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Global Innovation Index 2022

Why in news:

• India has made significant strides in the global innovation index rankings for the first time, placing among the top 40 countries, according to the latest annual report published by the World Intellectual Property Organization (WIPO).

India's Innovation Progress

• India has made remarkable progress in the Global Innovation Index ranking, entering the top 40 for the first time. It has been identified as the innovation leader in the lower middle-income group and continues to lead the world in ICT services exports.

Key Indicators

• India's top rankings in various indicators, including venture capital receipt value, finance for startups and scaleups, graduates in science and engineering, labour productivity growth, and domestic industry diversification, have contributed to its success.

Impact of COVID-19

• Despite the challenges posed by the COVID-19 pandemic, India's research and development (R&D) and other investments that drive worldwide innovative activity continued to thrive in 2021. However, challenges are emerging in translating innovation investments into impact.

Post-Pandemic Outlook

• As the world emerges from the pandemic, innovation is at a crossroads. While innovation investments surged in 2020 and 2021, the outlook for 2022 is clouded not just by global uncertainties but continued underperformance in innovation-driven productivity. Hence, there is a need to pay more attention to how innovation translates into economic and social impact, with quality and value becoming critical to success.

Global Trend

• The world's most innovative economies, including Switzerland, the United States, Sweden, the United Kingdom, and the Netherlands, have consistently shown strong performance. Emerging economies, such as India (ranked 40th) and Turkey (ranked 37th), have also demonstrated remarkable progress.

Origin and Purpose of the Global Innovation Index (GII)

• The Global Innovation Index (GII) project was launched in 2007 by Professor Soumitra Dutta during his tenure at INSEAD.
• The goal of the GII is to find and determine metrics and methods that can provide a comprehensive picture of innovation in society.
• The GII is published by WIPO in partnership with the Portulans Institute and with the support of corporate partners, including the Confederation of Indian Industry (CII), the Brazilian National Confederation of Industry (CNI), Ecopetrol (Colombia), and the Turkish Exporters Assembly (TIM).
• The GII is now in its 15th edition.

Criteria for Measuring Innovation in the GII

• The GII measures innovation using criteria that cover institutions, human capital and research, infrastructure, credit, investment, linkages, creation, absorption, and diffusion of knowledge, and creative outputs.
• The GII calculates three measures: the Innovation Input Sub-Index, the Innovation Output Sub-Index, and the overall GII score.
• The Innovation Input Sub-Index captures elements of the economy that enable and facilitate innovative activities, while the Innovation Output Sub-Index measures the result of innovative activities within the economy.
• The overall GII score is the average of the Input and Output Sub-Indices, on which the GII economy rankings are then produced.

Obstacles to Innovation in India

Academia-Industry Disconnect:

• Despite initiatives like the Atal Innovation Mission and partnerships with institutions in countries like Switzerland and the UK, there is still a significant gap between academia and industry. Research conducted in universities is often not aligned with industry needs or real-world problems.

Underinvestment in R&D:

• India continues to lag behind in spending on research and development, which is crucial for innovation and technological advancement.

Infrastructure Challenges:

• India faces significant infrastructure challenges, which hinder innovation. Efficient infrastructure can only be made available when the organizers understand the needs of innovators and scientists.

Strategies for Fostering Innovation

Taking All Stakeholders on Board:

• To ensure maximum impact and outcome, it is crucial to have representation from all stakeholders, whether it is creating innovative solutions for rural or urban areas. Interdisciplinary and international collaborations are the need of the hour.

Promoting Best Practices:

• To promote innovation, states that have consistently shown strong performance and areas of strength for various states need to be critically analyzed. Knowledge of the best practices needs to be disseminated to promote innovation.

Focus on Challenges:

• Identifying the critical challenges faced by low-performing states and areas of weaknesses of various states is essential for fostering innovation and promoting economic well-being in the region.

Status of Solar Power Projects

Why in News:

• The Ministry for New and Renewable Energy has announced that the Indian government has approved solar projects with a capacity of almost 39,000 MW through the 'Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects'. However, only 25% of these projects have been commissioned till date.

Overview of the Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects

About the Scheme:

• Ministry of New & Renewable Energy launched the scheme in 2014.
• Objective: To set up at least 25 Solar Parks and Ultra Mega Solar Power Projects with a target of over 20,000 MW of solar power capacity within 5 years.
• Later increased capacity to 40,000 MW with completion date of 2021-22.

