GROSS DOMESTIC PRODUCT (GDP)
There are three primary ways to calculate GDP:
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Production Approach (GDP by Production): This approach calculates GDP by adding up the value-added at each stage of production. It involves summing up the value of all final goods and services produced in an economy.
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Income Approach (GDP by Income): This approach calculates GDP by summing up all the incomes earned in an economy, including wages, rents, interests, and profits. The idea is that all the income generated in an economy must ultimately be spent on purchasing goods and services.
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Expenditure Approach (GDP by Expenditure): This approach calculates GDP by summing up all the expenditures made on final goods and services. It includes consumption by households, investments by businesses, government spending, and net exports (exports minus imports).
3. Measuring GDP
GDP can be measured in three different ways:
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Nominal GDP: This is the raw GDP figure without adjusting for inflation. It reflects the total value of goods and services produced at current prices.
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Real GDP: Real GDP adjusts the nominal GDP for inflation, allowing for a more accurate comparison of economic performance over time. It represents the value of goods and services produced using constant prices from a specific base year.
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GDP per capita: This is the GDP divided by the population of a country. It provides a per-person measure of economic output and can be useful for comparing the relative economic well-being of different countries.
The GDP is a useful measure of economic health, but it has some limitations. For example, it does not take into account the distribution of income in an economy. It also does not take into account the quality of goods and services produced.
Despite its limitations, the GDP is a widely used measure of economic health. It is used by economists, policymakers, and businesses to track the performance of an economy and to make decisions about economic policy
4. Gross Value Added (GVA)
Gross Value Added (GVA) is a closely related concept to Gross Domestic Product (GDP) and is used to measure the economic value generated by various economic activities within a country. GVA represents the value of goods and services produced in an economy minus the value of inputs (such as raw materials and intermediate goods) used in production. It's a way to measure the contribution of each individual sector or industry to the overall economy.
GVA can be calculated using the production approach, similar to one of the methods used to calculate GDP. The formula for calculating GVA is as follows:
GVA = Output Value - Intermediate Consumption
Where:
- Output Value: The total value of goods and services produced by an industry or sector.
- Intermediate Consumption: The value of inputs used in the production process, including raw materials, energy, and other intermediate goods.
Gross Domestic Product (GDP) and Gross National Product (GNP) are both important economic indicators used to measure the size and health of an economy, but they focus on slightly different aspects of economic activity and include different factors. Here are the key differences between GDP and GNP:
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Definition and Scope:
- GDP: GDP measures the total value of all goods and services produced within a country's borders, regardless of whether the production is done by domestic or foreign entities. It only considers economic activities that take place within the country.
- GNP: GNP measures the total value of all goods and services produced by a country's residents, whether they are located within the country's borders or abroad. It takes into account the production of residents, both domestically and internationally.
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Foreign Income and Payments:
- GDP: GDP does not consider the income earned by residents of a country from their economic activities abroad, nor does it account for payments made to foreigners working within the country.
- GNP: GNP includes the income earned by a country's residents from their investments and activities abroad, minus the income earned by foreign residents from their investments within the country.
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Net Factor Income from Abroad:
- GDP: GDP does not account for net factor income from abroad, which is the difference between income earned by domestic residents abroad and income earned by foreign residents domestically.
- GNP: GNP includes net factor income from abroad as part of its calculation.
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Foreign Direct Investment:
- GDP: GDP does not directly consider foreign direct investment (FDI) flowing into or out of a country.
- GNP: GNP considers the impact of FDI on the income of a country's residents, both from investments made within the country and from investments made by residents abroad.
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Measurement Approach:
- GDP: GDP can be calculated using three different approaches: production, income, and expenditure approaches.
- GNP: GNP is primarily calculated using the income approach, as it focuses on the income earned by residents from their economic activities.
For Prelims: GDP, GVA, FDI, GNP
For Mains: 1.Discuss the recent trends and challenges in India's GDP growth
2.Examine the role of the service sector in India's GDP growth
3.Compare and contrast the growth trajectories of India's GDP and GNP
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Previous Year Questions
1.With reference to Indian economy, consider the following statements: (UPSC CSE, 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade. 2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (b)
2.A decrease in tax to GDP ratio of a country indicates which of the following? (UPSC CSE, 2015) 1. Slowing economic growth rate 2. Less equitable distribution of national income Select the correct answer using the code given below: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer (a)
Previous year UPSC Mains Question Covering similar theme: Define potential GDP and explain its determinants. What are the factors that have been inhibiting India from realizing its potential GDP? (UPSC CSE GS3, 2020) Explain the difference between computing methodology of India’s Gross Domestic Product (GDP) before the year 2015 and after the year 2015. (UPSC CSE GS3, 2021) |
INDIA AS THE THIRD LARGE ECONOMY
1. Context
2. Basic characteristics of the Indian economy
Market size
- India’s real gross domestic product (GDP) at current prices stood at Rs. 135.13 lakh crore (US$ 1.82 trillion) in FY21, as per the provisional estimates of annual national income for 2020-21.
- India is the fourth-largest unicorn base in the world with over 21 unicorns collectively valued at US$ 73.2 billion, as per the Hurun Global Unicorn List.
- By 2025, India is expected to have 100 unicorns by 2025 and will create 1.1 million direct jobs according to the Nasscom-Zinnov report ‘Indian Tech Start-up’.
- India needs to increase its rate of employment growth and create 90 million non-farm jobs between 2023 and 2030’s, for productivity and economic growth according to McKinsey Global Institute.
- Net employment rate needs to grow by 1.5% per year from 2023 to 2030 to achieve 8-8.5% GDP growth between 2023 and 2030.
- According to data from the RBI, as of the week ended on June 04, 2021, the foreign exchange reserves in India increased by US$ 6.842 billion to reach US$ 605 billion.
Recent Developments
- With an improvement in the economic scenario, there have been investments across various sectors of the economy. Private Equity – Venture Capital (PE-VC) sector recorded investments worth US$ 20 billion in the first five months of 2021, registering a 2x growth in value compared with the same period in 2020. Some of the important recent developments in the Indian economy are as follows:
- Merchandise exports stood at US$ 62.89 billion between April 2021 and May 2021, while imports touched US$ 84.27 billion. The estimated value of service exports and imports Cumulative FDI equity inflows in India stood at US$ 763.58 billion between April 2000 and March 2021. Foreign Direct Investment (FDI) inflows in India stood at US$ 6.24 billion in April 2021, registering an increase of 38% YoY.
- India's Index of Industrial Production(IIP) for April 2021 stood at 126.6 against 143.4 for March 2021.
