MAINS QUESTIONS WITH MODEL ANSWERS
GS PAPER-III: Indian Economy
- How persistently high inflation undermined RBI’s effort to revive growth?
What are the concerns for RBI to revive growth despite rising inflation?
Recently, India’s growth rate had decelerated sharply to a six-year low and retail inflation that had shot up in November 2019. The rate of Inflation remained persistently high until Covid disruption made worse situation for government as well as RBI.
Reasons for high inflation
- The retail inflation is increasing significantly. Moreover, the main culprits were food prices, especially fruits and vegetable prices, which had increased after unseasonal rains.
- There is hope for “transient” spike in inflation and the GDP growth will resume momentum, but nothing has happened till yet.
- Decrease in GDP growth: It kept getting slower before Covid, which forced it to contract by 24% and 7.5%, respectively.
Concerns for RBI
- Retail inflation has been outside RBI’s comfort zone over the 12 months
- For central government and RBI, it is not just a matter of core inflation but also maintain enough liquidity in the market.
- Now, even the core inflation rate has continued to climb all through the year and is now threatening to breach the levels set for headline inflation.
- The ongoing inflation spiral is being fuelled by supply chain disruptions, excessive margins and indirect taxes.
- Increase of repo rate is not suffice to raise indirect taxes, decrease fuel prices etc.
- Capacity utilisation in firms is low and they are laying off employees to cut back costs.
- If the cause of the current inflation spike was excessive demand, then RBI should raise interest rates.
- Higher interest rates decreased purchasing power of people and increased investment thus bringing down the price level.
GS PAPER-III: Health
- India has many challenges regarding vaccine distribution. Also, suggest solutions to address such challenges.
Discuss what challenges are ahead in front of our country in the task of vaccine distribution. Give measures to address such challenges.
During the onset of COVID-19 pandemic in India, the medical institutions were left scrambling for protective gear and medical equipment to manage the crisis. As the vaccine distribution is yet to start in India, but still there are lot of challenges like lack of distribution network, health facilities, wastage etc which need to be corrected in time for smooth and timely delivery of vaccine.
Challenges in vaccine distribution
- Lack of basic facilities: The distribution of vaccines will require expansion of existing cold chain capacity at a faster speed, especially densely populated parts of the country, where such infrastructure is severely limited.
- Limited distribution network: Vaccine distribution network is operated through four government medical store depots (GMSDs) in Karnal, Mumbai, Chennai and Kolkata. The state vaccine stores then distribute the vaccines to regional, district and sub-district level cold chain points via insulated vans. This is not enough to distribute the vaccine in remote areas of the country.
- Wastage of vaccines: As per the data of Ministry of Health, more than a fifth of health facilities reported wastage of vaccines.
- India ranked within the 51-75 percentile range among 89 countries on effective vaccine management as per a global analysis by WHO-UNICEF in 2018. Its performance was relatively poor when it came to following the required vaccine arrival procedures and using the MIS system for estimating demand of vaccine, syringe, etc.
- Inter-state disparity in the distribution of cold chain points: For instance, roughly 4 cold chain points serve 100,000 population in Gujarat, whereas there is just one cold chain for the same number of people in Jharkhand.
- Jharkhand, Uttar Pradesh, and Bihar are among the least served states when it comes to cold chain infrastructure.
- The public sector distribution capacity will need to be expanded 2-3 times.
- The government need to ensure proper vaccine uptake among the masses and also documentation of vaccination and the tracking & investigation of vaccine safety events are essential components of monitoring.
GS PAPER-III: Indian Economy
- Do you agree that agriculture in India needs government assistance to flourish. Critically analyse.
To thrive agriculture of India, state support is a must. Critically analyse this statement in light of recent farm bills and respective protests by farmers.
Recently, the government has passed three contentious farm bills e.g; Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and Essential Commodities (Amendment) Act, 2020. The government claims that the reforms would remove the shackles from the agriculture sector and free farmers from the stranglehold of middlemen by creating one market.
Criticism of farm bills
- The various farmers’ unions and groups have raised concerns like there is no mention of MSP in these farm bills and they will lose the assured option of selling to the APMC mandis and that this will lead to corporate exploitation.