Implementing Agency:

• Designated implementing agency: Solar Power Park Developer (SPPD)

Features of the Scheme:

• Support to States/UTs in setting up solar parks at various locations.
• Objective: Create necessary infrastructure for solar power projects.
• Developed in collaboration with State Governments, Central Public Sector Undertakings, and private entrepreneurs.

Challenges in Commissioning Solar Projects

Land Acquisition:

• One of the major challenges in the commissioning of solar projects is the acquisition of land with a clear title. This often leads to delays and increases the cost of the project.

Infrastructure:

• There is often a mismatch between the time taken to set up a solar project and the infrastructure needed to route the power produced to the grid. This can result in further delays in the commissioning of the project.

Environmental Issues:

• Solar projects can have adverse impacts on the environment, including the encroachment upon the habitats of endangered species. For example, the critically endangered Great Indian Bustard has been affected by solar power projects, particularly by transmission lines that endanger the bird.

COVID-19:

• The COVID-19 pandemic has also impacted the commissioning of solar projects by halting economic activity and disrupting supply chains.

Supreme Court Order:

• In April 2022, the Supreme Court directed power companies to lay underground cables in solar parks in Rajasthan to protect the habitat of the Great Indian Bustard. However, few companies have actually complied with the order. The government has expressed concerns that laying underground cables would greatly increase the cost of solar power.

The Current State of Solar Energy in India

Installed Capacity:

• According to the numbers presented in Parliament, as of October 2022, 61GW of solar power had been installed in India.

Renewable Energy Target:

• India has set an ambitious target to achieve a capacity of 175 GW of renewable energy by the end of 2022, out of which 100 GW was to be from solar power.
• The target further expands to 500 GW by 2030, which is the world's largest expansion plan for renewable energy.

Market Position:

• India ranked as the second-largest market in Asia for new solar PV capacity and the third globally.
• India overtook Germany for the first time in total solar installations (60.4 GW) and ranked fourth globally.

Top States for Large-Scale Solar:

• As of June 2022, Rajasthan and Gujarat were the top states for large-scale solar, accounting for 53% and 14% of installations, respectively.
• Maharashtra ranked third with 9% of the total installations.

Initiatives by India to Promote Solar Energy

Solar Park Scheme:

• The Solar Park Scheme aims to establish multiple solar parks, each with a capacity of around 500 MW, across various states in India.

Rooftop Solar Scheme:

• The Rooftop Solar Scheme focuses on utilizing solar energy by installing solar panels on the roofs of residential buildings.

Atal Jyoti Yojana (AJAY):

• The AJAY scheme was launched in September 2016 to install solar street lighting (SSL) systems in states where less than 50% of households have access to grid power.

National Solar Mission:

• The National Solar Mission is a major initiative by the Indian Government and State Governments to promote sustainable growth while addressing the country's energy security challenges.

SRISTI Scheme:

• The Sustainable Rooftop Implementation of Solar Transfiguration of India (SRISTI) scheme promotes the use of rooftop solar power projects in India.

International Solar Alliance (ISA):

• The ISA is a joint effort by India and France to mobilize global efforts against climate change through the deployment of solar energy solutions.

RBI’s Monetary Policy Review

Why in News:

• The Reserve Bank of India's Monetary Policy Committee (MPC) has released its latest review of the Monetary Policy.
• According to the MPC, the growth prospects worldwide are decreasing.
• The financial markets are highly volatile and experiencing price swings.
• The Reserve Bank of India has noted these concerns in its review of the Monetary Policy.

Highlights of the Monetary Policy Review by the Reserve Bank of India

GDP Growth Forecast:

• The MPC lowered its GDP growth estimate for the fiscal year 2022-23 to 6.8%, down from 7% earlier.
• However, the World Bank raised its growth forecast to 6.9% for the same period, up from a revised 6.5% in October 2022.
• The projected real GDP growth for Q1:2023-24 is 7.1%, and for Q2, it is 5.9%.
• In September 2022, the GDP forecast for the full year was lowered, but the quarterly GDP forecast was raised.

Inflation & Interest Rates:

• The forecast for headline inflation for the financial year 2022-23 remains at 6.7%.
• RBI anticipates headline inflation to stay above 6% for 15 consecutive months, and achieving the 4% target will take longer.

Repo Rate:

• The MPC increased the repo rate by 35 basis points to 6.25%.
• The Standing Deposit Facility has also been raised to 6%.

What is Monetary Policy Framework?

Overview:

• The RBI Act was amended in May 2016 to establish a legislative mandate for the central bank to operate India's monetary policy framework.

Goals:

• The primary objective of the framework is to establish the policy rate (repo rate) based on an assessment of current and evolving macroeconomic conditions and adjust liquidity conditions to stabilize money market rates around the repo rate.

