Economic Development: March 2024 Current Affairs | Current Affairs & General Knowledge - CLAT PDF Download

Comprehensive Framework for a Regulatory Sandbox

Why in News?

Recently, the Reserve Bank of India (RBI) revised the timeline for the completion of various stages of a Regulatory Sandbox (RS) to nine months from the previous seven months.

Reserve Bank of India (RBI) Regulatory Sandbox (RS)

The Reserve Bank of India (RBI) has introduced a Regulatory Sandbox (RS) program, which lasts for a period of nine months initially, extendable to seven months. This initiative aims to foster innovation in the financial technology sector.

• The updated framework for an RS also mandates sandbox entities to ensure adherence to the regulations outlined in the Digital Personal Data Protection Act, 2023.

What is the Regulatory Sandbox (RS)?

The Regulatory Sandbox (RS) is a controlled environment provided by regulatory bodies like the RBI for fintech companies to test innovative products, services, and business models in a live setting, under regulatory supervision.

• Participants in the RS can experiment with new technologies and approaches without the need to fully comply with all regulatory requirements from the outset.
• It allows for a more flexible and adaptive regulatory process that facilitates innovation while ensuring consumer protection and financial stability.
• For example, a startup developing a blockchain-based payment solution could test its product within the RS to assess its feasibility and compliance before a full-scale launch.
• The RS encourages collaboration between regulators, innovators, and consumers to create a conducive environment for testing and implementing cutting-edge solutions.

Background

• The Reserve Bank of India (RBI) established an inter-regulatory Working Group in 2016 to delve into the detailed facets of FinTech, assess its implications, and review the regulatory framework to adapt to the swiftly evolving FinTech landscape.
• This group recommended the implementation of a Regulatory Sandbox (RS) framework within a specific space and time frame. Here, the financial sector regulator would offer necessary regulatory guidance to enhance efficiency, manage risks, and create fresh opportunities for consumers.

About Regulatory Sandbox (RS)

• A Regulatory Sandbox (RS) refers to live testing of new products or services in a controlled regulatory environment for which regulators may or may not permit certain regulatory relaxations for the limited purpose of testing.
• The RS is an important tool that enables more dynamic, evidence-based regulatory environments which learn from and evolve with, emerging technologies.
• It enables the regulator, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial innovations while monitoring and containing their risks.

Objectives

• The objective of the RS is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.
• It can provide a structured avenue for the regulator to engage with the ecosystem and to develop innovation-enabling or innovation-responsive regulations that facilitate delivery of relevant, low-cost financial products.

Target Applicants

• Entities eligible to participate in the RS include fintech firms, banks, and companies collaborating with or supporting financial services businesses, among others.

What are the Associated Benefits and Challenges Related to Regulatory Sandbox?

• Simplifying regulations for telecom R&D activities: This involves streamlining the rules and processes that govern research and development in the telecommunications sector to encourage innovation and growth.
• Exploration of new spectrum bands: The initiatives focus on identifying and utilizing untapped frequency ranges to support the deployment of advanced technologies like 5G and beyond.

Benefits of Regulatory Sandbox

• Regulatory Insights: Regulators can gather direct empirical evidence regarding the advantages and risks associated with emerging technologies. This insight helps them make informed decisions about potential regulatory modifications.
• Enhanced Understanding for Financial Providers: Traditional financial service providers can enhance their comprehension of the functioning of new financial technologies. This understanding can assist them in effectively incorporating these innovations into their business strategies.
• Cost-Effective Viability Testing: Users of a Regulatory Sandbox have the opportunity to assess the feasibility of a product without the necessity of a large-scale and costly rollout.
• Financial Inclusion Potential: Financial Technology (FinTech) companies offer solutions that can significantly contribute to enhancing financial inclusion.
• Thrust Areas for Innovation: The Regulatory Sandbox can potentially drive innovation in areas such as microfinance, innovative small savings mechanisms, remittances, mobile banking, and digital payment solutions.

Challenges of Regulatory Sandbox

• Flexibility and Time Constraints: Innovators may encounter difficulties related to adaptability and time management during the sandbox process, affecting their ability to iterate swiftly.
• Case-by-Case Authorizations: Obtaining customized authorizations and regulatory relaxations on an individual basis can be a prolonged process, often involving subjective evaluations, leading to delays in experimentation.
• Limitations on Legal Waivers: The Reserve Bank of India (RBI) or its Regulatory Sandbox cannot provide legal exemptions, which may restrict innovators seeking to mitigate legal risks during experimentation.
• Post-Sandbox Regulatory Approvals: Even after successful sandbox testing, experimenters may still require regulatory approvals before their products, services, or technologies can be authorized for broader application. This process could potentially elongate the time to market.

