GS-3, Uncategorized

Skill India Mission

According to government estimates, more than 1.04 Crore youth have been trained under the Skill India Mission in the year 2015-16 which is 36.8% higher than the previous year’s recorded data.

Key facts:

  • In the current arrangement, 60% of the trainings are directly under Ministry of Skill Development and Entrepreneurship while 40% are across other Central Ministries.
  • Pradhan Mantri Kaushal Vikas Yojana (PMKVY), which was launched on July 15, 2015, alone has witnessed more than 20 lakh people, of which 40% are women candidates, being trained in their choice of skills.

About the National Skill Development Mission:

  • The National Skill Development Mission aims to provide a strong institutional framework at the Centre and States for implementation of skilling activities in the country.
  • The Mission will have a three-tiered, high powered decision making structure. At its apex, the Mission’s Governing Council, chaired by the Prime Minister, will provide overall guidance and policy direction.
  • The Steering Committee, chaired by Minister in Charge of Skill Development, will review the Mission’s activities in line with the direction set by the Governing Council. The Mission Directorate, with Secretary, Skill Development as Mission Director, will ensure implementation, coordination and convergence of skilling activities across Central Ministries/Departments and State Governments.
  • The Mission will also run select sub-missions in high priority areas.
  • The National Skill Development Agency (NSDA), the National Skill Development Corporation (NSDC) and the Directorate of Training will function under the overall guidance of the Mission.
  • The Ministry of Skill Development and Entrepreneurship (MSDE) provides a natural home for the Mission, organically linking all three decisions making levels and facilitating linkages to all Central Ministries/Departments and State Governments.
Editorials, GS-3, Uncategorized

The MGNREGA index

The Hindu

The Mahatma Gandhi National Rural Employment Guarantee Act of 2005 (MGNREGA) aims at:

  • Enhancing the livelihood security of people in rural areas by guaranteeing 100 days of wage-employment in a financial year to a rural household whose adult members volunteer to do unskilled manual work.
  • In the financial year 2015-16, Rs.42,084 crore was spent on MGNREGA.

 

Assessment of the implementation of the Act by the States between 2015 and 2016.

Performance indicators:

  • There are three performance indicators to rank the States:
    • Average days of employment per household
    • Percentage wages paid within the promised 15 days of enlisting to work
    • The work completion rate
  • Each indicator measures the implementation of MGNREGA in the State on an important output.
  • Collectively the three indicators capture the key aspects of MGNREGA implementation, namely, employment generation, wages paid in time, and assets created as promised.
  • MGNREGA guarantees 100 days of employment, the national average has always been below 50 days.
  • Comparing this value across States, Tripura was able to provide 95 days of employment on average.
  • Manipur and Goa were at the lower end, providing 16 and 18 days of employment, respectively.
  • MGNREGA requires that wages be paid within 15 days of closing the muster roll.
  • Last financial year, only 40 per cent of the wages were paid within the stipulated time of 15 days.
  • Manipur stood out in this case with 82 per cent of wages being paid within 15 days while
  • Meghalaya was only able to pay wages for 4 per cent of the people on time.
  • Work completion rate refers to the number of works completed compared to works started, in percentage terms.
  • Mizoram performed best in this case with a 92 per cent work completion rate.
  • Tripura, Haryana, Madhya Pradesh, Himachal Pradesh also had work completion rates of above 80 per cent.
  • Arunachal Pradesh was at the bottom at just 20 per cent work completion rate.

 

Performance score

  • The absolute values of each performance metric are scaled to a value between 0 and 10 by dividing with the highest value across States and multiplying it by 10.
  • The scores across all performance indicators to come up with the score out of 30.

 

Findings

  • It is interesting that two north-eastern States are at either extreme of the ranking:
  • Tripura on top with a score of 26.8 and Arunachal Pradesh at the bottom with a score of 7.1.
  • Mizoram was a close second with a score of 26.3. Chhattisgarh, Goa, Meghalaya and Punjab all ranked second from the bottom with a score of 12.7. Andhra Pradesh and Jharkhand were two major States with a high ranking.
  • West Bengal, Bihar and Uttar Pradesh were major States with a low score of 14.

 

This ranking intends to give an overview to the policymakers of what works in each State and what doesn’t.

  • The reasons could vary across and within States.
  • Analysing the State-wise data, it was seen that Tripura was able to generate about 95 days of employment per household.
  • The reasons for the high employment days in Tripura need to be studied, so that they can be replicated in other similar States.
  • Similarly, a big State such as Andhra Pradesh was able to pay 80 per cent of the wages within the promised 15 days of enlisting to work, and Madhya Pradesh was able to achieve 82 per cent work completion rate.
  • The best practices in each of these high-performing States should be documented and shared with the other States, so that the performance of each State can go up.
  • For example, Andhra Pradesh is known for widespread computerisation of the processes which reduces corruption and ensures timely transfer of funds.

