GS Analyst: Daily Current Affairs

The government recently announced ambitious plans for the Indian textile and apparel sector, targeting a total business of USD 350 billion annually by 2030 and aiming to generate 3.5 crore jobs. However, the sector has faced significant challenges in recent years, casting doubt on the feasibility of achieving this goal.

Current Status of the Sector

• The textile and apparel industry contributes nearly 2.3 per cent of India’s GDP and 10.5 per cent to the total manufacturing Gross Value Added (GVA) in FY23.
• As of 2021, the Indian textile and apparel industry was valued at approximately USD 153 billion, with about USD 110 billion coming from domestic business.
• India ranks as the third largest textile exporter globally, holding a 5.4% market share, and has the second-largest manufacturing capacity in the world.
• Despite this, the industry experienced substantial growth in FY22, with exports reaching USD 43.4 billion.
• However, a downturn in demand starting in FY23 has led to a slump in both exports and domestic consumption, severely impacting manufacturing hubs, particularly in Tamil Nadu.

Challenges

• Export Slump: Geopolitical issues and decreased demand from importing countries have negatively affected exports. High raw material prices, particularly for cotton and Man Made Fibres (MMF), have compounded the problem. The 10% import duty on cotton has made Indian cotton less competitive internationally, while new quality control orders for MMF have disrupted raw material availability.
• Traditional Business Disruptions: The rise of e-commerce and direct-to-consumer retailing is changing the landscape, with new startups entering the market. There is also increasing pressure from foreign brands to adopt sustainability practices, complicating supply chain dynamics.
• Shifts in Consumer Preferences: The demand for comfort wear, loungewear, and athleisure has surged, requiring manufacturers to adapt quickly to changing trends. Additionally, rural and semi-urban customers are increasingly favoring multi-brand outlets over lesser-known brands.
• Labor Costs and Productivity: Labor constitutes about 10% of production costs, and with average daily wages for skilled workers at Rs 550 and unskilled at Rs 450, the industry needs to invest in technology and workforce skilling to enhance productivity and minimize waste.

Recent working papers from the Reserve Bank of India (RBI) highlight significant disparities in the remuneration received by farmers across different agricultural sectors. While farmers growing staple vegetables like tomatoes, onions, and potatoes (collectively known as TOP crops) face challenges, those in the pulses and poultry sectors enjoy better financial returns.

Key Findings from RBI Working Papers

• The RBI's analysis explores various agricultural value chains, focusing on TOP crops, fruits (such as grapes, bananas, and mangoes), livestock (milk, poultry, and eggs), and pulses (gram, tur, and moong).
• It reveals that farmers growing fruits and vegetables receive only 31% to 43% of the consumer rupee, while those in the pulses and livestock sectors realize a significantly higher share, ranging from 65% to 75%.
• The recent spikes in food inflation are largely attributed to rising prices of TOP crops, which have notable weightage in the Consumer Price Index (CPI).

Challenges Faced by TOP Farmers

The lower remuneration for TOP crop farmers can be traced to several factors:

• Fragmented Value Chains: The value chain for TOP vegetables is inefficient and highly fragmented, primarily due to their perishable nature and the presence of numerous intermediaries. Farmers often end up receiving only about one-third of the price consumers pay for these vegetables, with wholesalers and retailers capturing the majority of the value.
• Market Regulation: The Agricultural Produce Marketing Committees (APMCs) regulate markets and set mandi fees, which can further diminish farmers’ earnings.
• Storage and Distribution Issues: A lack of adequate storage facilities exacerbates the problem, as it limits farmers' ability to sell their produce at favorable prices.

Comparative Advantages of Other Sectors

• In contrast, farmers in the dairy and poultry sectors enjoy better returns. For example, dairy farmers receive around 70% of the consumer rupee, while poultry farmers earn about 56%.
• This is largely due to the establishment of efficient value chains, where cooperatives and integrators play a significant role in procuring and distributing products.
• The integration of production and distribution helps stabilize prices and enhance farmers' incomes.

Price Realization in Pulses

• Pulses have a longer shelf life, allowing farmers to realize a higher share of the consumer rupee.
• However, price spikes can occur due to demand-supply gaps, even though India is the world's largest producer of pulses.
• The government intervenes through imports and minimum support prices (MSP) to stabilize the market and protect farmers’ incomes.

