News Snippet
News 1: Govt.’s SRI Fund commits ₹5,000 cr. to aid MSMEs
News 2: Make – II Project
News 3: The Harvest of Polluted Air
News 4: Governors and their removal
Other important news:
- China’s home-grown Beidou satellite system eyes global footprint
- SEWA
- Foreign Exchange Reserve
- Mathura-Vrindavan aims to become a carbon neutral tourist destination by 2041
News 1: Govt.’s SRI Fund commits ₹5,000 cr. to aid MSMEs
Background
Government-backed Self Reliant India Fund (SRIF) said it has committed more than ₹5,000 crore to help small businesses with growth capital in its first year of operations.
The fund, started as part of the government’s ‘Atmanirbhar Bharat’ programme, has provided approvals to 38 ‘daughter funds’ with a commitment amount of more than ₹5,000 crore.
Self-Reliant India Fund
Why was it needed?
MSME Sector is very important for the Indian economy in terms of contribution to GDP and employment generation.
India has over 6 Crores MSMEs across manufacturing and services sectors which employ over 11 Crores people.
However, one of the biggest challenges faced by MSMEs in India is the inadequate availability of capital.
MSMEs have limited access to external equity primarily because only a handful of players provide early-stage equity capital.
Even if the equity is made available, the uptake would remain low due to:
- Legal Structure of MSMEs prevents infusion of external equity;
- Smaller investment size per enterprise tends to increase transaction cost and management costs for equity investors making this segment relatively less attractive;
- Information asymmetry between promoters, investors and other stakeholders;
- Entrepreneur’s concern regarding control and management;
- Low probability of non-linear return discouraging the Venture Capital ( VC) funding.
Objective
SRI Fund, in the form of Category II Alternative Investment Fund (AIF), will be oriented towards providing funding support to the Daughter Funds for onward provision to MSMEs as growth capital, in the form of equity or quasi-equity.
Alternate Investment Fund
It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP). Hence, in India, AIFs are private funds which are otherwise not coming under the jurisdiction of any regulatory agency in India.
Alternative investment funds refer to funds that include hedge funds, venture capital, private equity, angel funds, real estate, commodities, collectibles, structured products, etc. Alternative investment funds are an alternative to traditional investment options (stocks, bonds, and cash).
News 2: Make – II Project
Background
The Army has approved five Project Sanction Orders (PSOs) for the development of niche technology by the Indian industry under the Make-II route of defence procurement.
It includes high-frequency man-packed software defined radios, drone kill systems, infantry training weapon simulator, medium-range precision kill systems and 155mm terminally guided munitions.
Make – II Project
The Make-II projects are essentially industry funded, involving design, development and innovative solutions by Indian vendors for development of prototypes. An assurance of order is given after successful prototype development
News 3: The Harvest of Polluted Air
Background
The haze and smoke over Delhi, which has become an annual event for about three weeks in October-November, has triggered a temporary ban on construction activities and the movement of trucks and diesel four-wheelers that do not comply with BS-VI norms.
Delhi pollution: Is agricultural burning the main culprit?
At this time of the year, the burning of agricultural waste in Punjab and Haryana is indeed the dominant reason for the smoke and haze over Delhi.
The particulate matter from the burning contributes 30-40% of the PM2.5 concentrations in Delhi’s air during this time. It is the single largest source of PM2.5 levels on most days during this period.
However, the weather plays a critical role as well — a 30-40% rise in pollutants at any other time of the year would not cause the same impact. Agricultural waste burning in Punjab and Haryana happens in the months of May and June as well, although at a smaller scale.
At that time, it accounts for about 15-20% of PM2.5 concentrations in Delhi’s air. But the air quality over the capital hardly ever becomes this bad.
The reason is the weather, or rather, heat. Hotter air rises higher above the surface, and takes the pollutants along with it. The polluting particles are lifted 2-3 km above the surface or even higher, before getting dispersed.
During October-November, however, the air is not that hot. The pollutants are trapped and tend to get concentrated at lower levels of the atmosphere, resulting in the smoke and haze situation that is being witnessed now.
But why is agricultural waste burned?