 

Conclusion:

  • The Centre seems committed to MGNREGA. About 2 per cent of the Union Budget or 0.3 per cent of the GDP is allocated to the scheme.
  • Ensuring that this amount reaches the people who opt to work, while creating durable rural assets, is important.
  • This mega scheme needs local fixes and innovations to become more efficient and effective.
  • This points out the aspects of implementation lacking in various States and gives an idea about where to look to make implementation successful.
  • The ranking also recognises States that are performing well, and can be used to allocate funds and resources in a targeted manner.
Editorials, GS-3, Indian Economy, Uncategorized

Measuring Mudra’s success

Article Link

Summary:

Prime Minister Modi, in a recent interview, indicated that his focus was to create a third sector—the personal sector—other than farms and factories wherein a person turns into a job provider through entrepreneurship rather than a job-seeker in the other two sectors. This statement assumes significance as it has many policy implications for the next few years.

  • The government has already been active in translating this vision into reality. The Pradhan Mantri Mudra Yojana (PMMY) is one of the cornerstones of this policy.
  • According to estimates, the total amount of loans disbursed under the PMMY programme crossed Rs.1.25 trillion as of March 2016.

About the Pradhan Mantri MUDRA Yojana (PMMY) scheme:

The PMMY Scheme was launched in April, 2015. The scheme’s objective is to refinance collateral-free loans given by the lenders to small borrowers.

  • The scheme, which has a corpus of Rs 20,000 crore, can lend betweenRs 50,000 and Rs 10 lakh to small entrepreneurs.
  • Banks and MFIs can draw refinance under the MUDRA Scheme after becoming member-lending institutions of MUDRA.

Significance of this scheme:

  • It will greatly increase the confidence of young, educated or skilled workers who would now be able to aspire to become first generation entrepreneurs.
  • Existing small businesses, too, will be able to expand their activities.
  • Under the scheme, by floating MUDRA bank, the Centre has ensured credit flow to SMEs sector and has also identified NBFCs as a good fit to reach out to them.
  • People will now be able to get refinance at subsidised rate and it would be passed on to the SMEs. Moreover, it would enable SMEs to expand their activities.

There are three types of loans under PMMY:

  1. Shishu (up to Rs.50,000).
  2. Kishore (from Rs.50,001 to Rs.5 lakh).
  3. Tarun (from Rs.500,001 to Rs.10,00,000).

MUDRA Yojana has to address the following challenges:

  • One of the most persistent problems that Indian economy is facing is the inequitable distribution of funds. The larger portion of the capital is available to the bigger companies whereas too little of the capital is distributed to micro, small and medium business sector.
  • At present the non-profit micro financing institutes (MFI’s) are not able to provide enough support to small businesses. The commercial banks are also hesitant to provide funds to small and medium entrepreneurs. They avoid exposure to this particular segment because they consider it highly risky in nature with no performance history.
  • Even within the organized sector in India, it is the larger units that are deploying the most capital, providing the most jobs, wages and emoluments and generating the most output. Also, only 2% of the factories covered by the ASI generate net value-added (NVA) of over Rs.50 crore. They employ a quarter of the total employed in factories, provide 40% of all emoluments; generate half the total output from factories and 71% of NVA. Small businesses hardly come into picture.
  • Another problem is that as firms age in India they fail to employ more people. Even as firms become more than three decades old, they do not employ more people. If anything, employment size, relative to the size of employment at the birth of the firm, goes down.

Way ahead:

The government should measure the success or failure of its interventions including Mudra Yojana by the extent of reduction in informal employment, the rise in formal employment and the extent of mobility of firms to medium and large sizes. Objective criteria will help in making these decisions in an apolitical fashion. For that, one of the conditions of the loans must be that entrepreneurs start to maintain books of accounts on employment, output, revenues, expenses and taxes. Government should also bring in policy measures to create incentives for firms in India to increase their size. The aim of policy must be to make them grow out of their sizes at birth.

Conclusion:

Under this scheme, Rs.1.25 trillion disbursements have been done in the space of less than a year. If such rates of growth were maintained, they would constitute a sizeable chunk of total non-farm credit in the economy. Therefore, given its importance to the future evolution of the economy, it is useful to have as precise an idea as possible, ex-ante, of the economic and social outcomes that the government is seeking with such generous credit support.

