Economy: Agriculture

Categories
Economy
Published
28-Feb-2020

Agriculture

Agriculture remains the most important sector of the Indian economy, whether it be the pre independence or the post-independence periods.
This fact is emphatically proved by the large number of people who depend on it for their livelihood.

Some of the special features of Indian Agriculture are mentioned below:

- From the monetary point of view the share of the agriculture sector in the economy remains at 17.4 per cent of the GDP.
- From the livelihood point of view still 49 per cent of the people of India depend on the agriculture sector.
- Agriculture is not only the biggest sector of the economy, but also the biggest private sector too. It is the only profession which still carries no burden of individual income tax.
- This is the biggest unorganized sector of the economy accounting for more than 90 per cent share in the total unorganized labor-force.
- India has emerged as a significant agri-exporter in few crops, namely—cotton, rice, meat, oil meals, spice, guar gum meal and sugar.
- According to the export figures, agriculture is deeply related to industrial growth and the national income in India—1 per cent increase in the agricultural growth leads to 0.5 per cent increase in industrial output (growth) and 0.7 per cent increase in the national income of India.
- Productivity of major crops are lower in case of India in comparison to the world’s best practice.

Land-tenure systems

Three types of land-tenure systems existed in pre-independent India:

The Zamindari system

Zamindari System (also known as Permanent Settlement System) was introduced by Cornwallis in 1793 through Permanent Settlement Act.
It was introduced in provinces of Bengal, Bihar, Orissa and Varanasi. Zamindars were recognized as owner of the lands.
Zamindars were given the rights to collect the rent from the peasants.
The realized amount would be divided into 11 parts. 1/11th of the share belonged to Zamindars and 10/11th of the share belonged to East India Company

The Mahalwari system

Mahalwari system was introduced in 1833 during the period of William Bentick.
It was introduced in Central Province, North-West Frontier, Agra, Punjab, Gangetic Valley, etc of British India.
The Mahalwari system included many provisions of both the Zamindari System and Ryotwari System.
In this system, the land was divided into Mahals. Each Mahal comprises one or more villages.
Ownership rights were vested with the peasants.
The villages committee was held responsible for collection of the taxes.

The Ryotwari system

Here, individual cultivator was supposed to pay the rent directly to the government without any intermediary. It was prevalent in parts of Madras, Bombay province and Assam.
In practice, however, all three types of system had taken the features of each other. The picture that emerged at independence was that of exploitation of agricultural labourers at the hands of landlords, exorbitant rents, lack of incentive for technological progress and rigid system of land transfer across the country.

Land reforms

Land reform involves the changing of laws, regulations or customs regarding land ownership. Land reform may consist of government-initiated or government-backed property redistribution, generally of agricultural land.
Land reform can, therefore, refer to transfer of ownership from the more powerful to the less powerful, such as from a relatively small number of wealthy (or noble) owners with extensive land holdings (e.g., plantations, large ranches, or agribusiness plots) to individual ownership by those who work the land. Such transfers of ownership may be with or without compensation; compensation may vary from token amounts to the full value of the land.
The common characteristic of all land reforms, however, is modification or replacement of existing institutional arrangements governing possession and use of land.
Land distribution has been part of India’s state policy from the very beginning. Independent India’s most revolutionary land policy was perhaps the abolition of the Zamindari system (feudal land holding practices). Land-reform policy in India had two specific objectives:
- To remove such impediments to increase in agricultural production as arise from the agrarian structure inherited from the past.
- To eliminate all elements of exploitation and social injustice within the agrarian system, to provide security for the tiller of soil and assure equality of status and opportunity to all sections of the rural population.