- Consumer Food Price Index (CFPI) – Combined inflation was 5.01 in May 2021 against 1.96 in April 2021.
- Consumer Price Index (CPI) – Combined inflation was 6.30 in May 2021 against 4.23 in April 2021.
- In June 2021, foreign portfolio investors (FPIs) turned net buyers by investing Rs. 12,714 crores (US$ 1.71 billion) into the Indian markets. According to depositories data, between June 1, 2021, and June 25, 2021, FPIs invested Rs. 15,282 crore (US$ 2.06 billion) in equities.
- between April 2021 and May 2021 stood at US$ 35.39 billion and US$ 19.86 billion, respectively.
- In May 2021, the Manufacturing Purchasing Managers Index (PMI) in India stood at 50.8.
- Gross GST collections stood at Rs. 141,384 crore (US$ 19.41 billion) in April 2021.
3. India's Rise to Third-Largest Economy by 2027
- India's Rapid Overtaking: IMF forecasts show India poised to become the third-largest economy by 2027, surpassing Germany and Japan.
- Growth Comparison: India's GDP growth of 83% between 2014 and 2023 is second only to China's 84%, outpacing stagnant or contracting economies in the top 10.
- Stagnation in Competing Economies: European countries experienced stagnation due to the Global Financial Crisis (GFC) of 2008-09, while India's impact was comparatively milder.
- Continued Growth: Even with a more modest growth rate of 6% per annum, India is expected to overtake Germany and Japan by 2027.
- Slower Growth Momentum: India's growth momentum between 2014 and 2023 has slowed compared to the 2004-2014 period.
- Significant Gap: The gap between India's third rank and the first two economies (China and the US) remains substantial.
- Per Capita GDP Disparity: India's per capita GDP at $2,600 is the lowest among the top 10 countries and considerably lower than the countries it overtakes.
- Prosperity Metrics: While India's aggregate GDP is rising, per capita prosperity remains a challenge, emphasizing the need for inclusive growth and development.
4. Issues that remain
- Unemployment remains a huge challenge, as the youth still scramble for government jobs. The government disclosed in Parliament recently that 220 million Indians had applied for just seven lakh government jobs in the past seven years.
- Labour force participation rate is low, alarmingly so for women. Job creation is priority number one, even as nearly 70% of industrial jobs are vulnerable to becoming extinct, thanks to automation and robotics.
- High level of hunger: Despite PDS, India’s ranking in the world hunger index is abysmal, signifying the lopsided distribution of economic growth.
- Inequality in income, wealth, and access to quality education and health facilities is widening.
- Was late to adopt a free market economy: India was more inward-looking and influenced, by the Soviet planning model of development. One could argue, with hindsight, that it should have been abandoned much earlier than when we actually did.
- But it did pay dividends in terms of infrastructure and green revolution. It just stayed longer than it needed to.
- Late on capitalizing on export-led growth: India also missed the bus, unlike her East Asian neighbors, on capitalizing on labor-intensive export-led growth. But after the shock of 1991, the economy opened up dramatically.
For Prelims: Gross domestic product (GDP), Consumer Price Index, Consumer Food Price Index(CFPI), Per Capita Income.
For Mains: Discuss India's remarkable economic journey and its potential to become the third-largest economy by 2027, surpassing Germany and Japan. (250 Words).
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FOREIGN DIRECT INVESTMENT (FDI)
- India's net foreign direct investment (FDI) inflows experienced a decline, decreasing by nearly 31% to $25.5 billion during the first 10 months of the 2023-24 fiscal year. The Finance Ministry attributed this decline to a broader trend of slowing investments in developing countries, while expressing optimism for a potential increase in investments in the current calendar year.
- Although global FDI flows overall saw a 3% rise to approximately $1.4 trillion in 2023, economic uncertainty and elevated interest rates impacted global investment, resulting in a 9% decrease in FDI flows to developing nations, as outlined in the Ministry's February assessment of economic performance.
- Reflecting the global trend of reduced FDI flows to developing countries, gross FDI inflows to India also experienced a slight decline, from $61.7 billion to $59.5 billion during the period from April 2023 to January 2024. In terms of net inflows, the corresponding figures were $25.5 billion versus $36.8 billion. The decrease in net inflows was primarily attributed to an increase in repatriation, while the decline in gross inflows was minimal.
- While a modest uptick in global FDI flows is anticipated for the current calendar year, attributed to a decrease in inflation and borrowing costs in major markets that could stabilize financing conditions for international investment, significant risks persist, according to the Ministry. These risks include geopolitical tensions, elevated debt levels in numerous countries, and concerns regarding further fragmentation of the global economy
- FDI involves the transfer of funds and resources from one country to another. This capital inflow can help stimulate economic growth in the host country by providing funds for investment in infrastructure, technology, and other areas.
- FDI often leads to the creation of jobs in the host country. When foreign companies establish subsidiaries or invest in existing businesses, they typically hire local employees, which can help reduce unemployment and improve living standards
- Foreign investors often bring advanced technologies, processes, and management practices to the host country. This technology transfer can enhance the host country's productivity, competitiveness, and industrial capabilities
- FDI can provide access to new markets for both the host country and the investing company. Foreign investors can tap into the host country's consumer base, while the host country gains access to the investing company's global distribution networks.
- FDI can contribute to overall economic development in the host country by promoting industrialization, improving infrastructure, and fostering innovation and entrepreneurship.
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Automatic Route: Under the automatic route, FDI is allowed without the need for prior approval from the RBI or the government. Investors only need to notify the RBI within a specified time frame after the investment is made. This route is available for most sectors, except those that are prohibited or require government approval.
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Government Route: In sectors or activities that are not covered under the automatic route, FDI requires government approval. Investors must apply for approval through the Foreign Investment Facilitation Portal (FIFP) or the Foreign Investment Promotion Board (FIPB), depending on the sector.
- Under the automatic route, FDI of up to 100% is allowed for manufacturing of automobiles and components.
- For the manufacturing of electric vehicles (EVs), 100% FDI is allowed under the automatic route.
- In single-brand retail trading, 100% FDI is allowed, with up to 49% allowed under the automatic route. Beyond 49%, government approval is required.
- Multi-brand retail trading (supermarkets and department stores) with FDI is permitted in some states, subject to certain conditions and restrictions. The FDI limit is typically capped at 51%.
- FDI in the insurance sector is allowed up to 74%, with up to 49% under the automatic route. Beyond 49%, government approval is needed
- In the telecom sector, 100% FDI is allowed, with up to 49% under the automatic route. Beyond 49%, government approval is required
- In the defense sector, FDI up to 74% is allowed under the automatic route, with government approval required for investments beyond 49%
- In most segments of the media and broadcasting sector, including print and digital media, 100% FDI is allowed, with up to 49% under the automatic route
- FDI is prohibited in the atomic energy sector, which includes activities related to the production of atomic energy and nuclear power generation.
