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- The Indian economy grew at an impressive rate of 8.2% in the April-June quarter this year, its fastest pace in nine quarters, according to official GDP data released recently.
Back to basics – Understanding the GDP and GNP
- GDP: Gross Domestic Product (GDP) is the total money value of final goods and services produced in the economic territories of a country in a given year.
- GDP stands for total value of goods and services produced inside the territory of India irrespective of whom produced it – whether by Indians or foreigners.
- GNP: Gross National Product (GNP) is the total value of goods and services produced by the people of a country in a given year. It is not territory specific.
- If we consider the GNP of India, it can be seen that GNP is lesser than GDP.
Highlights of the report
- The first quarter growth spurt was propped by strong performance in the manufacturing sector, which grew at 13.5%, thanks to de-stocking by firms in the lead-up to the implementation of the Goods and Services Tax.
- The construction and agriculture sectors showed the growth rates of 8.7% and 5.3% in Q1 of 2018-19.
- While high frequency data points like auto sales and industrial output are in sync with these numbers, it must be remembered that this 8%-plus growth print can be attributed to the resolution of several GST transition problems, budgetary support to the rural economy and, in no small measure, the effect of a lower base last year.
- Earlier in 2015, the Central Statistics Office (CSO) under the Statistics Ministry had changed the base year for tabulating the Gross Domestic Product or size of economy to 2011-12 from 2004-05.
- The falling rupee, oil price trends and the expanding current account deficit are equally worrying, as is the Reserve Bank of India’s expectation of a rise in inflation in the latter half of this year.
- Also, growth in the services sector has decelerated from last year’s levels. The ‘normalcy’ of this monsoon is marred by wide regional variations.
- In such a scenario, the RBI, which has already raised interest rates twice in the last three months, is unlikely to adopt an easy money policy that is congenial to growth.
Back to basics – How to deal with the inflation?
- Monetary policy is policy formulated by monetary authority i.e. central bank which happens to be RBI in case of India
- It deals with monetary i.e money matters i.e. affects money supply in the economy. Example repo rate and reverse repo rate
- Fiscal policy is formulated by finance ministry i.e. government. It deals with fiscal matters i.e. matters related to government revenues and expenditure.
- Revenue matters- tax policies, non tax matters such as divestment, raising of loans, service charge etc
- Expenditure matters– subsidies, salaries, pensions, money spent on creation of capital assets such as roads, bridges etc.
- Monetary policy and fiscal policy together deal with inflation.
- India remains the world’s fastest growing large economy. But it needs to grow even faster to spur job creation.
- The focus must be on sorting out vital economic indicators that are far from perfect.
- Sustaining an 8%-plus growth rate needs more pro-active policy-making and a continuous pursuit of well-crafted reforms.
- By responding strongly to a soaring demand for generic drugs, India’s pharmaceutical producers emerged as world market leaders in this sector and were a major business success story in the 2000s
- In the process, Indian producers made a valuable contribution to reducing costs and to expanding access to life-saving treatments for patients, both in emerging markets and in developed countries
Current trends in the pharma sector
- Globally and especially in developed countries there are waves of consolidation among pharma retailers
- There is stiffer competition from Chinese pharma manufacturers
- Along with these, an uptick in generic drug applications have combined to put downward pressure on drug prices
Emerging prospects in the pharma sector
- There is a new push to produce more so-called complex generics
- These are hybrid medicines that often contain complex active pharmaceutical ingredients (the part of the drug that produces its effects) or formulations, or routes of delivery
- Indian firms have succeeded in capturing 19% of the global market in complex generics thus far
- Pharma companies would be well-advised to pursue is to expand their footprint in the biosimilars market
- Biosimilars are the generic versions of biologics medicines made from animal or plant proteins as opposed to chemicals
- Biologics are important market disrupters because they are transforming how we treat diseases, including certain types of cancer, rheumatoid arthritis, and multiple sclerosis
- Biologics are notable for targeting the underlying causes of diseases as opposed to just the symptoms, with fewer side effects
Need for biosimilars
- The growth in the biosimilars market is welcome from a human development standpoint because they are more affordable than biologics, the high cost of which often puts them out of reach of many patients
- Promoting the production of complex generics and biosimilars can have a positive development impact given how targeted they are toward treating non-communicable diseases such as cancer, asthma, and arthritis
- An alarming spike is being seen across developing countries in the prevalence of non-communicable diseases
- For example, diabetes is fast becoming an epidemic in developing countries, with rates rapidly catching up with those of the developed world
- It is increasingly clear that the segment of the pharmaceutical market where the demand will grow the fastest in the coming years is products that treat non-communicable diseases
- The government should, therefore, strive to promote strong, indigenous producers of complex generics and biosimilars as this has enormous potential to improve public health in emerging markets
- The Centre’s announcement fixing MSPs at 50 per cent above costs (A2+FL) is viewed as a game-changer in wooing back the farming community
- Several states have buffered the MSP increases with bonuses
- Madhya Pradesh went a step ahead in the last Kharif when it tried price deficiency payments (Bhavantar Bhugtan Yojana), where it compensated farmers of selected crops for the difference between the realised price and MSP
- The scheme fizzled out because traders colluded, farmers suffered plummeting prices and despite concerted efforts, the state government could not compensate beyond one-fourth of the total production
Maharashtra’s decision to make MSP compulsory
- In a controversial move, the Government of Maharashtra (GoM) has made buying at MSP mandatory in the state for traders
- In case the order is not observed, the licence of the trader will be cancelled, a fine of Rs 50,000 imposed and he must serve a jail term of one year
What can be implications of this decision?