Three major types of land-reforms were undertaken after independence:

Abolition of Intermediaries like Zamindars or jagirdars so that ownership of land could be clearly identified with management and control. Many states promulgated laws to put an end to absentee landlordism and as a result about 30 lakh tenants acquired land ownership over an area of 62 lakh acres throughout the country.
Tenancy reforms to confirm the rights of occupancy of tenants and to regulate rent of leased land. These reforms could not be implemented due to two main reasons. Many small tenants were forced to surrender their land under the so called “voluntary surrender” rule in the legislation. Secondly, the unavailability of accurate and up-to-date land record also constrained its implementation.
Reorganization of land holdings to offset extremely uneven distribution of agricultural land. Under this, ceiling laws were imposed which laid down the maximum land that can be owned by a land holder (which was subsequently amended to holding by a family with effect from 1972). The excess land was to be surrendered to the government. But its performance remained dismal as it lead to redistribution of less than 2% of operated area by 1992. Thus, with the exception of abolition of intermediaries, other reforms could not be implemented mainly due to lack of political will.
Consolidation of holding was introduced as a measure of improving farming efficiency. It made considerable progress in Punjab, Haryana and western U.P. but did not took off in southern and eastern states.
Cooperative joint farming, recommended by the Congress Agrarian Reforms Committee under Mr. J. C. Kumarappa was also encouraged in the five year plans initially. Under this, farmers pool their land and reap the economies of scale, although the ownership continues to remain with the individual farmer. But this could not be implemented mainly because of farmers’ reluctance to alienate their land. Many landlords also tried to misuse this concept to circumvent land ceiling.
The National Land Records Modernization Programme (NLRMP) was launched by the Government of India in August 2008, aimed to modernize management of land records, minimize scope of land/ property disputes, enhance transparency in the land records maintenance system, and facilitate moving eventually towards guaranteed conclusive titles to immovable properties in the country.

Reasons for Failure of Land Reforms:

Out of the many reasons forwarded by the experts responsible for the failure of the land reforms in India, the following three could be considered the most important ones:

Land in India is considered a symbol of social prestige, status and identity unlike the other economies which succeeded in their land reform programmes, where it is seen as just an economic asset for income earning.
Lack of political wills which was required to affect land reforms and make it a successful programme.
Rampant corruption in public life, political hypocricy and leadership failure in the Indian democratic system.

Green Revolution

It is the introduction of new techniques of agriculture, which became popular by the name of Green Revolution (GR) in early 1960s—at first for wheat and by the next decade for rice, too. It revolutionized the very traditional idea of food production by giving a boost by more than 250 per cent to the productivity level. The Green Revolution was centred around the use of the High Yielding Variety (HYV) of seeds developed by the US agro-scientist Norman Borlaug doing research on a British Rockfellor Foundation Scholarship in Mexico by the early 1960s.

Components of the Green Revolution

The Green Revolution was based on the timely and adequate supply of many inputs/components.

The HYV Seeds

These seeds were popularly called the ‘dwarf’ variety of seeds.
This made the plant dwarf and the grain heavier— resulting in high yield.
These seeds were non-photosynthetic, hence non-dependent on sun rays for targeted yields.

The Chemical Fertilizers

The seeds were to increase productivity provided they got sufficient level of nutrients from the land.
The level of nutrients they required could not be supplied with the traditional compostes because they have low concentration of nutrients content and required bigger area while sowing—it meant it will be shared by more than one seed.
That is why a high concentration fertilisers, were required, which could be given to the targeted seed only— the only option was the chemical fertilisers—urea (N), phosphate (P) and potash (K).

The Irrigation

For controlled growth of crops and adequate dilution of fertilizers, a controlled means of water supply was required.
It made two important compulsions—firstly, the area of such crops should be at least free of flooding and secondly, artificial water supply should be developed.

Chemical Pesticides and Germicides

As the new seeds were new and non-acclimatised to local pests, germs and diseases than the established indigenous varieties, use of pesticides and germicides became compulsory for result oriented and secured yields.

Chemical Herbicides and Weedicides

To prevent costlier inputs of fertilisers not being consumed by the herbs and the weeds in the farmlands, herbicides and weedicides were used while sowing the HYV seeds.

Credit, Storage, Marketing/Distribution

For farmers to be capable of using the new and the costlier inputs of the Green Revolution, availability of easy and cheaper credit was a must.
As the farmlands suitable for this new kind of farming was region-specific (as it was only Haryana, Punjab and western Uttar Pradesh in India) storage of the harvested crops was to be done in the region itself till they were distributed throughout the country.

