The Prayas ePathshala

Exams आसान है !

Q1. What is Production Linked Incentives Scheme? (250 words)

Paper & Topic: GS II à Government Policies and Interventions

Model Answer:

About:

Increased import substitution, employment creation, and indigenous manufacturing capability were all goals of the PLI program.
The budget for 2022–2023 included an additional allocation of Rs. 19,500 crores for PLI for solar PV modules in addition to the Rs. 1.97 lakh crore already given by the government under the PLI programs for various businesses.
The March 2020 launch of the initiative initially concentrated on three industries:
manufacturing of medical devices, electrical components, and mobile and related components

Rewards provided by the plan:

The incentives, which are based on the rise in sales, can be as low as 1% for electronics and technology products and as high as 20% for the development of particular medication intermediaries and significant key starting medications.
In other companies, such as those producing sophisticated chemical cell batteries, textiles, and drones, the incentive to be paid will be based on sales, performance, and local value addition over a five-year period.

For the following industries, the PLI Scheme has been made available:

PLI programs have been developed by the government for 14 businesses so far, including companies that are involved in drones, advanced chemical cell batteries, solar panels, white goods, telecom, electronics and IT hardware, metals and mining, communications, medicines, and solar modules.

Objectives:

The government established this scheme to reduce India’s reliance on China and other foreign countries.
It fosters labor-intensive companies and works to increase India’s employment rate.
This strategy tries to enhance indigenous production while reducing import costs.
The PLI Yojana, on the other hand, invites foreign companies to open offices in India while simultaneously encouraging indigenous companies to expand the size of their production facilities.

What challenges does the PLI Scheme encounter?

No common set of parameters exists:

A single set of measurements could not be used to comprehend the value addition by companies that have received or are anticipated to earn incentives under the PLI scheme.
Currently, it is impossible to compare two distinct PLI schemes because various ministries each track the value addition of their respective programs.
The number of jobs generated, the rise in exports and the improvement in quality cannot all be tracked in one centralized database.

Targeting Businesses for Too Steep Incentives:

Departments and ministries that collaborate with companies in their sector face particular challenges.
For instance, the requirement for businesses to be eligible for incentives may occasionally be too high.

Domestic companies rely on one or two supply chains:

Only three to four of the fourteen companies that had been approved were able to achieve the incremental sales requirements up until the previous fiscal year in order to be eligible for the PLI scheme.
Contrary to international organizations, the majority of local businesses relied on one or two supply chains that have been severely affected. As a result, many enterprises will be ineligible for the incentive despite having done nothing wrong.

Q2. Why Inflation holds so much importance for an economy? (250 words)

Paper & Topic: GS III à Indian Economy-related issues

Model Answer:

What is Inflation:

Inflation is the term used to describe an increase in the price of most commonplace or everyday products and services, such as food, clothing, housing, leisure, transportation, consumer staples, and so on. Inflation is the average annual increase or decrease in the cost of a certain basket of goods and services. Inflation is the term used to describe a decline in the purchasing power of a nation’s currency. Inflation is given a high significance in the UPSC IAS exam Economy Syllabus. The major and preliminary exams both frequently include this topic. The definition of inflation, various inflation measurement techniques, and inflation measurement in India are all covered in this article.

How is inflation calculated?

It’s simple to determine inflation by comparing current prices for products and services to those from the base year (target year of comparison). (For additional details on this topic, click here: Base Year)
Assume that the price of a litre of milk right now is 50 rupees. A litre of milk cost us 40 rupees exactly one year ago.
Here, the cost of a litre of milk has gone up by Rs. 10, so instead of buying a litre, Rs. 40 now only buys 800ml of milk annually.

Aiming at Inflation Targeting:

“Inflation targeting” is a central banking tactic that focuses on modifying monetary policy to reach a predetermined annual inflation rate.
The fundamental tenet of inflation targeting is that maintaining price stability, which is attained by containing inflation, is the best strategy for fostering long-term economic growth.
New Zealand was the first country to embrace inflation targeting, and since then, many nations, like India, have made it their primary tool for monetary policy.

Measures to limit inflation:

There are primarily two things that can cause inflation. Cost-push inflation and demand-pull inflation are the two types of inflation that affect the supply.
Every demand-pull inflation control strategy focuses on reducing demand. This can be done by either restricting the money supply or taxing more to raise prices.
Expanding supply to meet market demand and lowering prices by providing subsidies and technological know-how are the main goals of cost-push inflation control measures.
There are three types of measures used to control inflation: monetary, fiscal, and administrative.