GS-3, Indian Economy, Uncategorized

Jobs & Economic Growth

Asia-Pacific Human Development Report just released by UNDP says that by 2050 more than 280 million people will enter the jobs market in India, a 33 per cent increase from current levels—but let us have a look at the numbers:

  • 5 million New non-agricultural jobs were created annually between 1999-2000 and 2004-2005
  • An additional 7.5 million new industrial and service sector jobs were created annually between 2004-2005 and 2011-2012.
  • But only about 7 million have been added to the labour force annually since 2005—
    • Declining population growth rate
    • Rising educational levels

 

CARE Report: Points out that despite the economy growing at a good pace, employment seems to have grown meagrely, at 4.1 per cent and 0.3 per cent respectively in FY14 and FY15

Underemployment— Only 60.5 per cent of persons aged 15 and above who were available for work for all the 12 months were able to get work during that year (that is, earning below acceptable or sustainable levels)

Open Unemployment Rate: Looms larger over the 7 million young people who are joining the labour force (10 times higher than that for those 30 years and above)

Unemployment for (in 2013)

  • 15- to 17-year-olds is 10.2 per cent
  • For 18- to 29-year-olds is 9.4 per cent
  • Over- 30-year-olds is 0.8 per cent

Core physical sectors such as manufacturing, mining, construction and non-financial services had negative employment growth ranging from minus 3.8 per cent to minus 17.4 per cent in FY15

 

Creation of Jobs:

  • Growth in industrial and service sector jobs is of utmost importance for the demographic dividend to exist positively & profitably
  • Inter-related:
    • As jobs grow, incomes rise and so do savings.
    • Based on higher savings, the investment rate to GDP grows, resulting in faster GDP growth
  • Creation of new non-agricultural jobs: Job growth leads to an increase in consumer demand which has the effect of sustaining GDP growth and reducing volatility in the output growth rate.

 

Increase in infrastructure investment

  • Became the most important sources of increased consumer demand
  • 11th Five Year Plan: Infrastructure investment in the public and private sector together grew by $475 billion—
    • Employment in construction jumped from 26 to 51 million in 2011-12
    • Real wages increased
    • A consumer demand booming in both rural and urban areas
    • The combined demand and supply effects of investment plus job growth resulted in sustained economic growth at a rate unprecedented in India’s economic history

Present: 1.35 lakh jobs were created in 2015 (lowest figure since 2008)

Slow pace of job growth

  1. While the share of organised sector jobs is increasing, most of the job increases are still taking place in the unorganised segment of industry and services, and in informal jobs
  1. While construction had been booming from 2000 to 2012, its growth dipped since 2012, and has begun to revive only since late 2015 as infrastructure investment revived. Since 2004-2005, for the first time in Indian history, 5 million agricultural workers have been leaving agriculture per annum, being mostly absorbed in low-skilled construction employment. With infrastructure investment tapering off during the fiscal years 2012-2013, 2013-2014 and 2014-2015, construction employment growth is likely to have fallen sharply, compounding the already greater rural distress caused by drought in 2014 and 2015.
  1. Education enrolment levels of youth joining the labour force have been increasing every year since 2010 or so. As a result, secondary gross enrolment ratio has increased from 62 to 79 per cent between 2010 and 2014. The educated youth are unlikely to join agriculture and will look for non-agricultural jobs in urban areas. The revolution in rising expectations is already causing social movements (the Patel and Jat agitations in Gujarat and Haryana, for instance).

Refer: http://iasbaba.com/2016/02/iasbabas-daily-current-affairs-23rd-february-2016/

http://iasbaba.com/wp-content/uploads/2016/02/Jat-Reservation-IASbaba.jpg

 

Schemes—

Ministry of Labour is finalising the scheme to offer to pay 8.33 per cent of the salary as contribution for a pension scheme for new employees getting formal sector jobs. The scheme will be applicable to those with salary up to Rs.15,000 per month

Ministry of Commerce is customising incentives for labour-intensive export sectors

  • Has already initiated an Interest Equalisation Scheme and the Merchandise Exports from India Scheme to support declining exports, given that exports have been declining for 15 months
  • In the Budget, the government also announced that 100 per cent FDI in food retail will be permitted on the condition that the goods have to be manufactured in India

Stand-Up India scheme

  • Scheduled Castes, Scheduled Tribes and women entrepreneurs will get support such as free pre-loan training and facilitating loan and marketing.
  • There will be a Rs.10,000 crore refinance window to the Small Industries Development Bank of India (SIDBI)
  • The National Credit Guarantee Trustee Company will create a corpus of Rs.5,000 crore.
  • SIDBI will engage with the Dalit Indian Chamber of Commerce and Industry and other institutions to take the scheme forward.

