Monday, 8th July 2024

Table of contents

1   Daily Current Affairs

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India’s Balance of Payments

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Manufacturing in Defence Hits Record High

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Primary Agriculture Credit Societies

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Karnataka Bill Promise Gig Workers

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Daily Current Affairs

India’s Balance of Payments


Why in the news?

  • After a gap of 10 quarters, India’s current account balance posted a surplus of $5.7 billion or 0.6% of gross domestic product (GDP) during the fourth quarter (Jan-Mar) 2024 (Q4FY24) mainly due to a surge in services exports.

  • The country’s current account cannot be understood in isolation, and the larger picture is provided by the so-called ‘Balance of Payments’.

What is Balance of Payments (BoP)?

  • Understanding the Meaning of BoP:
    • BoP summarises all transactions that a country's individuals, companies, and government bodies complete (over a defined period) with individuals, companies, and government bodies outside the country.
    • For example, it shows how much money (in US Dollar or Indian Rupee terms) went out of the country and how much money came into the country.
    • These transactions could be:
      • Trade (export or import) of goods or services.
      • Investments (an Indian buying land in the US or an American firm investing in the Indian stock exchanges).
      • Exchange of loans between Indian and other countries of the world, etc.

Constituents of the BoP:

  • All possible transactions are divided into two main accounts - the Current Account and the Capital Account.
    • Current Account:
      • It refers to all transactions that are related to current consumption and is further divided into:
        • Trade Balance (the export and import of physical goods).
        • Invisibles Trade (trade in services, e.g., banking, IT, tourism, etc).
      • As seen from the table, India had a trade deficit (import>export) but a surplus in the Invisibles trade.
      • However, since the trade deficit was bigger than the surplus on the Invisibles trade, the overall current account of India is also in negative or deficit. This is called the Current Account Deficit (CAD).
    • Capital Account:
      • The capital account refers to those transactions which are not for current consumption but for investment.
      • It includes net foreign investments (either foreign direct investment or foreign portfolio investments) and loans or money that countries borrow from each other.
      • As seen from the table, India had a capital account surplus of $90 billion from April-December 2021 as against a current account deficit of $26.6 billion.
    • BOP:
      • Individually, either of these accounts can be in surplus or deficit.
      • A surplus implies that more money is coming into the country than going out of it, whereas a deficit (shown with a (-) mark) implies more money is going out of the country than coming in.
      • By definition, the BoP always balances, which implies that the deficit on one account must be balanced by a surplus on the other account.

How does the BoP Balance?

  • The net result of a current account deficit ($26.6 billion) and a capital account surplus ($90.1 billion) is that a total of 63.5 billion US dollars have entered the Indian economy.
  • To balance the BoP, RBI takes out these dollars and keeps them with itself (shown with a (-) sign before it) and adds (as assets) to its foreign currency reserves.
  • The increased forex also leads to an increased money supply in the Indian economy (which can also lead to higher inflation), as RBI increases its liabilities by the same amount ($63.5 billion) by printing the domestic currency.
  • This elucidates RBI’s role in maintaining the BoP, which in turn determines India's exchange rate and foreign exchange reserves.

Why does the RBI Intervene?

  • Take a case when more and more dollars have started coming into the Indian economy because of a growing capital account surplus.
  • If the RBI does not intervene, the increased demand for rupees vis-a-vis the dollar would have meant that the rupee would have appreciated in value.
  • As a result, India’s exports would have become costlier for the US or the rest of the world, thus bringing down their demand.
  • At the same time, Indians would have found foreign goods cheaper, thus India’s imports would have gone up.
  • This would have led to a widening of the trade deficit or the current account deficit to such an extent that the BoP would have balanced on its own.
  • When the RBI intervenes, India's exchange rate remains constant while its forex reserves increase.

How to Read the RBI’s Q4FY24 BoP Figures?

