ANTI DUMPING DUTY
An anti-dumping duty (ADD) is a protectionist tariff imposed by a government on imported goods that are sold below their fair market value, a practice known as "dumping." Dumping occurs when a foreign company exports a product at a price lower than what it charges in its domestic market or below its production cost, potentially harming the importing country’s domestic industries. The duty aims to level the playing field by offsetting this price difference, protecting local businesses from unfair competition.
- Legal Basis: Governed internationally by the World Trade Organization (WTO) under the Agreement on Implementation of Article VI of GATT 1994 (Anti-Dumping Agreement). It allows countries to impose ADD if dumping causes or threatens "material injury" to domestic industries.
- Process:
- A domestic industry files a complaint.
- An investigation assesses dumping margins (export price vs. normal value), injury, and causality.
- If confirmed, the government imposes a duty, typically calculated as the difference between the export price and the "normal value" (domestic price or cost-plus-profit in the exporting country)
Countervailing duties (CVDs) are tariffs imposed by a government on imported goods to counteract subsidies provided by the exporting country’s government to its producers or exporters. These subsidies—such as tax breaks, grants, or low-interest loans—can artificially lower the price of exported goods, giving them an unfair advantage in the importing country’s market. CVDs aim to neutralize this advantage, protecting domestic industries from subsidized foreign competition.
- Legal Basis: Governed by the World Trade Organization (WTO) under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), part of GATT 1994. Countries can impose CVDs if subsidies cause or threaten "material injury" to their domestic industries.
- Process:
- A domestic industry files a complaint with evidence of subsidies and injury.
- An investigation confirms the subsidy’s existence, calculates its value (subsidy margin), and assesses harm.
- If proven, a duty is levied, typically equal to the subsidy amount, to raise the import price to a fair level.
| Aspect | Countervailing Duties (CVDs) | Anti-Dumping Duties (ADDs) |
|---|---|---|
| Purpose | Counteract foreign government subsidies | Counteract dumping by foreign companies |
| Target | Government subsidies | Private companies selling below fair value |
| Legal Basis | WTO SCM Agreement | WTO Anti-Dumping Agreement |
| Investigation Focus | Subsidies and their impact | Dumping and its impact |
| Calculation | Based on subsidy amount | Based on price difference |
| Example | Solar panels subsidized by a foreign government | Steel sold below home market price |
The World Trade Organization (WTO) is an international body that regulates and facilitates global trade among its member nations. Established on January 1, 1995, under the Marrakesh Agreement, it succeeded the General Agreement on Tariffs and Trade (GATT), which began in 1948. Headquartered in Geneva, Switzerland, the WTO provides a framework for negotiating trade agreements, resolving disputes, and promoting free and fair trade. As of March 2025, it has 164 member countries, representing over 98% of global trade, with India as a founding member since 1995.
Key Functions of the WTO
- The WTO oversees the implementation and operation of multilateral trade agreements negotiated by its member countries. These agreements cover goods, services, and intellectual property
- The WTO serves as a platform for member countries to negotiate trade liberalization and resolve trade-related issues. Notable negotiations include the Doha Round, which focuses on development and reducing trade barriers
- The WTO provides a structured process for resolving trade disputes between member countries. Its dispute settlement mechanism is binding and aims to ensure that trade rules are followed
- The WTO conducts regular reviews of member countries' trade policies and practices to ensure transparency and adherence to global trade rules
- The WTO provides support to developing and least-developed countries to help them integrate into the global trading system and comply with WTO rules
- The WTO collaborates with organizations like the International Monetary Fund (IMF) and the World Bank to ensure coherence in global economic policy-making
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For Prelims: World Trade Organisation (WTO), Anti Dumping duty
For Mains: GS III - Economy
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CYBER SLAVERY
2. About ‘Cyber Slavery’
"Cyber slavery" refers to the exploitation and control of individuals or groups through digital means. This can involve various forms of coercion, manipulation, or force facilitated by technology, often for economic gain, power, or personal gratification. Cyber slavery can take different forms, including but not limited to
- The use of the internet and digital platforms to recruit, advertise, and exploit individuals for forced labour or sexual exploitation.
- Online Exploitation includes situations where individuals are coerced or manipulated into performing certain actions online, such as producing and distributing explicit content, engaging in fraudulent activities, or participating in cybercrime networks.
- Cyber slavery may involve exploiting individuals by threatening them with exposure to sensitive information, blackmail, or other forms of online coercion.
- Some individuals may be forced into digital labour, such as repetitive tasks, content creation, or online scams, often without fair compensation or under conditions of coercion.
3. Reasons for Indians being trapped in Cambodia
Reports indicate a significant number of Indians, estimates ranging up to 5,000, are trapped in Cambodia under forced cyber fraud schemes.
