01 December 2022

MAINS QUESTIONS DAILY QUESTIONS & MODEL ANSWERS

Q1. Even though the milk cooperatives were essential to “Operation Flood,” the contributions made by the private sector are still significant and relevant today. Comment. (250 words)

Paper & Topic: GS III – Indian Agriculture

Introduction:

• The entire dairy supply chain is significantly impacted by the production of milk. Millions of rural households all over the country profited from the strong networks and linkages that dairy cooperatives helped to establish. Nearly one-third of rural households’ gross income comes from milk.

Body:

Significance of the dairy industry:

• The 70 million individuals who work in the dairy and livestock industries are among the majority of people who depend on farms; they are labourers and cultivators.
• Women’s Empowerment In addition, women make up 69% of the 7.7 million people working primarily in the farming of cattle and buffalo, making up 5.72 percent of all employed women in the nation, 93% of whom reside in rural areas.
• economic growth In 2019–20, 28% of all agriculture’s Gross Value Added (GVA) came from the cattle industry.
• establishes a safety net Farmers benefit significantly from a growth rate of 6% annually in milk yield, particularly in times of drought and flooding. When crops fail due to natural disasters, farmers place a greater emphasis on animal husbandry, which results in increased milk production.
• Operation Flood (OF), which occurred in the 1970s, significantly changed this industry. The organisation of this area of the economy was altered by Verghese Kurien’s institutional innovation of a cooperative model. Cooperatives only processed 10% of the total milk production even after 50 years.

Issues:

• High Sensitivity: Because the demand for milk and milk products is sensitive to changes in consumer employment and income, dairy farmers are particularly vulnerable to even small shocks.
• Lack of Political Power: In contrast to farmers who cultivate wheat, rice, or sugarcane, cattle farmers are not organised and do not have the political clout to protect their rights.
• No MSP: The cost of production or minimum support price for milk is not estimated in an official or consistent manner.
• According to the Indian Grassland and Fodder Research Institute’s Vision 2050 report, India may experience a 30% shortage of green fodder by 2030.
• Low prices A cooperative provides: Despite handling 40% of the nation’s total marketable surplus of milk, dairy cooperatives are not the first choice for small or landless farmers. This is due to the fact that, on average, dairy cooperatives’ fat-based pricing is 20–30% less expensive than the price on the open market.
• According to the Animal Husbandry and Dairy department’s estimate, India will only have 1.16 lakh of the 2.02 lakh artificial insemination (AI) technicians needed as of August 2020.
• The largest privately owned dairy enterprise in India is Hatsun Agro Products Ltd (HAP), which is situated in Tamil Nadu. Only a very small number of doors are open to the private sector.
• As of October 3, 2020, only one-fourth of India’s 1.5 crore dairy farmers—who are organised into 230 milk unions—had submitted a bank loan application.
• Inadequate government intervention To make up for the income loss that COVID-19 caused for farmers, dairying was incorporated into MGNREGA. However, compared to the updated forecasts for 2020–21, the financial allocation for 2021–22 was reduced by 34.5%.

Effects of COVID-19:

• The demand for milk and milk products fell as a result of store closings, but input costs rose as a result of a severe shortage of fodder and animal feed.
• Reduced Buyers: Farmers were compelled to sell their whole output to dairy cooperatives at a greatly reduced price since householders in urban and rural areas self-imposed a prohibition on selling liquid milk door to door during the pandemic.
• Because of Covid-19, which has also resulted in the deaths of numerous agricultural animals, access to veterinary care is now more constrained.

How to Proceed:

• A consistent demand for liquid milk and a fair price for it; an unhindered supply of fodder and cow feed; and a steady stream of veterinary services and pharmaceuticals. All of these requirements must be met.
• Allow the market to choose what to charge rather than placing a heavy reliance on the government or cooperatives.
• To help them perform their tasks more efficiently and come up with fresh ideas, dairy industry employees should receive new training and skills.
• Agri-tech company “Hydrogreens” solves the lack of green fodder through their “Kambala” hydroponic green fodder unit. Farmers can grow green, fresh feed all year long in controlled environments with little water without using soil.

Conclusion:

• The problem cannot be solved in a way that benefits both farmers and consumers without increasing the quality, quantity, and value of milk produced. India is the world’s largest producer and consumer of milk.

Q2. Discuss about how India is affected by the middle-income trap. Give some examples of this. (250 words)

Paper & Topic: GS III – Indian Economy

Introduction:

• The phrase “middle-income trap” refers to the situation in which a nation with a middle-income economy finds itself unable to transition to a high-income economy due to rising costs and a decline in competitiveness. Only a few countries can transition successfully from low to moderate to high income levels. The term “middle-income trap,” coined by Indermit Gill and Homi Kharas, refers to a protracted economic decline that comes after a period of significant affluence.
• The middle-income trap is a stage of development that affects countries that are unable to develop institutional, human, and technological capital, trapping them between low-wage producers and highly skilled and quick-witted innovators, according to the World Bank.