This waste is the remains of the paddy crop after it has been harvested. This kind of burning is not specific only to Punjab or Haryana. However, the scale of burning in these states is much bigger than elsewhere.
Even in these states, this practice is relatively new. Even 10 years ago, the crop-burning problem was not this acute.
The burning is necessitated by the need to prepare the fields for the next crop in a very short window of time. Due to a slight shift in the cropping pattern in these states, there is now very little time between the harvesting of one crop and the planting of the next crop.
The traditional method of manually uprooting, or cutting, the stumps of the previous crop is time-consuming, and can delay the sowing of the next crop. So farmers resort to the easier option of burning these remains.
So is there no remedy for this situation?
Several solutions have been suggested, and are being tried. These include suggestions to change the crop cycle, deployment of mechanised equipment for harvesting that would render burning unnecessary, and conversion of this waste into something more useful, like a source of energy, which can become an incentive for not burning.
Hundreds of crores have been allocated in the last few years to buy the necessary equipment or to try out the alternative methods of dealing with this problem. But clearly, these equipment and methods have not been deployed effectively.
Delhi: Would the ban on construction and diesel vehicles work?
Construction has a small contribution to PM2.5 concentration. The particles released from these activities are usually larger, and add to PM10 concentrations. Banning of construction, therefore, is unlikely to have any significant impact on the prevailing situation.
Diesel vehicles, particularly older trucks, are indeed important contributors to high PM2.5 levels. And a ban on their movement can help in improving the situation somewhat.
However trucks, which are the biggest generators of pollutants in the diesel vehicle segment, are not allowed to move inside Delhi during the day in any case. In fact, the movement of trucks only at night results in a significant variation in the PM2.5 levels between day and night times.
UPSC Mains 2015 Question GS Paper – I
Mumbai, Delhi and Kolkata are the three mega cities of the country but the air pollution is much more serious problem in Delhi as compared to the other two. Why is this so?
News 4: Governors and their removal
Background
The DMK’s call for removal comes when Governors in several non-BJP-ruled states, including Kerala and Punjab, have expressed disagreements with the government on various issues.
Governor’s appointment, removal
Under Article 155 and 156 of the Constitution, a Governor is appointed by the President and holds office “during the pleasure of the President”. If this pleasure is withdrawn before completion of the five-year term, the Governor has to step down.
As the President works on the aid and advice of the Prime Minister and the council of ministers, in effect, the Governor can be appointed and removed by the central government.
Thus, a Governor is a representative of the Union government in states. Article 163 of the Constitution says the Governor will normally be aided and advised by the Council of Ministers except in those functions which require his discretion.
While the Governor’s duties and responsibilities lie in a particular state, there is no provision for impeaching the Governor.
Governor-state relations
Although envisaged as an apolitical head who must act on the advice of the council of ministers, the Governor enjoys certain powers granted under the Constitution, such as giving or withholding assent to a Bill passed by the state legislature, assenting to the convening of the state legislative assembly, determining the time needed for a party to prove its majority, and which party must be called first do so, generally after a hung verdict in an election.
All these powers have been flashpoints recently — to cite two instances, when the Maharashtra Governor had Devendra Fadnavis sworn in as the chief minister in 2019 amid a hung verdict, only for his government to fall in 80 hours; and when the Punjab Governor in September refused to allow a special session of the Assembly for a vote of confidence in the AAP government.
What happens in case of disagreements
There are no provisions laid down in the Constitution for the manner in which the Governor and the state must engage publicly when there is a difference of opinion. The management of differences has traditionally been guided by respect for each other’s boundaries.
What courts have said
Since the Governor holds office “on the pleasure of the President”, questions have been raised time and again on whether the Governor has any security of tenure, and if the President is obligated to show reasons for recalling a Governor.
In Surya Narain Choudhary vs Union of India (1981), the Rajasthan High Court held that the pleasure of the President was not justiciable, the Governor had no security of tenure and can be removed at any time by the President withdrawing pleasure.
In BP Singhal vs Union of India (2010), the Supreme Court elaborated on the pleasure doctrine. It upheld that “no limitations or restrictions are placed on the ‘at pleasure’ doctrine”, but that “does not dispense with the need for a cause for withdrawal of the pleasure”.