Way Forward

• Addressing Flexibility and Time Management Concerns: It is crucial for innovators to enhance their adaptability and time management skills to navigate the challenges posed by the sandbox process effectively. For instance, creating a structured timeline for iterations can help in streamlining the development process.
• Streamlining Case-by-Case Authorizations: Simplifying the process of securing custom authorizations and regulatory relaxations on an individual basis is essential to reduce delays in experimentation. Implementing clearer evaluation criteria can expedite the authorization process.
• Exploring Legal Compliance Strategies: Innovators should explore alternative strategies to navigate limitations on legal waivers within the Regulatory Sandbox. Collaborating with legal experts to identify compliant pathways can help in minimizing legal risks effectively.
• Accelerating Post-Sandbox Regulatory Processes: To expedite post-sandbox regulatory approvals, it is advisable for experimenters to engage proactively with regulatory authorities and maintain transparent communication channels. This proactive approach can facilitate a smoother transition to the market phase.

National Urban Cooperative Finance and Development Corporation Limited

Why in News?

The Union Cooperation Minister inaugurated an umbrella organisation for urban cooperative banks (UCB) - the National Urban Cooperative Finance and Development Corporation Limited (NUCFDC).

What is Cooperative Banking?

Meaning

Cooperative banking is a system where individuals in a community, like a village or a specific group, join together to combine their resources and offer financial services such as loans and savings accounts.

Working

• Membership: People or businesses who meet specific requirements can become members by buying shares or making an initial deposit.
• Democratic Governance: Each member holds equal voting rights, irrespective of their shareholding. Members select a board of directors from within the group to supervise the bank's operations and make important decisions.
• Cooperative banks are governed by both the Reserve Bank of India (RBI) and the relevant state governments. They are registered under the Co-operative Societies Act, similar to Primary Agricultural Credit Societies (PACS).

The Urban Cooperative Banks in India

• Currently, there exist more than 1,500 scheduled and non-scheduled Urban Cooperative Banks in India, collectively operating through over 11,000 branches.
• These banks hold a substantial deposit amount, exceeding Rs 5.33 lakh crore, and have extended loans totaling more than Rs 3.33 lakh crore.
• The Urban Cooperative Banks in the nation have successfully decreased their Net Non-Performing Asset (NPA) ratio to 2.10%, but there is a pressing need for further enhancements in this regard.
• Many of these banking institutions encounter challenges concerning their technological infrastructure, impeding their ability to provide contemporary banking services efficiently.

About the NUCFDC

• The National Urban Cooperative Finance Development Corporation (NUCFDC) has obtained the Certificate of Registration (CoR) from the Reserve Bank of India (RBI) to function as a Non-Banking Finance Company (NBFC) and act as the overarching body for the urban cooperative banking sector.
• Moreover, it has been granted permission to operate as a Self-Regulatory Organisation (SRO) for this sector.
• NUCFDC's primary objective is to secure funds, aiming to achieve a capital base of Rs. 300 crores. This capital will be utilized to assist Urban Cooperative Banks and establish a shared technology platform to enhance service provisions and diminish expenses.

Significance of the NUCFDC

• If India aims to rank as the world's third-largest economy, it must prioritize inclusive and comprehensive economic development. A crucial step towards this vision involves the establishment of Urban Cooperative Banks (UCBs) in every city.
• The National Urban Cooperative Federation of India (NUCFDC) plays a pivotal role in realizing the 'Sahakar se Samriddhi' vision for a self-reliant India ('Aatma Nirbhar Bharat'). Its primary objective is to modernize and fortify UCBs across the country.
• NUCFDC acts as a protective shield for small banks, enhancing depositors' trust and confidence in the banking system.

BioCNG Production from Dung

In the news

• Nestled along the Deesa-Tharad highway in Gujarat’s Banaskantha district lies India’s pioneering gas-filling station, seemingly unremarkable at first glance.
• However, this station, powered by cattle and buffalo dung, marks a significant leap in renewable energy innovation.

