IAS 2018

GS Mains
QA &

TEST: 21
ECONOMIC ISSUES IN NEWS

www.iasscore.in
 Test Paper

Test-21

GS Mains Q&A 2018

ECONOMIC ISSUES IN NEWS
Time Allowed: 3 hrs. Max. Marks: 250

The paper contains two sections:

Section A
1. India has made a significant jump in its Travel and Tourism Competitiveness Index and a robust
tourism sector could be a solution to India’s job less growth. Elaborate?
2. While in other countries, even the head of various governments lost their positions after
panama papers release; not much actions were taken in India;are we non-serious on black
money issue? Critically analyze.
3. Pakistan may allow the use of Yuan as acceptable currency in Gwadar port region? What are
the potential impacts of such a move on Pakistan?
4. Examine the reasons behind Improvement in Ease of Doing Business Index of India?
5. Logistics sector was recently given status of Infrastructure? Elaborate what benefits does it bring?
6. Do you think provisions of APMC Act and its implementationarethe biggest hurdle for food
processing industry in India? Give reasons in support of your answer?
7. Is the new health insurance scheme announced in budget a half-hearted step in correct
direction? Comment.
8. Elaborate on the major economic and environmental benefits of the bamboo cultivation?
9. Corporate Farming Ventures (CFVs) hold the potential to transform the Indian agriculture and
its productivity. Analyze.
10. Faster growth of jobs must be the principal objective of whatever economic reforms the Indian
government undertakes now. In this context, discuss on making bold labour market reforms.
Section B

11. World Economic Forum recently launched Global Manufacturing Index based on how well-prepared
countries are for the future of manufacturing production. With reference to report, discuss the
status of manufacturing in Indian economy, challenges the sector is facing and possible way out
to usher in a sustainable production future.
12. The handloom industry in India is not just an economic activity, but exhibits a national identity
that is admired and appreciated all over the world, however, this sector is ailing. What are the
reasons behind it? How its situation can be improved?

Environment and Science Issues in News | 1

13. Though the Indian Council for Agriculture Research (ICAR) launched the Lab to Land Programme
(LLP) back in 1979 as a part of its Golden Jubilee celebration, yet the connect between lab and
farm still missing;analyze. Also suggest, how to improve the land to lab connect?
14. What do you understand by Sunset Clause. Discuss the need for having such clause and benefits
of the Sunset Review Process.
15. There is huge debate and cry on implementation of the E-way Bill under new GST regime. In this
light, elaborate on E-way Bill, its benefit to the economy and challenges in its implementation.
16. In spite of great potential, the Indian electronics sector is a laggard. In this context, discuss on its
potential and reason behind its poor performance. What could be possible steps to boost it?
17. India is trying to woo Sovereign wealth funds especially in infrastructure sector and large capital
projects. In this context, discuss on objectives of creating a Sovereign wealth fund. What are the
economic and financial benefits they offer?
18. Discuss on the key reforms introduced in the real estate sector by the government and their
possible impacts?
19. While electricity production has improved leaps and bounds, the distribution is still struck in web
of leakages and inefficiency? Examine.
20. The Parliament has passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2017 to
resolve the issue of loan defaults and dispute resolution. In this context, discuss the major changes
brought in by the new amendment and key concerns which remains.

************

2 | Environment and Science Issues in News

1
GS SCORE
Test Code

GS SCORE 21
Name : ...................................................................

Roll No. : ..................................................................

Mobile No. : ..................................................................

GS MAINS Q&A 2018

ECONOMIC ISSUES IN NEWS

Time Allowed: 3 Hr. Max. Marks: 250

Instructions to Candidate Q Answer Q Answer

> There are 20 Questions. 1 11
> The paper contain two sections:
2 12
– Section A: Questions 1-10 are of 10 Marks Each
– Section B: Quetsions 11-20 are of 15 Mark Each 3 13
> All questions are compulsory. 4 14
> The number of marks carried by a question is indicated
against it.
5 15
> Answer the questions in SECTION A WITHIN 150 6 16
words each and SECTION B WITHIN 250 words
each. Contents of the answer is more important than 7 17
its length. 8 18
> Answers must be written within the space provided.
9 19
> Any page or portion of the page left blank in the
Question-cum-Answer Booklet must be clearly struck 10 20
off.

Date:

Candidate’s Signature Examiner’s Signature

2
GS SCORE
REMARKS
3

Roll No. : ..................................................................

GS SCORE
Section A
Q1. India has made a significant jump in its Travel and Tourism Competitiveness Index
and a robust tourism sector could be a solution to India’s job less growth. Elaborate?
(10 Marks)
4
GS SCORE
5
GS SCORE
Q2. While in other countries, even the head of various governments lost their positions
after panama papers release; not much actions were taken in India;are we non-serious
on black money issue? Critically analyze. (10 Marks)
6
GS SCORE
7
GS SCORE
Q3. Pakistan may allow the use of Yuan as acceptable currency in Gwadar port region?
What are the potential impacts of such a move on Pakistan? (10 Marks)
8
GS SCORE
9
GS SCORE
Q4. Examine the reasons behind Improvement in Ease of Doing Business Index of India?
(10 Marks)
10
GS SCORE
11
GS SCORE
Q5. Logistics sector was recently given status of Infrastructure? Elaborate what benefits does
it bring? (10 Marks)
12
GS SCORE
13
GS SCORE
Q6. Do you think provisions of APMC Act and its implementationarethe biggest hurdle for
food processing industry in India? Give reasons in support of your answer?
(10 Marks)
14
GS SCORE
15
GS SCORE
Q7. Is the new health insurance scheme announced in budget a half-hearted step in correct
direction? Comment. (10 Marks)
16
GS SCORE
17
GS SCORE
Q8. Elaborate on the major economic and environmental benefits of the bamboo
cultivation? 10 Marks)
18
GS SCORE
19
GS SCORE
Q9. Corporate Farming Ventures (CFVs) hold the potential to transform the Indian
agriculture and its productivity. Analyze. (10 Marks)
20
GS SCORE
21
GS SCORE
Q10. Faster growth of jobs must be the principal objective of whatever economic reforms
the Indian government undertakes now. In this context, discuss on making bold labour
market reforms. (10 Marks)
22
GS SCORE
23
GS SCORE
Section B
Q11. World Economic Forum recently launched Global Manufacturing Index based on how
well-prepared countries are for the future of manufacturing. With reference to report,
discuss the status of manufacturing in Indian economy, challenges the sector is facing
and possible way out to usher in a sustainable production future. (15 Marks)
24
GS SCORE
25
GS SCORE
26
GS SCORE
Q12. The handloom industry in India is not just an economic activity, but exhibits a national
identity that is admired and appreciated all over the world, however, this sector is
ailing. What are the reasons behind it? How its situation can be improved?
(15 Marks)
27
GS SCORE
28
GS SCORE
29
GS SCORE
Q13. Though the Indian Council for Agriculture Research (ICAR) launched the Lab to Land
Programme (LLP) back in 1979 as a part of its Golden Jubilee celebration, yet the
connect between lab and farm still missing;analyze. Also suggest, how to improve the
land to lab connect? (15 Marks)
30
GS SCORE
31
GS SCORE
32
GS SCORE
Q14. What do you understand by Sunset Clause. Discuss the need for having such clause
and benefits of the Sunset Review Process. (15 Marks)
33
GS SCORE
34
GS SCORE
35
GS SCORE
Q15. There is huge debate and cry on implementation of the E-way Bill under new GST
regime. In this light, elaborate on E-way Bill, its benefit to the economy and challenges
in its implementation. (15 Marks)
36
GS SCORE
37
GS SCORE
38
GS SCORE
Q16. In spite of great potential, the Indian electronics sector is a laggard. In this context,
discuss on its potential and reason behind its poor performance. What could be
possible steps to boost it? (15 Marks)
39
GS SCORE
40
GS SCORE
41
GS SCORE
Q17. India is trying to woo Sovereign wealth funds especially in infrastructure sector and
large capital projects. In this context, discuss on objectives of creating a Sovereign
wealth fund. What are the economic and financial benefits they offer? (15 Marks)
42
GS SCORE
43
GS SCORE
44
GS SCORE
Q18. Discuss on the key reforms introduced in the real estate sector by the government and
their possible impacts? (15 Marks)
45
GS SCORE
46
GS SCORE
47
GS SCORE
Q19. While electricity production has improved leaps and bounds, the distribution is still
struck in web of leakages and inefficiency? Examine. (15 Marks)
48
GS SCORE
49
GS SCORE
50
GS SCORE
Q20. The Parliament has passed the Insolvency and Bankruptcy Code (Amendment) Bill,
2017 to resolve the issue of loan defaults and dispute resolution. In this context,
discuss the major changes brought in by the new amendment and key concerns which
remains. (15 Marks)
51
GS SCORE
52
GS SCORE
GS SCORE Test - 21
Hints

GS MAINS Q&A 2018

Economic Issues in News

Section A

Q1. India has made a significant jump in its Travel and Tourism Competitiveness
Index and a robust tourism sector could be a solution to India’s job less
growth. Elaborate?

