is only regulated within a specific country can be placed on Appendix III if that country requires cooperation from other nations to help prevent exploitation.