Fuel Production from Dung: A Technological Marvel

• Innovative Concept: The ‘BioCNG’ outlet in Dama village of Deesa taluka stands as India’s sole gas-filling station utilizing cattle and buffalo dung.
• Daily Operations: The outlet serves 90-100 vehicles daily, selling 550-600 kg of gas generated from 40 tonnes of dung processed at an adjacent plant.
• Dung Utilization: Approximately 40,000 kg of dung are sourced daily from 2,700-2,800 animals belonging to 140-150 farmers residing within a 10 km radius of the plant.

Understanding the Dung-to-Fuel Process

• Biogas Production: Fresh dung, rich in methane and water, undergoes anaerobic digestion in a sealed vessel, yielding raw biogas.
• Purification Process: The raw biogas undergoes purification to remove impurities like CO2 and H2S, resulting in compressed biogas (CBG) suitable for vehicle use.
• Production Output: From 40 tonnes of dung, the plant generates 2,000 cubic meters of raw biogas containing 55-60% methane, 35-45% CO2, and 1-2% hydrogen sulphide (H2S) and moisture.

Dual Benefits: Fuel and Fertilizer

• Fuel Value: CBG is sold at the station for Rs 72/kg, offering a renewable and eco-friendly alternative to traditional fuels.
• Fertilizer Production: The process also yields bio-fertilizer, enriching soil health and providing an additional income stream for farmers.
• Fertilizer Sales: The Banaskantha Union markets 8,000-10,000 kg of bio-fertilizer daily, with phosphate-rich organic manure (PROM) fetching Rs 15-16/kg and compost Rs 8-10/kg.

Significance: Decentralized Model for Sustainable Agriculture

• Community Involvement: The initiative engages local farmers, who supply dung to the plant, fostering community participation and economic empowerment.
• Replicability and Scalability: The model holds potential for replication across districts and states, offering a scalable solution for energy and agricultural needs.
• Investment Plans: The Banaskantha Union plans to commission four additional 100-tonnes capacity plants by 2025, with a total investment of Rs 230 crore.

Unemployment in India

Why in News?

According to recent data provided by the Centre for Monitoring Indian Economy (CMIE), India saw its unemployment rate rise to 7.9% in December 2021, marking a four-month high.

What is Unemployment?

• Unemployment refers to the situation where individuals actively seeking employment are unable to secure jobs.
• It serves as a critical indicator of economic health. The unemployment rate, a key metric, is calculated as the ratio of unemployed individuals to the total labor force.
• The National Sample Survey Organization (NSSO) delineates employment and unemployment based on an individual's activity status, which includes being 'Employed' (engaged in economic activities) or 'Unemployed' (actively seeking or available for work).
• The unemployment rate formula is expressed as follows: Unemployment rate = (Number of Unemployed Workers / Total labor force) × 100.

Understanding Unemployment Rate and Labour Force

• Working (engaged in an economic activity) is referred to as 'Employed'.
• Seeking or available for work is known as 'Unemployed'.
• People not seeking nor available for work do not fall into the labour force category.
• The labour force consists of both employed and unemployed individuals.
• The unemployment rate is calculated as a percentage of the labour force without work.
• Unemployment rate formula: (Unemployed Workers / Total labour force) × 100.

Types of Unemployment in India

Unemployment in India can be classified into various types based on different factors:

• Frictional Unemployment: This type occurs when individuals are temporarily between jobs. For instance, a person resigning from one job to search for a better one.
• Structural Unemployment: This arises due to a mismatch between the skills possessed by job seekers and the requirements of available jobs. For example, technological advancements making certain skills obsolete.
• Cyclical Unemployment: It is linked to the business cycle, where economic downturns lead to reduced demand for labor. An example is the decline in job opportunities during a recession.
• Seasonal Unemployment: This type is related to seasonal fluctuations in demand. Agricultural workers facing unemployment during the off-season is a common example.

Challenges Faced due to Unemployment

Unemployment poses several challenges that impact individuals and the economy as a whole:

• Financial Instability: Loss of income can lead to financial hardships for individuals and their families.
• Social Issues: Unemployment can contribute to social issues such as poverty, crime, and mental health problems.
• Economic Impact: High levels of unemployment can hinder economic growth and stability, affecting the overall prosperity of a nation.

What are the Steps Taken by the Government?