Recent Development

Green Revolution made the country self-reliant in foodgrain production.
Post Green Revolution, there is increase in the use of chemical fertilizers and irrigation water to meet the nutrients and water demand respectively, of high yielding varieties (HYVs) of crops.
However, due to imbalanced use of fertilizers coupled with decrease in use of organic manure and over exploitation of ground water, there is deterioration of natural resources.
In order to meet the foodgrains requirement of the growing population of the country, the Government of India is laying emphasis on development of resource rich eastern region of the country for enhancing agricultural production.
This would also help in reducing the over exploitation of natural resources in north western region, the traditional food bowl of the country.
Considering potentiality of increasing production and productivity of foodgrains in eastern states, “Bringing Green Revolution to Eastern India (BGREI)”- a sub scheme of Rashtriya Krishi Vikas Yojana (RKVY) is being implemented since 2010-11 in seven (7) eastern states of the country namely Assam, Bihar, Chhatisgarh, Jharkhand, Odisha, Eastern Uttar Pradesh and West Bengal.
After implementation of the programme, the production of rice has increased in seven eastern states from 45.65 million tonnes during 2009-10 to 57.18 million tonnes during 2017-18.
Besides, the Schemes/Missions namely, National Food Security Mission (NFSM), Mission for Integrated Development of Horticulture (MIDH), National Mission for Sustainable Agriculture (NMSA), Sub-Mission on Seeds and Planting Material (SMSP), Sub-Mission on Agricultural Mechanisation (SMAM) etc. under the Umbrella scheme, “Green Revolution– Krishonnati Yojana” are also continued beyond 12th Five Year Plan for the periods from 2017-18 to 2019-20.
These schemes are for the development of the agriculture and allied sector in a holistic and scientific manner to increase the income of farmers by enhancing production, productivity and better returns on produce.

Food Management

Managing enough food in the domestic market has been the prime focus of the government since Independence. Meeting the physical target of food together with the challenge of enabling Indians to procure food for their consumption was also there. Once, the country joined the WTO, a new need was felt for producing surplus and competing with the world, so that the benefits of globalization could also be reaped by the agriculture sector.

Minimum Support Price

Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices —a guarantee price to save farmers from distress sale.
The MSPs are announced at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP, 1985).
The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.
Commencing with ‘wheat’ for the 1966–67, currently the MSPs are announced for 24 commodities including seven cereals (paddy, wheat, barley, jowar, bajra, maize and ragi); five pulses (gram, arhar/tur, moong, urad and lentil); eight oilseeds (groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum, safflower seed and nigerseed); copra, raw cotton, raw jute and virginia flu cured (VFC) tobacco.

Market Intervention Scheme

The Market Intervention Scheme (MIS) is similar to MSP, which is implemented on the request of state governments for procurement of perishable and horticultural commodities in the event of fall in market prices.
The scheme is implemented when there is at least 10 per cent increase in production or 10 per cent decrease in the ruling rates over the previous normal year.
Proposal of MIS is approved on the specific request of the state/UT governments, if the states/UTs are ready to bear 50 per cent loss (25 per cent in case of North Eastern states) incurred on its implementation.

Procurement Prices

In 1966–67, the Government of India announced a ‘procurement price’ for wheat, a bit higher than its MSP (the purpose being security of food procurement for requirement of the PDS).
The MSP was announced before sowing, while the procurement price was announced before harvesting—the purpose was to encourage farmers to sell a bit more and get encouraged to produce more.
But this increased price hardly served the purpose as a suitable incentive to farmers.
It would have been better had it been announced before sowing and not after harvesting.
That is why since the fiscal 1968–69 the government announced only the MSP, which is also considered the effective procurement price.

Buffer Stock

India has a policy of maintaining a minimum reserve of foodgrains (only for wheat and rice) so that food is available throughout the country at affordable prices round the year.
The main supply from here goes to the PDS and at times goes for Open Market Sale to check the rising prices, if needed.
The Buffer stocking norms (of 2005) was revised by the government (by mid-2014) in the backdrop of increased requirement of foodgrains.