- FDI is generally prohibited in the gambling and betting industry, which includes casinos and online betting platforms
- FDI is not allowed in the lottery business, except for state-run lotteries
- FDI is prohibited in chit funds, which are traditional Indian savings and credit schemes.
- Nidhi companies are non-banking finance companies (NBFCs) that facilitate mutual benefit funds. FDI is typically not permitted in these entities
- While FDI is allowed in single-brand retail trading, it is generally prohibited in multi-brand retail trading of agricultural products. Some states have allowed it under specific conditions, but this remains a highly regulated area.
- FDI is not allowed in the trading of transferable development rights (TDRs) pertaining to the construction of real estate
- FPIs invest in a country's financial markets, primarily by buying and selling securities traded on stock exchanges and fixed-income instruments like bonds and government securities
- FPIs often seek to diversify their investment portfolios by spreading their investments across different asset classes, sectors, and countries. This diversification helps manage risk and enhance returns
- FPIs have the flexibility to buy and sell securities in the secondary market, providing liquidity to the market and contributing to price discovery
- FPIs typically have a shorter investment horizon compared to Foreign Direct Investors (FDIs). They may engage in short-term trading or hold securities for a few months to a few years.
- FPIs are subject to regulatory frameworks and restrictions in the countries where they invest. These regulations are designed to ensure that foreign investments do not pose undue risks to the local financial markets and economy.
FPI (Foreign Portfolio Investment) | FDI (Foreign Direct Investment) |
FPI involves the purchase of financial assets such as stocks, bonds, mutual funds, and other securities in a foreign country. These investments are typically made with the intention of earning returns on capital and do not result in significant control or ownership of the underlying businesses | FDI entails making an investment in a foreign country with the primary objective of establishing a lasting interest and significant control or influence over a business enterprise or physical assets. FDI often involves the acquisition of a substantial ownership stake (typically at least 10%) in a company or the establishment of new business operations. |
FPI is generally characterized by a shorter investment horizon. Investors in FPI may engage in trading and portfolio rebalancing activities, and their investments are often more liquid. The focus is on earning capital gains and income from investments. | FDI is characterized by a longer-term commitment. Investors in FDI intend to engage in the day-to-day management or decision-making of the business, contribute to its growth and development, and generate profits over an extended period. |
FPI investors typically have little to no influence or control over the companies in which they invest. They are passive investors who participate in the financial markets and rely on market dynamics to drive returns. | FDI investors actively participate in the management and decision-making of the businesses they invest in. They often seek to exercise control over company operations and strategy, which may include appointing board members or key executives. |
FPI investments are often made through financial instruments like stocks, bonds, and securities. Investors may use instruments like mutual funds or exchange-traded funds (ETFs) to gain exposure to foreign markets | FDI investments involve a direct equity stake in a company, either through share acquisition or the establishment of a subsidiary or branch in the host country. FDI can also involve the purchase of real assets such as land, factories, or infrastructure |
FPI can provide short-term capital inflows, but it may be more susceptible to market volatility and sudden capital outflows. It may not have as direct an impact on job creation and economic development as FDI. | FDI often contributes to long-term economic development by creating jobs, stimulating infrastructure development, transferring technology and expertise, and enhancing the competitiveness of local industries |
FPI investments are subject to regulations that vary by country and may include foreign ownership limits, reporting requirements, and tax considerations. | FDI is subject to regulations that can be more stringent and may involve government approval, sector-specific conditions, and investment protection measures |
For Prelims: Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc
For Mains: General Studies III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment
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Previous Year Questions
1. Both Foreign Direct Investments (FDI) and Foreign Institutional Investor (FII) are related to investment in a country. (UPSC CSE 2011)
Which one of the following statements best represents an important difference between the two?
A.FII helps bring better management skills and technology, while FDI only brings in capital
B.FII helps in increasing capital availability in general, while FDI only targets specific sectors C.FDI flows only into the secondary markets, while FII targets primary market
D.FII is considered to the more stable than FDI
Answer (B)
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WETLANDS
1. Context
2. About Wetlands
A wetland is a land area that is saturated with water, either permanently or seasonally, and supports a distinct ecosystem of plants and animals adapted to wet conditions. Wetlands are found all over the world, from the tropics to the Arctic, and they come in a variety of forms, including marshes, swamps, bogs, and fens.
2.1. Importance of Wetlands
- Wetlands are some of the most biologically diverse ecosystems on Earth. They provide habitat for a wide variety of plant and animal species, many of which are specially adapted to these waterlogged environments. They serve as breeding grounds and nurseries for numerous aquatic and terrestrial species.
- Wetlands act as natural water filters. They can remove excess nutrients, pollutants, and sediment from water, improving water quality and helping to purify drinking water sources. This filtration function is critical for maintaining clean and healthy ecosystems.
- Wetlands act as natural sponges, absorbing excess rainfall and reducing the risk of flooding. They store water during periods of heavy rainfall and gradually release it, helping to control downstream flooding and erosion.
- Wetlands store and sequester significant amounts of carbon, which can help mitigate climate change. They also play a role in regulating local and regional climate patterns by influencing temperature and humidity.
- Wetlands are often valued for their aesthetic beauty and recreational opportunities. People visit wetlands for activities like birdwatching, fishing, and nature appreciation. This can support local economies through tourism and outdoor recreation.
- Many indigenous and local communities have deep cultural and traditional connections to wetlands. These ecosystems hold spiritual and cultural significance, and they often provide resources for traditional practices and livelihoods.
- Wetlands offer unique opportunities for scientific research and education. They help us better understand ecosystem dynamics, species interactions, and environmental processes.
- Wetlands can provide economic benefits through activities like fishing, agriculture, and forestry. They can also act as natural infrastructure for storm protection, reducing the economic costs of disasters.
- Many species, including endangered and threatened ones, rely on wetlands for their survival. By conserving wetland ecosystems, we can protect these species and their habitats.
2.2. Types of Wetlands
Wetlands come in various types, each with its unique characteristics and ecological functions. Some of the primary wetland types include:
- Swamps are forested wetlands dominated by trees and woody shrubs. They often occur in areas with slow-moving or standing water. Swamps are important for providing habitat to numerous bird and amphibian species. They can be freshwater or saltwater, depending on their location.