The Indian tourism and hospitality industry has emerged as one of the key drivers of growth
among the services sector in India. Tourism in India has significant potential considering the
rich cultural and historical heritage, variety in ecology, terrains, and places of natural beauty
spread across the country. Tourism is also a potentially large employment generator besides
being a significant source of foreign exchange for the country.
India’s ranking in the Travel and Tourism Competitive Index (TTCI) of World Economic Forum
moved from 65th position to 52th position in 2015. Now India has moved up by another 12
positions and ranked at 40th position.In all, in last three years India has cumulatively improved
its ranking by 25 places which is a significant achievement.
Potential:
!! India is expected to move up five spots to be ranked among the top five business travel
market globally by 2030, as business travel spending in the country is expected to treble
until 2030 from US$ 30 billion in 2015.
!! India’s Travel & Tourism sector ranks 7th in the world in terms of its total contribution to
the country’s GDP, as per report by the World Travel & Tourism Council (WTTC).
!! India’s Travel & Tourism sector was also the fastest growing amongst the G20 countries,
growing by 8.5% in 2016. A further 6.7% growth is forecast for 2017.
!! International hotel chains will likely increase their expansion and investment plans in India,
and are expected to account for 50 per cent share in the Indian hospitality industry by
2022, from the current 44 per cent.
A million youngsters attain working age every month and as many as 100 million jobs need
to be created between now and 2025 to avoid what experts are increasingly warning us about
— a demographic catastrophe. The reasons being: lack of low-skilled job opportunities outside
of agriculture even as skills mismatch and automation hurt the formal sector. In this scenario
promoting the Tourism can be a way-out for creating jobs.
Solution to jobless growth:
!! The sector supported 40.3 million jobs in 2016, which ranks India 2nd in the world in terms
of total employment supported by Travel & Tourism. The sector accounts for 9.3% of the
country’s total jobs.

GS SCORE Hints: Economic Issues in News 1

 !! For every 30 tourists one core tourism job gets created which then helps add another 1.5 jobs
in related sectors.
!! A good portion of the jobs that get generated are low-skilled, for women and for first-time
workers — the type of job opportunities that India presently needs.
!! The sector also has the potential to create micro-entrepreneurs who in turn can employ more
people. The multiplier effect it delivers is high.
According to the World Tourism Organization, the sector provides for 10 per cent of the world’s
GDP, 7 per cent of the global trade and creates one in every 11 jobs worldwide. In 2015 tourism
created 107 million jobs worldwide and supported 284 million other jobs.
The International Labour Organization estimates these numbers will grow to 136 million and 370
million respectively by 2026. Policymakers need to get their act together now if India has to corner
a fair share of these jobs. It is time the Government gives the same importance to the World
Economic Forum’s Travel and Tourism Competitiveness Report as it does to the World Bank’s Ease
of Doing Business rankings.

Q2. While in other countries, even the head of various governments lost their
positions after panama papers release; not much actions were taken in
India;are we non-serious on black money issue? Critically analyze.

Black money has been plaguing Indian society for long and the recent case of Panama papers
brought the issue to the forefront again. India follows a due course of law, and unless convicted,
trial cannot take place, like some countries such as, Pakistan where the PM was removed from
the post.
While India may not have had high profile arrests, its wrong to say, India is non-serious about
black money issue.
Measures taken post Panama episode in India:
!! Under the new anti-black money law cases of overseas illegal assets will attract a steep
120 per cent tax and penalty on undisclosed foreign assets and income besides carrying a
jail term of up to 10 years.
!! Benami Transactions (Prohibition) Amendment Bill, 2015 is proposed to check black money
in domestic economy.
!! Signing of the amendment protocol of DTAA with Mauritius
!! Provisions for KYC norms, opening of Jan Dhan account and direct benefit transfer scheme
to reduce corruption and leakage
!! Enacting Real Estate (Regulation and Development) Act, 2016 to prevent black money in
real estate sector and prevent parallel economy.
!! The government has come out with new Income Declaration Scheme (IDS), 2016. Under
which the people can declare their undisclosed income and pay tax, surcharge and penalty
on that.
!! India adopted Automatic exchange of information from 2017 and BEPS norms to share
information on tax evasion and avoidance.
!! Moving toward cashless economy through digitization and electronic transaction
!! Earlier India has ratified UN convention against corruption, UN convention against
transnational organised crime etc.
!! India achieved substantial success both in getting information of illicit money parked
offshoreand in stopping transfer of illicit money outside the country as Swiss Bank is ready
to share data even revealed few names and even Directorate of Enforcement initiated
investigation in the Hassan Ali case under FEMA/PMLA

2 Hints: Economic Issues in News GS SCORE

 However, these efforts are not sufficient, because:
!! Black money is still being circulated through many tax heavens
!! Income that is retained is very less.
!! Domestic black money is still largely lucrative as income tax filing rate is very less and mostly
cash transactions are taking place.
!! Majority work in informal sector and business so no impact on them.
!! Majority of black money is deployed in Real Estate sector where still no proper check is made
!! The implementation of above acts have been slow and timid.
Way ahead:
!! Better coordination among different agencies like CBDT and CBEC
!! Elections deal with lot of black money. Reforms in money power and election funding can bring
transparency.
!! Encourage more cashless transactions In India.
!! Amending international practices adopted effectively to prevent actions like round tripping.
Thus, a holistic approach is necessary and people need to be made aware of the adverse impacts
of Black money.

Tax heavens
What are tax havens? • Tax havens come in all shapes and sizes.
• Nevertheless, they have some common characteristics such
as ease of setting up companies/trusts/foundations, minimal
disclosure requirements, the possibility to hide beneficial
ownership, and low or no effective taxation on income or
wealth.
Examples of tax havens • Panama, Mauritius, Cayman islands etc
How are tax havens used? • Tax havens are the routes through which half of international
trade now takes place.
• Apart from high-net-worth individuals, tax havens are liberally
used by multinationals and their army of accountants and
lawyers for tax planning and transfer pricing.
Threats posed by tax • Tax Havens deprive governments of tens of billions of dollars
havens? of annual revenue.
• Tax Havens threaten free markets by enabling fraud, concealing
insider trading and helping banks and corporations side-step
rules and regulations designed to prevent financial meltdowns.
• Tax Havens launder dirty money for organized crime, drug
cartels, and white-collar criminals and hide their assets from
police.
How to deal with tax • Action against them works only if there are credible sanctions,
havens? which he proposes in the form of trade tariffs.
• We need to create a global finance register of all financial
securities in circulation.
• Since 2011, India has a provision in the Income Tax Act in Section
94A to deal with jurisdictions that do not effectively exchange
information. So far, only Cyprus has been notified. There are

GS SCORE Hints: Economic Issues in News 3

 reports that perhaps Panama will also be put on that list. But
considering that in almost all collusive international deals at
least one tax havens is involved, there needs to be a review of all
tax havens and the provision used effectively.

Q3. Pakistan may allow the use of Yuan as acceptable currency in Gwadar port
region? What are the potential impacts of such a move on Pakistan?

Pakistan is one step closer to deciding what to do about the Chinese proposal to use the yuan
for bilateral trade and investment.
!! The State Bank of Pakistan (SBP) approved the use of the yuan for imports, exports, finance
and investments.
!! This means Pakistani and Chinese banks will in the course of time, be able to open import
letters of credit in rupees and yuan (also known as renminbi, or RMB). Moreover, Pakistan will
be able to pay for imports from China in yuan rather than in dollars, and Chinese companies
investing in CPEC projects will bring in yuan-denominated funds here and remit back their
profits and dividends also in yuan instead of dollars or other foreign currencies.
Potential impacts:
Positive:
!! This would simplify the operation of the CPEC project.
!! With the opening of Bank of China in Pakistan, the access to onshore Chinese markets will
strengthen further.
!! The free flow of capital and cross-border transfer of legitimate funds between the two
countries would become easier, reducing the need for more complex centralized international
clearing system in New York and London.
!! Even non-Chinese companies participating in the CPEC will be able to do that via their
Chinese principal companies.
!! For Pakistan, the rupee-yuan settlement of trade with China is important because it would
reduce its needs for US dollars to a significant extent as its imports from China are in
excess of $10bn
Concerns:
!! The approval seems premature, with most of the CPEC infrastructure yet to be in place.
!! The Chinese banking system is used to handling transactions in yuan and other regional
currencies (of the countries with which direct settlement of transactions are going on), but
Pakistan is not.
!! For banks to get used to the new system will be a challenge.
!! An even bigger challenge for bankers will be to explain it to businessmen how the rupee-
yuan settlement of transactions would work and how their businesses would benefit from
it.
!! Dollar lending is possible through multiple sources, unlike lending for any yuan-related
trade deficit, which will have to be done through China.
The two countries aim to promote monetary cooperation between the central banks, implement
existing currency-swap arrangements, research to expand the amount of currency and explore
to enrich the use and scope of bilateral currency swap and assign the foreign currency to
domestic banks through credit-based bids to support the financing for projects along the CPEC
[China-Pakistan Economic Corridor].