Open Market Sale Scheme

The FCI has been undertaking sale of wheat at pre-determined prices (reserve prices) in the open market from time to time, known as the Open Market Sale Scheme (OMSS).
This is aimed at serving the following objectives:

To enhance market supply of foodgrains;
To exercise a moderating influence on open market prices; and
To offload surplus stocks.

Under the Open Market Sale Scheme (Domestic), the government now adopts a policy of differential prices to encourage sale of older stock first.

Price Stabilization Fund

The Government of India, by late March 2015, launched the Price Stabilisation Fund (PSF) as a Central Sector Scheme to support market interventions for price control of perishable agri horticultural commodities.
The cost to be borne between the centre and the states in equal ratio (in case of the North Eastern-states, the respective share will be 75:25).
The scheme will commence with only two crops, viz., onion and potato.

Farm Subsidies

Farm subsidies form an integral part of the government’s budget.
In the case of developed countries, the agricultural or farm subsidies compose nearly 40 per cent of the total budgetary outlay, while in India’s case it is much lower (around 7.8 per cent of GDP) and of different nature.
Direct farm subsidies: These are the kinds of subsidies in which direct cash incentives are paid to the farmers in order to make their products more competitive in the global markets
Indirect farm subsidies: These are the farm subsidies which are provided in the form of cheaper credit facilities, farm loan waivers, reduction in irrigation and electricity bills, fertilizers, seeds and pesticides subsidy as well as the investments in agricultural research, environmental assistance, farmer training, etc. These subsidies are also provided to make farm products more competitive in the global market.

Food Security

Food security means making food available at affordable prices at all times, to all, without interruptions.
India attained self-sufficiency in food by late 1980s, though food security still evades the country.
Lack of food security hampers the nutritional profile of the vulnerable section of the population.
As per the State of Food Insecurity in the World, 2015 (FAO), India has the second highest number of undernourished people at 194.6 million which is around 15.2 per cent of the world’s total undernourished population.
Two important things need attention regarding India’s food security –

Around 27 per cent of India’s population is BPL and a greater portion (one conservative estimate puts it at 75 per cent) of their household income is spent on food.
There is a strong correlation between stability in agricultural production and food security. Volatility in agricultural production impacts food supplies and can result in spikes in food prices, which adversely affect the lowest income groups of the population.

Therefore, along with provision of food subsidy, stability in agricultural commodity prices is essential for making the poorer sections food secure.
Due to high level of undernourishment and volatility in agricultural prices, India has one of the largest number of food schemes in the World to ensure food security –

There is entitlement feeding programmes like the Integrated Child Development Scheme (ICDS – covers all Children under six, pregnant and lactating mothers)
Mid-Day Meal Schemes (MDMS),
Food subsidy programmes like the Targeted Public Distribution System (through which the National Food Security Act is being implemented)
Annapurna (10 kgs of free food grain for destitute poor) and the
Employment Programmes like Mahatma Gandhi National Rural Employment Guarantee Scheme (100 days of employment at minimum wages) to ensure food security.

PDS & Food subsidy

The Public Distribution System (PDS was changed to Targeted PDS in 1997) strives to ensure food security through timely and affordable distribution of food grains to the BPL population as this section cannot afford to pay market prices for their food.
This involves procurement of food grain at MSP by the Government, building up and maintenance of food stocks, their storage, and timely distribution, making food grains accessible at reasonable prices to the vulnerable sections of the population.

Institutions/Schemes related to Agricultural Marketing

Agricultural Produce Market Committee (APMC)

Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government under the Agricultural Produce Market Committee Act in respect of trade in certain notified agricultural or horticultural or livestock products.
APMCs are intended to be responsible for: Ensuring transparency in pricing system and transactions taking place in market area;
- Providing market-led extension services to farmers;
- Ensuring payment for agricultural produce sold by farmers on the same day;
- Promoting agricultural processing including activities for value addition in agricultural produce;
- Publicizing data on arrivals and rates of agricultural produce brought into the market area for sale; and Setup and promote public private partnership in the management of agricultural markets
- There are about 2477 principal regulated markets based on geography (the APMCs) and 4843 sub-market yards regulated by the respective APMCs in India.