- Marshes are herbaceous wetlands dominated by grasses, reeds, sedges, and other non-woody plants. They are typically found near the edges of lakes, rivers, and coastlines. Marshes are vital for water purification and provide habitat for a wide range of wildlife, including birds, amphibians, and insects. They can be freshwater, brackish, or saltwater.
- Bogs are acidic wetlands characterized by waterlogged, spongy ground and a distinctive peat layer. They tend to be low in nutrients and are often fed by rainwater. Bogs support unique plant communities, including sphagnum mosses and carnivorous plants. They are important for carbon storage and can be sources of groundwater recharge.
- Fens are similar to bogs but have alkaline or mineral-rich water sources. They typically have a higher nutrient content and support different plant species. Fens are essential for water filtration and can be important for maintaining water quality in certain regions.
- Vernal Pools are temporary or seasonal wetlands that often appear in the spring and dry up during the summer or fall. They provide breeding habitats for amphibians and invertebrates. Because they are ephemeral, vernal pools are not always wetlands in the traditional sense, but they serve important ecological functions.
- Tidal Wetlands are influenced by the ebb and flow of ocean tides. They include salt marshes and mangrove swamps. These wetlands are important for shoreline stabilization, habitat for numerous marine species, and protection against coastal erosion and storm surges.
- Freshwater Wetlands are found in various settings, including along rivers, lakes, ponds, and in the interior of continents. They are essential for water purification, flood control, and providing habitat for numerous species.
- Saltwater Wetlands such as salt marshes and mangroves, occur in coastal areas and estuaries where saltwater from the ocean mixes with freshwater from rivers. They are vital for coastal protection, as well as supporting a range of marine life.
- Estuarine Wetlands are transitional zones where freshwater rivers and saltwater bodies meet, creating a unique mix of conditions. They are important for supporting diverse and specialized species, acting as nurseries for fish and providing food and habitat for numerous wildlife species.
2.3. Threats to Wetlands
Wetlands, despite their ecological importance, face numerous threats that can lead to their degradation or loss. Some of the primary threats to wetlands include:
- One of the most significant threats to wetlands is urban and industrial development. Construction of roads, buildings, and infrastructure often involves draining or filling wetlands, leading to their destruction. Urbanization can also introduce pollution and increased runoff, degrading water quality.
- Agriculture, including the drainage of wetlands for crop cultivation or livestock grazing, can lead to the loss of wetland habitats. The use of fertilizers and pesticides in agricultural areas can also result in pollution of wetlands.
- Pollution from various sources, including urban, industrial, and agricultural runoff, can contaminate wetland water, affecting the health of aquatic life and undermining the water purification function of wetlands.
- Altering the natural flow of water, such as through dam construction, water diversion for irrigation, or urban drainage systems, can disrupt the natural hydrology of wetlands. Changes in water levels can negatively impact the plants and wildlife that rely on these ecosystems.
- The introduction of non-native or invasive species can threaten wetland ecosystems. Invasive plants, in particular, can outcompete native species and alter the wetland's natural composition and functions.
- Climate change can lead to rising sea levels and increased temperatures, affecting coastal and freshwater wetlands. Altered precipitation patterns can also impact wetland hydrology. Climate-related factors can lead to shifts in wetland ecosystems and can exacerbate other threats.
- Excessive water extraction from wetland areas, often for agricultural or industrial use, can lead to the depletion of wetland resources and the drying up of these habitats.
- Conversion of wetlands into other land uses, such as residential or commercial developments, can result in the loss of wetland ecosystems. This often involves drainage and filling activities.
- Large infrastructure projects like road construction, mining, and the development of hydropower facilities can disrupt or destroy wetlands. Dams, in particular, can alter water flow and reduce wetland habitat.
- Fragmentation of wetlands due to human activities can isolate populations of plants and wildlife, making it challenging for species to move and maintain genetic diversity.
- Dredging and channelization of water bodies for navigation and flood control can modify natural watercourses and negatively impact wetland ecosystems.
- Practices such as overgrazing, deforestation, and soil erosion can result in sedimentation and nutrient runoff into wetlands, degrading their water quality.
3. The Convention on Wetlands (Ramsar Convention)
- The Convention on Wetlands, commonly known as the Ramsar Convention, is an international treaty dedicated to the conservation and sustainable use of wetlands.
- It is named after the city of Ramsar in Iran, where the convention was adopted on February 2, 1971, and officially entered into force on December 21, 1975.
- The Ramsar Convention is the only global environmental treaty that focuses on a single ecosystem type, specifically wetlands.
3.1. Key aspects of the Ramsar Convention include
- The primary mission of the Ramsar Convention is to ensure the conservation and wise use of wetlands around the world.
- The term "wise use" in the context of the convention refers to the sustainable use of wetlands to maintain their ecological character and provide for the well-being of human communities that depend on them.
- Parties to the convention designate wetlands within their territories as "Wetlands of International Importance," often referred to as Ramsar Sites. These sites are recognized for their significance in terms of biodiversity, water resources, and human well-being.
- The Ramsar Convention emphasizes the importance of conserving wetlands in a manner that maintains the ecological character of the site and provides benefits for both nature and people.
- The convention recognizes a wide range of wetland types, including lakes, rivers, marshes, peatlands, and coastal areas. It encompasses both freshwater and saltwater wetlands.
- The Ramsar Convention promotes international cooperation and information sharing related to wetland conservation and management. It encourages countries to work together on transboundary wetland issues.
- The convention supports capacity building, scientific research, and public education to raise awareness about the value of wetlands.
- As of my last knowledge update in September 2021, there were over 170 countries that were parties to the Ramsar Convention. These countries commit to implementing the convention's principles within their territories.
- February 2nd of each year is celebrated as World Wetlands Day to raise awareness about the importance of wetlands and the need for their conservation.
4. About Ramsar Sites
To be designated as a Ramsar Site, a wetland must meet one or more of the following criteria:
- It supports vulnerable, endangered, or critically endangered species or threatened ecological communities.
- It plays a significant role in the conservation of biological diversity.
- It provides habitat for a substantial number of waterbirds, including migratory species.
- It supports fishery resources that are of critical importance to human communities.
- It has significant hydrological value in controlling flooding, recharging groundwater, or regulating water flow.
- It contributes to the maintenance of traditional cultural practices, livelihoods, and sustainable land use.
4.1. Importance of Being a Ramsar Site
- Designation as a Ramsar Site confers international recognition of the wetland's ecological and cultural importance. It places the site on a global platform, highlighting its significance.
- Ramsar Sites receive increased attention and support for their conservation. This often leads to improved protection measures and management practices to safeguard the ecological character of the wetland.