- They are lured by fake job advertisements promising high-paying data entry positions.
- False Promises These scams target people looking for work, especially those from Southern India.
- Once in Cambodia, their passports or travel documents are taken away, restricting their movement.
- They are then pressured or coerced into committing cybercrimes like scamming people in India over the internet.
4. The steps taken by the Government of India
The Government of India has taken multiple steps to address the issue of Indians trapped in Cambodia through cyber scams.
- The Ministry of External Affairs (MEA) works closely with the Indian embassy in Cambodia to identify and rescue victims. This involves coordinating with Cambodian authorities and local NGOs.
- Southern Indian states like Tamil Nadu have special departments like the Commissionerate of Rehabilitation and Welfare of Non-Resident Tamils, which work with the MEA to rescue their citizens and provide them with reintegration support upon return.
- There are efforts to raise awareness about fake job scams, particularly targeting vulnerable populations seeking employment.
- The situation likely involves cooperation between the MEA, Ministry of Home Affairs, and law enforcement agencies to dismantle these criminal networks.
5. The Need for Cyber Security
Cybersecurity is essential in today's world for a variety of reasons.
- Our personal information, financial data, and even intellectual property are increasingly stored online. Strong cybersecurity safeguards this information from being stolen by hackers and cybercriminals.
- Cyberattacks can disrupt critical infrastructure and services, causing financial losses and chaos. Cybersecurity helps prevent these attacks and keeps things running smoothly.
- In a world obsessed with online sharing, cybersecurity protects our privacy by preventing unauthorized access to our personal data and communications.
- Cybersecurity is vital for businesses of all sizes. Data breaches can damage a company's reputation, lead to financial penalties, and erode customer trust. Strong cybersecurity helps businesses avoid these costly pitfalls.
- We all rely on the Internet for banking, communication, and even healthcare. Cybersecurity protects us from online scams, phishing attacks, and malware that can steal our personal information or damage our devices.
6. Global Cybersecurity Index (GCI)
The Global Cybersecurity Index (GCI) is an important tool for understanding a country's commitment to cybersecurity. It's an initiative of the International Telecommunication Union (ITU), a specialized agency of the United Nations that focuses on Information and Communication Technologies (ICTs). It acts as a trusted reference point, measuring a nation's cybersecurity efforts on a global scale. The goal is to raise awareness of the importance of cybersecurity and its various aspects.
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- Laws and regulations in place to address cybercrime and promote cybersecurity practices.
- Technical infrastructure and tools a country has to prevent cyberattacks and protect its networks.
- The government's commitment to cybersecurity through dedicated agencies and policies.
- Programs to educate and train the workforce on cybersecurity best practices.
- A country's willingness to collaborate with other nations and international organizations on cybersecurity issues.
7. The difference between cyber slavery and cyber fraud
| Feature | Cyber Slavery | Cyber Fraud |
| Definition | Exploitation and control of individuals/groups through digital means, often for economic gain, coercion, or manipulation | Deceptive activities online with intent to gain unauthorized access, steal information, or obtain financial benefits through fraudulent means |
| Examples | Human trafficking, forced labor in digital environments, online exploitation of vulnerable individuals | Phishing attacks, identity theft, online scams, financial fraud, unauthorized access to accounts/systems |
| Characteristics | Involves coercion, manipulation, and abuse using technology; not solely focused on financial gain | Deceptive practices aimed at tricking victims for financial gain or other malicious purposes |
| Motivation | Economic gain, coercion, manipulation | Financial gain, unauthorized access, information theft |
| Focus | Exploitation and control of individuals | Deception and fraud for financial or malicious purposes |
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For Prelims: Cyber Slavery, Cyber fraud, Global Cybersecurity index, Ministry of External Affairs
For Mains:
1. Cyber slavery has emerged as a major threat in the digital age. Critically analyze the reasons why Indians are particularly vulnerable to such schemes, and suggest measures to be taken by the Government of India to prevent such situations. (250 words)
2. Many young Indians fall prey to cyber slavery due to a lack of job opportunities. Critically analyze the ethical implications of such situations and suggest the role of civil society in promoting digital literacy and awareness. (250 words)
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Previous Year Questions
1.In India, under cyber insurance for individuals, which of the following benefits are generally covered, in addition to payment for the loss of funds and other benefits? (UPSC 2020)
1. Cost of restoration of the computer system in case of malware disrupting access to one's computer
2. Cost of a new computer if some miscreant wilfully damages it, if proved so
3. Cost of hiring a specialized consultant to minimize the loss in case of cyber extortion
4. Cost of defence in the Court of Law if any third party files a suit
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
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OBESITY
Causes of Obesity:
- Unhealthy Diet – High-calorie, processed foods with excess sugar and fats.