Body:

• The possibility that India could face a Late Convergence Stall and fall prey to the Middle-Income Trap was discussed in the Economic Survey 2018. India might, however, use its demographic dividend to break out of this rut and make a swift transition to high income levels.

The Middle Income Trap in India:

• Beginning in 1991, India began to pursue economic reforms, which sparked an era of phenomenal growth that helped millions of people escape poverty and raise the nation’s economy by more than nine times in around 30 years.
• In contrast to China and other industrialised East Asian nations, there was no significant migration from farming to factories.
• India’s manufacturing industry is currently only responsible for less than 17% of the nation’s economic output due to its incapacity to expand.
• In late convergers like India, premature deindustrialization—the tendency for manufacturing to peak at lower levels of activity and early in the growth process—is a key source of worry.
• The service-driven economic boom resulted in an increase in unemployment. Investments in the service industry, which only succeeded in creating a pitiful few million high-skilled jobs and forced an amazing 81% of the workforce into the unorganised sector, have therefore been the primary driver of India’s economic growth.
• According to the Asian Development Bank, income is distributed unfairly.
• The enormous, ambitious, and swiftly growing economy of India has a very low rate of growth in its human capital. In last year’s Global Human Capital Index results, which were released by the World Bank, India was given the poor ranking of 115th out of 157 countries.
• Modern technological advances require human capital that is not just talented but also always learning. In contrast to these requirements, there is a wider gap between developing and industrialised economies in terms of educational accomplishment.
• Agricultural output is necessary for both food security and the transfer of human capital from agriculture to more developed industries. The average temperature has gone up and there are more extreme weather events now because to climate change. Because of how much India’s agriculture depends on precipitation, this presents a challenge.
• India is now more likely to fall into the middle income trap as a result of the faltering economy. A decrease in private consumption, a slowing in export growth, and a moderate increase in fixed investment are some of these variables.

How to avoid falling into a middle-income rut:

industrial specialisation from industrial diversification:

• By utilising economies of scale, the specialised middle-income Asian countries were able to lessen the adverse consequences of rising wages. As an illustration, consider the electronics sector in South Korea.
• Two essential requirements for assuring specialised manufacturing are making significant investments in cutting-edge technology and having laws that support innovation.
• The restructuring process that emerges from specialisation can be aided by establishing robust social safety nets and skill-updating programs.

higher output

• Transferring labour from low-productivity sectors like agriculture to high-productivity ones like manufacturing has been a key factor in raising the standard of living for those who live in today’s industrialised economies.
• It contributed only 14.5% of India’s total value added in 2020–21, down from 17.4% in 2011–12.
• An important first step in this industry is to increase productivity.

amplify the manufacturing sector

• Industrial labour relations are a key element in reviving India’s manufacturing sector, especially in light of labour productivity.
• These labour laws promoted small, uncompetitive businesses, which had an impact on output.
• The new regulation will increase the 300 worker cap for layoffs and retrenchments at industrial sites once it is put into effect.
• For export markets and foreign investment, India competes with countries like China, Vietnam, and Bangladesh, none of which demand the approval of administrative or judicial authorities for dismissals.
• Therefore, despite recent revisions, India’s labour laws continue to be severe when compared to those of its rival countries.

manufacturing with a technological emphasis

• Before they reach that breaking point, the economy must support innovation in higher value-added, tech-intensive industries.
• If a country’s manufacturing prowess and competitiveness are measured by its exports, India’s tech-intensive manufacturing currently falls short of international standards.
• Only 10.3% of India’s industrial exports in 2019 were high-tech, according to data from the World Bank.
• Comparable goods could be found in much higher percentages in competing countries: 31% in China, 13% in Brazil, 40% in Vietnam, and 24% in Thailand.
• Due to inadequate R&D spending, which over the past two decades has ranged from just 0.64% to 0.86% of the nation’s GDP, India has fallen behind other developing countries.

eliminating barriers to effective competition

• There are rigidities that need to be addressed, including those brought on by discrimination, stringent tax regulations, a lack of enforcement of intellectual property laws, false information, and bankruptcy laws.

improvisatory economic strategy

• More authority should be granted to local governments so that decisions can be taken more swiftly.

Moving forward:

• In addition to long-term structural changes and better social security for those who haven’t benefited from India’s economic expansion, India needs to make significant improvements to its education system, the skill sets of its workforce, the accessibility of numerous different manufacturing skills in specific locations, better logistics connectivity, a simplified and friendly tax system, land and labour reforms, etc. in order to escape the middle income trap.
• There is little likelihood of an economic recovery in the absence of a rise in demand. Priority should be given to government initiatives that boost demand, such as universal basic income, improved job creation, lower personal income tax rates, and lower GST rates.

Conclusion:

• Our nation is confronting a tough situation that demands major structural adjustments. Concerns include environmental difficulties in addition to rising GDP and demand. For practically every industry, new regulations are necessary. In comparison to other middle-income countries, India has less remaining natural resources, and its GDP is expanding more slowly. This calls for a programme that goes above and beyond economic factors. The equity principle must be followed while distributing the combined resources.