Model APMC Act 2003

The monopoly of Government regulated wholesale markets has prevented development of a competitive marketing system in the country. An efficient agricultural marketing is essential for the development of the agriculture sector as it provides outlets and incentives for increased production, the marketing system contribute greatly to the commercialization of subsistence farmers. Worldwide Governments have recognized the importance of liberalized agriculture markets. In accordance with above objectives, Model APMC act was drafted by ministry of agriculture in 2003.

Major Features:

- It provides for direct sale of farm produce to contract farming sponsors.
- It provides a provision for setting up “Special markets” for “specified agricultural commodities”
- It permits private persons, farmers and consumers to establish new markets for agricultural produce in any area.
- Every market shall levy market fee on sale or purchase of agriculture commodities which brought from within or outside state.
- Replaces licensing with registrations of market functionaries and trade at any market area within state.
- Market Committees permitted to use its funds to create facilities like grading, standardization and quality certification; to create infrastructure for post-harvest handling of agricultural produce and development of modern marketing system.
- State Governments conferred power to exempt any agricultural produce brought for sale in market area, from payment of market fee.
- State Agricultural Marketing Board made responsible for grading and standardization.

National Agriculture Market (eNAM)

eNAM is an online trading platform for agricultural commodities in India.
It seeks to network the existing Agricultural Produce Market Committees (APMCs) and other market yards to create a unified national market for agricultural commodities.
NAM is a “virtual” market but it has a physical market (mandi) at the back end.
Following are the benefits of eNAM:
- The market facilitates farmers, traders and buyers with online trading in commodities.
- The market is helping in better price discovery and provides facilities for smooth marketing of their produce.
- Over 90 commodities including staple food grains, vegetables and fruits are currently listed in its list of commodities available for trade.
- The eNAM markets are proving popular as the crops are weighed immediately and the stock is lifted on the same day and the payments are cleared online.

Tribal Cooperative Marketing Development Federation of India (TRIFED)

The Tribal Cooperative Marketing Development Federation of India (TRIFED) came into existence in 1987.
It is a national-level apex organization functioning under the administrative control of Ministry of Tribal Affairs, Government of India. TRIFED organizes National Tribal Craft Expo called “AADISHILP”, painting exhibition called “Aadi Chitra”, “OCTAVE” for North Eastern Artisans and Tribal Artisan Melas to facilitate the sale of their products.
Promote sustainable livelihood systems for tribal people by marketing development and ensuring remunerative price for their products, provide minimum support price and value addition of Non-Timber Forest Produce (Minor Forest Produce), empower them through meticulous capacity building, augment their resources substantially, Develop marketing partnership with Central/State Government agencies and other development partners through establishing convergence and coherence in activities.

National Agricultural Cooperative Marketing Federation of India Ltd (NAFED)

NAFED is an apex organization of marketing cooperatives for agricultural produce in India, under Ministry of Agriculture, Government of India.
It was founded in October 1958 to promote the trade of agricultural produce and forest resources across the nation.
NAFED is now one of the largest procurement as well as marketing agencies for agricultural products in India.
With its headquarters in New Delhi, NAFED has four regional offices at Delhi, Mumbai, Chennai and Kolkata, apart from 28 zonal offices in capitals of states and important cities.
In 2008, it established, National Spot Exchange, a Commodities exchange as a joint venture of Financial Technologies (India) Ltd. (FTIL).

Promotion of National Market through Agri Tech Infrastructure Fund (ATIF)

The Scheme envisages initiation of e-marketing platform at the national level and will support creation of infrastructure to enable e-marketing in 642 regulated markets across the country.
For creation of a National Market, a common platform across all States is necessary.
It is, therefore, proposed that a Service Provider be engaged centrally who would build, operate and maintain the e-platform on BOOT Project model (Build, Own, Operate, Transfer - BOOT) it is a PPP project model.
This platform would be customized/ configured to address the variations in different states.
As an initiative of deregulation, states have been advised by the Government of India to bring fruits and vegetables out of the ambit of APMC Act. In pursuance of this advisory, 12 States have, so far, either de-regulated the marketing of fruits and vegetables or have exempted from levying of market fee.