This ruling had come in response to a PIL filed by BJP leader BP Singhal, who had challenged the removal of the Governors of Uttar Pradesh, Gujarat, Haryana and Goa on May 2, 2004 by the President on the advice of the newly formed UPA government.
In its judgment, the Bench, while noting that the President can remove the Governor from office “at any time without assigning any reason and without giving any opportunity to show cause”, the power to remove can’t be exercised in an “arbitrary, capricious or unreasonable manner”.
The Bench held that the court will presume that the President had “compelling and valid” reasons for the removal but if a sacked Governor comes to the court, the Centre will have to justify its decision.
What various commissions have said
Over the years, several panels and commissions have recommended reforms in how Governors are appointed and how they function, such as the Administrative Reforms Commission of 1968, the Sarkaria Commission of 1988, and the National Commission to Review the Working of the Constitution, headed by retired CJI M N Venkachaliah, in 2001.
The Sarkaria Commission had recommended that Governors are not sacked before completing their five-year tenure, except in “rare and compelling” circumstances. Recommendations have also been made for a provision to impeach the Governor by the Assembly. However, none of these have been implemented.
Other important news
China’s home-grown Beidou satellite system eyes global footprint
China on Friday outlined plans to further expand the global reach of its home-grown Beidou satellite navigation system, billed as its alternative to the U.S.’s Global Positioning System (GPS).
Beijing has, since 2020, also made an outreach to South Asia and is already working, or in discussion with, a number of countries in the region, including Pakistan, Nepal, Bangladesh and Sri Lanka, over adopting the Beidou satellite (BDS) navigation system.
Its application in China, now included use in guiding drones, autonomous cars, in agriculture and forestry, as well as launching with Chinese mobile phone companies, using Chinese chips, satellite-powered messaging for smartphones that provides for connectivity in remote areas even in the absence of ground reception.
SEWA
Elaben Bhatt, a legendary figure in post-Independent India pioneered SEWA (Self Employed Women’s Association) was one of the most innovative and successful experiments in India in the field of social development.
SEWA empowered women in India in the comprehensive sense of the term on a scale never witnessed before.
It simultaneously provided employment to women and promoted cooperative production, consumption and marketing of textiles which constituted the core of India’s industrialisation. It also decisively influenced the course of trade unionism and labour movement in India.
Foreign Exchange Reserve
Foreign Exchange reserves or Forex reserves are assets such as foreign currencies, gold reserves, treasury bills, etc retained by a central bank or other monetary authority that checks the balance payments and influences the foreign exchange rate of its currency and maintains stability in financial markets.
RBI is the custodian of the Foreign exchange reserves in India. In 2020, India’s forex reserves crossed the $500-billion mark for the first time in history due to higher foreign direct investment, foreign institutional investment. Low oil prices also helped reduce outflows. This gave India an adequate cushion to combat external shocks.
The biggest contributor to this reserve is foreign currency assets followed by the gold, SDR, and reserve with the International Monetary Fund.
Purpose of the Foreign Exchange Reserve:
- The most significant objective behind this is to ensure that RBI has backup funds if their national currency rapidly devalues or becomes altogether insolvent.
- If the value of the Rupee decreases due to an increase in demand of the foreign currency then RBI sells the dollar in the Indian money market so that depreciation of the Indian currency can be checked.
- A country with a good stock of forex has a good image at the international level because the trading countries can be sure about their payments.
- A good forex reserve helps in attracting foreign trade and earns a good reputation in trading partners.
Mathura-Vrindavan aims to become a carbon neutral tourist destination by 2041
Mathura-Vrindavan, one of India’s largest pilgrimage centres, aims to become a “net zero carbon emission” tourist destination by 2041, Uttar Pradesh government officials have told The Hindu.
This means that tourist vehicles will be banned from the entire Braj region, which includes famous pilgrim centres such as Vrindavan and Krishna Janmabhoomi. Instead, only electric vehicles used as public transport will be allowed into the area.
All 252 waterbodies and 24 forests in the area will also be revived, officials privy to the U.P. government’s draft redevelopment plan said.