- Lack of Physical Activity – Sedentary lifestyle with minimal exercise.
- Genetics – Family history and inherited traits can influence body weight.
- Medical Conditions & Medications – Hormonal imbalances (e.g., hypothyroidism, PCOS) and certain drugs (e.g., steroids, antidepressants) may contribute.
- Psychological Factors – Stress, emotional eating, and mental health disorders.
- Sleep Deprivation – Poor sleep patterns can disrupt metabolism and increase appetite
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By 2050, more than half of the global adult population and a third of children and adolescents are expected to be overweight or obese. The report indicates that, compared to 1990, obesity rates worldwide have surged by 155.1% in males and 104.9% in females.
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A particularly concerning trend is the sharp rise in obesity among older adolescents, specifically those aged 15 to 24. Among young men, the number of overweight or obese individuals increased from 0.4 crore in 1990 to 1.68 crore in 2021, with projections reaching 2.27 crore by 2050. Similarly, for young women, this figure rose from 0.33 crore in 1990 to 1.3 crore in 2021, and is expected to reach 1.69 crore by 2050.
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The report estimates that by 2050, India will have 21.8 crore overweight or obese men and 23.1 crore women, bringing the total to 44.9 crore—nearly one-third of the country’s projected population.
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The prevalence of overweight and obesity among boys in India increased from 0.46 crore in 1990 to 1.3 crore in 2021, with a projected rise to 1.6 crore by 2050. For girls, this number grew from 0.45 crore in 1990 to 1.24 crore in 2021, and is expected to reach 1.44 crore by 2050.
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These findings are particularly alarming given India's already high burden of non-communicable diseases (NCDs) such as heart disease, strokes, and diabetes. Obesity significantly contributes to these conditions and is a key factor in the early onset of Type 2 diabetes, even among teenagers
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Indian Scenario
As per the National Family Health Survey (NFHS)-5 (2019-21), 24% of women and 23% of men in India are classified as overweight or obese. Additionally, 56.7% of women and 47.7% of men have a high-risk waist-to-hip ratio, which is a key indicator of obesity-related health risks. Among individuals aged 15-49 years, obesity affects 6.4% of women and 4.0% of men. The prevalence of overweight children under the age of five (based on weight-for-height measurements) has also risen at the national level, increasing from 2.1% in NFHS-4 (2015-16) to 3.4% in NFHS-5 (2019-21) |
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A major factor contributing to the rising obesity epidemic is the increased consumption of processed foods that are high in salt, sugar, and fat. According to the study, between 2009 and 2019, countries like Cameroon, India, and Vietnam recorded the highest annual growth in per capita sales of ultra-processed food and beverages.
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There has been a noticeable shift away from traditional diets and active lifestyles. Traditional diets were generally low in animal products, salt, refined oils, sugars, and flours, whereas modern dietary patterns are high in energy but low in essential nutrients. These new eating habits consist largely of refined carbohydrates, high-fat foods, processed meats, and packaged foods.
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Urbanization has further contributed to decreasing physical activity, with longer commutes, desk jobs, and sedentary lifestyles becoming more common. This shift has also led to increased work-related stress, poor sleep, and mental health issues, all of which are linked to obesity.
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The study also highlighted the rising obesity rates among women. Several factors contribute to this trend, including traditional societal roles, lack of time for physical activity, limited access to nutritious food, and dietary practices that prioritize the needs of other family members over their own. Additionally, many women have restricted access to healthcare and obesity awareness programs, making it even more challenging to address the issue effectively
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The World Health Organization (WHO) defines obesity as an abnormal or excessive accumulation of body fat that increases health risks. According to Body Mass Index (BMI) classifications, individuals with a BMI below 18.5 are considered underweight, those between 18.5 and 24.9 fall within the normal range, individuals with a BMI of 25 to 29.9 are classified as overweight, and those with a BMI above 30 are categorized as obese.
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However, relying solely on BMI to diagnose obesity can lead to both overestimation and underestimation. Some individuals with excess body fat may not have a BMI exceeding 30 but still face obesity-related health issues.
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Conversely, people with high muscle mass may have a BMI over 30 while being physically fit and not requiring medical intervention. In India, many individuals with BMI below 30 still carry abdominal fat, which can negatively impact organ function.
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A recent Lancet Diabetes & Endocrinology Commission report introduced a broader definition of obesity, incorporating factors such as height, weight, waist circumference, muscle mass, and organ function rather than relying solely on BMI.
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The new definition eliminates the overweight category and introduces "preclinical obesity", which is described as a physical condition rather than a disease. The Commission explains that, in some individuals, preclinical obesity may progress to clinical obesity, whereas in others, it may not directly impair organ function.
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In India, obesity is categorized differently, using the terms "stage 1" and "stage 2" obesity instead of preclinical and clinical obesity.