Enhancing Farmer Incomes: Suggested Solutions

To improve the financial status of TOP crop farmers, the RBI working papers propose several measures:

• Privatization of Mandis: Allowing private mandis could create competitive markets for farmers and increase their earnings.
• Digital Market Integration: Enhancing the National Agriculture Market (e-NAM) by linking it with APMCs could facilitate online trading, making it easier for farmers to reach consumers.
• Strengthening Farmers’ Collectives: Scaling up Farmer Producers Organizations (FPOs) would empower small and marginal farmers by increasing their bargaining power.
• Futures Trading: Relaunching futures trading in commodities like potatoes and onions could help in better price discovery.
• Improving Dairy Value Chains: Enhancing operational efficiency in the dairy sector through better procurement practices and investment in feed and fodder production can further increase farmer incomes.

The 28th edition of the multi-national Malabar Naval exercise, hosted by the Indian Navy, commenced in the Bay of Bengal. The Royal Australian Navy hosted the 27th edition of the Malabar Naval exercise in August 2023 near Sydney.

About

• MALABAR was initiated in 1992as a bilateral exercise between India and the US.
• It gained further traction as a significant maritime engagement, with Japan and Australia joining in subsequently.
• The exercise brings together like-minded nations to further enhance the ability to train and operate jointly, towards establishing the synergy critical to achieve shared objectives.
• The exercise is aligned with the Indian Government’s vision of Security & Growth for All in the Region (SAGAR) and reflects India's growing engagement with like-minded nations.
• The exercise will feature participation of various Indian naval platforms, including guided missile destroyers, multi-purpose frigates, submarines, fixed wing MR, fighter aircraft and helicopters.
• Australia: HMAS Stuart, an Anzac Class Frigate with its MH-60R helicopter and P8 Maritime Patrol Aircraft
• United States: USS Dewey, an Arleigh Burke-Class Destroyer and P8 Maritime Patrol Aircraft.
• Japan: JS Ariake, a Murasame-class Destroyer

After nearly 29 months of a tight monetary policy marked by a significant increase in interest rates, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has made a notable change. Following its October meeting, the MPC shifted its policy stance from “withdrawal of accommodation” to “neutral.” This adjustment signals a potential easing of interest rates, with analysts predicting a possible rate cut in December.

Key Highlights

• Current Policy Rate: The policy rate stands at 6.5%, following a cumulative increase of 250 basis points from May 2022 to February 2023.
• Change in Stance: The MPC’s shift to a neutral stance is the first since June 2022 and indicates that inflation concerns are being addressed.
• Inflation Control: India’s benchmark inflation rate has recently stabilized within the RBI’s target range of 2%-6% after exceeding it for five consecutive quarters from March 2022 to March 2023.
• Future Projections: GDP growth is projected at 7.2% for 2024-25, while inflation is expected to average 4.5%.
• Expert Consensus: Economists widely expect a 25 basis point rate cut in the December meeting, followed by another cut in February 2025.

Reasons behind the decision

• Improved Inflation Outlook: The MPC’s decision reflects a belief that inflation is under control, with quarterly inflation rates remaining within the target band for four out of the five quarters since March 2023. This change in inflation dynamics has allowed the MPC to reconsider its aggressive monetary tightening stance.
• Global and Domestic Considerations: The MPC is also mindful of global uncertainties, including geopolitical tensions and economic conditions. A softer policy stance could provide the necessary support to bolster domestic growth amid these challenges.
• Economic Indicators: Recent trends in key economic indicators, such as manufacturing, bank credit, and GST revenue growth, suggest a shift in economic activity that justifies a more accommodative monetary policy.
• Strategic Sequencing: The MPC’s approach of first changing the stance before considering a rate cut allows for flexibility in monitoring inflationary pressures and assessing economic conditions without committing to immediate cuts that could spur inflation.

What do stances of the RBI mean? 

Hyundai Motor India Ltd. (HMIL) announced India’s largest ever initial public offer (IPO) of Rs 27,870 crore.

What is Initial Public Offering (IPO)?