- Many Ramsar Sites are vital for the conservation of rare and endangered species. Protecting these areas helps ensure the survival of these species and maintains the overall biodiversity of the region.
- Ramsar Sites provide essential ecosystem services, such as water purification, flood control, and water storage. These services benefit both the environment and human communities, making them crucial for sustainable development.
- Designated Ramsar Sites often become focal points for scientific research and monitoring. They contribute to our understanding of wetland ecosystems and their functioning.
- Ramsar Sites can attract eco-tourism, providing opportunities for recreation, research, and environmental education. They can serve as platforms for raising awareness about wetland conservation.
- Being a Ramsar Site promotes international cooperation and collaboration, as many wetlands are transboundary in nature. Neighbouring countries often work together to manage and protect these shared resources.
- Many Ramsar Sites have cultural and traditional significance for local communities. Recognition under the convention can support the continuation of cultural practices and livelihoods.
5. About the National Wetland Inventory and Assessment (NWIA)
The National Wetland Inventory and Assessment (NWIA) is a comprehensive program initiated by the Ministry of Environment, Forest and Climate Change (MoEFCC) in India to map, classify, and assess the wetlands of the country. The primary objective of the NWIA is to generate a reliable database of wetlands, understand their distribution and characteristics, and assess their ecological status and conservation needs.
5.1. The NWIA is implemented in two phases
National Wetland Inventory (NWI)
The NWI involves the mapping and classification of wetlands using satellite imagery and ground-truthing surveys. The NWI aims to identify and delineate the extent of wetlands, classify them into different types based on their hydrological, ecological, and geomorphological characteristics, and create a spatial database of wetlands.
National Wetland Assessment (NWA)
- The NWA involves the assessment of the ecological status and conservation needs of wetlands.
- The NWA aims to evaluate the ecological health of wetlands, identify threats and pressures affecting them, and prioritize wetlands for conservation and management interventions.
- The NWIA provides a valuable tool for wetland conservation and management in India.
- It helps in understanding the distribution and status of wetlands, identifying priority areas for conservation, and informing policy and decision-making related to wetland management.
- The NWIA also contributes to raising awareness about the importance of wetlands and their role in maintaining ecological balance and providing ecosystem services.
5.2. The key benefits of the NWIA
- The NWIA provides a comprehensive database of wetlands, including their location, extent, type, and ecological characteristics. This information is essential for understanding the distribution and diversity of wetlands in India.
- The NWA evaluates the ecological health of wetlands and identifies threats and pressures affecting them. This information helps in prioritizing wetlands for conservation and management interventions.
- The NWIA provides scientific data and information to support policy and decision-making related to wetland conservation and management. This includes identifying priority areas for conservation, developing management plans, and implementing conservation measures.
- The NWIA contributes to raising awareness about the importance of wetlands and their role in providing ecosystem services, such as water purification, flood control, and biodiversity conservation.
- The NWIA aligns with international efforts to conserve wetlands, such as the Ramsar Convention on Wetlands. It provides data and information that can be shared with the international community to support global wetland conservation initiatives.
For Prelims: Dhanauri Wetland, Wetlands, Ramsar Convention, Ramsar Sites, National Wetland Inventory and Assessment, Ministry of Environment, Forest and Climate Change, National Green Tribunal,
For Mains:
1. Explain the cultural and traditional connections that many indigenous and local communities have with wetlands. How can the preservation of these cultural ties support wetland conservation and management? (250 Words)
2. Explain the ecological significance of wetlands and their role in supporting biodiversity. How can the conservation of wetlands benefit both the environment and human communities? (250 Words)
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Previous Year Questions
Prelims
1. Consider the following Questions: (UPSC 2019)
1. Under Ramsar Convention, it is mandatory on the part of the Government of India to protect and conserve all the wetlands in the territory of India
2. The Wetlands (Conservation and Management) Rules, 2010 were framed by the Government of India based in the recommendation of Ramsar Convention
3. The Wetlands (Conservation and Management) Rules, 2010 also encompasses the drainage area or catchment regions of the wetlands as determined by the authority
Which of the Statements given above is/ are correct
A. 1 and 2
B. 2 and 3
C. 3 Only
D. 1, 2, 3
Answer: C
2. How is the National Green Tribunal (NGT) different from the Central Pollution Control Board (CPCB)? (UPSC 2018)
1. The NGT has been established by an Act whereas the CPCB has been created by the executive order of the Government.
2. The NGT provides environmental justice and helps reduce the burden of litigation in the higher courts whereas the CPCB promotes cleanliness of streams and wells, and aims to improve the quality of air in the country.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Answer: B
3. The National Green Tribunal Act, 2010 was enacted in consonance with which of the following provisions of the Constitution of India? (UPSC 2012)
1. Right of a healthy environment, construed as a part of the Right to life under Article 21
2. Provision of grants for raising the level of administration in the Scheduled Areas for the welfare of Scheduled Tribes under Article 275(1)
3. Powers and functions of Gram Sabha as mentioned under Article 243(A)
Select the correct answer using the codes given below:
A. 1 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: A
4. With reference to the wetlands of India, consider the following statements: (UPSC CSE 2012)
1. The country's total geographical area under the category of wetlands is recorded more in Gujarat as compared to other States.
2. In India, the total geographical area of coastal wetlands is larger than that of inland wetlands. Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: A
5. Which of the following National Parks is unique in being a swamp with floating vegetation that supports a rich biodiversity? (UPSC 2015) A. Bhitarkanika National Park B. Keibul Lamjao National Park C. Keoladeo Ghana National Park D. Sultanpur National park Answer: B 6. Which one of the following is an artificial lake? (UPSC 2018) (a) Kodaikanal (Tamil Nadu) (b) Kolleru (Andhra Pradesh) (c) Nainital (Uttarakhand) (d) Renuka (Himachal Pradesh) Answer: A 7. If you want to see gharials in their natural habitat, which one of the following is the best place to visit?(UPSC 2017) A. Bhitarkanika Mangroves B. Chambal River C. Pulicat Lake D. Deepor Beel Answer: B 8. If a wetland of international importance is brought under the ‘Montreux Record’, what does it imply? (UPSC 2014) A. Changes in ecological character have occurred, are occurring or are likely to occur in the wetland as a result of human interference. B. The country in which the wetland is located should enact a law to prohibit any human activity within five kilometers from the edge of the wetland C. The survival of the wetland depends on the cultural practices and traditions of certain communities living in its vicinity and therefore the cultural diversity therein should not be destroyed. D. It is given the status of ‘World Heritage Site’ Answer: A Mains 1. What is wetland? Explain the Ramsar concept of ‘wise use’ in the context of wetland conservation. Cite two examples of Ramsar sites from India. (150 words, 10 marks) (UPSC Mains-2018)
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DEEP SEA MINING
- The deep sea is a trove of biodiversity, rich in living resources used in medicines and critical in regulating the climate and providing spawning and feeding grounds for fish
- Whether copper or nickel for batteries, cobalt for electric cars or manganese for steel production: rare earth minerals and metals are fundamental to the renewable energy
- technologies driving the world’s energy transition
- But while demand is rising fast, the resources are also becoming scarcer globally
- According to estimates, in just three years the world will need twice as much lithium and 70% more cobalt.