Significance of Repo Rate:

• Changes in the repo rate affect the entire financial system through the money market, which influences aggregate demand, making it a crucial factor in determining inflation and growth.

The Monetary Policy Committee: Objective, Origin, and Composition

Objective:

• The objective of the Monetary Policy Committee (MPC) is to determine the policy rate required to achieve the inflation target set by the Reserve Bank of India (RBI). The decision of the committee is binding on the bank.

Origin:

• The central government is authorized to constitute a six-member Monetary Policy Committee (MPC) under Section 45ZB of the amended RBI Act, 1934. This amendment was made in 2016.

Composition:

• The MPC is composed of six members, as mandated by Section 45ZB. The composition includes the RBI Governor as its ex-officio chairperson, the Deputy Governor in charge of monetary policy, an officer of the Bank nominated by the Central Board, and three persons appointed by the central government. The appointed members must have knowledge and experience in the field of economics, banking, finance, or monetary policy and should possess ability, integrity, and standing.

What are the Instruments of Monetary Policy?

• Repo Rate
• Standing Deposit Facility (SDF) Rate
• Marginal Standing Facility (MSF) Rate
• Liquidity Adjustment Facility (LAF)
• LAF Corridor
• Main Liquidity Management Tool
• Fine Tuning Operations
• Reverse Repo Rate
• Bank Rate
• Cash Reserve Ratio (CRR)
• Statutory Liquidity Ratio (SLR)
• Open Market Operations (OMOs)

Horticulture Cluster Development Programme

Why in News:

• Union Ministry of Agriculture and Farmers Welfare conducted a meeting for Horticulture Cluster Development Programme (CDP).
• The CDP will be implemented to focus on the overall development of horticulture in the country.
• Horticulture is a branch of plant agriculture that deals with garden crops, including fruits, vegetables, and ornamental plants.

Overview of Horticulture Cluster Development Programme (CDP)

• The Horticulture Cluster Development Programme is a central sector programme aimed at developing and growing identified horticulture clusters to make them globally competitive.
• Horticulture clusters are regional/geographical concentrations of targeted horticulture crops.
• The CDP is implemented by the National Horticulture Board (NHB) of the Ministry of Agriculture and Farmers’ Welfare.
• In the pilot phase, the CDP was implemented in 12 clusters covering 11 states/union territories.
• The states of Arunachal Pradesh, Assam, West Bengal, Manipur, Mizoram, Jharkhand, Uttarakhand, etc. will also be included in the list of 55 clusters, identified with their focus/main crops.

Objectives of Horticulture Cluster Development Programme (CDP)

• The CDP aims to improve exports of targeted crops by about 20% and create cluster-specific brands to enhance the competitiveness of cluster crops.
• The CDP aims to address all major issues related to the Indian horticulture sector, including pre-production, production, post-harvest management, logistics, marketing, and branding.
• The CDP aims to leverage geographical specialisation and promote integrated and market-led development of horticulture clusters.
• The CDP aims to converge with other government initiatives such as the Agriculture Infrastructure Fund.
• A lot of investment will also come in the horticulture sector through CDP.

Significance of Horticulture Cluster Development Programme (CDP)

• The Cluster Development Programme has the potential to transform the entire horticulture ecosystem by creating last-mile connectivity with the use of multimodal transport for efficient and timely evacuation and transportation of horticulture produce.
• The CDP will bring a lot of investment to the horticulture sector.

Status of the Horticulture Sector in India

Production:

• India is the second-largest producer of horticulture crops globally.
• India is a leader in producing fruits like Mango, Banana, Pomegranate, Sapota, Acid Lime and Aonla.
• In 2021-22, Uttar Pradesh followed by Madhya Pradesh and West Bengal were the top states in horticulture production.
• West Bengal, Uttar Pradesh and Madhya Pradesh were the top States in vegetable production.
• Maharashtra followed by Andhra Pradesh and Uttar Pradesh were the top states in fruit production.
• The area under horticulture crops increased to 27.74 million hectares in 2021-22, and produced around 341.63 million tonnes.