- In the first scenario, let us assume that traders fall in line and buy everything at MSP or above
- What if supply exceeds demand for some Kharif products, which is likely to be the case for most pulses, oilseeds and coarse cereals?
- Market prices will tend to fall, possibly below MSPs
- If the high MSPs are translated into higher retail prices by not allowing any inward flow from neighbouring states, this would amount to creating a republic of its own with elevated price structures
- In that case, the GoM may face the wrath of consumers who would be paying much higher prices than consumers in neighbouring states
- In scenario two, a private trader buys at MSP, unloads the produce at prevailing market prices that are below MSPs and incurs heavy losses
- No rational businessman would do that unless the government promises to compensate losses, akin to the BBY of Madhya Pradesh
- In the third scenario, Maharashtra’s neighbouring states like Karnataka, Madhya Pradesh and Gujarat are selling the same crops at prices below MSP
- Maharashtra’s traders may move to the adjoining states and buy at market prices
- In that case, the GoM becomes the buyer-of-last-resort, resulting in a de facto takeover of the wholesale trade
What is actually required?
- The best way to deliver a better deal to farmers is to “get the markets right”
- Treat farmers as businessmen and facilitate a conducive environment for them to flourish
- Reform archaic laws like the Essential Commodities Act (ECA) 1955 and APMC Act
- Invite the private sector to build storage, assaying, grading, packing facilities at the back-end with farmer-producer-organisations (FPOs)
- Create competition for APMCs by facilitating private mandis
- Freeze the commission of the commission agents. As for the market fee, possibly cap it at 2 per cent of the value of agri-produce being transacted for all commodities across the country
- Big agri-processors and organised retailers, including e-commerce players, should be invited to buy directly from FPOs without paying any market fee
- The Negotiable warehouse receipt system (NWRS) needs to be stepped up, as does futures’ trading
- Export bans need to be banned and Minimum Export Price used judiciously
- A better approach to help farmers will be to move through an income policy, a la the Telangana model, which will have the least distortions
- It can subsume the input subsidies, setting input prices to be freely determined by the markets
2+2 dialogue between India and the USA is scheduled to be held on the 6th of September.
What is 2+2 Dialogue?
It is a dialogue mechanism that would include defence and foreign ministers of the two countries. It is similar to India-Japan 2+2 dialogue format between foreign and defence secretaries and ministers of the two countries. It replaces earlier India -Japan 2+2 dialogue format between foreign and defence secretaries and ministers of the two countries. It replaces earlier India-US Strategic and Commercial Dialogue.
Significance of “2+2” Dialogue
- The objective of this dialogue mechanism is to raise defence and security issues to the forefront and centre of the relationship between India and the U.S.
- It is aimed at enhancing peace and stability across the Indo-Pacific region by elevating strategic consultations in the dialogue.
- The shared priorities include job creation, improving the business and investment climate and sustaining a rules-based global order.
- The U.S. has strategic consultations in this format with key partners and allies including Australia, Japan and the Philippines.
What is in store?
- At the 2+2 dialogue an announcement could be made about an in-principle agreement between the two sides on the Communications Compatibility and Security Agreement (COMCASA).
- Another major announcement likely to be made is for cross posting of officials at the US Defence Innovation Unit Experimental (DIUx) and India’s recently created Innovations for Defence Excellence (iDEX) to work on joint development projects. The proposal for this was made by the US and intends to take forward the co-development and co-production efforts under the Defence Technology and Trade Initiative (DTTI).