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Under Indian guidelines, stage 1 obesity is diagnosed when an individual has a BMI over 23—with waist circumference and waist-to-height ratio being optional criteria—but does not exhibit functional limitations or obesity-related chronic conditions.
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Stage 2 obesity, according to Indian criteria, is diagnosed when a person has a BMI above 23, meets at least one additional physical marker of obesity (such as waist circumference or waist-to-height ratio), and experiences obesity-related complications or limitations in daily activities
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For Prelims: Body Mass Index (BMI), Obesity
For Mains: GS III - Science & Technology
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H-1B VISA
1. Context
The United States has recently made significant changes to its H-1B visa program, prioritizing higher wages and skills when selecting candidates instead of the previous lottery system.
2. The Genesis of H-1B Work Visas
- In 1952, as the United States expanded its presence in science, technology, engineering, and mathematics (STEM) fields, it sought skilled workers to drive innovation at reasonable costs.
- This led to the introduction of the H-1 work visa system, which includes H-1B, H-2B, L1, O1, and E1 visas, tailored to specific qualifications and job categories.
- Among these, the H-1B visa emerged as the most popular due to its relatively better wage prospects.
- H-1B visas are for temporary workers in speciality occupations, which are defined as those requiring theoretical and technical expertise in a specific field, such as engineering, mathematics, science, or medicine.
- H-1B workers must have a bachelor's degree or equivalent in their field, and their employer must obtain a Labor Condition Application (LCA) from the US Department of Labor (DOL).
3. Globalization of STEM Graduates
- With the proliferation of the Internet and affordable computers in developing nations like India, China, and Pakistan, a surge of STEM graduates emerged.
- These graduates, facing a scarcity of job opportunities in their home countries, were eager to work in the United States at competitive wages.
- This symbiotic arrangement benefited both employers and employees, making H-1B work visas highly sought-after.
- The H-1B visa system has undergone numerous revisions to accommodate or restrict the entry of skilled workers, depending on the U.S. economic climate.
- However, it has also faced criticism for potentially displacing domestic workers with lower-cost foreign labour.
4. The Old Lottery System
- Previously, the U.S. administration annually issued 85,000 H-1B work permits, with 65,000 allocated for individuals in speciality occupations and the remainder for foreign workers with advanced U.S. degrees.
- Employers seeking H-1B hires submitted registration forms with employee details, including job nature, offered wages, and education levels.
- Due to an overwhelming number of applications, a random lottery determined the selection for the 65,000 speciality occupation visas, followed by the 20,000 advanced degree exemption visas. This lottery system disregarded wage levels, skills, or employer needs.
5. The New Wage-Based H-1B Visa Regime
In the latest development, the H-1B visa selection process has shifted toward a wage-based model that prioritizes certain criteria.
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Wage Prioritization: The new regime gives priority to applications from employers offering a "proffered wage" that equals or exceeds the prevailing wage level in the area of employment. The proffered wage is the salary the employer intends to pay the visa beneficiary. This rule applies to both the 65,000 regular visas and the 20,000 advanced degree exemption visas.
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Skill Assessment: Additionally, the system considers the skill set of the prospective worker and evaluates whether similar skills are available among U.S. workers at a comparable cost.
6. H-2B, L1, O1, and E1 visas
H-2B, L1, O1, and E1 visas are all nonimmigrant visas that allow foreign nationals to work in the United States. Each visa type has its own specific eligibility requirements and purpose.
- H-2B visas are for temporary nonagricultural workers who perform jobs that are seasonal or temporary and for which there is a shortage of US workers. H-2B workers are typically employed in industries such as landscaping, hospitality, and construction.
- L1 visas are for intracompany transferees, which are employees of a foreign company who are being transferred to a related US company. L1 workers must have a managerial or executive position in a foreign company and must have worked for the company for at least one year in the past three years.
- O1 visas are for individuals with extraordinary ability in the arts, sciences, education, business, or athletics. O1 visa holders must have demonstrated extraordinary achievement in their field and must be coming to the US to work in their field of expertise.
- E1 visas are for treaty traders, which are nationals of a country with which the US has a treaty of commerce and navigation. E1 visa holders must be coming to the US to trade in goods or services between the US and their home country.
7. The Way Forward
- The shift from the lottery-based selection system to a wage-based regime marks a significant change in the H-1B work visa program.
- This adjustment aims to align the visa allocation process with market-driven factors such as wages and skill sets, potentially mitigating concerns about undercutting domestic employment opportunities.