Way Forward:

  • Single-minded focus: Make livelihood creation central to development strategies— the leadership must bring rozgaar and employment to centre-stage in all their plans, achievements and articulations
  • Organised manufacturing is no longer the answer to generate large-scale employment:
    • Limited opportunities due to increased mechanisation and productivity
    • Specialised skills needed for select process areas
  • Encouraging people’s entrepreneurial instincts— Once the concept of ‘Start-up’ is more comprehensive, delivery of results under the Startup India or Stand-up India missions — will generate sustainable outcomes
  • Data consciousness needs to arise as close to 90 per cent of youngsters completing engineering or management studies are actually unemployable.
    • Lack of a comprehensive and practical education leading to a gap in ‘right-skilling’ vis-à-vis the true needs of the economy
    • Requirement of a separate ‘Ministry of manpower’- where training and end-user needs for human resources are truly convergent
  • Agro Subsidy-nama Need to appreciate and encourage double incomes based on output and intellect, and not through subsidies
    • Government may be able to leverage returns through its own spending on creating agri-related infrastructure
    • Distribution and logistics-based infrastructure initiatives—be given a financial boost
    • Aggregation of land parcels through pragmatic policy
  • Profitable Staple crops: Requires improved quality of seeds and better irrigation (will boost up outputs & farm incomes)
  • Massive expansion in fruit and vegetable output & a vibrant food processing industry will help in balancing out seasonal spikes and improve the longevity of produce while reducing its national waste
  • Industrial policy- Ease of doing business improvement and infrastructure investment increases should improve the economic environment— International evidence is that when consumer demand grows consistently, whether from domestic or international markets, that is when jobs grow

Connecting the Dots:

  • Does there exist potential for the government schemes to create the required number of jobs? Critically examine.
  • Discuss the idea of providing incentives to employers for creating jobs.

 

Refer: http://iasbaba.com/wp-content/uploads/2016/04/Unemployment-Stagnant-Economy-IASBaba.jpg

GS-3, Indian Economy, Uncategorized

A job for every Indian

Context

The Labour Bureau has compiled statistics for job creation in labour-intensive sectors in the country each quarter since the 2008 global financial crisis.

Key points

  • The latest figures show that 1.35 lakh jobs were created in 2015, the lowest figure by far of any year since then — lower than the 4.9 lakh new jobs in 2014 and 12.5 lakh in 2009.
  • In fact, the last quarter of 2015 recorded job losses.
  • Private surveys suggest that the services sector will hire more than manufacturing this year, but there is little to suggest that this will be sharp enough to gainfully employ the one crore Indians who enter the workforce annually.

Challenges Ahead

Annual economic growth has dipped somewhat since 2009-10, but the challenge for the country remains as stark: how to better its job creation for every percentage point of GDP growth, a ratio on which it significantly lags behind most other emerging economies.

Are we ready?

  • According to a Government report.,175 million new jobs could be created by 2032 if the economy grows by 10 per cent annually; the figure is 115 million if it grows by 7 per cent.
  • To create jobs on such a scale, it proposes tax incentives and interest subsidies for firms creating jobs and some blue-sky interventions to invigorate sectors.
  • For instance, negotiate free trade pacts with major markets such as the European Union and the U.S. to boost textiles, improve regional air connectivity for tourism, and so on.

What we really need?
We need a holistic action plan that covers every base — one that includes

  • A skilling and re-skilling programme to increase employability and productivity
  • Incentives for smaller enterprises that absorb a greater number of workers
  • And the embedding of job generation in the massive infrastructure upgrade that India requires.

Jobs must be the pivot for social and economic policy.

GS-3, Indian Economy, Uncategorized

Pradhan Mantri Mudra Yojana: Funding the unfunded

mudra-bank-fact-file

Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of Government of India to enable a small enterprise come into the formal financial system and get affordable credit to run his/ her business.

  • Who? Any Indian Citizen who has a business plan for a non-farm sector income generating activity
  • Credit need? Less than Rs 10 lakh
  • Possible Creditors? Banks, MFI, or NBFC

Types of Loans provided

Under the aegis of Pradhan Mantri MUDRA Yojana, MUDRA has already created the following products / schemes.

  • Shishu : covering loans upto 50,000/-
  • Kishor : covering loans above 50,000/- and upto 5 lakh
  • Tarun : covering loans above 5 lakh and upto 10 lakh

Note that there is no subsidy for the loan given under PMMY. However, if the loan proposal is linked some Government scheme, wherein the Government is providing capital subsidy, it will be eligible under PMMY also.


 

What is MUDRA Bank and what is its role in the MUDRA Yojna?