- And this is despite the slow progress of the energy transition. According to the International Energy Agency, if climate goals were properly pursued through the massive expansion of renewable energy, about five times as much lithium and four times as much cobalt would be needed by 2030
- The projected production volumes for these raw materials fall far short of demand. To close this gap, some countries and companies now want to mine the resources in the deep sea
- So-called polymetallic nodules, also known as manganese nodules, are driving the rush to mine seabeds
- These potato-sized lumps contain high proportions of nickel, copper, manganese, rare earths and other valuable metals
- The best-studied area is currently the seabed at between 3,500 and 5,500 meters [between 11,500 feet and 18,000 feet] in the Clarion-Clipperton Zone in the eastern Pacific Ocean near the US state of Hawaii
- Spanning thousands of kilometers, the area contains more nickel, manganese and cobalt than any known area on land
- The basin in the central Indian Ocean and the seabed off the Cook Islands, Kiribati atolls and French Polynesia in the South Pacific are also of interest for potential extraction
- The nodules’ composition happens to be remarkably well-aligned with the needs of electric vehicle makers
- Carmakers will need a great deal more of these metals in order to make battery cathodes and electrical connectors for an electric vehicle fleet of around a billion cars and trucks by mid-century
- The Canada-based company specializes in the medium and long-term exploitation of mineral resources in the Clarion-Clipperton Zone
- Although manganese nodules are not yet being mined anywhere in the world, that could soon change as they practically lie directly on the seabed and can be easily extracted without breaking up rock layers or eroding the seabed
- Seabed mining is made easy when a huge vacuum can simply travel over the ocean floor to suck up the nodules which are then brought to the surface with a hose
- That means all organisms, bacteria and higher organisms that live in and on the sediment and on the nodules are completely sucked in
- These organisms also require manganese nodules to survive, meaning they “won’t come back for millions of years
- Rapid regeneration is impossible because it can take a million years for a nodule to grow a few millimeters
- Scientists and opponents of deep-sea mining also fear that the clouds of sediment from the suction could cause enormous damage to ecosystems within a radius of several hundred kilometers
- Potential victims would include plants, creatures in the middle water depths and microorganisms whose respiratory tracts could be blocked by the sediment
- The Metals Company aims to mine the nodules in the Clarion-Clipperton Zone, and makes no secret of the possible damage to marine biodiversity
- However, the company has argued that deep-sea mining could be less damaging to the environment than extraction on land, pointing out that it would emit 80% less greenhouse gas emissions
- The Metals Company has also claimed that deep-sea mining would be largely automated, avoiding the exploitation of cobalt miners, including children, in Congo, where most of the world’s cobalt is mined today
- Possible exploitation of deep-sea deposits is regulated by the International Seabed Authority, which was established under the UN Convention on the Law of the Sea
- It has awarded 31 exploration contracts so far worldwide, but none for commercial mining activities
- These permits allow companies to explore the resources and potential for future extraction, but also require them to collect data for environmental analysis
- The Pacific island state of Nauru has been collaborating with The Metals Company to force through a code by 2023 so applications can be decided. But other island nations have called for a moratorium on deep-sea mining
- Deep-sea mining would go beyond harming the seabed and have a wider impact on fish populations, marine mammals and the essential function of the deep-sea ecosystems in regulating the climate
For Prelims: Samudrayaan Project, Deep Ocean Mission, Deep-sea exploration
For Mains: General Studies-III: Achievements of Indians in science & technology; indigenization of technology and developing new technology
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LACHIT BORPUKHAN
- Lachit Borphukan (1622–1672) was a legendary military commander of the Ahom Kingdom, celebrated for his leadership and strategic acumen in defending Assam from Mughal invasions.
- His most notable achievement was leading the Ahom forces to victory in the Battle of Saraighat (1671), where he thwarted the Mughal army, commanded by Raja Ramsingh I, from reclaiming Assam.
- This battle is remembered as a landmark in Indian military history for its display of guerrilla tactics and naval warfare on the Brahmaputra River.
- Born on November 24, 1622, Lachit was the son of Momai Tamuli Barbarua, a prominent administrator and warrior of the Ahom Kingdom.
- He was appointed by King Charadhwaj Singha as one of the five Borphukans, a prestigious position that combined administrative, judicial, and military responsibilities.
- Lachit's dedication to his duties and his patriotism are exemplified in the story of how he executed his uncle for neglecting his responsibilities during the construction of a crucial defensive rampart.
- His unwavering commitment earned him immense respect and has made him a symbol of Assamese pride and valor.
- Every year on November 24, Lachit Divas is observed in Assam to honor his legacy
-
From 1615 to 1682, the Mughal Empire, led by Jahangir and later Aurangzeb, launched several campaigns to conquer the Ahom kingdom. In January 1662, Mir Jumla, the Governor of Bengal, led Mughal forces in a campaign that resulted in the occupation of parts of Ahom territory.
-
Between 1667 and 1682, the Ahoms, under successive rulers beginning with Chakradhwaj Singha (reigning from 1663 to 1670), mounted a determined counter-offensive to recover their lost lands.
-
In 1669, Aurangzeb tasked Raja Ram Singh I with regaining the territories reclaimed by the Ahoms. This led to the Battle of Alaboi on August 5, 1669, fought in the Alaboi Hills near Dadara in North Guwahati.
-
Unlike the Mughals, who favored open-field battles, Lachit Borphukan used his deep understanding of the terrain to employ guerrilla tactics. These strategies enabled his smaller, more agile forces to outmaneuver the Mughal army.
-
Similar to Shivaji’s tactics against the Mughals in Marathwada, Lachit struck the enemy through surprise raids, targeting their camps and static positions. These assaults caused significant casualties among unsuspecting Mughal troops and disrupted their operations.
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After initial setbacks, Ram Singh deployed his elite Rajput and Mughal veterans, which shifted the momentum of the Battle of Alaboi. Approximately 10,000 Ahom soldiers lost their lives, as per Assam’s archaeological records.
