- Cabinet approves capital infusion in Export Credit Guarantee Corporation Ltd.
- Economic survey 2018-19
Science & Technology
- Agriculture Ministry signs SOI for Artificial Intelligence
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Cabinet approves capital infusion in Export Credit Guarantee Corporation Ltd.
The Cabinet Committee on Economic Affairs has approved the capital infusion of Rs.2000 crore for strengthening of Export Credit Guarantee Corporation (ECGC).
SIGNIFICANCE OF THE CAPITAL INFUSION:
- It will enhance insurance coverage to Micro, Small and Medium Enterprises (MSME) exports and strengthen India’s exports to challenging markets like Africa and Latin American countries.
- With enhanced capital, ECGC’s underwriting capacity and risk to capital ratio will improve considerably.
- Increased capital infusion will help ECGC to diversify its product portfolio and provide cost effective credit insurance helping exporters to gain a stronger foothold in the difficult markets.
ABOUT EXPORT CREDIT GUARANTEE CORPORATION (ECGC):
- ECGC Ltd, wholly owned by Government of India, was set up in 1957.
- It was Formerly known as Export Credit Guarantee Corporation of India Ltd.
- It aims to promote exports from the country by providing credit risk insurance and related services for exports.
- It functions under the administrative control of Ministry of Commerce & Industry and is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community.
- Finance Minister in Pandit Nehru’s cabinet appointed a special committee under the Chairmanship of T.C.Kapur to examine the feasibility of setting up an effective organization to provide insurance against export credit risks.
- The Government accepted the recommendations of Kapur Committee and thus the Export Risk Insurance Corporation (ERIC) was registered in 1957.
WHAT DOES ECGC DO?
- Provides a range of credit risk insurance covers to exporters against loss in export of goods and services.
- Offers Export Credit Insurance covers to banks and financial institutions to enable exporters to obtain better facilities from them.
- Provides Overseas Investment Insurance to Indian companies investing in joint ventures abroad in the form of equity or loan.
HOW DOES ECGC HELP EXPORTERS?
- Offers insurance protection to exporters against payment risks.
- Provides guidance in export-related activities.
- Makes available information on different countries with its own credit ratings.
- Makes it easy to obtain export finance from banks/financial institutions.
- Assists exporters in recovering bad debts.
- Provides information on credit-worthiness of overseas buyers.
NEED FOR EXPORT CREDIT INSURANCE
- The Payments risks have assumed large proportions today due to the far-reaching political and economic changes.
- However, an outbreak of war or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported.
- Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.
Economic survey 2018-19
The Union Minister for Finance and Corporate Affairs tabled the Economic Survey 2018-19 in the Parliament.
KEY HIGHLIGHTS OF ECONOMIC SURVEY 2018-19
- India’s GDP (gross domestic product) is projected to grow at a rate of 7 per cent in the fiscal year 2019-20.
- Sustained real GDP growth rate of 8% is needed for a $5 trillion economy by 2024-25.
- It says that ‘Virtuous Cycle’ of savings, investment and exports supported by a favourable demographic phase required for sustainable growth.
- Private investment remains a key driver for demand, capacity, labor productivity, new technology, creative destruction and job creation.
Behavioural Economics of Nudge:
- The survey mentioned the ‘Nudge theory’ of Richard Thaler who has been awarded the Nobel economics prize.
- Behavioural economics provides insights to nudge people towards desirable behavior.
- It also envisages to take insights from behavioural economics for social change such as From ‘Beti Baco Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi), From ‘Swachh Bharat’ to ‘Sundar Bharat’, From ‘Give it up’ for the LPG subsidy to ‘Think about the Subsidy’ and From ‘Tax evasion’ to ‘Tax compliance’.
- It emphasized on three Key principles of behavioural economics:
- Emphasizing the beneficial social norm
- Changing the default option
- Repeated reinforcements
Reorienting policies for MSME Growth
- Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organized firms in manufacturing by number.
- Contribution of dwarfs to employment is only 14% and to productivity is a mere 8%.
- Large firms (more than 100 employees) account for 75% employment and close to 90% of productivity despite accounting for about 15% by number.
Steps need to be taken to grow MSME:
- A sunset clause of less than 10 years, with necessary exemption, for all size-based incentives.
- Deregulating labor law restrictions to create significantly more jobs, as evident from Rajasthan.
- Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
Data for public good
- Government must intervene in creating data as a public good, especially of the poor and in social sectors.
- Merging the distinct datasets held by the Government already would generate multiple benefits.
Ramp up Capacity in the Lower Judiciary
- Delays in contract enforcement and disposal resolution are the single biggest hurdle to the ease of doing business and higher GDP growth in India.
- Around 87.5 per cent of pending cases are in the District and Subordinate courts.
- States of Uttar Pradesh, Bihar, Odisha and West Bengal need special attention in context of empty vacancies in high court and lower courts.
Policy Uncertainty affecting Investment:
- Survey proposes reduction in economic policy uncertainty by way of:
- Consistency of actual policy with forward guidance and
- Quality assurance certification of processes in Government departments.
Planning Public Good Provision for the 21st Century
- National Total Fertility Rate expected to be below replacement rate by 2021.
- Working age population to grow by roughly 9.7mn per year during 2021-31 and 4.2mn per year during 2031-41.
- Significant decline to be witnessed in elementary school-going children (5-14 age group) over next two decades.
An Analysis of the Swachh Bharat Mission
- 1% of the households have access to toilets and 96.5% of those with access to toilets are using them in rural India.
- 100% Individual Households Latrine (IHHL) Coverage in 30 states and UTs.