- They apprehend a process of corporatisation of agriculture in the absence of regulation, as agribusiness firms might well be able to dictate both the market conditions (including prices) and the terms of contract farming as small farmers do not have the same bargaining power.
- These farm bills may clear the way for giant Indian companies and led to the privatization of agriculture sector.
Condition of Indian Peasants
- In India without some support from the state, the smallest peasants would be even more vulnerable.
- According to provisional numbers from the 10th Agriculture Census 2015–2016, in India, “smallholder and marginal farmers” (those with less than two hectares of land) account for 86.2 per cent of all cultivators — that is, almost 126 million people.
- For them, it is inconceivable to carry their produce to other states or far-off places to sell. They will not easily resist the deals “proposed” by agribusiness firms.
Is modernization of agriculture is feasible?
- This will work if the industrial sector could offer them jobs. But the share of the secondary sector in total employment has been stagnant at around 26 per cent (as against 41 per cent for agriculture) and its share in the GDP is declining.
- The tertiary sector has not been able to create enough jobs either and most migrant labourers in cities live in precarious circumstances, as the reverse migration due to the COVID-19 lockdown clearly demonstrated.
- The government should increase public investment in agriculture in terms of infrastructure and in the form of income support schemes like the Rythu Bandhu in Telangana or the Krushak Assistance for Livelihood and Income Augmentation in Odisha.
- This coupled with ensuring that no transaction can be done below the MSP, would help alleviate some rural distress.
- For making farming sustainable, the government should draw inspiration from Andhra Pradesh’s community managed farming model which promotes agro-ecological principles with the use of locally produced, ecologically sustainable inputs, focusing on soil health, instead of depending on chemical fertilisers.
GS PAPER-III: Indian Economy
- How India can be a ‘Plus One’ manufacturing destination, while reducing dependence on China.
What measures should be taken to reduce manufacturing dependence on China and foster India as a ‘Plus One’ manufacturing destination?
To recover from the crises occurred due to COVID-19 pandemic, various global companies have stepped up efforts to implement the ‘China Plus One’ strategy, of diversifying their supply chains.
While this will also provide a second chance for India to emerge as a global manufacturing hub. This depends upon the ability to expand the manufacturing sector and will be critical to job creation and balanced growth.
India’s position in manufacturing sector
- India’s manufacturing sector’s share of GDP is low in comparison to China. Even Vietnam also emerged as a manufacturing hub for goods such as electronics, leather and textiles because of lower labour costs and free trade agreements (FTAs) with China.
- India has moved up 14 places to the 63rd position on the Ease of Doing Business ranking in 2019, following structural reforms like GST and fast-tracking of environmental clearances. But it still lags far behind countries like South Korea and China.
- India remains uncompetitive on labour, infrastructure and logistics. Even, critical inter-linkages between different modes of transport are weak.
- The Economic Survey 2019 said delays in contract enforcement and disposal resolution are “the single biggest hurdle to the ease of doing business in India.”
- Indian is lagging behind Bangladesh and Vietnam in the manufacturing of Ready Made Garments.
- India imports 68% of its medical requirements from China, due to lot of cost differences between Indian and Chinese companies.
Measures to be taken
- Increasing the number of working hours – around five Indian states have adopted this so far – and ensuring the ability to fire workers could help enhance competitiveness on labour.
- Land reforms are also crucial. The government can learn from Vietnam and redistribute large parcels on lease along with the right to rent, sub-contract and mortgage.
- The government should take a long-term view and provide tax and other incentives to build manufacturing ecosystems in new-age sectors such as mobile phones, defence equipment and lithium ion batteries.
- Also, strengthen the other sectors like textiles, leather, auto components and pharmaceuticals to spawn scale-ups.
- In sectors like Ready Made Garments (RMG) and leather, India should focus on entering FTAs apart from resolving issues related to the Merchandise Export from India Scheme.
- To decrease dependence of medical requirements on China, the government need to bring introduce anti-dumping duties and strategic manufacturing incentives.