4 Hints: Economic Issues in News GS SCORE

 In 2013, China and Pakistan announced plans to construct an economic corridor to connect Uygur
Autonomous Region with the southwestern Pakistani port of Gwadar. Together with the proposed
BCIM Economic Corridor (BCIM-EC), the China-Pakistan Economic Corridor (CPEC) extends to South
Asia the broader trend of Asian regional economic integration through economic corridors.
The CPEC assumes crucial significance for India in the larger context of China’s regional/
transnational initiative, known as ‘One Belt, One Road’.
New Delhi has opposed this corridor as it will pass through disputed territory.
However, in the continually evolving regional dynamics marked by a remarkable upsurge in
bilateral trade between India and China, increasing bilateral cooperation on various other fronts,
including the development of the BCIM-EC, and attempts to revive the India-Pakistan peace
process, the proposed CPEC presents to India some interesting and promising choices which,
if exercised innovatively, may open new vistas of regional cooperation, stability and economic
growth in the region.
Imperatives/Implications for Pakistan
The proposed Economic Corridor could potentially be a blessing for the economic development
of Pakistan. Pakistan has witnessed a sharp fall in FDI in recent years- from US $5.4 billion in
2007-8 to US $1.6 billion in 2013-14 (Government of Pakistan Board of Investment 2015) and
the industrial sector is performing way below its potential due to the severe energy crises. The
proposed oil and gas pipelines from Gwadar and Iran to Kashgara cross Pakistan would also be
instrumental in easing the energy crises in Pakistan.
Situated at the crossroads of huge supplying and consuming markets of the Middle East, Central
Asia and China, it is projected that the proposed corridor could virtually rewrite the economic
revival of Pakistan by generating huge transit revenues. Together with the economic assistance
for infrastructure development from China, the corridor can transform Pakistan into a regional
trade hub and energy transit corridor. All these factors could have a huge impact on the industrial,
agricultural and overall economic growth and development of Pakistan.
Imperatives/Implications for China

GS SCORE Hints: Economic Issues in News 5

 For China, the proposed economic corridor would be very useful in pursuit of the policy of opening
up and developing its western regions because of its geographical proximity to these areas. Along
with the process of regional economic integration, the CPEC can help in the development of closer
relations and cooperation between China and the countries of southern, central and western
Asia.
Given that the bulk of China’s oil imports passes through the Strait of Malacca which is vulnerable
to piracy and geopolitical uncertainties, a pipeline from Gwadar to China over the Karakoram
would provide an alternative for the supply of oil from the Middle East to China’s western and
central provinces in particular.
CPEC and India
CPEC will also have consequences for India–Pakistan relations. The corridor runs through the
region of Gilgit-Baltistan (GB)in northern Pakistan. This region belongs to Jammu and Kashmir, to
which both India and Pakistan have asserted claims.
Given the political synergy between China and Pakistan, the CPEC will be a disguised political
disturbance for India. Its strategic content is high and capable of restricting New Delhi’s
maneuverability in the region. In an extreme scenario, Pakistan may act as a ‘rented house’ for
Chinese Military.

Q4. Examine the reasons behind Improvement in Ease of Doing Business

Index of India?

India has jumped into 100th place on the World Bank’s ranking of countries by Ease of Doing
Business for the first time in its report for 2018, up about 30 places.
The report ranked India among the top 10 “improvers” globally, having done better in eight
out of 10 business indicators.
Reasons behind the improvement are:
!! Paying taxes became easy:
 In 2016, Income Computation and Disclosure Standards (ICDS), an accounting standard
for the purpose of income tax was introduced. It advances some income and postpones
some expenses to arrive at the profitability of companies. Hence, data gathering has
become automated due to the use of the latest software.
 India has also eased tax compliance on businesses through an online platform for
electronic payment of the Employees Provident Fund leading to reduction in the time
required to complete provident fund and state insurance applications.
 Introduced administrative measures to ease corporate income tax compliance.
 A new form for business incorporation that combines the permanent account number
or PAN with the tax account number or TAN
!! Dealing with construction permits:
 India made obtaining a building permit faster by implementing an online single-window
system for the approval of building plans.
!! Getting credit:
 India has strengthened access to credit by amending the rules on the priority of
secured creditors outside reorganization proceedings and adopting a new insolvency
and bankruptcy code.
!! Trading across borders:
 India reduced border compliance time by improving infrastructure at the Nhava Sheva
Port in Mumbai; export and import border compliance costs reduced in Delhi and Mumbai
after removal of merchant overtime fees.

6 Hints: Economic Issues in News GS SCORE

 !! Resolving insolvency:
 The country has regulated the profession of insolvency administrators as well as setting
up of sectoral regulators apart from adopting a new insolvency and bankruptcy code.
!! Starting a business:
 India streamlined the business incorporation process by introducing the SPICe form
!! Initiatives by SEBI:
 Initiatives taken by SEBI in the area of “ease of doing” business include rationalization of
knowing your customer (KYC) norms, increasing the number of arbitration centers and
simplifying FPI (foreign portfolio investor) norms for investing in the debt market.
!! Protection of minority investors.
Conclusion:
!! The World Bank noted that India need to improve in areas such as starting a business,
enforcing contracts, and dealing with construction permits.

Q5. Logistics sector was recently given status of Infrastructure? Elaborate what
benefits does it bring?

The Department of Economic Affairs (DEA) has widened the category of infrastructure sub-
sectors to transport and logistics from the earlier sub-head of transport.
will include Multimodal Logistics Parks comprising Inland Container Depot (ICD) with minimum
investment of Rs 50 crore and minimum area of 10 acre, cold chain facilities having an investment
of at least Rs 15 crore and minimum area of 20,000 sq ft, and warehousing facilities with
investment of a minimum Rs 25 crore and over 100,000 sq ft area
According to the government’s notification, the inclusion also makes it easier for logistics
companies to:
Access larger amounts of funds as External Commercial Borrowings (ECB)
Access longer-tenure funds from insurance companies and pension funds, and
Be eligible to borrow from India Infrastructure Financing Company Limited (IIFCL).
Benefits:
!! It will help logistics sector access loans on easier terms
!! The cost of logistics in India is very high compared to developed countries and it reduces
the competitiveness of Indian goods both in domestic as well as export market. The latest
move can help with the cost effectiveness of the sector as well.
!! It will provide a boost to domestic as well as external demand, encouraging manufacturing
and job creation.
!! It will enable the logistics sector to avail infrastructure lending at easier terms with enhanced
limits, access to larger amounts of funds as External Commercial Borrowings, access to longer
tenor funds from insurance companies and pension funds.
!! This will in turn be instrumental in improving economic growth and country’s GDP.
!! Logistics sector is now likely to attract more funding at competitive rates and on a long-
term basis as rising logistics cost impacts global competitiveness of exporters

GS SCORE Hints: Economic Issues in News 7

Q6. Do you think provisions of APMC Act and its implementationarethe biggest
hurdle for food processing industry in India? Give reasons in support of
your answer?

APMCs have served some key purposes like removal of malpractices and imperfections in
agricultural markets, creation of orderly and transparent marketing conditions and ensuring a
fairer deal for farmers selling their produce.
In some States, APMCs not only serve to protect the interests of farmers by improving facilities
at the yards, but also by allowing farmers to deal with alternatives markets such as Safal, Rythu
Bazar and Ujhavar Sandi.
APMC model act promotes direct marketing. As farmer is allowed to sell his goods outside
APMC, he can now under APMC model act, directly sell to consumer. This completely eliminates
middleman and narrows gap between farmer’s sale price and price paid by consumer.
However, some concerns remained:
!! The revenue generated was used for creation of market infrastructure on ad-hoc basis which
did not streamline the markets as intended.
!! Many policymakers and academicians see the APMC law as restricting
 Creation of infrastructure by private players
 Development of alternative marketing channels for farmers
 Establishing of a competitive market.
 Led to formation of cartels with links to caste and political networks resulting in price
variations.
!! The provisions of the State Agricultural Produce Marketing Committee (APMC) Acts have
prevented creation of competitive conditions in the distribution of commodities and creation
of a national market for agricultural commodities.
 Multiple layers of intermediation in the distribution of food articles have also pushed
up prices for consumers.
!! Indian farmers in many states, are still required to buy and sell only in the government-
designated Agricultural Produce and Marketing Committees (APMC) to licensed entities.
Farmers are not allowed to sell their produce directly to the consumers. A national market
for food is yet to develop.
!! State APMC laws are a major hurdle to modernization of the food economy. They have
artificially created cartels of buyers who possess market power.
!! Monopoly of APMC deprives farmers from better customers, and consumers from original
suppliers.
Way ahead:
!! Apart from breaking the monopoly and dissuading state governments from treating
the APMCs as liberal sources of revenue, substantive efforts have to be made to create
alternative trading platforms in the private sector where it is possible to reduce the layers
of intermediation.
!! FPOs/self-help groups (SHGs) can be encouraged to organize farmers markets near urban
centers, malls, etc. that have large open spaces.
!! Focus on contract farming by passing the draft model contract farming act 2018:
 Contract farming can emerge as a significant opportunity for companies whereby they
can create direct farm linkages to source appropriate quality, quantity and varieties of
inputs.

8 Hints: Economic Issues in News GS SCORE

  The Act seeks to bring contract farming outside the ambit of the state APMCs. Accordingly,
buyers need not pay market fee and commission charges to APMCs
!! Model State (Union Territory) Agricultural Produce and Livestock Marketing (APLM) (facilitation
and promotion) act of 2017:
 This act has provision where entire state would be treated as a single market, which will
certainly remove hurdle of area limitations by APMC.
 Once the warehouses and other storage facilities will be declared as markets or sub-market
yards, it will enable linkage between the farmer and buyer.

Q7. Is the new health insurance scheme announced in budget a half-hearted

step in correct direction? Comment.