Initiatives for Horticulture

• Mission for Integrated Development of Horticulture:
• MIDH is a Centrally Sponsored Scheme for the holistic growth of the horticulture sector covering fruits, vegetables and other areas.
• Under MIDH, Government of India contributes 60% of the total outlay for developmental programmes in all the states (except North Eastern and Himalayan states where GOI contributes 90%) & 40% is contributed by State governments.
• It has five major schemes on horticulture:
  • National Horticulture Mission (NHM)
  • Horticulture Mission for North East and Himalayan States (HMNEH)
  • National Horticulture Board (NHB)
  • Coconut Development Board (CDB)
  • Central Institute of Horticulture (CIH), Nagaland

Impact of Global Layoffs

Context:

• Multinational companies such as Amazon, Microsoft, Meta, Facebook, and Google have initiated a wave of layoffs recently.
• Within just three months, around 2 lakh IT employees have lost their jobs in a massive layoff spree.
• In January, over 26,000 employees were terminated by 104 tech companies.
• On average, more than 1000 employees are laid off every day in the tech industry.
• Among all the employees who lost their jobs in the IT sector, 30-40% are Indians.

Causes of Layoffs in the Tech Industry

Covid-19 Pandemic:

• The pandemic has caused significant loss to the economy, leading to layoffs in several sectors.
• During the pandemic, there was a rise in internet usage, but as things normalize, many fields have seen a decrease in demand.

Cost Cutting:

• Companies often layoff employees to reduce expenses and increase profits.

Phase of Moderation:

• As remote work becomes more prevalent, companies are looking to resize their workforce to ease cost pressures.

Ukraine-Russia War:

• The war has impacted the global economy, leading to recession in several countries.

Potential Economic Recession:

• Experts predict a looming economic recession, with some countries already experiencing one, leading to the current wave of layoffs.

Situation of Indian IT firms

Overview:

• Indian IT services firms are major employers in the organized sector, and changes in the global economic environment can have an impact on their growth.

No Discernible Trend:

• Currently, there is no noticeable trend in the Indian IT sector that may lead to layoffs or reductions in employment.

Startups Most Affected:

• Startups are more likely to experience layoffs and reductions in employment, as they are more vulnerable to changes in the economic environment.

Impact of Layoffs

Impact of Layoffs on Employment and Finance:

• Layoffs lead to a rise in unemployment which is already a major problem in the economy.
• Even if companies offer a severance package, it can still cause a huge financial loss for the individual and their family.

Impact on Prospects and Goodwill:

• Layoffs lead to a loss of job prospects for individuals.
• The impact of layoffs on the goodwill of the company in front of customers can be detrimental.
• Many Indian IT professionals on non-immigrant work visas are looking for ways to stay in the US after losing their jobs and changing their visa status to find a new job within the allotted time of a few months.

Mental Health Impact of Layoffs:

• Layoffs can have a significant impact on the mental health of the individual who goes through the process.
• The productivity of the person can be impacted, and they may require time to recover from the loss of job and financial stability.

Way forward

Despite being laid off, there are still several opportunities for skilled tech professionals to find employment. India has seen an increase in the number of international in-house centers being established, and there is still a high demand for specialized skills in the industry.

Fertilizer Subsidy

Context:

• The Indian government has decided to increase the fertilizer subsidy for the rabi season due to the significant rise in global fertilizer prices. The subsidy has been doubled in order to assist farmers in purchasing fertilizers.

Details:

• The subsidy for fertilizers during the rabi season has been announced, which includes a significant amount for urea. The total amount of subsidy for both rabi and kharif seasons would be the highest so far. The announced subsidy amount for the rabi season is ₹1,38,875 crore, with an allocation of ₹80,000 crore for urea. For both the rabi and kharif seasons, the total subsidy amount would be ₹2.25 lakh crore.

What is fertilizer subsidy?

• Farmers can purchase fertilizers at a subsidized price below the market rate
• The government sets the maximum retail price (MRP) for neem-coated urea at Rs 5,922.22 per tonne, while the average cost-plus price paid to domestic manufacturers and importers is Rs 17,000 and Rs 23,000 per tonne, respectively.
• The Centre provides a subsidy to cover the difference in price between the MRP and the actual production or import cost.
• Non-urea fertilisers have decontrolled or company-set MRPs, but the Centre provides a flat per-tonne subsidy to keep prices reasonable.
• Decontrolled fertilizers are priced higher than urea and receive lower subsidies.

How is the subsidy paid and who gets it?

• The subsidy is paid to the fertiliser companies, who sell the fertilisers at a lower price to the farmers.
• Direct Benefit Transfer (DBT) system was introduced from March 2018.
• The payment of subsidy to the companies happens only after the actual sales to the farmers by the retailers.
• Each retailer has a point-of-sale (PoS) machine which is linked to the Department of Fertilisers' e-Urvarak DBT portal.
• The buyer of subsidised fertilisers has to provide either their Aadhaar unique identity or Kisan Credit Card number.
• The company can claim the subsidy only after the sale is registered on the e-Urvarak platform.
• The subsidy claims are processed on a weekly basis, and the payments are remitted electronically to the company's bank account.