  • Apart from a current account surplus of $5.7 billion, the Q4FY24 shows a net surplus of $25 billion on the capital account.
  • There was a current account deficit of $1.3 billion (0.2% of GDP) during the fourth quarter, which was $8.7 billion (1% of GDP) during the quarter ended December 2023 (Q3FY24).
  • Contrary to the images they evoke, the words ‘deficit’ and ‘surplus’ do not always correlate to ‘bad’ and ‘good’ respectively.
  • For example, a surplus on the current account in FY 2020-21 did not lead to much economic activity due to Covid-induced lockdowns.
  • Typically, for a country like India, a current account deficit happens because a developing economy needs to import lots of capital goods (say, machineries) to build up its capacity to produce more exports.
  • A trade deficit also suggests that India’s underlying economy has a strong demand impulse.
  • For a country like India, a current account deficit of 1.5%-2% of GDP is consistent with a GDP growth rate of 7%-8%.

Source: IE

Keywords: GS-3, Economy- Fiscal Policy- BOI
Daily Current Affairs

Manufacturing in Defence Hits Record High


Why in the News?

  • According to the Defence Ministry, India’s indigenous defence production surged to a record high of Rs 1.27 lakh crore in 2023-24. 
  • This 16.7% growth compared to the previous fiscal year is credited to government policies and self-reliance initiatives.

Steps Taken by the Government to Boost Defence Manufacturing:

  • Policy Reforms and Strategic Initiatives:
    • Defence Procurement Procedure (DPP):
      • The DPP has been revised to promote indigenous manufacturing and enhance transparency and efficiency in the procurement process.
      • It includes a category called 'Buy (Indian-IDDM)' which prioritises products designed, developed, and manufactured indigenously.
    • Defence Production and Export Promotion Policy (DPEPP) 2020:
      • This policy aims for a turnover of ₹1.75 lakh crore in aerospace and defence goods and services by 2025, including ₹35,000 crore in exports.
    • Strategic Partnership Model:
      • This model encourages collaboration between Indian private companies and foreign original equipment manufacturers (OEMs) to set up manufacturing facilities in India, fostering technology transfer and capability building.
    • Negative Import List/Positive Indigenisation List:
      • Five positive indigenisation lists have been released.
      • Items on these lists cannot be imported by the Services and must be sourced domestically.
    • Defence Offset Policy:
      • This policy requires foreign defence companies to invest a part of their contract value in India, promoting technology transfer and local manufacturing.
  • Financial and Structural Support:
    • Foreign Direct Investment (FDI):
      • The FDI limit in the defence sector has been raised to 74% through the automatic route and up to 100% through government approval in cases involving access to modern technology or other specified reasons.
    • Defence Corridors:
      • Defence industrial corridors have been established in Uttar Pradesh and Tamil Nadu to create a conducive ecosystem for defence manufacturing.
      • These corridors aim to attract investments and generate employment.
    • Budget 2023-24:
      • The government allocated 75% of its defence capital budget for 2023-24 towards procurements from domestic sources.
  • Infrastructure and Innovation:
    • Innovation for Defence Excellence (iDEX):
      • iDEX fosters innovation and technology development in defence and aerospace by engaging startups and MSMEs.
      • It provides financial support and a platform for showcasing solutions.
    • Technology Development Fund (TDF):
      • This fund supports the indigenous development of defence technology and products. It offers grants to MSMEs, startups, and academia for research and development projects.
  • Public-Private Partnership
    • Ordnance Factory Board (OFB) Corporatization:
      • The OFB has been restructured into seven new Defense Public Sector Undertakings (DPSUs) to enhance autonomy, efficiency, and accountability.
    • Increased Role of Private Sector:
      • The government has actively encouraged private sector participation in defence manufacturing by allowing private companies to bid for contracts previously reserved for DPSUs.

Defence Manufacturing in FY 2023-24:

  • India’s defence production achieved an unprecedented milestone, reaching approximately Rs 1.27 lakh crore in the financial year 2023-24.
  • This represents a 16.7 percent increase over the previous year and a significant 60 percent growth since 2019-20.
  • In FY 2023-24, Defense Public Sector Undertakings (DPSUs) and other Public Sector Units (PSUs) contributed 79.2% of the total value of production (VoP) in India's defence manufacturing sector, while the private sector accounted for 20.8%.
  • Both public and private sectors have shown steady growth in absolute terms.