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Unlike in Alaboi, where Lachit was forced into a land battle, he strategically lured the Mughals into a naval engagement during the Battle of Saraighat. As a skilled naval commander, he orchestrated a series of surprise pincer movements to outflank and overpower the Mughal fleet.
-
Historian H.K. Barpujari noted that the Ahom forces combined frontal assaults with surprise rear attacks. They deceived the Mughal fleet by feigning an attack from the front, prompting the Mughals to leave their rear vulnerable, allowing the main Ahom fleet to secure a decisive victory.
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Lachit succumbed to a chronic illness a year after the Battle of Saraighat. Despite his poor health during the battle, he led his troops to triumph, further solidifying his legendary status.
-
The Battle of Saraighat cemented Lachit Borphukan’s reputation as a brilliant strategist, earning comparisons with India’s greatest military leaders. To honor his legacy, the Lachit Borphukan Gold Medal, established in 1999, is awarded to the best cadet at the National Defence Academy
For Prelims: Anglo-Burmese War, Treaty of Yandabo
For Mains: Anglo-Burmese Wars as part of Colonial Expansion, Role of treaties like Yandabo in consolidating British control over new territories
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SEMICONDUCTOR
Semiconductors constitute a unique category of materials exhibiting electrical characteristics that blend those of conductors and insulators. Analogous to a faucet regulating water flow, semiconductors offer precise control over electric currents.
Among semiconductors, the transistor holds paramount importance. In the early stages of modern electronics, integrated circuits featured a mere four transistors, enabling basic arithmetic operations. Presently, single chips accommodate billions of transistors.
The intricate process of integrating numerous transistors onto a minuscule chip, comparable in size to a fingernail, demands meticulous precision akin to dividing a strand of human hair into a thousand segments, each with specific width, and further subdividing each segment into a hundred parts. Consequently, semiconductor fabrication necessitates cutting-edge technological and scientific expertise
3. How are Semiconductors made?
- The process commences with an engineer meticulously selecting a silicon wafer as the base upon which the semiconductor will be constructed.
- A dedicated team subjects the silicon, derived from sand, to an elaborate purification procedure to isolate it from other substances, resulting in an ultra-pure wafer with impurity levels as minimal as a few parts per billion.
- This proportion is akin to an error margin of merely one centimeter when measuring the Earth's diameter.
- Subsequently, the photolithography process ensues—a pivotal stage wherein the circuit pattern is etched onto the wafer.
- The wafer is coated with a light-sensitive substance known as a photoresist. A mask is then positioned in front of the wafer, and light is directed onto it. The mask features small apertures corresponding to the circuit pattern.
- Light passes through these apertures, eroding the underlying sections of the photoresist. Consequently, the photoresist on the wafer adopts the configuration of the transistor circuits.
- After photolithography, engineers employ chemical and/or physical methods to eliminate the unetched portions of the photoresist, leaving the circuit's framework on the silicon substrate intact.
- Next, they introduce impurities into specific areas of the semiconductor—a process known as doping—to modify its electrical properties deliberately.
- Thin layers of materials such as metals or insulators are then deposited onto the wafer's surface to establish electrical connections or insulate components.
- Subsequently, the resultant product undergoes packaging—individual chips are segregated, encapsulated, and subjected to testing to ensure functionality and reliability—before integration into the electronic device
- Every stage of semiconductor production necessitates exceptionally precise techniques and draws upon a variety of scientific principles. For instance, in crafting cutting-edge transistors, the photolithography process demands a light source emitting electromagnetic radiation with a wavelength of 13.5 nm.
- To achieve this, the High NA EUV machine developed by the Dutch company ASML employs a unique method: a cannon propels a 50-micrometer droplet of liquid tin at 300 km/hr through a vacuum chamber, where laser beams impart sufficient energy to generate a plasma emitting the required wavelength of radiation.
- Semiconductor manufacturing is characterized by specialization, resulting in an oligopoly dominated by companies specializing in specific areas. ASML, originally a spin-off of Philips, holds a monopoly on photolithography machines essential for cutting-edge semiconductor production worldwide.
- In the realm of software tools for circuit design, American firms Synopsys and Cadence reign supreme, while Japan's Shin Etsu leads in silicon wafer production.
- Taiwan's TSMC leads the market in fabrication, utilizing equipment from U.S.-based Applied Materials and Lam Research. The bulk of intellectual property rights are owned by the British company Arm.
- India plays a significant role in chip design, particularly centered in Bengaluru. However, ownership of most intellectual property rights necessary for executing these designs lies with parent companies or with Arm, relegating India to a consumer rather than a proprietor of these products.
- This dynamic mirrors the business model of McDonald's: while India may host numerous McDonald's outlets, the recipe and supply chain are controlled by a parent company headquartered elsewhere
- Smartphones and computers epitomize the apex of semiconductor technology, yet the impact of semiconductors permeates nearly every aspect of daily life. These components power not only the sophisticated functions of electronic devices but also enable the operation of "smart" air conditioners for temperature regulation and facilitate space telescopes in capturing both captivating and scientifically significant images from the depths of the universe, among various other applications.
- The solutions to many of the pivotal challenges of the 21st century, encompassing realms such as artificial intelligence, electric vehicles, space exploration, robotics, personalized healthcare, and environmental monitoring, hinge upon a reliable supply of advanced semiconductors. This underscores their critical importance for humanity's survival and pursuit of fairness, sustainability, and justice.
- The establishments dedicated to semiconductor technology not only foster innovation and generate high-income employment opportunities but also cultivate the potential for startups specializing in cutting-edge technologies.
- Furthermore, they contribute to and benefit from advancements in fields such as materials science, computer engineering, big data, optics, chemical engineering, and chip design, among others.
- Given their significance in sectors like defense and automotive industries, semiconductors have become focal points of geopolitical interest. Countries vie to establish semiconductor fabrication facilities domestically, offering various incentives to attract industry leaders. Notably, the United States has imposed sanctions on Chinese technology companies, including bans on acquiring advanced ASML equipment and high-end design software, citing similar reasons.
- In response, China has intensified efforts to bolster its domestic semiconductor production capabilities to meet internal demand.
- India, on the other hand, has been leveraging its expertise in design to establish semiconductor manufacturing plants domestically. It is hoped that this strategic initiative, coupled with the potential for continued innovation and collaboration, will enhance India's position in the semiconductor industry
For Prelims: Semiconductor, intellectual property rights, India Semiconductor Mission, Semicon India Program
For Mains:
1. Discuss the potential of India's semiconductor industry to reduce the country's dependence on imported chips and contribute to the "Make in India" initiative. (250 Words)
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MINIMUM SUPPORT PRICE
1. Context
A day after steep 50 per cent US tariffs came into effect that has raised concerns of job losses in the textile industry, the Finance Ministry on Thursday extended the exemption on cotton import duty till December 31, a move that would help the Indian textile industry place long-term cotton import orders.