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For Prelims: H-1B visa, United States, U.S. Citizenship and Immigration Services, STEM fields, lottery system,
For Mains:
1. What are the implications of the new H-1B visa regime for US-India relations?
Discuss the measures can the Indian government take to support Indian IT workers affected by the new H-1B visa regime. (250 Words)
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Previous Year Questions
1. Consider the following statements: (UPSC 2019)
1. Coal sector was nationalized by the Government of India under Indira Gandhi.
2. Now, coal blocks are allocated on lottery basis.
3. Till recently, India imported coal to meet the shortages of domestic supply, but now India is self-sufficient in coal production.
Which of the statements given above is/are correct?
A. 1 only B. 2 and 3 only C. 3 only D. 1, 2 and 3
Answer: A
2. Which of the following statements about town planning in British India in early 19th century is/are correct? (UPSC CAPF 2018)
1. The funds for town improvement were also raised through public lotteries.
2. The threats of epidemics gave an impetus to town planning in the early decades of 19th century.
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: C
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INCOME INEQUALITY
- Inequality refers to the unequal distribution of resources, opportunities, rights, and privileges among individuals or groups within a society or between different societies.
- It can manifest in various forms, such as economic inequality (disparities in income, wealth, and access to resources), social inequality (unequal treatment based on factors like race, gender, ethnicity, religion, or disability), and political inequality (unequal access to political power and decision-making processes).
- Inequality can have significant social, economic, and political implications. It can lead to social unrest, hinder economic growth, limit opportunities for social mobility, and perpetuate cycles of poverty and exclusion.
- Addressing inequality often involves policies and actions aimed at promoting equal opportunities, reducing disparities, and ensuring fairness and justice in various aspects of society.
3. About Income Inequality
- Income inequality refers to the unequal distribution of income among individuals or households within a society or geographic area.
- It is often measured using statistical tools such as the Gini coefficient, which quantifies the extent of income inequality within a population.
- Income inequality can manifest in different ways, including variations in wages, salaries, bonuses, investment income, and other sources of earnings.
- Key factors contributing to income inequality include differences in education, skills, employment opportunities, discrimination, technological advancements, globalization, tax policies, and social welfare programs.
- These factors can create disparities in income levels between different socioeconomic groups, such as high-income earners, middle-income earners, and low-income earners.
- Income inequality can have wide-ranging social and economic consequences. It can lead to disparities in living standards, access to education and healthcare, social mobility, and overall quality of life.
- Excessive income inequality may also contribute to social tensions, political instability, and reduced economic growth potential.
- Governments, policymakers, and organizations often implement various strategies to address income inequality, such as progressive taxation, minimum wage laws, social safety nets, education and training programs, labour market reforms, and initiatives to promote inclusive economic growth.
- These efforts aim to create a more equitable distribution of income and improve overall societal well-being.
4. How to measure income inequality?
Income inequality can be measured using several statistical methods and indices.
- Gini Coefficient: The Gini coefficient is a widely used measure of income inequality. It ranges from 0 to 1, where 0 represents perfect equality (everyone has the same income) and 1 represents perfect inequality (one person has all the income). A higher Gini coefficient indicates greater income inequality. The Gini coefficient is calculated based on the Lorenz curve, which plots the cumulative income distribution against the cumulative population.
- Income Quintile Ratios: This measure compares the income of households in the highest income quintile (top 20%) to the income of households in the lowest income quintile (bottom 20%). A higher ratio indicates greater income inequality between the top and bottom income groups.
- Palma Ratio: The Palma ratio compares the income share of the top 10% of the population to the income share of the bottom 40%. It focuses on the relative income concentration at the top and bottom ends of the income distribution.
- Theil Index: The Theil index is another measure of income inequality that considers both within-group inequality and between-group inequality. It is based on the concept of entropy from information theory and can be decomposed into two components: the inequality within groups and the inequality between groups.
- Percentile Ratios: Percentile ratios compare the income of households at different percentiles of the income distribution. For example, the ratio of the 90th percentile income to the 10th percentile income can provide insights into the income gap between higher and lower earners.
- Decomposition Analysis: This method breaks down income inequality into various components, such as differences in earnings, capital income, government transfers, and taxes. It helps identify the factors contributing to income inequality within a population.
5. India’s inequality trends
India's inequality trends are concerning, with a widening gap between rich and poor.
Rising Inequality
- Decades of decline in inequality post-independence reversed in the 1980s.
- Since then, the share of income and wealth going to the top 1% has been steadily increasing, reaching record highs in recent years.
- The World Inequality Lab reports that by 2022-23, the top 1% held a staggering 22.6% of national income, among the highest in the world.
Extreme Concentration
- The wealthiest 10% of the population controls a massive portion of the national wealth, estimated at around 77%.
- This means the bottom 50% of the population struggles to scrape together just a tiny fraction (around 4%) of the wealth.
Limited Mobility
- While some economic mobility exists, many who escape poverty remain vulnerable.