• Government Initiatives for Employment Generation
• Providing Skill Development Programs
• Implementing Job Placement Services
• Offering Financial Assistance for Startups
• Ensuring Social Security Measures for the Unemployed
• Establishing Vocational Training Centers
• Promoting Entrepreneurship Opportunities
• Facilitating Access to Microfinance Options
• Integrated Rural Development Programme (IRDP): Initiated in 1980 to generate employment opportunities in rural regions.
• Training of Rural Youth for Self-Employment (TRYSEM): Launched in 1979 to equip jobless rural youth aged 18-35 with skills for self-employment, with a focus on SC/ST Youth and Women.
• RSETI/RUDSETI: A collaborative effort between Sri Dharmasthala Manjunatheshwara Educational Trust, Syndicate Bank, and Canara Bank in 1982, leading to the establishment of the "Rural Development And Self Employment Training Institute" (RUDSETI) near Dharmasthala, Karnataka. These institutes are now overseen by Banks with support from the Government of India and State Government.
• Jawahar Rozgar Yojana (JRY): Commenced in 1989 by amalgamating National Rural Employment Programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP), sharing costs on an 80:20 basis between the center and the States.
• Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA): Introduced in 2005, ensuring a minimum of 100 days of paid work annually to families opting for unskilled labor-intensive jobs, granting Right to Work.
• Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Launched in 2015 to provide industry-relevant skill training to Indian youth, enhancing their employability.
• Start Up India Scheme: Initiated in 2016 to foster entrepreneurship nationwide, facilitating bank loans ranging from Rs 10 lakh to Rs 1 crore for SC/ST and women borrowers to establish new enterprises.

Initiatives to Promote Sustainable Agriculture

What is Sustainable Agriculture?

Sustainable agriculture isn't just about growing food; it's about doing it in a way that keeps the environment healthy, supports communities, and helps farmers economically. It's like farming with a triple bottom line: planet, people, and profit.

Key Features of Sustainable Agriculture

• Resource Conservation: This means using things like soil, water, and air wisely. Farmers use clever techniques to protect soil from washing away, keep water clean, and make sure we don't run out of freshwater.
• Soil Health Management: Healthy soil means better crops without relying too much on chemicals. Farmers add natural stuff like compost to keep soil happy and full of life.
• Biodiversity Protection: Keeping things diverse helps ecosystems stay strong. By using local plants and encouraging helpful critters like bees, farmers keep their farms buzzing with life.
• Water Conservation: Water is precious, especially for farming. Sustainable farmers find smart ways to use less water and keep it clean for everyone.
• Energy Efficiency: Using less energy and using renewable sources like sunlight or wind helps keep farming sustainable. It's like giving the planet a break from too much pollution.
• Social Responsibility: Sustainable farming looks after farmers, workers, and the local community. Fair wages, good working conditions, and sharing knowledge are all part of it.
• Climate Change Resilience: Farms need to be ready for crazy weather. Sustainable farming uses tough plants and smart techniques to keep producing food even when the weather goes wild.
• Approaches to the Circular Economy: This means finding ways to use everything wisely. From composting leftovers to recycling resources, sustainable farms waste less and make more.
• Ongoing Research, Innovation, and Information Sharing: Learning never stops on a sustainable farm. Farmers, scientists, and others work together to find better ways to grow food without hurting the planet.

Sustainable Agriculture in India

• Organic Farming: More and more Indian farmers are going organic. They use things like natural fertilizers and bugs to keep their crops healthy without chemicals.
• Conservation Agriculture: This is about saving soil and water. Farmers use tricks like not digging too much and planting different crops to keep their fields happy.
• Agroforestry: Mixing trees with crops is catching on in India. It's like having a farm and a mini forest all in one, which helps soil and wildlife thrive.
• System of Rice Intensification (SRI): This is a smart way to grow more rice using less water and fewer chemicals. It's like a win-win for farmers and the environment.
• Precision Farming Tools: Indian farmers are getting high-tech. They use gadgets like drones and GPS to grow crops smarter and save resources.
• Integrated Pest Management (IPM): Bye-bye, pesticides! IPM is all about friendly bugs and clever tricks to keep pests away without harmful chemicals.
• Community Seed Banks and Conservation: Saving seeds is like saving history. Community seed banks help farmers keep old varieties alive and strong.

Challenges of Sustainable Agriculture

• Limited Resources: Not all farmers have what they need to go sustainable. Some don't have enough land or money to try new things.
• Water Shortage and Irrigation Issues: Water is a big deal for farming, but not everyone can afford fancy irrigation systems.
• Soil Deterioration: Bad farming practices can wreck soil, making it hard to grow anything. It's a big problem in places like Punjab.
• Vulnerability to Climate Change: Crazy weather can ruin crops and make farming tough. Places like Gujarat and Rajasthan feel the heat.
• Market Access and Pricing Instability: Sometimes, farmers can't sell what they grow or don't get paid enough. It's like a roller coaster for their wallets.