2. What is the Minimum Support Price (MSP)?
- MSP is the minimum price a farmer must pay for their food grains as guaranteed by the government. They are recommended by the Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs.
- The CACP submits its recommendations to the government in the form of Price Policy Reports every year.
- After considering the report and views of the state governments and also keeping in view the overall demand and supply situation in the country, the central government takes the final decision.
- The Food Corporation of India (FCI) is the nodal agency for procurement along with State agencies, at the beginning of the sowing season.
- 7 cereals (paddy, wheat, maize, bajra, jowar, ragi, and barley)
- 5 pulses (chana, tur/arhar, moong, urad, and Masur)
- 7 oilseeds (rapeseed-mustard, groundnut, soya bean, sunflower, sesamum, safflower, and Enigerseed) and
- 4 commercial crops (sugarcane, cotton, copra, and raw jute).
3. How MSP is Calculated?
- MSP, presently, is based on a formula of 1.5 times the production costs.
- The CACP projects three kinds of production costs for every crop, both at state and all-India average levels.
- A2 covers all paid-out costs directly incurred by the farmer — in cash and kind — on seeds, fertilizers, pesticides, hired labour, leased-in land, fuel, irrigation, etc.
- A2+FL includes A2 plus an imputed value of unpaid family labour.
- C2: Estimated land rent and the cost of interest on the money taken for farming are added to A2 and FL.
- Farm unions are demanding that a comprehensive cost calculation (C2) must also include capital assets and the rentals and interest forgone on owned land, as recommended by the National Commission for Farmers.
4. The issue with the calculation of MSP
- To calculate MSP, the government uses A2+FL cost. The criticism of A2+FL is that it doesn’t cover all costs and that a more representative measure, C2, needs to be used.
- For example, in the 2017-18 rabi season, CACP data shows that C2 for wheat was 54% higher than A2+FL.
- The Swaminathan Commission also stated that the MSP should be based on the comprehensive cost of production, which is the C2 method.
5. Key Points about the Farmer's Demand
- After the recent decision to repeal three contentious farm laws, protesting farmer unions are now pressing for their demand of the legalization of the Minimum Support Price (MSP).
- They want a legal guarantee for the MSP, which at present is just an indicative or a desired price.
- Legalising MSPs would put the government under a legal obligation to buy every grain of the crops for which MSPs have been announced.
- At present, the PM has announced the formation of a committee to make MSP more transparent, as well as to change crop patterns and to promote zero-budget agriculture which would reduce the cost of production.
- The entire issue of enforcing MSP legally is a tricky, complicated, and multidimensional one, involving lots of factors.
- Core demand: MSP based on a C2+50% formula should be made a legal entitlement for all agricultural produce. This would mean a 34% increase in the latest MSP for paddy and a 13% increase for wheat. MSP should also be extended to fruit and vegetable farmers who have been excluded from benefits so far.
6. The rationale behind the demand for legislation of MSP
- Farmers receive less than MSP: In most crops grown across much of India, the prices received by farmers, especially during harvest time, are well below the officially declared MSPs. And since MSPs have no statutory backing, they cannot demand these as a matter of right.
- Limited procurement by the Govt: Also, the actual procurement at MSP by the Govt. is confined to only about a third of wheat and rice crops (of which half is bought in Punjab and Haryana alone), and 10%-20% of select pulses and oilseeds. According to the Shanta Kumar Committee’s 2015 report, only 6% of the farm households sell wheat and rice to the government at the MSP rates.
7. Challenges associated with MSP
- Protest by Farmers: Farm unions have been protesting for more than six months on Delhi's outskirts, demanding legislation to guarantee MSP for all farmers for all crops and a repeal of three contentious farm reform laws.
- MSP and Inflation: When announcing the MSP, inflation should be taken into account. But often the price is not increased up to the mark. For example, this time MSP for Maize has not even considered inflation then how it will benefit farmers! Also, frequent increases in the MSPs can lead to inflation too.
- High Input Costs: The input costs have been rising faster than sale prices, squeezing the meagre income of the small farmers and driving them into debt.
- Lack of Mechanism: No mechanism guarantees that every farmer can get at least the MSP as the floor price in the market. So proper mechanisms need to be fixed for all times to come.
- Restriction in Europe: Even after producing surplus grains, every year a huge portion of these grains gets rotten. This is due to the restrictions under WTO norms, that grain stocks with the FCI (being heavily subsidized due to MSP) cannot be exported.
For Prelims: Minimum Support Price, Rabi Crops, WTO, Commission for Agricultural Costs and Prices (CACP), Cabinet Committee on Economic Affairs, Food Corporation of India
For Mains:
1. Explain the concept of Minimum Support Price (MSP) in India. How is MSP determined, and what is its role in ensuring fair prices for agricultural produce? (250 Words)
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Previous Year Questions
1. Consider the following statements: (UPSC CSE 2020)
1. In the case of all cereals, pulses, and oil seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.
2. In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2
Answer: D
2. Which of the following factors/policies were affecting the price of rice in India in the recent past? (UPSC CSE, 2020)
(1) Minimum Support Price (2) Government’s trading (3) Government’s stockpiling (4) Consumer subsidies Select the correct answer using the code given below: (a) 1, 2 and 4 only (b) 1, 3 and 4 only (c) 2 and 3 only (d) 1, 2, 3 and 4 Answer: D
3. In India, which of the following can be considered as public investment in agriculture? (UPSC GS1, 2020)
(1) Fixing Minimum Support Price for agricultural produce of all crops (2) Computerization of Primary Agricultural Credit Societies (3) Social Capital development (4) Free electricity supply to farmers (5) Waiver of agricultural loans by the banking system (6) Setting up of cold storage facilities by the governments. In India, which of the following can be considered as public investment in agriculture? Select the correct answer using the code given below: (a) 1, 2 and 5 only (b) 1, 3, 4 and 5 only (c) 2, 3 and 6 only (d) 1, 2, 3, 4, 5 and 6 Answer: C
4. The Fair and Remunerative Price (FRP) of sugarcane is approved by the (UPSC CSE, 2015)
(a) Cabinet Committee on Economic Affairs (b) Commission for Agricultural Costs and Prices (c) Directorate of Marketing and Inspection, Ministry of Agriculture (d) Agricultural Produce Market Committee Answer: A
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