The national health protection scheme or the Ayushman Bharat health insurance scheme is
the latest step taken by the government with respect to health and is announced in the union
budget.
Features of the scheme:
!! Every family will be provided Rs. 5 lakhs annually for secondary and tertiary health care.
!! The scheme seeks to provide health cover to 10 crore economically vulnerable families.
!! Rs. 2000 crore are allocated for the scheme in the budget 2018.
!! The Premium for every household is expected to be Rs.1000 to Rs. 1200 annually.
!! The scheme will replace Rashtriya Swasthya Bima Yojana under which, the government
provided Rs. 30,000 annually for healthcare. Under NHPS, Rs. 30,000 is increased to Rs. 5
lakhs.
!! The scheme is a centrally sponsored scheme. The center intends to bear 60 percent of the
cost. Remaining 40 percent will be borne by the states.
Concerns with the scheme are:
!! It will not reduce out-of-pocket expenditure (OOPE), catastrophic health expenditure or
health payment-induced poverty.
!! Does not cover outpatient care which accounts for the largest fraction of OOPE.
!! The NHPS too remains disconnected from primary care.
!! Universal health insurance through private hospitals has not worked for the poor anywhere.
Biggest beneficiaries are the private hospitals and insurance companies. There is no substitute
for public health care.
!! The Rashtriya Swasthya Bhima Yojana also targeted 5.9 crore families, and managed to
enroll 3.6 crore families. Thus, the government’s announcement today of reaching ten crore
families is also vastly ambitious
!! There is a decline in the health budget this year.
!! Still the scheme is not finalized properly. So, it is uncertain if the scheme will be fully
implemented this year
!! Challenges with states:
 When center has not raised its public expenditure on health how will the states be
inspired to raise their allocation for health to over 8%.
 West Bengal has already pulled out of this scheme leading to uncertainties.
 Some states have already got good health insurance schemes then their support to the
union’s scheme is doubtful

GS SCORE Hints: Economic Issues in News 9

 Benefits:
!! It will bring healthcare system closer to the homes of people.
!! It can achieve its goal as only40 per cent of India’s population will be covered under this
insurance scheme. If the National Health Protection Scheme is properly implemented and
monitored India would have taken an important step in creating a Swasth Bharat.
What needs to be done?
!! India needs a major revamp of the healthcare infrastructure, which includes upgrading primary
healthcare systems to provide preventive healthcare.
!! Awareness on preventive healthcare measures, nutrition, prenatal care, vaccinations and
counselling on the importance of hygienic practiceslike sanitation and clean drinking water
should be pursued aggressively.
!! The Government should focus on promoting primary healthcare at all rural centers, secondary
care hospitals at taluk levels and tertiary care establishments at district hospitals.
!! Indianeeds to increase the availability of skilled healthcare workers at all levels
In a federal polity with multiple political parties sharing governance, an all-India alignment around
the NHPS requires a high level of cooperative federalism, both to make the scheme viable and to
ensure portability of coverage as people cross State borders.

Q8. Elaborate on the major economic and environmental benefits of the

bamboo cultivation?

The Centre’s idea of planting bamboo saplings along the several thousands of kilometres of
National Highways recently will pave way for prospective bamboo cultivation.
Bamboo has spurred worldwide attention as a versatile plant with multifarious uses. Its uses
ranged from subsistence to commercial food (young shoots), to building and furniture. It offers
vital economic and ecological benefits to many people in the world.
Economic benefits of bamboo cultivation are:
!! That move of the government will give impetus to bamboo entrepreneurs deriving economic
benefit from developing nurseries, organizations’ working for development of tribal
communities
!! The other government plans for producing ethanol from bamboo and creating designated
space along National Highways for entrepreneurs to sell bamboo and other handicraft products
will also provide more opportunities to the bamboo cultivators.
!! There are now many new technologies developed that could transform bamboo poles into
strong building and construction materials such as concrete reinforcements, laminated bamboo
floor tiles and many more.
!! Construction material:
 These can be directly sold to craftsmen, furniture makers and other end users.There is a big
potential also for bamboo-based panels to be used as engineered building materials.
!! Musical instruments:
 Bamboo could be transformed into a wide variety of musical instruments such as wind, string
or percussion.Creating a niche market would be a potential market for these products.
!! Bamboo is a good substitute for wood. A bamboo culm matures and develops strength
properties comparable to most wood species inabout three years. Its utility has expanded to
include its transformation into various structuralfloors and panels and engineered bamboo
products.

10 Hints: Economic Issues in News GS SCORE

 !! Bamboo shoots are good food source.Edible and tasty young bamboo shoots could be sold in
domestic and international markets
!! Bamboo is an exquisitecomponent of landscape designs. Many species of bamboo are good
for landscaping and urban greening.
!! Bamboo is relatively inexpensive. During the first two to three years of growth, while the clumps
of bamboo are maturing and culms and shoots are not yet ready for harvesting or for sale, you
can raise other crops in the area to recover the starting capital.
Environmental benefits:
!! Bamboo protects the environment and cleanse the air people breathe. Bamboo stands release
35% more oxygen than equivalent stands of trees.
!! Some bamboo can sequester up to 12 tons of carbon dioxide from the air per hectare.
!! It can also lower light intensity and protects man against ultraviolet rays.
!! Bamboo is a goodsoil conservation plant. With its widespread root system, it can provide an
effective erosion control. It sustains riverbanks and serves as good windbreaks.
!! Bamboo is a highly renewable material. There is no need to replant once the clump is already
established.It produces new shoots on an annual basis that develop depending on species, into
erect culms reaching 30 m tall.

Q9. Corporate Farming Ventures (CFVs) hold the potential to transform the
Indian agriculture and its productivity. Analyze.

Despite serious attempts, improving farm productivity on a large scale remains the most significant
challenge. It is time to think of alternative models for the rapid development of agriculture.
Pooling resources and engaging in systematic, collaborative farming, with initial support from
external agencies is the way which are also known as Corporate Farming Ventures (CFVs).
Transforming agriculture and productivity through CFVs:
!! Today, the Government does not have enough resources to reach the last farmer. CFVs
by investing money can create islands of excellence. The best practices will then spread to
adjoining areas.
!! CFVs have reported higher yields for most crops. These include wheat, rice, sugar, cotton,
potato, gherkin, tomato, groundnut, safflower, marigold, safflower, poultry and milk. Much of
India’s exports originate from the CFVs’ baskets. They have already proved that agriculture
can be profitable. CFVs today engage with lakhs of farmers across the country.
!! CFVs also understand the importance of maintaining product quality and supply-chain
integrity. They know that many countries do not accept India’s agriculture produce as they
do not meet the prescribed quality or health and safety standards. Thus, they invest in good
agricultural practices such as maintaining specified standards in pesticides residue levels,
assaying, grading, packaging, and storage.
!! They understand the technology and investment needs of the sector. They can reduce the
cost of cultivation by 25 to 30 per cent by using laser land levelers, and precision seeders in
combination with the residue management.
!! CFVs know the importance of farm-to-fork supply chains. For perishables goods like fruits
and vegetables, this means transportation in refrigerated vans after pre-cooling of produce.
Most farmers cannot afford these. The Government may help CFVs with tax breaks on these
investments.
!! Examples of CFVs: PepsiCo in Punjab and eight other states, Hindustan Lever, Rallis, and ICICI
jointly in Madhya Pradesh, Amul and NDDB in Gujrat, Sugarcane Cooperatives in Maharashtra,
and Suguna in Tamil Nadu, are important CFVs.

GS SCORE Hints: Economic Issues in News 11

 CFVS holds potential to improve farm productivity. High-profit margins and exports will follow.
Within a few years. Farmers who participates with CFVs can form a group within the village. They
will pool their land and start collaborative farming where external CFVs will not be needed. As the
movement will spread it will bring social, political and economic benefits to the 50 crore farmers
spread across 5 lakh villages.

Q10. Faster growth of jobs must be the principal objective of whatever economic
reforms the Indian government undertakes now. In this context, discuss
on making bold labour market reforms.