  • MUDRA Bank = Micro Units Development and Refinance Agency Bank
  • The Rs 20,000 crore MUDRA Bank aims to provide refinancing to small and medium enterprises, particularly those from SC & ST
  • The idea is to refinance micro-finance institutions through Pradhan Mantri Mudra Yojana
  • This bank would be responsible for regulating and refinancing all MFIs which are in the business of lending to MSME

Are there any concerns regarding the structure or establishment of MUDRA bank?

  • The bank will be financially challenged since inception, if it is funded through non-budgetary support
  • The funds for the bank would be sourced from shortfall in the achievements of the priority sector lending (PSL) targets
  • Currently, the shortfall in the PSL targets of the domestic scheduled commercial banks are deposited in Rural Infrastructure Development Fund (RIDF) and for foreign banks in Small Enterprises Development Fund
  • The fact of the matter is that banks have been surpassing the targets in all years, since 2002, except for the last three years
  • The shortfall lies only in agricultural loans, but it would be unfair to divert the target for agriculture from RIDF to micro units

What are some of the positive points which go in favour of such a scheme?

  • Informal sector accounts for 90% of our non-agricultural workforce, 50% of the GDP & 40% of the non-farm GDP
  • Analysts point that the Indian GDP can be raised by almost 15% if the informal sector data is incorporated in the GDP series
  • The MUDRA bank aims to boost loans and cut borrowing costs for the cash-starved domestic small businesses

But has a direct intervention from government (to facilitate loans) worked in past?

What are some of the prominent concerns in this area?

  • There is always a case for direct government intervention to solve any one of our many chronic problems, to justify the need for MUDRA bank
  • The govt. is trying to ensure equity through determined government action that previously drove the govt. to nationalise banks and bring priority sector lending
  • However, such ‘directed credit’ has not worked successfully in the past
  • The govt. control over banks had led to large-scale corruption and repeated recapitalisation through taxpayers’ money
  • MUDRA bank has been over-burdened with many conflicting objectives and too-many roles, viz. a lender, consultant, regulator, think tank and an agent of social change
GS-2, Social Empowerment, Uncategorized

Deen Dayal Upadhyaya Antyodaya Yojana

Uplifting the poor through through skill development


 

It is a scheme for upliftment of urban and rural poor through enhancement of livelihood opportunities through skill development and other means

Why the scheme?

  • To provide Skill training to the poor in cities and villages. This would make them eligible for employment and will help in poverty alleviation
  • By 2020, developed nations will have shortage of ~57 million workers & foreign companies will have to outsource work elsewhere
  • Companies require cheap but skilled labour force (India will have ~47 million new workers by 2020)
  • Every year, 12 million Indians join workforce but out of them only 10% are skilled compared to 70% in and 50% in China
  • Therefore, success of Make in India, will depend on success of this scheme
  • Also, under the current urban poverty alleviation programmes, only 790 cities and towns are covered
  • The government has decided to extend these measures to all the 4,041 statutory cities and towns, there by covering almost the entire urban population

Rural component

Official name: Deen Dayal Upadhyaya Grameen Kaushalya Yojana

Under: Ministry of Rural Development

Earlier schemes:

  • Swarnajayanti Gram Swarojgar Yojana (SGSY) was renamed as National Rural Livelihood Mission (NRLM) which was in turn converted to Aajivika
  • Aajivika has a sub-component of skill development which is now named as Deen Dayal Upadhyaya Grameen Kaushalya Yojana

Eligibility: 15 years and above (in Aajivika, it was 18)

Target: Train 10 Lakh rural youth by 2017

Others:

  • Government will setup training centres in rural areas
  • Training syllabus will be designed on international standards, so that rural youth can work in the foreign companies coming to India under Make in India
  • Special attention to physically disabled persons

Urban component

Official name: Deen Dayal Upadhyay Antyodaya Yojana (DAY)

Under: Ministry of Housing & Urban Poverty Alleviation (HUPA)

Eligibility: Urban poor

Target: Train 5 Lakh people every year

6 Components:

  1. Setup City Livelihood Centres with Rs. 10 lakh grant
  2. Give training to each urban poor via these centres. Government will spent Rs.15k-18k on training each of them
  3. Form Urban Self Help Groups (SHG) and give Bank linkage and Rs.10,000 to each group
  4. Setup Vendor markets and give skill training to vendors as well
  5. Construction of permanent shelters for urban homeless & other essential services
  6. Help the poor to setup enterprises & give them loan at 7% interest rate

Tie up with NSDC

  • MoHUPA signed an MoU with National Skill Development Corporation (NSDC)
  • NSDC will give training to poor, according to market needs, via its training centres
  • It will also help in identification of beneficiaries besides certification of training programmes through Sector Skill Councils (SSCs)