- Environmental and water management issues need to be incorporated in SBM for sustainable improvements in the long-term.
Enabling Inclusive Growth
- 4 times increase in per capita energy consumption needed for India to achieve 0.8 Human Development Index score.
- India now stands at 4th in wind power, 5th in solar power and 5th in renewable power installed capacity.
- Share of renewable (excluding hydro above 25 MW) in total electricity generation increased from 6% in 2014-15 to 10% in 2018-19. Thermal power still plays a dominant role at 60% share.
- Market share of electric cars only 0.06% in India while it is 2% in China and 39% in Norway.
Redesigning a Minimum Wage System
- Survey proposes a well-designed minimum wage system.
- Present minimum wage system in India has 1,915 minimum wages for various scheduled job categories across states.
- 1 in every 3 wage workers in India not protected by the minimum wage law.
- ‘National Floor Minimum Wage’ should be notified by the Central Government, varying across five geographical regions.
- Minimum wages by states should be fixed at levels not lower than the ‘floor wage’ and it can be notified based either on the skills or on geographical region or on both grounds.
State of the Economy in 2018-19: A Macro View
- Growth of GDP moderated to 6.8 per cent in 2018-19 from 7.2 per cent in 2017-18.
- Inflation contained at 3.4 per cent in 2018-19 and current account deficit is 2.1 percent of GDP.
- Fiscal deficit of Central Government declined from 3.5 percent of GDP in 2017-18 to 3.4 percent in 2018-19.
- Debt to GDP ratio was 44.5 per cent during 2018-19.
- The revised fiscal glide path envisages achieving fiscal deficit of 3 per cent of GDP by 2020-21 and Central Government debt to 40 per cent of GDP by 2024-25.
Prices and Inflation
- Headline inflation based on CPI-C continuing on its declining trend and remained below 4 per cent in the last two years.
- Food inflation based on Consumer Food Price Index (CFPI) has remained below 2.0 per cent for the last two consecutive years.
- CPI-C based core inflation (CPI excluding the food and fuel group) has now started declining since March 2019 after increment during 2018-19 as compared to 2017-18.
- Miscellaneous, housing and fuel and light groups are the main contributors of headline inflation based on CPI-C during 2018-19.
Sustainable Development and Climate Change
- Kerala and Himachal Pradesh are the front runners states amongst India’s SDG Index Score.
- Chandigarh and Puducherry are the front runners among the UTs.
- Namami Gange Mission launched as a key policy priority towards achieving the SDG 6, with a budget outlay of INR. 20,000 crores for the period 2015-2020.
As per WTO, World trade growth slowed down to 3 per cent in 2018 from 4.6 per cent in 2017 due to:
- Introduction of new and retaliatory tariff measures
- Heightened US-China trade tensions
- Weaker global economic growth
- Volatility in financial markets (WTO)
- Top export items continue to be Petroleum products, precious stones, drug formulations, gold and other precious metals.
- Top import items continue to be Crude petroleum, pearl, precious, semi-precious stones and gold.
- India’s main trading partners continue to be the US, China, Hong Kong, the UAE and Saudi Arabia.
Agriculture and Food Management
- Women’s participation in agriculture increased in 2015-16 from 2005-06 and their concentration is highest (28 per cent) among small and marginal farmers.
- A shift is seen in the number of operational land holdings and area operated by operational land holdings towards small and marginal farmers.
- 89% of groundwater extracted is used for irrigation. Hence, focus should shift from land productivity to ‘irrigation water productivity’.
- Fertilizer response ratio has been declining over time. Organic and natural farming techniques including Zero Budget Natural Farming (ZBNF) can improve both water use efficiency and soil fertility.
Policies should focus on
- Dairying as India is the largest producer of milk.
- Livestock rearing particularly of small ruminants.
- Fisheries sector, as India is the second largest producer.
Industry and Infrastructure
- India’s ranking improved by 23 to 77th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.
- Services sector (excluding construction) has a share of 54.3 per cent in India’s Gross value added (GVA).
- Accelerated sub-sectors: Financial services, real estate and professional services.
- Decelerated sub-sectors: Hotels, transport, communication and broadcasting services.
Science & Technology
Agriculture Ministry signs SOI for Artificial Intelligence
Agriculture Ministry signs a Statement of Intent with IBM for pilot study to utilize Artificial Intelligence & Weather Technology solutions in agriculture.
ABOUT THE PILOT STUDY:
- Ministry of Agriculture and Farmers Welfare signed a Statement of Intent (SoI) for undertaking a pilot study in 3 districts of Bhopal (Madhya Pradesh), Rajkot(Gujarat) and Nanded (Maharashtra) with IBM India Private Limited.
- IBM’s Watson Decision Platform will give solution in the field of agriculture through Artificial Intelligence (AI) and weather technology at village level to provide weather forecast and soil moisture information on pro bono basis to help farmers for taking decisions regarding water and crop management for better production.
- This pilot study will be conducted for the Kharif crop season 2019.
WHAT IS IBM’S WATSON DECISION PLATFORM FOR AGRICULTURE?
- The Watson Decision Platform for Agriculture applies AI, machine learning, and advanced analytics agriculture data to extract valuable insights and automatically generate guidance for smarter decisions.
- For example, AI visual recognition of drone-capture footage may be used to automatically identify certain types and severity levels of pest and disease damage.
- It highlights any key factors that might affect crop yields, such as soil temperature, moisture levels, crop stress, pests, and diseases.
- In addition, the Watson agriculture suite include models for crops such as corn, wheat, soy, barley, potato etc.