Fertilizer subsidies in India:

• The purpose of fertilizer subsidies in India is to make them affordable to farmers and ensure food security for the country.
• India is the second-largest user of fertilizer in the world, after China.
• The subsidy bill for fertilizers has increased exponentially over the years, from $700 million in 1990-91 to nearly $11 billion in 2017-18.
• Fertilizer subsidies are the country's second-largest subsidy payment, after food.
• Despite the increase in expenditure, an estimated 65% of the fertilizer produced does not reach the intended beneficiaries, small and marginal farmers, according to government data.

Subsidies for urea:

• The bulk of the fertilizer subsidy is given in the form of urea, which makes up 70% of all fertilizer used in India.
• The government sets an artificially low price for each quintal (equal to 100 kilograms) of urea, which buyers (i.e.: farmers) pay to the retailer (i.e.: fertilizer shops).
• These retailers are the last-mile touch-points that sell fertilizer to farmers on a commission basis.
• A retailer is given a license by the state government on the basis of pre-defined selection criteria.
• The gap between the sale price and the cost of producing urea is paid by the government to the manufacturer.
• There are no restrictions on who can buy subsidized fertilizer or on how much they can buy.

Issues with fertilizer subsidies

• The lack of restrictions on the purchase of subsidized fertilizers has led to the overuse of fertilizers in cultivation.
• Diversion of urea to other industries, like dairy, textile, paint, fisheries, etc., and neighboring countries, like Bangladesh and Nepal, has occurred through organized black market players who buy it in the guise of farmers and sell it for a profit.

Steps Taken:

• The Indian government has taken steps to reform the fertilizer distribution supply chain using technology to address leakages.
• The Mobile Fertilizer Management System was implemented to digitize the system.
• In 2016, the government piloted the Direct Benefit Transfer (DBT) system to pay subsidies and rolled it out nationwide in 2018.
• The new DBT system ensures that manufacturers are paid only after the fertilizer is sold to authenticated individuals.
• Buyers are required to prove their identity and provide their fingerprints on a Point of Sale machine possessed by the retailer.
• Once the Point of Sale machine verifies the buyer's identity, the sale is recorded, and the subsidy is remitted to the manufacturer.
• The DBT system allows the government to know who is buying the fertilizer, which increases transparency.
• The system does not verify if the buyer is a farmer since there is no database of farmers in India.
• Despite this limitation, the DBT system has made an impact in increasing transparency.

Potential Reforms for Further Efficiency in Fertilizer Subsidies:

• The government is considering implementing a new system where subsidies are directly credited to the bank accounts of farmers.
• Direct bank transfers are already in place for cooking fuel subsidies and pension payments.
• This model involves depositing a pre-defined amount of money directly into the beneficiary's bank account.
• Replicating the direct bank transfer model for fertilizer subsidies is more complex than for other subsidies.
• The government does not have a list of beneficiaries or a database of farmers, which makes it difficult to implement direct bank transfers for fertilizer subsidies.

Solutions for Directly Connecting Fertilizer Subsidies with Farmers

Creating a List of Beneficiary Farmers:

• To optimize fertilizer subsidy transfers, the government must create a list of beneficiary farmers, including tenant farmers who rent land.
• Existing databases like the PM Kisan list can serve as a starting point for creating this list.
• Determining how much subsidy each beneficiary is entitled to will depend on factors like land holdings, crop types, geo-climatic conditions, and soil health status.

Direct Bank Transfers for Fertilizer Subsidies:

• One possible solution is to credit farmers' bank accounts with the subsidy amount.
• Farmers could then buy fertilizer at market price from retailers.

Concerns of Farmers Regarding Direct Bank Transfers

Payment Issues:

• 65% of farmers in India do not want to receive fertilizer subsidies via bank transfer.
• They have faced problems with similar programs in the past, where payments were either delayed or never received.

Financial Burden:

• If the subsidy amount is not available on time, farmers would have to buy fertilizer at high non-subsidized prices, which would increase their financial burden.
• Currently, farmers pay Rs 295 - Rs 325 for a bag of urea, while the non-subsidized price would be Rs 950 - Rs 1,100.
• Paying Rs 1,100 per bag upfront would be too burdensome for many small farmers.

Banking Hassles:

• Farmers would have to make multiple trips to banking points to withdraw cash, which translates to lost opportunity costs.
• The hassle of banking and additional trips to the fertilizer retailer could be problematic for farmers.