Subsequent governments are facing criticism of not creating enough jobs in consistent with
growth of economy. One of the major hurdle in job creation is cited as poorly managed and overly
regulated labour market. In this scenario faster growth of jobs must be the principal objective of
whatever economic reforms the Indian government undertakes now. For this, some economists
are urging the Government to bite the bullet in 2018 and make bold labour market reforms.
Case of bold labour reforms:
!! The labour market is not functioning. The Indian labour market is not working when many
young people, who need jobs most, cannot find them. There is a supply-side problem from the
citizens’ perspective: not enough jobs are being created.
!! Unless employers have the right to fire, they will not hire more workers.
!! The thrust of government’s policies must be to protect workers’ incomes and not to protect
jobs which should disappear when industries change.
!! Unions, who care only for their own highly paid workers, are the obstacles to labour market
reforms, the aim of which must be to benefit workers who are not union members.
!! We need labour reform of the right kind. It isn’t politically feasible to give employers more
freedoms to retrench workers before strengthening social safety nets
!! Reforming the laws: India’s labour laws are archaic, too many, often contradictory, and
badly administered. They must be reformed. Even the unions are demanding reforms. The
government is simplifying and consolidating the laws into a few codes. The reformed laws must
suit emergent conditions. They must provide more flexibility to employers. Above all, they must
ensure fair treatment of workers, and provide a wider social safety net.
!! Reforms must be made with consensus amongst workers and their unions, and employers and
their associations. Trust between workers and employers must be increased. The sometime
slow process to achieve consensus must not be short-circuited.
!! Technologies are changing more rapidly. Also, off-line training institutions cannot keep up.
Their trainees do not have the skills needed as employers say. Employers must change their
processes, they must provide workers opportunities to learn the new skills necessary. Employers
need to show commitment to retain and invest in people.
!! The rights of workers, Decent treatment, Fair wages, Adequate social security, must be
secured.
!! Ensuring social security net. For contract workers, informal sector workers, and even domestic
workers. Farmers are demanding better prices for their produce and financial safety nets. The
expansion of the social safety net in India, to cover a variety of occupations and enterprises,
will have to be the principal thrust of ‘labour market’ reforms. Employers can be given more
freedoms to retrench workers only after strengthening the social safety nets beneath them.
Policymakers will need to work on different levels to be able to create a competitive labour force
and make India benefit from the emerging global situation. Making ‘bold’ labour reforms, either

12 Hints: Economic Issues in News GS SCORE

 at the Centre or in the States, to give employers more freedoms to fire workers, may please
financial markets for a while, as Thatcher’s reforms did in the UK. However, it will weaken the
already fraying social compact in India between the elite and workers. India must strengthen the
social compact and build a strong industrial base democratically, like Germany and Japan did, with
consensus amongst unions and employers.

Section B

Q11. World Economic Forum recently launched Global Manufacturing Index

based on how well-prepared countries are for the future of manufacturing.
With reference to report, discuss the status of manufacturing in Indian
economy, challenges the sector is facing and possible way out to usher in a
sustainable production future.

WEF Global Manufacturing Index which rank countries according to their preparation for future
manufacturing production highlighted comparison among countries in the development of new
production techniques, implementing strategies, competitive paradigm and challenges they are
facing.
Status of Manufacturing in India:
!! India is ranked at 30th position on a global manufacturing index - below China’s 5th place but
above other BRICS peers, Brazil, Russia and South Africa.
!! India has been placed in the ‘Legacy’ group (strong current base, at risk for future) along with
Hungary, Mexico, Philippines, Russia, Thailand and Turkey, among others.
!! As per report India is the 5th-largest manufacturer in the world with a total manufacturing
value added of over USD 420 billion in 2016. The country’s manufacturing sector has grown
by over 7 per cent per year on average in the past three decades and accounts for 16-20 per
cent of India’s GDP.
!! In terms of scale of production, India has been ranked 9th, while for complexity it is at 48th
place. For market size, India is ranked 3rd.
Challenges in manufacturing sector:
!! Report listed human capital and sustainable resources as the two key challenges for India.
!! Lack of skilled manpower: India severely lacks skilled professionals. Only 2.5% of Indian has
received skill training, compared to Japan (75%) and Germany (80%).
!! Areas where the country is ranked poorly (90th or even lower) include female participation in
labour force, trade tariffs, regulatory efficiency and sustainable resources.
!! Complex government regulations and taxation laws: Firms find it easier to reduce tax burden if
they remain small, i.e. below 5 crore capital expenditure. Thus, growth of small manufacturing
units is being penalized.
!! Lack of technology, and R&D: Indian firms spend less than 10% in R&D. Also, more than 75%
of manufacturing activity is done by cottage, micro and small industries, which use obsolete
technology and old age capital machines, where productivity is very low.
!! MSME sector which accounts for near 40% of industrial production, 90% of industrial units and
10 million jobs left out in modernization especially in infrastructure, technology and marketing
and productivity enhancement.
!! Process & Quality management is below par. On time delivery record is also below par.
!! The eco system for Design /Tech development / innovation / Productivity improvement is not
conducive. Most of the entrepreneurs looking for short term returns.

GS SCORE Hints: Economic Issues in News 13

 !! Skewed labor laws: India has more than 45 labor laws combining center and states. This leads
to harassment and undue interference in industrial activity by bureaucracy.
!! Financing costs are very high. This impacts global competitiveness
!! While most were happy about the overall economic growth, the gradual domination of foreign
players/foreign technology/ foreign brands and increasing share of low cot Chinese imports,
blunting the Manufacturing sector in India.
!! Enterprises in this sector have a growth problem. They suffer from low productivity given
that their small size prevents them from achieving economies of scale, among other
disadvantages.
Way out to usher in a sustainable production future:sustainable production future is solution-
driven, human-centric, environmentally sound, and inclusive. Following steps need to be taken
for it.
!! Transition framework: New transition frameworks to help governments codesign and
implement strategies in collaboration with the private sector, civil society, and academia.
While the readiness assessment serves as a diagnostic, the transition framework will support
treatment of the diagnosis.
!! The country needs to continue to raise the capabilities of its relatively young and fast-growing
labour force. This entails upgrading education curricula, revamping vocational training
programmes and improving digital skills.
!! India should continue to diversify its energy sources and reduce emissions as its manufacturing
sector continues to expand.
!! Promoting women entrepreneurship, skills and education along with sharing adequate
opportunities with women to enhance their participation.
!! Needs conducive environment with low tax rates, absence of bribery, corruption and neatly
defined laws to end the harassment from the regulators.
!! Environmentally responsible technology and production model to be promoted.
!! Need more bold reforms in labour laws, Shramev-jayate portal, online compliance and
codification of labour laws into 4 codes are welcome steps.
!! Investors’ confidence must be improved by creating competitive environment, which will
attract much needed FDI inflows in India
!! More practical approach and regulations under startup India should be adopted to increase
its spread.
India need to work on emerging technologies— such as the Internet of Things, artificial intelligence,
robotics and additive manufacturing and business models that will fundamentally transform
production. It is also imperative to implement industrial strategies that promote productivity and
inclusive growth than India can be on path of sustainable and inclusive production future.

Q12. The handloom industry in India is not just an economic activity, but
exhibits a national identity that is admired and appreciated all over the
world, however, this sector is ailing. What are the reasons behind it? How
its situation can be improved?

The handloom industry in India exhibits a national identity that is admired and appreciated all
over the world given its unique, unparalleled, rich heritage. It exhibits the spectacular craft of
our artisans and nourishes the social fabric of the country. India produces almost 85 per cent of
the world’s handloom products and sector is the second largest unorganized set of economic
activities in the country, after agriculture, that supports rural areas.

14 Hints: Economic Issues in News GS SCORE

 More than three-fourth of all adult weavers are women and members of SC/ST/OBC communities.
There are almost 2.4 million handlooms in India, of which almost 85 per cent are in villages. Thus,
sector provides huge job and economic opportunities to rural population especially vulnerable
sections, however according to textile ministry’s Handlooms Census the sector is registering de
growth in employment generation, overall value addition and exports.
Reason behind ailing of handloom sector:
!! Today, a major difficulty of handloom weavers across the country is the non-availability of
adequate quantities of good quality yarn at reasonable prices.
!! Since most of the weavers are illiterate or less educated and the separation of producers from
the marker has given rise to middlemen. Trader entrepreneurs who may know the market
well, and thus be able to meet new demands often dominate existing marketing channels. But
as traders, they also block the trickledown of benefits even though the profit margin is quite
high.
!! Technological advancements are increasingly encouraged in the country and rightly so. Sadly,
this impacts the handloom industry negatively and the cut-throat competition from power
looms has put the very existence of the handloom sector in doubt.
!! The credit facilities currently available to weavers are far from adequate. Even those made
available through co-operatives rarely reach the sections for whom it is intended. This is
because master weavers control a number of co-operatives and tend to corner a substantial
proportion of institutional credit.
!! There is a significant mismatch between cloth production and marketing.The decline of local
markets for handlooms is a reality today.
!! The centralized marketing bodies of weaver co-operatives too have been malfunctioning. Not
receiving payments in time for the products supplied by the apex marketing agency, has led to
the collapse of a number of co-operatives, since they are unable to generate/rotate capital for
subsequent rounds of production.
Steps need to be taken to improve the situation:
!! Use of high-valued raw material to match the input value of material and high cost of production
in handloom and produce only value-added products.
!! Diversification of handloom products, product development to maximize the value addition.
!! Awarding GI tags and Brand name to get premium to artisans.
!! Direct market linkage with the developed communication media will boost the market potential
further.
!! Eliminating role of middle men, promoting direct sale through cooperatives or primary
groups.
!! Integrating the weavers either in cooperative or some group fold so that credit availability and
negotiation can be boosted.
!! Marketing of products at suitable platforms with help of government agencies and adaptation
of Fair-trade practices
!! Sensitize handloom weaving as a modern profession like fine arts, photography, music etc.
!! Motivate youngsters towards handloom sector.
!! Incentive schemes towards handloom research.
India is considered to be the world’s best handloom hub and this will continue to be so in the
future. Handloom sector has high potential to grow further with focused approach while matching
with the modern aspects of living hood. Hand woven products are vibrant; it is made with the
threads potent with tenacity, strength, passion and dignity. Fabrics so produced carry special
values and hence should not be deprived of its value for money. With such belief handloom will
remain sustainable as ever. However, many weavers are uneducated and rely solely on their skills
that have been passed on to them by their previous generations. This is traditional knowledge for
them and it is the government’s responsibility to take their concerns and future into account.