• An Initial Public Offering (IPO) is a crucial process for companies looking to raise capital by selling securities to the public in the primary market.
• It allows businesses to access funds for growth and expansion while enhancing their credibility and visibility.
• In an IPO, investors buy shares directly from the company, becoming its owners and contributing to its share capital.
• This influx of funds enables the company to create fixed assets necessary for operations.
• A vibrant IPO market signals a healthy economy, as it indicates investor confidence and facilitates capital formation.
• Once shares are issued, shareholders can also sell their investments in the secondary market, ensuring liquidity.

The Cabinet Committee on Security (CCS) has approved significant defense deals aimed at enhancing India's military capabilities, particularly in the naval domain. This includes the indigenous construction of nuclear-powered attack submarines and the acquisition of 31 MQ-9B remotely piloted aircraft (RPAs) from the United States.

About MQ-9B Drone

• The MQ-9B is a high-altitude, long-endurance (HALE) remotely piloted aircraft system developed by General Atomics.
• It is designed for a range of missions, including intelligence, surveillance, and reconnaissance (ISR) operations.
• The MQ-9B can operate in various environments and is equipped with advanced sensors, including synthetic aperture radar and electro-optical/infrared (EO/IR) cameras, allowing it to conduct detailed surveillance and reconnaissance tasks.
• Additionally, the drone can perform precision strikes on strategic targets, making it a versatile asset for military operations.
• The Indian Armed Forces will receive a mix of 16 Sky Guardian and 15 Sea Guardian variants, which will be assembled in India.
• The acquisition is part of a broader effort to enhance India's operational capabilities in both land and maritime domains, particularly in light of recent geopolitical tensions.
• The use of MQ-9B drones is expected to provide India with improved situational awareness and the ability to conduct effective operations across diverse scenarios.

Recent tragedies involving young professionals, including a 26-year-old woman executive and a 38-year-old software engineer, have spotlighted a growing mental health crisis in India, exacerbated by immense work pressures and societal expectations. These incidents highlight the disconnect between perceived success and actual mental well-being, prompting urgent discussions on the state of mental health in a rapidly developing nation.

The Rising Mental Health Crisis

• Surge in Disorders: India is witnessing an alarming rise in mental health disorders, with over 197 million people affected by conditions such as depression, anxiety, and substance abuse, as reported by The Lancet Psychiatry Commission.
• Impact of Economic Growth: While economic expansion has generated opportunities, it has also intensified societal pressures, driving individuals towards relentless productivity and material wealth at the expense of mental well-being.
• Existential Questions Ignored: Traditional inquiries about identity and purpose have been overshadowed by consumerism, resulting in a society where the pursuit of material success leads to a profound sense of purposelessness and emotional distress.

The Role of Consumerism

• Disconnect from Community: The focus on consumerism fosters a culture where luxury and material possessions define status, leading to feelings of inadequacy and social comparison, particularly in urban areas.
• Temporary Comfort vs. True Well-being: Material wealth may provide temporary relief, but it fails to address deeper emotional needs, causing individuals to feel isolated despite their achievements.
• Cycle of Dissatisfaction: The relentless pursuit of affluence traps individuals in a cycle of dissatisfaction, where personal success is measured by consumption rather than meaningful relationships or self-awareness.

Solutions and Community Focus

• Shift to Collective Well-being: Addressing the mental health crisis requires a shift from individual success to collective well-being, emphasizing the importance of strong social connections and supportive communities.
• Lessons from Other Countries: Initiatives like community gardens in Brazil exemplify how fostering social bonds can combat urban isolation, suggesting similar approaches could benefit Indian communities.
• Rethinking Freedom: Prioritizing community and connection over material consumption can cultivate a healthier society, where well-being is assessed by relationships and shared experiences rather than purchasing power.

Practice Question

Q. "Critically evaluate the impact of consumerism on mental health in India, and discuss community-oriented solutions that could help address the growing mental health crisis in the country."

Recent discussions have emerged regarding the detrimental impact of international NGOs (INGOs) on local communities in developing countries. Notably, case studies from Tanzania, Kenya, and India illustrate how INGOs have inadvertently contributed to social issues like displacement and gender imbalances, leading to public outcry and a re-evaluation of their roles in social development.