Middle Income Trap

Context

Many economists have cautioned that India runs the risk of getting caught in the middle-income trap.

About

Middle income trap: The middle income trap is a theoretical economic development situation in which a country that attains a certain income (due to given advantages) gets stuck at that level. The Middle income countries are not able to move up to the Higher income status due to operation of several adverse factors:

A country in the middle income trap has lost its competitive edge in the export of manufactured goods because of rising wages.
Also, it is unable to keep up with more developed economies in the high-value-added market.
There is failure to build institutional, human and technological capital.

Middle-income range: World Bank defines a middle-income country as one with a gross national income (GNI) per capita of $1,000-12,000 at constant 2011 prices.

Case of different countries:

Countries that escaped it: Japan, South Korea, Portugal, Poland and Latvia are success stories of transformation to high-income status.
South Africa and Brazil: Newly industrialised economies such as South Africa and Brazil have not, for decades, left what the World Bank defines as the 'middle-income range'. They suffer from low investment, slow growth in secondary industry, limited industrial diversification and poor labour market conditions.
Africa, Egypt, Thailand and Turkey also tried to develop but could not transition to the high-income level. These countries failed to develop and remain stuck below their potential.
Argentina, Mexico, and Russia have been trapped in the upper middle-income category for a long time.
China, with a GNI per capita of around $9,800, is most likely on its way out of the middle-income trap—unless it stumbles.

Case of India

Lower middle income country: In 1960, India had a per capita income of $1,033 (in 2011 purchasing power parity terms). This was equivalent to 6% of per capita income of US. India attained lower middle-income status in 2008. By 2017-18, India’s per capita income was $6,538—or 12% of US per capita income.
Critics: Critics have cautioned that India runs the risk of getting caught in the middle-income trap. It has been argued that India’s growth has mostly been driven by demand generated by few. India does not have broad income base, and this narrow demand base/market size could act as a growth barrier, resulting in India slipping into a middle-income trap.

Even if India reaches $5 trillion in GDP by 2024-25 — Government of India’s objective — it will still be a lower middle-income country.

Factors that can hurt India’s growth: The 2017 Economic Survey warned that four factors could hurt India:

Hyper-globalization repudiation.
Thwarted/impeded structural transformation.
Human capital regression due to technological progress.
Climate change-induced agricultural stress.

How to avoid Middle income trap?

New process and markets: Avoiding the middle income trap entails identifying strategies to introduce new processes and find new markets to maintain export growth.
Domestic demand: Ramping up domestic demand is also important—an expanding middle class can use its increasing purchasing power to buy high-quality, innovative products and help drive growth.

Inequality is a barrier to the broadening of the demand base in an economy.

Innovation: The biggest challenge is moving from resource-driven growth that is dependent on cheap labour and capital to growth based on high productivity and innovation.

This requires investments in infrastructure and education—building a high-quality education system that encourages creativity and supports breakthroughs in science and technology that can be applied back into the economy.

Global Value Chains

Context

Global Value Chains (GVCs) have often been in news. It is important to understand their role in trade and growth.

About

Earlier, companies used to make things primarily in one country. Today, a single finished product often results from manufacturing and assembly in multiple countries, with each step in the process adding value to the end product.
Through GVCs, countries trade more than products; they trade know-how, and make things together. Imports of goods and services matter as much as exports to successful GVCs.
GVCs integrate the know-how of lead firms and suppliers of key components along stages of production and in multiple offshore locations.

The international, inter-firm flow of know-how is the key distinguishing feature of GVCs.

How countries engage with GVCs determines how much they benefit from them.
Example: iPhone is a good example to understand GVCs. The US prepares the iPhone design, Taiwan and South Korea produce critical inputs such as processors. Final assembly takes place in China from where they are marketed all over.

Advantages of GVC

Promote productivity and growth: According to WTO report, a 1% increase in GVC participation is estimated to boost per capita income levels by more than 1%—about twice as much as standard trade.