SSCs– These are industry led bodies and they define standards and syllabus for different training program in given industrial sector

  • NSDC will identify beneficiaries and design their training program with help of above SSCs
  • Thus, NSDC-MoHUPA tie up will help in speedy and result oriented implementation of Deen Dayal Antyodaya Yojana

 

For updates, follow- The Mammoth Task Of Skilling India

Editorials, GS-3, Indian Economy, Uncategorized

No jobs in sight

Article Link

With recent demands for affirmative action or job reservations for Scheduled Caste and Scheduled Tribe candidates in the private sector, debates surrounding quota have once again come to the fore.

What has been suggested?

Reservation in private sector has been suggested. Because providing quota in private jobs will help cool down anger among SC and STs, thereby stemming the rise of Maoist militancy among them.

How it helps?

The lands of vulnerable communities are being snatched away and with nothing left, the youth take up the wrong path including militancy. But, Maoist militancy is not just a security challenge, but results from deeply embedded socio-economic causes. And a major reason for mounting discontent among young people is because they have no jobs and future to look forward to. Hence, reservation in private jobs is a good solution.

Why young people take up arms?

The reasons for young people taking up arms in some impoverished regions are wide-ranging. They include-

  • Profound agrarian crisis, caused by abysmally low public investments in dry-land agriculture and farmer income protection.
  • Failures of land reforms.
  • Promotion of unsustainable, high-cost, risky agricultural technologies.
  • The ecological degradation of the countryside.
  • Decline and dispossession from forests.
  • Contraction of rural credit.

Need for quota in private sector:

The hopes of young people are shifting to the private sector. Also, at a time when the few jobs that are being created are in the private sector, and there is wide evidence of the bias shown by this sector against employing youth from socially discriminated categories, there is a strong case for job reservations.

Is it not possible to create enough jobs in public sector?

There is a colossal, unprecedented and ever-mounting crisis of employment for the young in India today. Every month, a million new persons are joining India’s workforce and there are hardly any jobs for them in either the public or private sector.

  • The total number of government staff, including Central and state governments, PSUs and local bodies, is less than 1.4% of the population, against the global average of over 3%.
  • Besides, this number has been going down over the years, falling from 19.13 million in 2000-01 to 17.60 million in 2011-12. Hence, it is not possible to create enough jobs in the public sector.

Why young people are turning away from agriculture?

Growing millions of young people find no future in agriculture. The Socio-Economic Caste Census showed that more than 55% of rural households possess no land, and are forced to survive exclusively by distress manual labour.

  • Marginal and small farmers are not much better off. Most of them are reduced to footloose migrants, travelling, working and surviving under conditions of great hardship away from their homes.

What’s needed now?

  • Massive public investments in agriculture and rural job creation would help create enormous local markets that could spur jobs and demands.
  • Huge expansions in the broken school, higher and technical education, and health and child care services would not just generate jobs, but also render youth entering work more productive and equipped with marketable skills.

Conclusion:

Young people today desperately long to escape the drudgery and hunger that entrapped their parents. Hence, there is a need to change course drastically without which we will continue to profoundly fail our young, with both tragic and explosive outcomes. However, independent of whether or not it would help allay the attraction of dispossessed young Dalit and tribal people to militant ideologies, the case for affirmative action in the private sector for SCs and STs must be considered on its own merit.

Editorials, GS-3, Science & Tech, Uncategorized

Fourth Industrial Revolution

CEOs, political leaders, social entrepreneurs, technologists and other global leaders are all at Davos to further the World Economic Forum’s mission of improving the state of the world. But, the big buzz at the World Economic Forum (WEF) in Davos this year is about the ‘Fourth Industrial Revolution’.

What is Fourth Industrial Revolution?

As described by the founder and executive chairman of WEF, Klaus Schwab, “the fourth industrial revolution is a technological revolution that will fundamentally alter the way we live, work and relate to one another”.

Background:

1st industrial revolution: The first Industrial Revolution began in Britain in the last quarter of the 18th century with the mechanisation of the textile industry, harnessing of steam power, and birth of the modern factory.

2nd industrial revolution: The Second Industrial Revolution, from the last third of the nineteenth century to the outbreak of World War I, was powered by developments in electricity, transportation, chemicals, steel, and mass production and consumption. Industrialization spread even further – to Japan after the Meiji Restoration and deep into Russia, which was booming at the outset of World War I. During this era, factories could produce countless numbers of identical products quickly and cheaply.