According to the plan, the Braj region’s annual pilgrim-tourist footfall is expected to multiply from the current level of 2.3 crore to six crore by 2041.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.
Globally, around 80% of wastewater flows back into the ecosystem without being treated or reused, according to the United Nations.
This can pose a significant environmental and health threat.
In the absence of cost-effective, sustainable, disruptive water management solutions, about 70% of sewage is discharged untreated into India’s water bodies.
A staggering 21% of diseases are caused by contaminated water in India, according to the World Bank, and one in five children die before their fifth birthday because of poor sanitation and hygiene conditions, according to Startup India.
As we confront these public health challenges emerging out of environmental concerns, expanding the scope of public health/environmental engineering science becomes pivotal.
For India to achieve its sustainable development goals of clean water and sanitation and to address the growing demands for water consumption and preservation of both surface water bodies and groundwater resources, it is essential to find and implement innovative ways of treating wastewater.
It is in this context why the specialised cadre of public health engineers, also known as sanitation engineers or environmental engineers, is best suited to provide the growing urban and rural water supply and to manage solid waste and wastewater.
Traditionally, engineering and public health have been understood as different fields.
Currently in India, civil engineering incorporates a course or two on environmental engineering for students to learn about wastewater management as a part of their pre-service and in-service training.
Most often, civil engineers do not have adequate skills to address public health problems. And public health professionals do not have adequate engineering skills.
India aims to supply 55 litres of water per person per day by 2024 under its Jal Jeevan Mission to install functional household tap connections.
The goal of reaching every rural household with functional tap water can be achieved in a sustainable and resilient manner only if the cadre of public health engineers is expanded and strengthened.
In India, public health engineering is executed by the Public Works Department or by health officials.
This differs from international trends. To manage a wastewater treatment plant in Europe, for example, a candidate must specialise in wastewater engineering.
Furthermore, public health engineering should be developed as an interdisciplinary field. Engineers can significantly contribute to public health in defining what is possible, identifying limitations, and shaping workable solutions with a problem-solving approach.
Similarly, public health professionals can contribute to engineering through well-researched understanding of health issues, measured risks and how course correction can be initiated.
Once both meet, a public health engineer can identify a health risk, work on developing concrete solutions such as new health and safety practices or specialised equipment, in order to correct the safety concern..
There is no doubt that the majority of diseases are water-related, transmitted through consumption of contaminated water, vectors breeding in stagnated water, or lack of adequate quantity of good quality water for proper personal hygiene.
Diseases cannot be contained unless we provide good quality and adequate quantity of water. Most of the world’s diseases can be prevented by considering this.
Training our young minds towards creating sustainable water management systems would be the first step.
Currently, institutions like the Indian Institute of Technology, Madras (IIT-M) are considering initiating public health engineering as a separate discipline.
To leverage this opportunity even further, India needs to scale up in the same direction.
Consider this hypothetical situation: Rajalakshmi, from a remote Karnataka village spots a business opportunity.
She knows that flowers, discarded in the thousands by temples can be handcrafted into incense sticks.
She wants to find a market for the product and hopefully, employ some people to help her. Soon enough though, she discovers that starting a business is a herculean task for a person like her.
There is a laborious process of rules and regulations to go through, bribes to pay on the way and no actual means to transport her product to its market.
After making her first batch of agarbathis and taking it to Bengaluru by bus, she decides the venture is not easy and gives up.
On the flipside of this is a young entrepreneur in Bengaluru. Let’s call him Deepak. He wants to start an internet-based business selling sustainably made agarbathis.
He has no trouble getting investors and to mobilise supply chains. His paperwork is over in a matter of days and his business is set up quickly and ready to grow.
Never mind that the business is built on aggregation of small sellers who will not see half the profit .
Is this scenario really all that hypothetical or emblematic of how we think about entrepreneurship in India?
Between our national obsession with unicorns on one side and glorifying the person running a pakora stall for survival as an example of viable entrepreneurship on the other, is the middle ground in entrepreneurship—a space that should have seen millions of thriving small and medium businesses, but remains so sparsely occupied that you could almost miss it.