In Ethiopia, firms participating in GVC are more than twice as productive as similar firms that participate in standard trade.

Reduce poverty: Since gains in growth from GVC are larger than from trade in final products, their impact on poverty reduction is also larger.

Regions in Mexico and Vietnam that participated more intensively in GVCs experienced greater reductions in poverty.

Deliver better jobs: Firms in GVC draw people into more productive manufacturing and services activities and tend to employ more women, supporting structural transformation in developing countries.
Important for growth: GVCs are a powerful driver of productivity growth, job creation, and increased living standards. Countries that embrace them grow faster, import skills and technology, and boost employment.

With GVC-driven development, countries generate growth by moving to higher-value-added tasks and by embedding more technology and know-how in all their agriculture, manufacturing, and services production.
GVCs provide countries the opportunity to leap-frog their development process.

H1-B visas

Context

United States government has said that it is planning to curb the distribution of H-1B visa to Indians. While the final decision is yet to be taken, Government of India has expressed concerns to the US over the proposal.

About

The US government had recently said that it is planning to curb the distribution of H-1B visa to Indians. Hence, at the 2+2 dialogue with the US, India pitched its stand for H-1B visa holders.
Objective: The reason H-1B visas may see changes is to better protect US workers and wages, and save them from competition from workers arriving from outside countries like India and China.
H-1B visa: The H-1B is a United States visa under the Immigration and Nationality Act. It has roots in the earlier issued H-1 visa which was later split between H-1A (for nurses) and H-1B. H-1B is one of the most popular visas for foreigners visiting the US for business or trade purpose.

It is a non-immigrant visa that allows US companies to employ foreign workers in speciality occupations that require theoretical or technical expertise.
Speciality occupations include specialized fields like IT, finance, accounting, architecture, engineering, mathematics, science, medicine, etc. which usually require a bachelor’s degree or higher.
US employers wishing to bring in staff for long-term assignment prefer H1B visa because its application is quicker than applying for a US Green Card.
H-1B visa has its roots in the H1 visa of the Immigration and Nationality Act; which split between H-1A (for nurses) and H-1B in 1990.

Who will be worst hit: Worst hit by the new H1B bill will be Indian companies such as Infosys, TCS, and Wipro, as well as US tech giants like Apple, Facebook and Google, who use the H1B visa to fill positions that cannot be filled by American workers.

How is H-1B visa important to India?

Majority H-1B visa holder: India has been the only country that takes 70 per cent of the 85,000 H-1B visas applied annually. The H-1B visa is crucial for the IT sector in India.
IT professionals: The technology companies of US depend on it to hire tens of thousands of employees each year from countries like India and China. Hence, a cancellation of H-1B visas will most adversely affect Indian IT professionals.
Talent flow: The US should not obstruct the flow of talent from India as it is an important part of the economic cooperation and almost acts as a strategic bridge between the two countries, and is important for the bilateral ties.

Problems that Indians face with current H-1B rules

Recent changes in H-1B visa rules: Recently, US proposed revision of “specialty occupations” definition for the H1B visa. H1B visas will be issued to only the most-skilled foreigners or highest-paid beneficiaries.

USCIS can reject H1B applications that do not provide the necessary required information when submitted.
New rules require H-1B petitioners to first electronically register with USCIS.
US can initiate deportation of expired H1-B holders.
US Department of Homeland Security (DHS) is also considering ban on work authorization for spouses of H-1B visa holders.

Problem in job switch: H-1B visa holders in the US face problems in switching jobs even if the new job requires the exact same skill set as before. The US citizenship and Immigration Services (USCIS) has denied several applications by new employers citing that the new position does not constitute a 'specialty occupation’.

If the H-1B holder starts working elsewhere and the transfer is denied, the person could be 'out of status' with a bar on entry into the US, unless the old employer is willing to take him/her back.

Removing country-cap on green cards: Recently, US also removed 7% country-cap on issue of Green Cards. This too will agonise the wait of many skilled professionals from India who had sought permanent residency in USA.