3rd industrial revolution: The third industrial revolution, beginning c. 1970, was digital — and applied electronics and information technology to processes of production. Mass customisation and additive manufacturing — the so-called ‘3D printing’ — are its key concepts, and its applications, yet to be imagined fully, are quite mind-boggling.

How different will be the 4th industrial revolution?

There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact.

  • The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace.
  • Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.
  • The 4th revolution will be characterized by the advent of cyber-physical systems which, while being reliant on the technologies and infrastructure of the third industrial revolution, represent entirely new ways in which technology becomes embedded within societies and even our human bodies. Examples include genome editing, new forms of machine intelligence, and breakthrough approaches to governance that rely on cryptographic methods such as blockchain.
  • Hence, it can be said that the 4th industrial revolution is conceptualised as an upgrade on the third revolution and is marked by a fusion of technologies straddling the physical, digital and biological worlds.

How does mankind benefit from this?

Like the revolutions that preceded it, the Fourth Industrial Revolution has the potential to raise global income levels and improve the quality of life for populations around the world.

  • By gaining access to the digital world, consumers will be benefited in several ways. With the advent of new technology, we get to use more and more efficient products.
  • In the future, technological innovation will also lead to a supply-side miracle, with long-term gains in efficiency and productivity.
  • Transportation and communication costs will drop, logistics and global supply chains will become more effective, and the cost of trade will diminish, all of which will open new markets and drive economic growth.

Challenges posed by this revolution:

Economists have pointed out that the 4th revolution could yield greater inequality, particularly in its potential to disrupt labor markets.

  • As automation substitutes for labor across the entire economy, the net displacement of workers by machines might exacerbate the gap between returns to capital and returns to labor.
  • With this revolution, it is also possible that in the future, talent, more than capital, will represent the critical factor of production. This will give rise to a job market increasingly segregated into “low-skill/low-pay” and “high-skill/high-pay” segments, which in turn will lead to an increase in social tensions.
  • In addition to being a key economic concern, inequality represents the greatest societal concern associated with the Fourth Industrial Revolution. The largest beneficiaries of innovation tend to be the providers of intellectual and physical capital—the innovators, shareholders, and investors—which explains the rising gap in wealth between those dependent on capital versus labor.

What will be the impact on the government?

As the physical, digital, and biological worlds continue to converge, new technologies and platforms will increasingly enable citizens to engage with governments, voice their opinions, coordinate their efforts, and even circumvent the supervision of public authorities.

  • Simultaneously, governments will gain new technological powers to increase their control over populations, based on pervasive surveillance systems and the ability to control digital infrastructure.
  • On the whole, however, governments will increasingly face pressure to change their current approach to public engagement and policymaking, as their central role of conducting policy diminishes owing to new sources of competition and the redistribution and decentralization of power that new technologies make possible.
  • Ultimately, the ability of government systems and public authorities to adapt will determine their survival. If they prove capable of embracing a world of disruptive change, subjecting their structures to the levels of transparency and efficiency that will enable them to maintain their competitive edge, they will endure. If they cannot evolve, they will face increasing trouble.

Impacts on national and international security:

The Fourth Industrial Revolution will also profoundly impact the nature of national and international security, affecting both the probability and the nature of conflict.

  • The history of warfare and international security is the history of technological innovation, and today is no exception.
  • Modern conflicts involving states are increasingly hybrid in nature, combining traditional battlefield techniques with elements previously associated with nonstate actors.
  • As new technologies such as autonomous or biological weapons become easier to use, individuals and small groups will increasingly join states in being capable of causing mass harm.
  • This new vulnerability will lead to new fears. But at the same time, advances in technology will create the potential to reduce the scale or impact of violence, through the development of new modes of protection or greater precision in targeting.

The impact on people:

The Fourth Industrial Revolution will change not only what we do but also who we are. It will affect our identity and all the issues associated with it: our sense of privacy, our notions of ownership, our consumption patterns, the time we devote to work and leisure, and how we develop our careers, cultivate our skills, meet people, and nurture relationships.

  • Also, the revolutions occurring in biotechnology, which are redefining what it means to be human by pushing back the current thresholds of life span, health, cognition, and capabilities, will compel us to redefine our moral and ethical boundaries too.

How can we be prepared for the Fourth Industrial Revolution?

  • By providing universal access to affordable education and job training.
  • By continuing to ensure basic protection for workers as the changes take place. Governments have, along with the private sector, an obligation to strengthen these core protections.
  • By modernizing infrastructure. Governments have fundamental responsibilities to build roads, bridges, railways, ports, broadband. And all of this can have profound impact on economic growth, generating well-paying jobs and bringing opportunity to areas where it does not exist.
  • By having a more progressive tax code.
  • By expanding access to capital. Existing capital and the tools that support entrepreneurship should be made widely available to people who haven’t had access to it before.