- Intergenerational mobility, meaning the ability of children to achieve a higher economic status than their parents, is also low, suggesting limited opportunities for many.
These trends have serious implications for social justice, economic stability, and overall development.
6. The causes of rising inequality in India
The rising inequality in India can be attributed to a combination of economic, social, and policy factors.
- Economic Reforms and Globalization: The economic reforms initiated in the early 1990s, which opened up the Indian economy to globalization and liberalization, led to rapid economic growth. However, this growth was not evenly distributed across sectors and regions, resulting in widening income gaps between different segments of society.
- Urban-Rural Divide: There exists a significant disparity between urban and rural areas in terms of income, opportunities, infrastructure, and access to basic services. Urban areas, especially metropolitan cities and industrial hubs tend to attract more investment and offer higher-paying jobs, leading to a widening urban-rural income gap.
- Sectoral Disparities: Certain sectors of the economy, such as information technology, finance, and services, have experienced robust growth and generated wealth for a relatively small segment of the population, contributing to income concentration. Meanwhile, sectors like agriculture, which employ a large portion of the workforce, have faced challenges such as low productivity, inadequate infrastructure, and income volatility.
- Education and Skills Gap: Disparities in education and skills development contribute to income inequality. Individuals with higher levels of education, specialized skills, and access to quality education opportunities are more likely to secure well-paying jobs and participate in sectors with higher growth prospects.
- Gender Inequality: Gender disparities in education, employment, and wages contribute significantly to income inequality. Women often face barriers to accessing education and employment opportunities, receive lower wages for similar work compared to men, and are underrepresented in leadership positions and high-paying sectors.
- Informal Economy: A significant portion of India's workforce is engaged in the informal economy, which includes activities such as agriculture, small-scale enterprises, and informal labour. Informal workers often lack job security, social protection, and access to formal financial services, leading to income instability and vulnerability.
- Wealth Concentration and Corruption: The concentration of wealth among a small elite, including wealthy individuals, corporate entities, and influential groups, contributes to income inequality. Issues such as corruption, crony capitalism, and rent-seeking behaviour can exacerbate wealth disparities and hinder equitable economic opportunities for all segments of society.
- Social and Caste Factors: India's social structure, including caste-based discrimination and inequalities, also plays a role in income disparities. Historically marginalized communities, such as Scheduled Castes (Dalits) and Scheduled Tribes (Adivasis), often face socio-economic barriers that limit their access to education, employment, and resources.
7. The poor and rich gap in India
The wealth gap between rich and poor in India is vast and has been growing wider in recent years.
Wealth Concentration
- The richest 1% of the population controls a staggering share of the wealth, estimated to be around 40%.
- In contrast, the bottom 50% of the population owns a minuscule portion, around 3% of the total wealth.
Income Distribution
- The top 10% of earners corner a significant share of the national income, around 77%.
- This means a large portion of the population struggles to make ends meet with a much smaller share.
- Reports suggest the top 1% hold a concerningly high share of income, reaching over 22% in recent years.
8. Inclusive growth
- Inclusive growth refers to a type of economic development that aims to ensure that the benefits of growth and prosperity are widely shared across different segments of society, particularly targeting marginalized and vulnerable groups.
- It emphasizes creating opportunities for all individuals to participate in and benefit from economic progress, regardless of their background, social status, or location.
- Inclusive growth goes beyond mere economic expansion and focuses on reducing disparities, promoting social inclusion, and enhancing overall well-being and quality of life for everyone.
The steps are taken to Promote inclusive growth in India
Promoting inclusive growth in India requires a comprehensive approach involving various policies, programs, and initiatives across different sectors.
- Social Welfare Programs: The Indian government has implemented several social welfare programs aimed at providing support and assistance to vulnerable and marginalized populations. Examples include the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) for rural employment generation, the National Food Security Act for food distribution to low-income households, and various housing schemes for the homeless and economically weaker sections.
- Financial Inclusion: Initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) have been launched to promote financial inclusion by providing access to banking services, savings accounts, insurance, and credit facilities to individuals in rural and urban areas who were previously excluded from the formal financial system.
- Education and Skill Development: Programs like the Sarva Shiksha Abhiyan (SSA) and the Skill India initiative aim to improve access to quality education and vocational training, especially for disadvantaged groups and rural communities. These initiatives focus on enhancing employability and fostering entrepreneurship among youth and adults.
- Healthcare Reforms: The government has prioritized healthcare reforms to improve access to affordable and quality healthcare services, especially in rural and underserved areas. Initiatives such as the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PMJAY) provide health insurance coverage to economically vulnerable families for hospitalization expenses.
- Rural Development: Schemes like the Pradhan Mantri Gram Sadak Yojana (PMGSY) aim to improve rural connectivity by constructing and upgrading roads, bridges, and transport infrastructure, which facilitates access to markets, education, healthcare, and employment opportunities in rural areas.