GS SCORE Hints: Economic Issues in News 15

Q13. Though the Indian Council for Agriculture Research (ICAR) launched the
Lab to Land Programme (LLP) back in 1979 as a part of its Golden Jubilee
celebration, yet the connect between lab and farm still missing;analyze.
Also suggest, how to improve the land to lab connect?

The Lab to Land Programme (LLP) was launched by the ICAR in 1979 with overall objective to
improve the economic condition of the small and marginal farmers and landless agricultural
laborers, particularly scheduled castes and scheduled tribes, by transfer of improved technology
developed by the agricultural universities, research institutes etc. Though the programme has
taken some significant steps but the seamless diffusion of technology from universities and
research institutes is still missing.
Significant steps taken:
!! Krishi Vigyan Kendra (KVK): it is an innovative science-based institution which undertakes
vocational training of farmers, farm women and rural youths; conducts on farm research for
technology refinement and front-line demonstrations to promptly demonstrate the latest
agricultural technologies to the farmers as well as the extension workers.
!! On-Farm Research (OFR): On farm research is an adaptive research which is conducted on
farmers’ fields by the farmers with the support from scientists/subject-matter specialists. It
is conducted with a farming systems perspective.
!! In Service Training: The KVKs has been given the responsibility of conducting in service
training of grass route level extension workers like VEWs and others working in Government
and non-Government development organizations.
!! Vocational Training of Farmers: This had been the major mandate of the KVKs in the past
and will continue to be so in future as well. The objective is to organize long term vocation
based and skill-oriented training for farmers, farm women, rural youths and school dropouts
so that they could adoptnew methods of farming and increase farm income thus, the
emphasis is not on crops but on vocations.
!! Front line Demonstrations (FLD) and other Extensional Activities: The KVKs organize front line
demonstrations which aim at demonstrating the production potentialities of newly released
and pre-released production technologies of cereals, pulses and oil seeds and farmers’
fields.
Challenges in dissemination of knowledge and technology (Lab to land connects):
!! There is crunch of resources and technical staff in universities and research institutions to
conduct village level meets with farmers.
!! KVKs have different organizational structures. While some come directly under ICAR, others
are monitored by State Agricultural Universities or even Civil Society Organizations. This has
led to problems of monitoring and co-ordination problems.
!! Research output in the university laboratories cannot be directly transferred to the companies,
and in India that gap is huge.
!! Agriculture universities and research institutes are facing difficulty in attracting the talented
faculty and youth.
!! Participation of private players in research and extension is negligible.
!! Allocation to research and extension is under government budget is poor which is less than
1% of agriculture GDP and it is even less than that of Bangladesh and Indonesia
!! Majority (63.5 per cent) of scientists have low to very low level of productivity.
!! Superstitions, social dogmas and illiteracy among farmers is another factor which inhibit
the adoption of new technology

16 Hints: Economic Issues in News GS SCORE

 How to Improve Land to Lab:
!! A system needs to be created where the workable models of research output can be presented
to companies.
!! Improve investment as a proportion of agro GDP.
!! Securing participation from the private sector.
!! There is need of instituting performance indicators in universities.
!! instituting a system in which the winner is offered a proportionately large enough award for
innovating desirable agricultural traits (such as improving pules productivity considerably) but
the intellectual property rights of the innovation are transferred to the government
!! Indian traditional knowledge to be used for onsite implementation of lab innovations.
!! Improve KVKs to take better initiatives on field research.
!! Set up Core Groups at State, District and Block levels for coordination. Issue letter to District
Collector, Line Departments and Banks about the implementation of the initiative.
!! Identification of nodal persons in each department. BDO to be trained as the Chief Block
Coordinator.
!! Initiation meeting with stakeholders at the block level to be chaired by DistrictCollector.
!! Orientation of officials, PRIs, SHGs, community resource institutions / persons on thematic
issues.
!! Finalization of objectives, actions, indicators, targets with PRA. Sharing of action plan with CRPs
and the community. Setting up of a community radio.
The Kisan Path Shala Yojana of the Uttar Pradesh (UP) government is a promising scheme for
extension and outreach programme to connect the agricultural department’s scientific and
technical staff with the state’s farming community. it provides a forum for two-way communication
between agriculture department officials and farmers during every cropping season. The logical
next step should be to also involve the private sector. There is no harm if the instructors at the
pathshalas also include representatives of seed, fertilizer or agro-machinery firms. So, there is
need to address the challenges of taking farm research from ‘Lab-to-Land by making efforts to
convince farmers about efficacy of new farm techniques in simple ways.

Q14. What do you understand by Sunset Clause. Discuss the need for having
such clause and benefits of the Sunset Review Process.

Sunset clause, also called sunset provision, a legal provision that provides for the automatic
termination of a government program, agency, or law on a certain date unless the legislature
affirmatively acts to renew it. Means such clauses require that certain provisions or laws will cease
to be effective from a pre-determined date unless they are reauthorized. Such a policy measure
could help in tackling legislative inertia that leads to accumulation of unwanted laws over the
years.
Need of such Clause
!! The government at different points has taken small steps like making pre-legislative scrutiny
of Bills mandatory through public feedback to design better laws but these processes are not
data-driven or systematic. But, these steps are not proving enough for government to become
more effective and transparent.
!! As laws have become more and more specific, there is a greater need to have a mechanism
in place to check both how the law has performed in handling the situation and, whether and
how, the circumstances around that situation have changed.

GS SCORE Hints: Economic Issues in News 17

 !! Today in 21st century the society and its needs are changing continuously. So, it becomes very
important for state to become dynamic in the sphere of legislation. One of the policy tools that
must be used to tackle this problem is “sunset clause” or “periodic review”.
!! Such provisions are an admission by the lawmakers that the law is not made for eternity and
a recognition that circumstances change over time whether it is one year or five years. Its
best example is that our Constitution itself provides for a 10-year sunset for reservations to
Parliament and legislative assembly seats (Article 334).
!! There is a need to extend this learning to other areas of law by admitting that social circumstances
and institutional behaviour (like economic situations) do also change over time with the
consequent need to revisit the laws.
Benefits of the Sunset Review Process:
!! Sunset laws are a key tool the legislature uses in asserting itself against an executive branch
that often dominates state government.
!! According to some political theorists the sunset laws are a way to diminish interest group
power over government programs and to promote more active legislative oversight.
!! Most laws do not have sunset clauses and therefore remain in force indefinitely, and hence
increasing executive and financial burden on government.
!! Having a fixed tenure for review in effect may actually ensure certainty of law. If the review
process may find that the statute is performing as expected and is valuable then the status quo
will be maintained.
!! In the long run, this, more than anything else, would allow the present government to deliver
on its electoral promise of “good governance.”
!! This has even more importance in the Indian context where the parties in power could swing
widely, leading to either implementation of unviable electoral promises or mindless reversal of
laws passed by previous government.
Insisting on sunset clauses would be a significant structural improvement in the function and
efficiency of government at all levels, and would protect citizens from an ever-spreading snarl of
outdated laws and regulations, administered by a government incompetent enough to allow them
to accumulate in the first place.

Q15. There is huge debate and cry on implementation of the E-way Bill under
new GST regime. In this light, elaborate on E-way Bill, its benefit to the
economy and challenges in its implementation.

E-way bill has potential to change the face of India’s logistics Industry. E-way bill is an electronic
document generated on the GST portal evidencing movement of goods having more than Rs.
50,000 in value. It has two Components - Part A comprising of details of GSTIN of recipient,
place of delivery (PIN Code), invoice or challan number and date, value of goods, and reasons for
transportation; and Part B comprising of transporter details (Vehicle number). An e-way bill can
be generated by a supplier, recipient or transporter.
The major benefits of E way bill are as follows:
!! One of the key achievements of the e-way bill will surely be the effective dissolution of state
borders. The amount of time wasted at state borders to validate documents with regards to
inter-state movements of goods, coupled with the fact that each state had its own format of
declaration forms, permits and waybills, was obviously a hindrance to any business which dared
to spread its wings, beyond its home state.

18 Hints: Economic Issues in News GS SCORE

 !! The traders need not visit tax offices to collect and submit the Way Bill forms as used to
be done in VAT regimes in some states.
!! Transporters will not need separate transit passes for moving goods from one state to
another as the e-way bill issued to them will be valid throughout India.
!! Those generating the e-way bill can enter the vehicle number, and the same can be updated
in case of vehicle breakdown.
!! Average waiting time at mobile squad reduces drastically – As the verification of the E-Way
Bill is done with the common portal, it will speed up the process of verification and allowing
the vehicle to pass faster.
!! If a transporter faces detention of more than 30 minutes, he can upload a report on the
portal. Thus, reduces hassles on the way.
!! Self-policing by traders - A trader while uploading gives the identification of the buying
trader who will also account the transaction automatically.
!! Environment friendly – The need of the paper form of the multiple copies of way bill is
eliminated. Hence, tons of paper are saved per day.
!! Generation of GSTR-1 returns – GSTR-1 return of the supplier is auto prepared; hence he
need not have to upload the same.
!! Officials saved of monotonous work collecting and matching the manual way bill with the
returns of the taxpayers.
Challenges in E way bill implementation:
!! The foremost challenge is handling of millions of E way bill generation and subsequent
management and monitoring which require a robust IT infrastructure.
!! E-way bill mechanism adds a layer of compliance and if implemented without IT preparedness,
then defeats the purpose of GST, which is to boost ease of doing business in India.
!! e-way bill number (EBN) will be valid for one day for a 100km journey and one day each
for each additional 100km. Validity is based on the distance travelled by the goods and
is calculated from the date and time of generation of e-way bill. This will be a hindrance
making transport of goods within the city difficult.
!! The e-way bill rules provide for random verification which can be done by a tax officer.
This may increase bureaucratic discretion and corruption.
!! Installation of a radio frequency identification device in transporter’s vehicle to map the
soft copy of an e-way bill is an additional cost. Some see scope for it being misused by
taxmen, who can interrupt journeys to verify the e-way bill and even physically verify the
consignment.
!! E-way bill implementation would give a state government free hand to harass companies,
particularly in cases where the E-way bill validity may have expired due to failure of the
system or change in destination.
E-way bills would aid in formalizing India’s logistics ecosystem and reduce road freight pricing.
But implementation without sufficient IT preparedness will be nothing less than a nightmare.
Digitization of the documentation process will ensure accountability and easier verification. For
all of this to come about though, the government will have to take care of the technological
aspects such as internet coverage and e-literacy. The transition from pen and paper to online
documentation will have to be done in phases with ample scope for necessary changes. And
most importantly, the government will also have to factor in unavoidable delays (say due to
natural or man-made calamities) and list out the rules for expired e-way bills in such cases. If
implemented wisely, e-way bills have the potential to reshape the logistics industry and make
transport of goods easier and faster.