Steps India is Taking

• National Mission for Sustainable Agriculture (NMSA): This helps farmers go green and stay resilient to climate change.
• Pradhan Mantri Krishi Sinchayee Yojana (PMKSY): Making sure farmers have enough water to grow food is the goal of this scheme.
• National Horticulture Mission (NHM): This helps farmers grow more fruits and veggies in a way that's kind to the planet.
• National Food Security Mission (NFSM): Growing more food without hurting the environment is what this mission is all about.

Local Currency Trade between India-Indonesia

Why in News?

The Reserve Bank of India (RBI) and the Bank Indonesia (BI) signed a Memorandum of Understanding (MoU) for establishing a framework to promote the use of local currencies (the Indian Rupee (INR) and the Indonesian Rupiah (IDR)) for cross-border transactions.
Reserve Bank of India (RBI)Bank Indonesia (BI)Local currencies (the Indian Rupee (INR) and the Indonesian Rupiah (IDR)) for cross-border transactions.

• Earlier in 2023 India and Malaysia announced that they will settle trade in INR in addition to other currencies.

What are the Key Highlights of the MoU between RBI and Bank Indonesia?

• The primary objective of the MoU is to facilitate bilateral transactions in INR and IDR, covering all current account transactions, permissible capital account transactions, and other economic and financial transactions as mutually agreed upon by both countries.
• bilateral transactions in INR and IDR
• The framework enables exporters and importers to invoice and pay in their respective domestic currencies, thereby fostering the development of an INR-IDR foreign exchange market. This approach optimizes costs and settlement time for transactions. It is expected to promote trade between India and Indonesia, deepen financial integration, and enhance the historical, cultural, and economic relations between the two nations.
• exporters and importers to invoice and pay in their respective domestic currencies
• It is expected to promote trade between India and Indonesia, deepen financial integration, and enhance the historical, cultural, and economic relations between the two nations.

What are Efforts for the Internationalisation of the Rupee?

• Liberalisation of Capital Markets: India increased the availability of rupee-denominated financial instruments, such as bonds (Masala Bond) and derivatives, to enhance the rupee's appeal.
• Promotion of Digital Payment Systems: Initiatives like the Unified Payments Interface (UPI) have facilitated digital transactions in rupees. Recently, Sri Lanka and Mauritius have adopted UPI.
• Special Vostro Rupee Accounts (SVRAs): India permitted authorized banks from 18 countries (e.g., Russia and Malaysia) to open Special Vostro Rupee Accounts (SVRAs) for settling payments in rupees at market-determined exchange rates. Objectives of the Mechanism are lower transaction costs, greater price transparency, faster settlement time, and overall promotion of international trade.
• Currency Swap Agreements: Signed by the RBI with several countries (e.g., Japan, Sri Lanka, and SAARC members) enables the exchange of rupee and foreign currency between respective central banks, bolstering the international usage of the rupee.
• Bilateral Trade Agreements: The government's signing of bilateral trade agreements with other countries has facilitated greater cross-border trade and investment, promoting the use of the rupee in international transactions.

Government Proposes Higher Reporting Limits for Ministry Expenditure

Context

Parliament’s Public Accounts Committee (PAC) has approved the Finance Ministry’s proposal to raise reporting limits for new policy-related expenditures by ministries/departments.

What does the new reporting limit mean?

The new reporting limit dictates the amount of spending that requires prior approval or oversight from Parliament or other relevant authorities.
The new limits are set above Rs 50 crore but not exceeding Rs 100 crore, with mandatory prior approval of Parliament for spending over Rs 100 crore. The move comes after nearly 18 years and is in line with GDP growth and budget size expansion. The revision also covers New Service (NS) and New Instrument of Service (NIS) expenditure, aiming to encourage better budget estimation by ministries.
Aim: This revision aims to reduce delays in project execution caused by frequent supplementary demands for grants. The proposed changes are expected to streamline the spending process and improve decision-making while ensuring parliamentary oversight.

Penicillin G and PLI Scheme

Context

India is set to restart the manufacturing of the common antibiotic Penicillin G after three decades, with Hyderabad-based Aurobindo Pharma leading the initiative.