- Affordable Housing: The government has launched schemes like the Pradhan Mantri Awas Yojana (PMAY) to promote affordable housing for economically weaker sections, lower-income groups, and rural households. These initiatives aim to address housing shortages and improve living conditions for marginalized communities.
- Entrepreneurship and Small Business Support: Programs such as Startup India and the Stand-Up India scheme focus on promoting entrepreneurship among women, SC/ST (Scheduled Castes/Scheduled Tribes) entrepreneurs, and individuals from backward regions by providing financial assistance, mentorship, training, and market access.
- Digital Inclusion: Initiatives like Digital India aim to bridge the digital divide by promoting digital literacy, expanding internet connectivity, and leveraging technology for delivering government services, financial transactions, education, healthcare, and e-commerce opportunities to remote and rural areas.
- Environmental Sustainability: Efforts are being made to integrate environmental sustainability into development policies and practices, including renewable energy initiatives, sustainable agriculture practices, conservation of natural resources, and climate change mitigation and adaptation strategies.
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For Prelims: inequality, Income inequality, inclusive growth
For Mains:
1. Critically evaluate the evidence of rising income inequality in India. What are the major factors contributing to this trend? Discuss the social and economic implications of such inequality. (250 words)
2. What are the challenges faced in promoting inclusive growth in India? Suggest a multi-pronged strategy to address these challenges and achieve equitable development. (250 words)
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Previous Year Questions
1. Given below are two statements, one is labeled as Assertion (A) and the other as Reason (R). (UPPSC 2019)
Assertion (A): The labour force participation rate is falling sharply in recent years for females in India.
Reason (R): The decline in labour force participation rate is due to improved family income and an increase in education.
Select the correct answer from the codes given below:
Codes:
A. Both (A) and (R) are true and (R) is the correct explanation of (A)
B. Both (A) and (R) are true and (R) is not the correct explanation of (A)
C. (A) is true, but (R) is false
D. (A) is false, but (R) is true
2. Which of the following statements about the employment situation in India according to the periodic Labour Force Survey 2017-18 is/are correct? (UPSC CAPF 2020)
1. Construction sector gave employment to nearly one-tenth of the urban male workforce in India
2. Nearly one-fourth of urban female workers in India were working in the manufacturing sector
3. One-fourth of rural female workers in India were engaged in the agriculture sector
Select the correct answer using the code given below:
A. 2 only B. 1 and 2 only C. 1 and 3 only D. 1, 2 and 3
3. Disguised unemployment generally means (UPSC 2013)
(a) large number of people remain unemployed
4. Assertion (A): Workers - population ratio in India is low in contrast to that in developed countries. Reason (R): Rapid growth of population, low female worker population rate and omission of unpaid family workers lead to low worker-population ratio. Choose the correct answer: (Telangana Police SI Mains 2018) A. (A) is true, but (R) is false.
B. (A) is false, but (R) is true.
C. Both (A) and (R) are true, but (R) is not a correct explanation of (A).
D. Both (A) and (R) are true, but (R) is the correct explanation of (A).
Answers: 1-C, 2-B, 3-C, 4-D Mains 1. Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (UPSC 2023) |
FOREIGN EXCHANGE MANAGEMENT ACT (FEMA)
The ruling camp in Kerala on Monday came down heavily on the Bharatiya Janata Party (BJP) and the Enforcement Directorate (ED) after the agency issued a show-cause notice to Chief Minister Pinarayi Vijayan over alleged Foreign Exchange Management Act (FEMA) violations
2.Foreign Exchange Management Act(FEMA)
The Foreign Exchange Management Act (FEMA) is an important piece of legislation in India that governs foreign exchange and payments.
Here is an overview of FEMA and its history:
FEMA replaced the Foreign Exchange Regulation Act (FERA) of 1973. FERA was considered stringent and primarily aimed at controlling and regulating foreign exchange in India. However, it was felt that the economic environment required a more liberalized and contemporary approach
FEMA was introduced in 1999 to replace FERA, aligning with the economic reforms and liberalization measures undertaken by the Indian government in the early 1990s. The primary objective was to promote external trade and payments and to facilitate foreign investment in India.
3.Key Features of FEMA
- FEMA brought about a more liberalized approach compared to its predecessor. It aimed to simplify and rationalize foreign exchange management, making it more conducive for foreign trade and investment
- FEMA distinguishes between current account transactions (related to trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements)
- FEMA provides a comprehensive regulatory framework for foreign exchange transactions and seeks to manage and regulate various aspects, including dealings in foreign exchange, export and import of currency, and opening and maintenance of foreign currency accounts
- The act empowers the Reserve Bank of India (RBI) to regulate foreign exchange transactions. It also prescribes penalties for contravention of its provisions to ensure compliance.