Defence Exports:

  • India’s defence exports have also experienced remarkable growth, contributing to the overall rise in indigenous defence production.
  • Defence exports reached a record high of Rs 21,083 crore in FY 2023-24, reflecting a 32.5 percent increase over the previous fiscal’s Rs 15,920 crore.

UPSC Civil Services Examination, Previous Year Question (PYQ)

Prelims

Q:1  Which one of the following is the best description of ‘INS Astradharini’, that was in the news recently? (2016)

  1. Amphibious warfare ship
  2. Nuclear-powered submarine
  3. Torpedo launch and recovery vessel
  4. Nuclear-powered aircraft carrier

Ans: (c)


Q.2 Consider the following in respect of Indian Ocean Naval Symposium (IONS): (2017)

  1. Inaugural IONS was held in India in 2015 under the chairmanship of the Indian Navy.
  2. IONS is a voluntary initiative that seeks to increase maritime co-operation among navies of the littoral states of the Indian Ocean Region.

Which of the above statements is/are correct?

  1. 1 only
  2. 2 only 
  3. Both 1 and 2
  4. Neither 1 nor 2

Ans: (b)


Q:3 The term ‘IndARC’, sometimes seen in the news, is the name of (UPSC 2015)

  1. an indigenously developed radar system inducted into Indian Defence
  2. India’s satellite to provide services to the countries of the Indian Ocean Rim
  3. a scientific establishment set up by India in the Antarctic region
  4. India’s underwater observatory to scientifically study the Arctic region

Answer: (d)


Q: 4 What is "Terminal High Altitude Area Defence (THAAD)", sometimes seen in the news? (UPSC 2018)


  1. An Israeli radar system
  2. India's indigenous anti-missile programme
  3. An American anti-missile system
  4. A defence collaboration between Japan and South Korea

Answer: (c)


Q:5 Which one of the following is the best description of ‘INS Astradharini’, that was in the news recently? (UPSC 2016)

  1. Amphibious warfare ship
  2. Nuclear-powered submarine
  3. Torpedo launch and recovery vessel
  4. Nuclear-powered aircraft carrier

Answer: (c)


Q:1 Foreign Direct Investment (FDI) in the defence sector is now set to be liberalised.What influence is this expected to have on Indian defence and economy in the short and long run? (UPSC 2014)

Source: IE

Keywords: GS-3, Defence Technology– Indigenization of Technology
Daily Current Affairs

Primary Agriculture Credit Societies


Why in the News?

  • Union Minister of Home Affairs and Cooperation, Amit Shah, urged stakeholders in cooperative societies to support the establishment of primary agricultural credit societies (PACS) in all villages and blocks of the country.

What is a Primary Agricultural Credit Society (PACS)?

  • Definition: 
    • PACS are village-level cooperative credit societies that serve as the last link in a three-tier cooperative credit structure headed by the State Cooperative Banks (SCB) at the state level.
  • Credit Structure:
    • Credit from the SCBs is transferred to the District Central Cooperative Banks (DCCBs), which operate at the district level.
    • The DCCBs work with PACS, which deal directly with farmers.
  • Membership and Governance:
    • Since these are cooperative bodies, individual farmers are members of the PACS, and office-bearers are elected from within them.
    • A village can have multiple PACS.
  • Functions:
    • PACS provide short-term and medium-term agricultural loans to farmers for various agricultural and farming activities.

Number of PACS in India:

  • Historical Background: The first PACS was formed in 1904.
  • Current Statistics:
    • There are more than 1,00,000 PACS in the country.
    • These PACS have a huge member base of more than 13 crore farmers.
    • However, only 65,000 of them are functional.