GS SCORE Hints: Economic Issues in News 19

Q16. In spite of great potential, the Indian electronics sector is a laggard. In this
context, discuss on its potential and reason behind its poor performance.
What could be possible steps to boost it?

The electronics industry is going through an exciting phase due to revolutionary changes in
technology, the launch of innovative products and the challenge of global competition. This has
made it necessary for electronic product and component manufacturers to focus on continuous
improvements in order to stay ahead of the pack. Though India offer one of the largest market
for electronics however Indian electronic manufacturing is seeming incapable to encash this
opportunity.
Market Potential for Electronics Sector.
!! A growing middle class, rising disposable incomes, declining prices of electronics, increased
penetration in the consumer durables segment and a number of government initiatives have
led to a fast-growing market for electronics and hardware products.
!! The Indian electronics market is one of the largest in the world and is expected to reach a
turnover of US$ 400 billion in 2020, up from US$ 69.6 billion in 2012.
!! According to an Indian Brand Equity Foundation (IBEF) report, the market is projected to grow
at a compound annual growth rate (CAGR) of 29.4 per cent during the period 2015-2020.
!! Greater digitization could lead to increased broadband penetration in the country and open up
newer avenues for companies in the electronics industry.
!! By 2018, the number of DTH subscribers in India is expected to rise to 200 million from 84.80
million in FY162 and India offer World’s 3rd largest TV market. By 2020, the television industry
in India is expected to expand to USD16.8 billion from USD9.4 billion in 2016
Reason behind laggard Indian Electronic Manufacturing:India’s weak manufacturing base has not
been able to respond to this increasing demand, leading to a growing trade deficit. Major challenges
facing the Indian electronic manufacturing market are lack of World-class infrastructure, Lack of
clear-cut government policy for the industry, very little expenditure in Research and Development
area, Power of Marketing not harnessed to the maximum and Inverted duty structure on various
electronic components which discourages the competitiveness of Indian manufacturing.
Steps to Boost Indian Electronic manufacturing:
Government must promote and encourage:
!! Partnerships and foreign technology-based venture capital investments in industry start-up
and incubation ventures
!! Corporate rewards for the private sector to play an active role in producing a continuous
stream of innovative business ideas and models conducive to the dynamic Indian environment
and socioeconomic development and beyond its borders.
!! Effective communication of the relative laws and enforcement measures that ensure strict
implementation of IP rights to continue to promote innovation.
!! Understanding the rewards of participating on a global level
!! Adequate attention to upgrading basic ESDM-related technical infrastructures and better
access for links to knowledge sources and international industry networks
!! A system of awards and prizes at the national level to encourage regional and international
EMS-market entry, performance and innovation
!! The private sector must get better at collaborating with universities and research centers in new
technology initiatives, and invest more in startups.
!! the duties on components down to the level of the product.

20 Hints: Economic Issues in News GS SCORE

 !! Businesses must host specially designed training programs and applied research programs for
students to include:
!! Collaborating with local universities with a focus on sector vocational training and the continuing
education of technical and upper-level ESDM decision-makers
!! Entering into strategic alliances and partnerships with internationally renowned MNCs,
international business leaders and industry experts to enhance access to global markets.
China, with its rising labour costs, will soon not be the global manufacturing hub it is today. This
is an opportunity for countries like India, the Philippines, Thailand, etc., to attract companies to
move their plants to their country. Policy reforms favoring electronic sector, boosting it through
competition, is the need of the hour as the industry has the potential to provide millions of jobs,
directly and indirectly.

Q17. India is trying to woo Sovereign wealth funds especially in infrastructure

sector and large capital projects. In this context, discuss on objectives of
creating a Sovereign wealth fund. What are the economic and financial
benefits they offer?

A social wealth fund or sovereign wealth fund (SWF) is a state-owned investment fund that invests
in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative
investments such as private equity fund or hedge funds and whose dividends would be paid out
directly to the citizenry. The funding for a sovereign wealth fund (SWF) comes from central bank
reserves that accumulate as a result of budget and trade surpluses, and from revenue generated
from the exports of natural resources.
Unlike, the state-operated funds which are used in a discretionary manner that helps countries
(for example Saudi Arabia) generate revenues and whose benefits end up flowing to the country’s
richest. A social wealth fund would guarantee that the income from capital assets gets distributed
widely—perhaps as a universal basic income
Objectives of creating a Sovereign wealth fund: Every SWF has its own unique purpose and
objective, but the general aim is to do something that will benefit the country as a whole. Some
possible objectives include:
!! The primary functions of a sovereign wealth fund are to stabilize the country’s economy through
diversification and to generate wealth for future generations.
!! Fund social or economic projects to boost growth and employment.
!! Get political mileage and increase vote share.
!! Provide long-term capital growth opportunities for the domestic market.
!! Protect the economy from excess volatility due to revenues or exports.
!! Provide stability against oil price fluctuations.
!! Diversify portfolio with an aim to create savings for the future generation.
SWFs offer a variety of economic and financial benefits.
!! The SWFs of several nations enable governments to augment resources and achieve strategic
objectives.
!! SWF’s earnings will diversify a country’s revenues and augment foreign exchange reserves or
commodity revenues.
!! It helps to acquire strategic stakes in oil and gold companies.
!! They help avoid boom-bust cycles in their home countries, and facilitate the saving and
transfer across generations of proceeds from fiscal surpluses related to commodity exports
and privatizations.

GS SCORE Hints: Economic Issues in News 21

 !! Countries such as China and Singapore have used SWFs to meet their commodity import
requirements, promote the expansion of domestic companies overseas, attract foreign direct
investment and increase government revenues.
!! They help to combat inequality and provide macroeconomic stability.
!! SWFs would be socially owned and could be used to finance a range of public projects that benefit
society as a whole. These might include investment in economic and social infrastructure and
urban regeneration and strengthening mechanisms that encourage upward social mobility.
SWFs can generate a sizeable fund over time, enough to fund a range of social programmes and
possibly an annual citizen’s dividend, through a modest contribution from a very privileged social
group. Depending on how they are financed, these funds have the potential to be a powerful
weapon in the anti-inequality armory, they would boost social investment and greatly improve
the overall balance sheet of the public finances in the process. The emergence of sovereign wealth
funds is an important development for international investing, and as regulation and transparency
issues are resolved in the coming years, these funds are likely to take on a major role in shaping the
global economy. The Government of India (GoI) incorporating an SWF would facilitate achieving
key political and economic goals.

Q18. Discuss on the key reforms introduced in the real estate sector by the
government and their possible impacts?

Real Estate sector which is facing a down turn and crisis is one of the potential growth factor of
India both socially and economically. Government has introduced several key reforms in the real
estate sector in 2017. It includes notifications of the Real Estate (Regulation and Development)
Act, 2016 (RERA) and, Union Budget putting development of affordable housing on priority and
introduction of GST.
Key Reforms and their impact:
!! Real Estate (Regulation and Development) Act, 2016: The Real Estate (Regulation and
Development) Act, 2016 which came into force in March 2016 has laid down a regulatory
framework which will change the way the real estate sector operates in India. It aims to enhance
transparency, bring greater accountability in the realty sector and set disclosure norms to
protect the interest of all stakeholders. Speedy execution of property disputes will also be
ensured in due course.
!! Amendment to the Benami Transactions Act: The Benami Transactions (Prohibition) Amendment
Act, 2016 lays down stringent rules and penalties associated with dealings related to ‘Benami’
transactions. It establishes a regulatory mechanism to deal with disputes arising from such
transactions and levying penalties to increase the institution-investor participation and
regulating the sector to make India an attractive investment destination.
!! Goods and Services Tax (GST): it will put an end to multiple taxes as it will incorporate major
indirect taxes into one, 12 percent in case of under-construction properties. Besides promoting
ease of doing business and improving supply chain efficiency, the new tax regime is expected
to play a vital role in bringing down the construction costs.
!! Liberalized FDI rules: Relaxation in Foreign Direct Investment (FDI) norms is touted to be a
game changer for the real estate industry especially in achieving the ‘Housing for All’ initiative.
The move will address shortage of housing in the industry and ensure speedy delivery of
projects thus, reducing construction costs and save time.
!! Pradhan Mantri Awas Yojana (PMAY)- Housing for All: The Union government came up with
an ambitious ‘Housing for all by 2022’ mission to tackle enormous urban housing shortage
of 20 million homes with a pivot on providing adorable and low-cost housing to the EWS
(economically weaker section).