The Role of INGOs in Social Issues

• Displacement and Harmful Policies: INGOs have often driven donor-led agendas that ignore local contexts, resulting in harmful consequences for communities. For instance, conservation efforts in Tanzania and Kenya led to the displacement of Maasai communities.
• Water Privatization in Bolivia: In Bolivia, INGOs supported water privatization in Cochabamba, which restricted access to water and resulted in significant public backlash and policy reversal.
• Gender Imbalance in India: In India, INGOs have promoted projects that overlook local realities, contributing to a growing crisis of female foeticide linked to external interventions rather than traditional cultural practices.

Historical Context of Gender Imbalance

• Colonial Legacy: Historical policies during British colonial rule, including land reforms, directly influenced the rise of infanticide among land-owning castes, challenging the narrative that cultural backwardness is solely responsible for gender imbalances.
• Malthusian Influence: Post-Independence, INGOs perpetuated the "white man’s burden" narrative, pushing Malthusian agendas that emphasized population control, further exacerbating the issue of female foeticide in India.
• Impact of Foreign Funding: Between the 1950s and 1980s, INGOs like the Ford Foundation and Rockefeller Foundation significantly influenced India's health policies, prioritizing family planning over other pressing health needs, thereby facilitating the spread of sex-determination technologies.

Consequences and Current Trends

• Decline in Child Sex Ratio: Census data indicates a troubling decline in the child sex ratio, particularly after the introduction of sex-determination technologies in the late 1960s, revealing the unintended consequences of INGOs’ interventions.
• Sharp Regional Disparities: States with easier access to sex-determination tests, like Punjab and Haryana, experienced dramatic drops in the female-to-male ratio, illustrating the correlation between technology access and gender imbalance.
• Need for Local Policymaking: The ongoing gender imbalance in India highlights the risks associated with INGOs' interventions, emphasizing the need for local policymakers to critically evaluate external advice and prioritize community-based solutions.

Practice Question

Q. "Critically assess the role of international NGOs in influencing social issues in developing countries, particularly in the context of gender imbalance in India. Discuss the implications for local policymaking."

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has shifted its stance to "neutral" while maintaining the current policy rate. This decision comes amid persistent high food inflation, impacting overall economic stability and influencing future monetary policy actions, especially in light of global economic shifts and domestic inflation dynamics.

Current Economic Conditions

• Inflationary Trends: High food inflation has constrained the RBI's ability to adjust interest rates, despite non-food inflation remaining low at 2.3% in August. The MPC expects food inflation to ease, potentially allowing for a 25 basis point rate cut in December.
• Global Monetary Policy Changes: The US Federal Reserve's recent decision to cut rates by 50 basis points has influenced global monetary policy, creating favorable conditions for emerging markets like India to reassess their own monetary strategies.
• Capital Flows and Currency Strengthening: The Fed's rate cut has resulted in increased capital inflows into India, strengthening the rupee as the interest rate differential widens, offering the RBI more flexibility in policy adjustments.

RBI's Inflation Management Strategy

• Focus on Consumer Inflation: The RBI aims to align consumer inflation with its long-term target of 4%, emphasizing that a temporary decline in inflation is insufficient to justify a rate cut. Food inflation plays a critical role in determining overall inflation.
• Transmission Effects on Inflation: Elevated food inflation in a high-growth context can lead to generalized inflation, with potential spillovers into non-food prices. The RBI has noted the influence of food inflation on household inflation expectations.
• Current Non-Food Inflation Status: With non-food inflation soft at 2.3% and core inflation at 3.3%, the RBI does not foresee significant upward movement in non-food prices, aided by a slowing global economy and subdued commodity prices.

Future Outlook and Challenges

• Impact of Weather and Climate Risks: Food inflation remains unpredictable due to climate-related factors, although there are signs of softening foodgrain inflation due to favorable monsoon conditions. Reservoir levels and groundwater recharge may support upcoming agricultural outputs.
• Vegetable Prices Fluctuations: Vegetable inflation remains a concern, particularly with ongoing volatility in prices for tomatoes, potatoes, and onions due to adverse weather and production challenges, impacting the overall consumer price index.
• Anticipated Rate Cuts: A combination of cooling food inflation, stable non-food inflation, and global rate cuts from the Fed is expected to enable the RBI to implement rate cuts, starting as early as December.

Practice Question

Q. Discuss the implications of the Reserve Bank of India's recent monetary policy decisions in the context of domestic inflation dynamics and global monetary trends. How should the RBI navigate its policy in light of current economic challenges?