Significance of PACS:

  • Last Mile Connectivity:
    • PACS provide crucial connectivity to the farmers, ensuring they reach the end beneficiaries efficiently.
  • Timely Access to Capital:
    • Farmers need prompt access to funds at the beginning of their agricultural activities, which PACS can facilitate.
  • Minimal Paperwork:
    • PACS are capable of extending credit with minimal paperwork and in a short time frame.
  • Comparison with Scheduled Banks:
    • Farmers often face tedious paperwork and bureaucratic delays with scheduled commercial banks.
  • Collective Strength:
    • PACS offer strength in numbers, as the office-bearer of the PACS manages most of the paperwork for the farmers.
  • Individual Requirements:
    • In scheduled commercial banks, farmers have to individually fulfil requirements and often need agents to get their loans sanctioned.

Challenges Faced by PACS:

  • Political Influence:
    • Political compulsions can overshadow financial discipline, impacting the recovery of loans.
  • Identified Issues:
    • Various committees have highlighted issues such as:
      • Lack of active participation by members
      • Lack of professionalism
      • Absence of corporate governance
      • Bureaucratisation
      • Ageing and unenthusiastic employees

News Summary:

  • Government Initiative:
    • Union Minister Amit Shah, addressing a program in Gandhinagar for the 102nd International Day of Cooperatives, announced the government's plan to establish PACS in every village and block.
  • Current Deficit:
    • There are currently 2 lakh gram panchayats without PACS.
  • Cooperative Sector Strengthening:
    • Shah urged cooperative societies to open bank accounts with local cooperative banks and buy from local dairies to strengthen the cooperative sector.
  • Expansion Drive:
    • The cooperation ministry aims to establish 2 lakh dairies and PACS in the 2 lakh gram panchayats currently lacking such facilities.
  • Database Initiative:
    • In March 2024, the government launched the National Cooperative Database, releasing the 'National Cooperative Database 2023: A Report' to identify and address gaps through comprehensive analysis.
  • Future Plans:
    • The Centre plans to form PACS in every village by 2029.
    • A new national cooperative policy is expected within a month to replace the existing 2002 policy, aiming to further strengthen the cooperative movement in the country.

Source: TOI 

Keywords: GS-3, Economy- Agricultural incentive & Schemes
Daily Current Affairs

Karnataka Bill Promise Gig Workers


Why in the News?

  • Recently, on June 29, the Karnataka government published the draft of the Karnataka Platform-based Gig Workers (Social Security and Welfare) Bill, making it the second Indian State to initiate such a move, the first being Rajasthan.

What is the Gig Economy?

  • A gig economy is a free market system in which organisations hire or contract workers for a short span of time.
  • Simply put, the positions are temporary to meet the company’s requirements by having short-term engagements.
  • Startups like Ola, Uber, Zomato, and Swiggy have established themselves as the main source of the gig economy in India.

Who is a Gig Worker?

  • According to the Code on Social Security, 2020 (India), “A gig worker is a person who performs work or participates in work arrangements and earns from such activities, outside of the traditional employer-employee relationship.”
  • They are independent contractors, online platform workers, contract firm workers, on-call workers, and temporary workers.

What is the Size of the Gig Economy in India?

  • A NITI Aayog study on “India’s Booming Gig and Platform Economy” has estimated that at present, about 47 per cent of the gig work is in medium-skilled jobs, about 22 per cent in high skilled, and about 31 per cent in low-skilled jobs.
  • These figures clearly indicate the importance of the gig working community in the Indian economy.
  • Ensuring the comfort and security of this community is investing in a more progressive and prosperous future.
  • Research studies by Boston Consulting Group (BCG) have indicated that participation in the gig economy is higher in developing countries (5-12 percent) versus developed economies (1-4 percent).
  • Most of these jobs are in lower-income job-types such as deliveries, ridesharing, microtasks, care, and wellness.
  • These studies further estimate that in 2020-21, 77 lakh workers were engaged in the gig economy.
  • The gig workforce is expected to expand to 2.35 crore workers by 2029-30.

What is the Average Age/Income of Gig Workers in India?

  • The median age of Indian gig workers is 27 and their average monthly income is Rs 18,000.
  • Of these, about 71 per cent are the sole breadwinners of their families. Additionally, gig workers operate with an average household size of 4.4.