Conclusion:

In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and thus to deprive us of our heart and soul. But as a complement to the best parts of human nature—creativity, empathy, stewardship—it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is incumbent on us all to make sure the latter prevails. We should thus grasp the opportunity and power we have to shape the Fourth Industrial Revolution and direct it toward a future that reflects our common objectives and values.

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Editorials, Uncategorized

India’s Start-up Policy

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As part of a bunch of measures that constitute the action plan for government’s start-up initiative, the centre will shortly be setting up a Fund of Funds that would invest in private venture capital funds.

  • The fund will be set up with the initial corpus of 10,000 crore (about $1.5 billion). However, it will be deployed in tranches of Rs.2,500 crore over a period of four years. India’s venture capitalists are very happy with this announcement.
  • Please note that the idea of a fund of funds isn’t new. Finance minister Arun Jaitley had earmarked Rs.10,000 crore for a fund of funds nearly 18 months ago in the Union Budget 2014-2015. The fund of funds announced as part of start-up action plan is a reiteration, rather a repackaging of the July 2014 budget proposal with some clarity on how it will be structured and managed.

Who can use this fund?

The fund of funds will invest in venture capital funds registered with markets regulator Securities and Exchange Board of India (Sebi).

Why we need this fund?

Presently, the domestic venture capital industry is practically non-existent in the country. The country’s venture capital industry, consisting mostly of foreign firms, currently raise more than 90% of their capital from foreign institutional investors, commonly known as limited partners. Thus, it is necessary to stimulate the growth of the domestic venture capital industry.

Why is it important to encourage the growth of a domestic venture capital industry that is not overwhelmingly dependent on foreign capital?

It is because of the following reasons-

  • Firms backed by foreign capital tend to jump towards start-ups that replicate business models that have been successful in the US, or in other developing markets. Their limited partners are understandably more comfortable with that strategy.
  • The dependence on foreign capital makes firms in India vulnerable to the ups and downs of those markets. While the Indian venture capital market is not currently strapped for capital and India remains an attractive investment destination for global limited partners, even a tremor in the US economy or venture capital market could trigger a major upset here.

The fund of funds aims to address the above mentioned concerns by specifically investing in funds that will, in turn, invest in sectors such as health, education, manufacturing and agriculture.

Challenges before the venture capital industry:

  • According to data compiled by Chennai-based Venture Intelligence, in 2015, venture capital investments in India stood at about $1.8 billion. Therefore, Rs.10,000 crore is not sufficient to spur the growth of this industry.
  • The government has announced that it intends to contribute up to 50% of the stated corpus of a Sebi-registered venture capital fund. However, the problem here is that it is quite difficult for these funds to raise the rest 50%. Added to it, the government contributes 50% only after the Sebi-registered fund has already raised commitments from other investors for the balance 50%.
  • These venture capital funds do not have access to a large pool of domestic institutional capital. Even the banks and insurance companies cannot help them as their investment limits are capped at 10% of the overall corpus of a Sebi-registered venture capital fund.
  • Hence, the only sources of domestic capital currently available to venture capital funds are HNIs (high net-worth individuals) and family offices. However, neither is incentivised enough, through tax concessions, to put meaningful money into play in venture capital funds.
  • This leaves domestic venture capital funds with no option but to raise but to raise capital from overseas investors. Even that is not easy because of a complex regulatory framework.
  • As a result, most domestic venture capital funds have to adopt a dual fund structure (in which capital raised from foreign investors is parked in a separate offshore fund).

Why some people are not happy with the formation of this fund?

Critics argue that it is not prudent, even proper, on the part of the government to invest taxpayers’ money in venture capital funds, which will in turn invest in enterprises that carry a high risk of failure.

Way ahead:

An advisory panel set up by Sebi and led by Infosys founder N.R. Narayana Murthy has just submitted a report suggesting reforms to make the fund-raising environment for venture capital funds more conducive. The government has assured that it will soon address their concerns.

What qualifies a start-up?
startup-India

 

Conclusion:

While it remains unclear whether tech start-ups have anywhere near the potential to create the kind of employment that India needs, the government on its part has done well to give these start-ups the necessary ammunition to get on with value creation with the minimum of government interface. Overall, while the intent is praiseworthy and there are many laudable ideas in the policy, much in the fine print needs attention if its goal is to be realised. However, on the other hand it appears that the launch of the fund of funds at this juncture is more a case of putting the cart before the horse. And, it certainly isn’t the most efficient use of taxpayers’ money.