- FEMA establishes adjudicating authorities to hear cases related to violations. It also provides for the establishment of the Foreign Exchange Appellate Tribunal to hear appeals against the orders of the adjudicating authorities
- Since its enactment, FEMA has undergone several amendments to keep pace with changing economic scenarios and to address emerging challenges. Amendments have been made to enhance regulatory measures, facilitate ease of doing business, and align with international best practices
- One of the primary objectives of FEMA is to liberalize and facilitate foreign exchange transactions. It aims to simplify procedures and create a conducive environment for foreign trade and investment
- FEMA seeks to promote external trade and payments by providing a regulatory framework that governs the flow of foreign exchange in and out of the country. This includes facilitating imports and exports of goods and services
- FEMA is designed to encourage foreign direct investment (FDI) and foreign portfolio investment (FPI) by providing a transparent and predictable regulatory environment. The act lays down the rules and regulations governing the acquisition and transfer of immovable property by non-residents
- FEMA empowers the Reserve Bank of India (RBI) to manage and regulate the country's foreign exchange reserves effectively. This involves maintaining stability in the foreign exchange market and ensuring the availability of adequate reserves to meet external obligations
- FEMA distinguishes between current account transactions (related to day-to-day trade in goods, services, and short-term financial transactions) and capital account transactions (related to long-term investments and capital movements). This helps in applying appropriate regulations to different types of transactions
- The act aims to establish a robust adjudication and enforcement mechanism to ensure compliance with its provisions. It provides for penalties and adjudicating authorities to address violations and maintain the integrity of the foreign exchange management system
- FEMA is designed to align with international best practices in the field of foreign exchange management. This alignment is essential for integrating India into the global economy and ensuring compatibility with international norms and standards
- The act allows for amendments to be made to its provisions to adapt to changing economic conditions and emerging challenges. This ensures that the regulatory framework remains relevant and effective in a dynamic global economic environment.
The Foreign Exchange Management Act (FEMA) in India has a wide applicability, covering various individuals, entities, and transactions involved in foreign exchange dealings. Here's a breakdown of its applicability:
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Residents and Non-Residents: FEMA applies to both residents and non-residents of India. Residents are individuals or entities ordinarily resident in India, while non-residents are those residing outside India.
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Indian Entities: Indian entities, including companies, partnerships, trusts, and other forms of organizations, are subject to FEMA regulations concerning foreign exchange transactions.
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Foreign Entities: Foreign entities, including companies, branches, subsidiaries, and other organizations, are also subject to FEMA regulations when conducting transactions involving Indian currency or assets in India.
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Foreign Exchange Transactions: FEMA governs various foreign exchange transactions, including the acquisition and transfer of foreign exchange, remittances, import and export of goods and services, external commercial borrowings, and investments in India by non-residents.
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Current and Capital Account Transactions: FEMA distinguishes between current account transactions and capital account transactions. Current account transactions include day-to-day trade in goods and services, while capital account transactions involve long-term investments and capital movements. FEMA applies different regulations to these types of transactions.
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Authorized Persons: FEMA designates certain individuals and entities as authorized persons, such as authorized dealers, authorized banks, and other financial institutions. These authorized persons play a crucial role in facilitating foreign exchange transactions and are responsible for complying with FEMA regulations.
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Regulatory Authorities: The Reserve Bank of India (RBI) is the primary regulatory authority responsible for administering FEMA and enforcing its provisions. The RBI issues regulations, notifications, and guidelines to ensure compliance with FEMA requirements.
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Penalties and Enforcement: FEMA establishes penalties for contravention of its provisions, including fines, confiscation of assets, and imprisonment. Adjudicating authorities and appellate tribunals are designated to hear cases related to violations and enforce compliance with FEMA regulations.
| Category | Description | Examples |
|---|---|---|
| Authorized Dealers (ADs) | Broadest category, authorized for a wide range of forex transactions. | State banks, commercial banks, co-operative banks, foreign banks. |
| Full-Fledged Money Changers (FFMCs) | Authorized to buy and sell foreign currency notes, travelers' cheques and foreign currency instruments. | Money exchange companies, authorized hotels. |
| Authorised Money Changers (AMCs) | Limited scope compared to FFMCs, can only buy and sell foreign currency notes and travelers' cheques. | Small money exchange booths, airport counters. |
| Authorized Banks | Specific banks authorized for limited forex transactions, like specific export-import transactions. | Export houses, financial institutions engaged in specific foreign exchange activities. |
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Previous Year Questions
1.Which one of the following groups of items is included in India’s foreign-exchange reserves? (UPSC CSE 2013) (a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries Answer: (b) Mains
1.Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. (2021) |
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.
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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) |