Challenges Faced by Gig Workers:

  • While platform companies have created avenues of employment, it has often been marred by low wages, unequal gender participation, and a lack of possibility for upward mobility within an organisation.
  • This has triggered protests from workers at companies like Swiggy, Zomato, Ola, Uber, and Urban Company, among others.
  • Gig workers are typically hired by companies on a contractual basis and are not considered their employees.
  • As a result, they do not receive some of the benefits that an on-roll employee of the company may have.
  • This means they often do not receive benefits like paid sick and casual leaves, travel and housing allowances, and provident fund savings, among other things.

What Needs to be Done in Order to Improve the Living Standards of these Gig Workers?

Fiscal Incentives:

  • NITI Aayog in its report "India’s Booming Gig and Platform Economy" has suggested that fiscal incentives such as tax-breaks or startup grants may be provided for businesses that offer livelihood opportunities where women constitute a substantial portion of their workers.

Retirement Benefits:

  • The report also recommended firms adopt policies that offer old age or retirement plans and benefits, and other insurance cover for contingencies such as the Covid-19 Pandemic.
  • Such plans and policies may be envisaged under the Code on Social Security, 2020.
  • Businesses should consider providing income support to workers as it would be a “critical step in providing assured minimum earnings and social security from income loss in the wake of uncertainty or irregularity in work.”
  • It also suggested offering paid sick leave to workers apart from insurance cover.

The Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act 2023:

  • Recently, the Rajasthan State Assembly passed the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act 2023.
  • Under the Act, a board will be established to ensure gig workers’ registration and welfare, addressing their vulnerabilities and providing a platform for collective bargaining and negotiations.
  • The board can serve as an independent grievance redress mechanism.
  • The Act also has a provision of establishing a social security fund funded through a fee on every transaction.

Key Features of the Draft Bill:

  • Termination Clause:
    • The draft Bill mandates that the contract between the aggregator and the worker must include a comprehensive list of grounds for terminating the contract.
    • Aggregators are prohibited from terminating a worker without providing valid reasons in writing and giving a prior notice period of 14 days.
    • Arbitrary terminations, a longstanding grievance among gig workers, are addressed to ensure fair treatment.
  • Payment Regulations:
    • Aggregators are required to make payments to workers at least every week.
    • They must inform workers about any deductions in their payments, specifying the reasons for these deductions.
  • Right to Refuse Gigs:
    • Under the new draft, gig workers have the right to refuse a specified number of gigs per week with 'reasonable cause', without facing adverse consequences from the aggregator.
  • Welfare Fund:
    • A welfare fee will be levied either on each transaction between the worker and the company or based on the company's total revenue.
    • Contributions from this fee, combined with funds from Union and State governments, will constitute a welfare fund aimed at supporting gig workers.
  • Registration and Database:
    • All gig workers must be registered, and aggregators are obligated to provide the government with a comprehensive database of these workers.
  • Working Conditions:
    • Aggregators are required to ensure reasonable and safe working conditions for gig workers, although the draft does not specify the exact criteria for what constitutes 'reasonable' condition

Source: TH

Keywords: GS-3, Economy- Gig Workers
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UPSC Daily Current Affairs focuses on learning current events on a daily basis. An aspirant needs to study regular and updated information about current events, news, and relevant topics that are important for UPSC aspirants. It covers national and international affairs, government policies, socio-economic issues, science and technology advancements, and more.

UPSC Daily Current Affairs provides aspirants with a concise and comprehensive overview of the latest happenings and developments across various fields. It helps aspirants stay updated with current affairs and provides them with valuable insights and analysis, which are essential for answering questions in the UPSC examinations. It enhances their knowledge, analytical skills, and ability to connect current affairs with the UPSC syllabus.

UPSC Daily Current Affairs covers a wide range of topics, including politics, economics, science and technology, environment, social issues, governance, international relations, and more. It offers news summaries, in-depth analyses, editorials, opinion pieces, and relevant study materials. It also provides practice questions and quizzes to help aspirants test their understanding of current affairs.

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