- Other announcements expected from the dialogue include likely US sale of MH-60 Romeo maritime helicopters and armed drones through the Foreign Military Sales programme. The US has already cleared the legislative hurdles to sell armed drones to India.
- A joint tri-service amphibious Humanitarian and Disaster Relief (HADR) exercise which has been in the works is also expected to be announced.
- The issue of India’s defence cooperation with Russia and the looming sanctions under CAATSA will be a major issue for discussion, as India has already stated that it would go ahead with the purchase of the S-400 long range air defence system from Russia.
Several other decisions which have been finalized are:
- A tri-service Armed Forces exercise in Vishakhapatnam with both countries participating. India has done only one exercise so far and that too with Russia. This is being seen as a major step.
- An Indian Armed Forces officer will be part of the Combined Maritime Forces, involving 33 countries in Oman.
- There will be maritime domain awareness— an agreement on “white shipping.”
- There will be close cooperation on humanitarian assistance and disaster relief.
- India also looked at the Industrial Security Agreement and the BECA— the Basic Exchange and Cooperation Agreement— and returned them to the USA for further discussion. Top officials said discussions on the issues are still going on.
What is COMCASA?
- Communications Compatibility and Security Agreement (COMCASA) will allow India to obtain secure and encrypted defence technologies, including weapons systems from the United States.
- The COMCASA will facilitate exchange of secure communications between the two militaries and allow the sale of encrypted communication systems to India.
- For a long time there have been concerns that this would allow US to listen into Indian secure communication channels. But these have been gradually overcome and India agreed to move forward with the agreement.
- COMCASA “will override objections by the Indian military which fears that it will enable seamless penetration horizontally and vertically of the official Indian communications grid, including the most sensitive strategic communications network” writes strategic analyst Bharat Karnad in his latest book Staggering Forward.
A year since nearly a million Rohingya refugees poured into Bangladesh, the situation is yet to stabilize, and the impending cyclone season could spell disaster for the humanitarian effort, a senior United Nations official based in Cox’s Bazaar has warned.
- There seems to be a humanitarian crisis in the Rohingya camps, the impending cyclone season could result in serious problems for the humanitarian efforts.
- The senior humanitarian coordinator for the Rohingya Refugee Response, made an appeal for more international funding. It was stated that this year’s UN joint response plan (JRP) has received only 34% of the funds needed, in contrast to about 85% last year.
What is the Rohingya Refugee Crisis?
The Rohingya refugee crisis refers to the mass migration of Rohingyas (Rohingya Muslim people) from Myanmar (Burma) to Bangladesh, Malaysia, Thailand and Indonesia.
Who are Rohingyas?
- Rohingyas are indigenous to Rakhine state (also known as Arakan) in Myanmar settled since the 15th
- Collectively they fall under the Muslim Indo-Aryans, a mixture of pre-colonial and colonial immigrations.
- However, according to Myanmar government, they are illegal immigrants migrated to Rakhine following Burmese independence and Bangladesh liberation war.
- They are victims of an organized genocide and are one of the world’s most persecuted minorities.
- The population of Rohingyas was around 1.1 to 1.3 million before the 2015 crisis.
- The crisis received international attention followed to Rakhine state riot in 2012, Rohingya crisis in 2015 and 2016-17 military crackdown.
- At present 40000 Rohingyas have their second home in India.
The legal status of Rohingyas:
- The Myanmar government never allowed a citizenship status to Rohingyas. Hence the majority of them do not have any legal documentations, making them stateless.
- Until recently, they have been able to register as temporary residents with identification cards known as white cards which began issuing in the 1990s.
- These cards gave some basic rights to Rohingyas such as the right to vote. But they were never recognized as a proof of citizenship.
- These cards get cancelled in 2015 which effectively put an end to their right to vote.
- In 2014, UN held a census, which was the first in Myanmar in 30 years. Initially, the Muslim minority were allowed to register as Rohingya. But after Buddhist threatened to boycott the census, the government issued a statement that Rohingyas can register only if they are identified as Bengalis.
- India has been receiving Rohingya refugees and allowing them to settle in the different parts of the country over the years, especially after the communal violence in the state of Rakhine in 2012.
- However, India considers the refugee crisis as an internal affair of Myanmar.
- Indian believes that ASEAN has an undeniable responsibility to resolve this crisis.