22 Hints: Economic Issues in News GS SCORE

 !! Ever since then, the mission has picked up pace owing to a number of policy initiatives and
tax reforms, including infrastructure status to adorable housing to accelerate fund owes,
service tax exemption to affordable housing developers, and interest subvention of three and
four percent for home loans up to Rs 9 and 12 lakhs under the
!! DDT exemption for SPVs to REITs: The Union Budget 2016-17 exempted any distribution made
out of the income of the Special Purpose Vehicles (SPVs) to the Real Estate Investment Trusts
(REIT) and Infrastructure Investment Trusts (InvIT) from the levy of Dividend Distribution Tax.
This paved the way for the REIT model to become financially viable for retail investors.
!! Demonetization: The recent demonetization of Rs 500 and Rs 1,000-rupee notes by the prime
minister is perceived as a significant reform. In the long run, this measure along with Real
Estate (Regulation and Development) Act, 2016 (RERA) will align the real estate sector to
the international standards of doing business, resulting in more fund flow from institutional
investors, banks and higher unit sales.
!! Change in arbitration norms for construction companies: To help the ailing construction
sector, the government has cleared reforms including speedier resolution of disputes and the
release of 75% of amounts that are stuck in arbitration. The amount released will be used by
contractors to complete projects or pay off debts. It will improve the cash flow position of
large developers who have significant exposure in infrastructure and government contracts
and eventually help in speedy execution of large infrastructure projects. Coming at a time
when most developers are struggling with liquidity issues, this is a boon from an overall
perspective.
!! Permanent Residency Status for foreign investors: The Union Cabinet approved the grant of
Permanent Residency Status (PRS) to foreign investors, subject to various conditions and with
a provision for renewal for another 10 years. As PRS allows the holders’ spouse/dependents
to take up employment in India, as well as the purchase of one residential property for end-
use, the end user pool, mainly for high-end and luxury segment products stands increased
which can promote the asset class in a big way.
The positive impacts of these also include improvement in the affordability and making this
sector more efficient, help in achieving ‘Housing for all by 2022’,Smart city development would
be positively impacted by efficient Realty sector, Improve the employment prospects and overall
growth, boost other upstream and downstream industries both related directly and indirectly.
Though the recent trend in the decline of new project launches has impacted the market, and is
expected to gradually find some equilibrium with demand, and prices subsequently picking up
pace.

Q19. While electricity production has improved leaps and bounds, the
distribution is still struck in web of leakages and inefficiency? Examine.

Electricity is critical to fuel the economic growth of India. The country is on the fast trajectory
of development but to keep the momentum of growth high, availability of uninterrupted power
supply is a must
The utility electricity sector in India has one National Grid with an installed capacity of 334.40
GW as on 31 January 2018.
The following initiatives have been taken by government to promote Solar Power in the
country:
!! Exemption from excise duties and concession on import duties on components and equipment
required to set up a solar plant
!! A 10-year tax holiday for Solar Power Projects.
!! Guaranted market through solar power purchase obligation to states.

GS SCORE Hints: Economic Issues in News 23

 !! A payment security mechanism to cover the risk of default by state utilities/discoms.
!! A subsidy of 30% of the project cost for off-grid solar thermal projects, subject to availability
of funds.
In the Budget 2015, Government has announced a target of adding 175 GW of renewable
energy, including addition of 100 GW of solar power, by the year 2022. India has surplus power
generation capacity but lacks adequate infrastructure for supplying electricity to all needy
people.
!! A system of cross-subsidization is practiced based on the principle of ‘the consumer’s ability
to pay’:
 The industrial and commercial consumers subsidize the domestic and agricultural
consumers. Further, Government giveaways such as free electricity for farmers, have
depleted the cash reserves of state-run electricity-distribution system and led them to
amassing a debt.
!! This has financially crippled the distribution network, and its ability to pay for purchasing power
to meet the demand in the absence of subsidy reimbursement from state governments.
!! Average transmission, distribution and consumer-level losses exceeding 30% which includes
auxiliary power consumption of thermal power stations, fictitious electricity generation by
wind generators, solar power plants & independent power producers (IPPs), etc.
!! Majority of the state electricity boards (SEBs) have been unable to replace or even repair
substandard distribution equipment, such as transformers, for lack of finances.
!! Failure of earlier government schemes like the Rajiv Gandhi Grameen Vidyutikaran Yojana
(RGGVY) for rural electrification and the Accelerated Power Development and Reforms
Programme (APDRP) which are way behind schedule.
Government has been taking measures:
!! In order to address the lack of adequate electricity supply to all the people in the country by
March 2019, the Government of India launched a scheme called “Power for All”. This scheme
will ensure continuous and uninterrupted electricity supply to all households, industries and
commercial establishments by creating and improving necessary infrastructure.
!! Further, the Government’s flagship programmes like, the Deen Dayal Upadhyaya Gram Jyoti
Yojana, Integrated Power Development Scheme and Ujjwal DISCOM Assurance Yojana have
catalyzed the process for unprecedented investment in the distribution infrastructure leading
to improved distribution efficiency, reduce supply-demand dissonance, decrease technical and
commercial losses, improve revenue realization and establish technologically sophisticated
smart distribution network.
!! The Union Government’s thrust on renewable energy is likely to increase the penetration of
electricity in the country, thereby driving the demand upwards.
!! Above all, emerging technologies like power storage devices, electric vehicles, energy saving
devices, smart transmission and distribution systems, etc., are opening new vistas for business
expansion.

Q20. The Parliament has passed the Insolvency and Bankruptcy Code
(Amendment) Bill, 2017 to resolve the issue of loan defaults and dispute
resolution. In this context, discuss the major changes brought in by the new
amendment and key concerns which remains.

Government notified the Insolvency and Bankruptcy Code, 2016 aims to consolidate and amend the
laws relating to insolvency resolution of companies and limited liability entities, partnerships and
individuals, which are contained in various enactments, into a single legislation however during its

24 Hints: Economic Issues in News GS SCORE

 implementation new insight came up with reference to NPA resolution, will full defaulters, dispute
resolution and creditors interests. To bridge the gap in these areas the Parliament has passed the
Insolvency and Bankruptcy Code (Amendment) Bill, 2017 to make the insolvency and bankruptcy
code more impactful. These include:
!! Loan defaulters can now participate in bidding under the insolvency proceedings after paying
due interest and making their bad loan accounts operational.
!! The ineligible persons or entities will include undercharged insolvent, willful defaulter and
those whose accounts have been classified as non-performing asset.
!! The objective of the new Bill is to allow creditors to move to the National Company Law
Tribunal (NCLT) in case of insolvency.
!! The Bill proposes the creation of a new class of insolvency professionals that will specialize in
helping sick companies.
!! The Code creates time-bound processes for insolvency resolution of companies and individuals.
These processes will be completed within 180 (extended to 270) days.
!! Given that many corporate transactions and businesses involve an international element, the
Code attempts to address this by including provisions for cross border insolvency
!! Information utilities (IUs) will be established to collect, collate and disseminate financial
information to facilitate insolvency resolution.
!! The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies.
The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.The
Insolvency and Bankruptcy Board of India will be set up to regulate functioning of IPs, IPAs
and IUs.
It looks for Legislation that will prevent unscrupulous persons from misusing or vitiating the
provisions of the insolvency. Whole effort is to make banking sector robust and detach it from
politics.
Key Issues:
!! The Bill prohibits certain persons from submitting resolution plans or participating in the
liquidation process. One argument may be that these persons may be considered undesirable
to take charge of the company. However, this may reduce competition among applicants and
result in lower recoveries for creditors.
!! A company that is liquidated ceases to exist, and the background of persons bidding for its
assets may be irrelevant.
!! Another major concern was the huge “haircut [loss on account of auction of assets of defaulting
companies],” to the extent of 75%, being taken by public sector creditors
Impact of the Bankruptcy Act:
!! Impact of the bankruptcy code will be positive, leading to a better management of stressed
companies in India.
!! There will be better financial discipline among companies; this will ensure that all their creditors
are paid on time, building confidence in financial system of India.
!! Timely recovery of loans and relief in NPAs issue, Appointment of Insolvency Resolution
professionals (IRP) who are specialized in handling sick companies would be in place.
!! It will free up banks productive resources, the credit availability in the economy which could be
used for welfare purposes.
!! Solving bankruptcy and insolvency cases in a quick manner will act as confidence building
majors to foreign investors.
!! Creditors will be able recover a larger part of their investment faster which will eventually allow
them to re-invest in other projects.
This Act will corroborate to take India from among relatively weak insolvency regimes to becoming
one of the world’s best insolvency regimes. The strict timelines for resolution of insolvency and
liquidation proceedings would definitely be an incentive and provide the requisite impetus for
economic growth when implemented in letter and spirit, provide a major boost to the India
economy.

GS SCORE Hints: Economic Issues in News 25