If we are to achieve meaningful economic growth in our country, we need to incorporate, in our national conversation on entrepreneurship, ways of addressing the missing middle.
Spread out across India’s small towns and cities, this is a class of entrepreneurs that have been hit by a triple wave over the last five years, buffeted first by the inadvertent fallout of demonetization, being unprepared for GST, and then by the endless pain of the covid-19 pandemic.
As we finally appear to be reaching some level of normality, now is the opportune time to identify the kind of industries that make up this layer, the opportunities they should be afforded, and the best ways to scale up their functioning in the shortest time frame.
But, why pay so much attention to these industries when we should be celebrating, as we do, our booming startup space?
It is indeed true that India has the third largest number of unicorns in the world now, adding 42 in 2021 alone. Braving all the disruptions of the pandemic, it was a year in which Indian startups raised $24.1 billion in equity investments, according to a NASSCOM-Zinnov report last year.
However, this is a story of lopsided growth.
The cities of Bengaluru, Delhi/NCR, and Mumbai together claim three-fourths of these startup deals while emerging hubs like Ahmedabad, Coimbatore, and Jaipur account for the rest.
This leap in the startup space has created 6.6 lakh direct jobs and a few million indirect jobs. Is that good enough for a country that sends 12 million fresh graduates to its workforce every year?
It doesn’t even make a dent on arguably our biggest unemployment in recent history—in April 2020 when the country shutdown to battle covid-19.
Technology-intensive start-ups are constrained in their ability to create jobs—and hybrid work models and artificial intelligence (AI) have further accelerated unemployment.
What we need to focus on, therefore, is the labour-intensive micro, small and medium enterprise (MSME). Here, we begin to get to a definitional notion of what we called the mundane middle and the problems it currently faces.
India has an estimated 63 million enterprises. But, out of 100 companies, 95 are micro enterprises—employing less than five people, four are small to medium and barely one is large.
The questions to ask are: why are Indian MSMEs failing to grow from micro to small and medium and then be spurred on to make the leap into large companies?
At the Global Alliance for Mass Entrepreneurship (GAME), we have advocated for a National Mission for Mass Entrepreneurship, the need for which is more pronounced now than ever before.
Whenever India has worked to achieve a significant economic milestone in a limited span of time, it has worked best in mission mode. Think of the Green Revolution or Operation Flood.
From across various states, there are enough examples of approaches that work to catalyse mass entrepreneurship.
The introduction of entrepreneurship mindset curriculum (EMC) in schools through alliance mode of working by a number of agencies has shown significant improvement in academic and life outcomes.
Through creative teaching methods, students are encouraged to inculcate 21st century skills like creativity, problem solving, critical thinking and leadership which are not only foundational for entrepreneurship but essential to thrive in our complex world.
Udhyam Learning Foundation has been involved with the Government of Delhi since 2018 to help young people across over 1,000 schools to develop an entrepreneurial mindset.
One pilot programme introduced the concept of ‘seed money’ and saw 41 students turn their ideas into profit-making ventures. Other programmes teach qualities like grit and resourcefulness.
If you think these are isolated examples, consider some larger data trends.
The Observer Research Foundation and The World Economic Forum released the Young India and Work: A Survey of Youth Aspirations in 2018.
When asked which type of work arrangement they prefer, 49% of the youth surveyed said they prefer a job in the public sector.
However, 38% selected self-employment as an entrepreneur as their ideal type of job. The spirit of entrepreneurship is latent and waiting to be unleashed.
The same can be said for building networks of successful women entrepreneurs—so crucial when the participation of women in the Indian economy has declined to an abysmal 20%.
The majority of India’s 63 million firms are informal —fewer than 20% are registered for GST.
Research shows that companies that start out as formal enterprises become two-three times more productive than a similar informal business.
So why do firms prefer to be informal? In most cases, it’s because of the sheer cost and difficulty of complying with the different regulations.
We have academia and non-profits working as ecosystem enablers providing insights and evidence-based models for growth. We have large private corporations and philanthropic and funding agencies ready to invest.
It should be in the scope of a National Mass Entrepreneurship Mission to bring all of them together to work in mission mode so that the gap between thought leadership and action can finally be bridged.