- India does not want a conflict of interests with the new regime in Myanmar-Myanmar has a key role in India’s Look East Policy.
- Since India is not a signatory to the United Nations Convention on Refugees, refugee status granted by the United Nations High Commissioner for Refugees (UNHCR) to the Rohingya was irrelevant to their deportation.
- According to the Government of India, there are no refugee camps established for either Bangladeshis or Rohingyas in India and there were only schemes of assistance for Tibetan and Sri Lankan refugees.
- The Principal Bench of the National Green Tribunal (NGT) panel, which permitted the Ministry of Environment Forest and Climate Change (MoEF and CC) to re-publish the draft notification on Eco-Sensitive Zones, which expired on August 26, ordered that the matter may be finalised within six months. It also ordered that the draft of the republished notification be placed on the record of the tribunal.
- The Bench issued the order based on a petition filed by the Goa Foundation
- The Principal Bench of theNGT, which noted that the ecology of the Western Ghats region was under serious stress, has highlighted the fact that Western Ghats region is one of the richest biodiversity areas which needed to be conserved.
- In the year 2010, Western Ghats Ecology Expert Panel (WGEEP) was constituted by the Central Government, under the chairmanship of Madhav Gadgil.
- WGEEP issued recommendations for the preservation of the fragile western peninsular region.
Highlights of Gadgil Report
- Recommended that the entire stretch of the Western Ghats should be declared as Ecologically Sensitive Area (ESA).
- It recommended the division of region into three zones – ESZ1, ESZ2, ESZ3 and gave a broad outline of certain restrictions for each zone.
- The committee recommended the division of region into zones at the block/taluk level.
- It recommended that no new polluting industries (red and orange) were to be permitted in ESZ1 and ESZ2 and gradual phasing out of such existing industries by 2016. Complete ban on mining in ESZ1 and regulation of mining in ESZ-2.
- It was recommended that bottom to top approach be followed for conservation of Western Ghats.
- Western Ghats Ecological Authority was proposed to be set up as a statutory body and given powers under the Environment protection Act 1986.
- There were many criticisms of the Gadgil Committee Report. Some among them were that
- The report was not prepared keeping in mind the ground realities. If the report is implemented, the development and the energy requirements in the states coming within the boundary of Western Ghats would be adversely affected.
- There is no need to set up a new body while there are many such bodies for the protection of environment.
- Madhav Gadgil has said the recent havoc in Kerala is a consequence of short-sighted policymaking, and warned that Goa may also be in the line of nature’s fury.
Following severe resistance to the implementation of Gadgil Committee report, Kasturirangan Panel was set up in 2012 to advise the government on Gadgil Committee Report.
Highlights of Kasturirangan Report:
- Divide the Western Ghats into Natural Landscape and Cultural Landscape
- Of the natural landscape, it picked out 37% as “bioplogically rich” and with “some measure of contiguity”. Any restrictions were placed in this area.
- It proposed the demarcation of ESZ be done at the village level.
- Only red category (heavy polluting) industries were restricted.
- Hydro power project would be given the green signal on a case to case basis, post assessment of its benefits and the possible damage it could cause.
Gadgil report laid too much importance to the environment, Kasturirangan report was biased towards development. Kasturi Rangan report was criticized by many as that it provided loopholes for mining, which if allowed would turn detrimental to the environment, in long-term will affect development too. Kasturirangan report got the tag as anti-environmental soon after its release. But this report was tagged anti-development too by many who fear that their livelihood and interests will be affected.
- The WGEEP had earlier proposed “much larger areas for being included in the eco-sensitive zone” though the Kasturirangan-led High-Level Working Group, also appointed by the MoEF and CC to look into the WGEEP report, had reduced it.
- The Ministry had accepted the Kasthurirangan report and issued the draft notifications on ecologically sensitive zones.
- Now, the six Western Ghats States, Kerala, Tamil Nadu, Karnataka, Goa, Maharashtra and Gujarat have been restrained by the NGT from giving environmental clearance to activities that may adversely impact the eco-sensitive areas of the mountain ranges.
- The panel directed that the extent of Eco-Sensitive Zones of Western Ghats, which was notified by the Central government earlier, should not be reduced, in view of the recent floods in Kerala.
- The Madhav Gadgil-led Western Ghats Ecology Expert Panel (WGEEP) report had created a political furore in the State with most of the political parties and a section of the church opposing it.
- The Tribunal Bench, in its order, noted that any alteration in the draft notification of zones may seriously affect the environment.
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