• The halt in Penicillin manufacturing in India during the ’90s was primarily due to cheaper Chinese products flooding the market, rendering Indian production unviable.

About Penicillin G

• Benzylpenicillin (Penicillin G) is a narrow-spectrum antibiotic used to treat infections caused by susceptible bacteria. It is a natural penicillin antibiotic that is administered intravenously or intramuscularly due to poor oral absorption.
• The government’s Production Linked Incentive (PLI) scheme, launched during the pandemic to promote domestic manufacturing, has played a crucial role in restarting production by offering incentives to companies on incremental sales.
• An active pharmaceutical ingredient (API) is the main ingredient in a medicine that causes the desired effect.

Coal Logistics Plan and Policy

Why in News?

India will start manufacturing the common antibiotic Penicillin G in 2024, three decades after India’s last plant shut down. This is one of the successes of the government’s Production Linked Incentive (PLI) scheme launched during Covid-19 to promote domestic manufacturing.

• Penicillin G is the Active Pharmaceutical Ingredient (API) used in manufacturing several common antibiotics.
• APIs, also called bulk drugs, are significant ingredients in the manufacture of drugs. The Hubei province of China is the hub of the API manufacturing industry.

Why did Penicillin Manufacturing Stop in India?

Closure of Manufacturing:

• Penicillin G, along with numerous other active pharmaceutical ingredients (APIs) manufactured in India, faced discontinuation due to the influx of competitively priced Chinese alternatives flooding the market.
• During the 1990s, at least five companies were engaged in the production of Penicillin G within the country. However, the significantly lower prices of Chinese counterparts rendered Indian manufacturers economically nonviable, leading to the closure of their operations.
• Many sizable manufacturing plants had to be liquidated for scrap.
• Additionally, the Drug Prices Control Order, which enforced price caps on essential medicines, further incentivized the adoption of cheaper imported products.
• For Example, India initially sold Paracetamol at approximately Rs 800 per kilogram, but the entry of Chinese competitors slashed prices to nearly Rs 400 per kilogram, rendering domestic production economically unviable..

Delay in Revival:

• Previously, there was little urgency to revive Penicillin manufacturing domestically, as cheaper alternatives were readily available in the global market.
• The disruption in the supply chain during the pandemic served as a wake-up call, highlighting the necessity for self-reliance.
• Consequently, the government initiated the PLI scheme to bolster domestic manufacturing.
• The substantial initial costs pose a significant barrier, particularly fermented ones like Penicillin G, requiring considerable capital investment, with profitability often taking years to achieve.
• Moreover, China has already emerged as a dominant supplier, having significantly expanded its manufacturing capabilities over the past three decades.
• To compete with their prices would necessitate substantial investments in larger facilities.

Impact of PLI Schemes:

• There has been a significant decrease in API imports following the implementation of the PLI scheme.
• For example, paracetamol, the imports have halved compared to pre-pandemic levels.
• However, despite this decline, a substantial portion of APIs, particularly for antibiotics, is still imported, highlighting the need for further development in domestic API manufacturing.
• The PLI scheme offers incentives, including a 20% support for the first four years, 15% for the fifth year, and 5% for the sixth year for fermentation-based bulk drugs like antibiotics, enzymes, and hormones such as insulin.
• These drugs, which involve fermentation in their production process, are considered more challenging to manufacture.
• Additionally, chemically synthesised drugs are eligible for a 10% incentive over six years on eligible sales.

What is the Production Linked Incentive Scheme (PLI)?

About:

• The PLI scheme was conceived to scale up domestic manufacturing capability, accompanied by higher import substitution and employment generation.
• Launched in March 2020, the scheme initially targeted three industries:
• Mobile and allied Component Manufacturing
• Electrical Component Manufacturing and
• Medical Devices.
• Later, it was extended to 14 sectors.
• In the PLI scheme, Domestic and Foreign companies receive financial rewards for manufacturing in India, based on a percentage of their revenue over up to five years.

Targeted Sectors:

• The 14 sectors are mobile manufacturing, manufacturing of medical devices, automobiles and auto components, pharmaceuticals, drugs, specialty steel, telecom & networking products, electronic products, white goods (ACs and LEDs), food products, textile products, solar PV modules, advanced chemistry cell (ACC) battery, and drones and drone components.
• Incentives Under the Scheme:
• The incentives given, are calculated on the basis of incremental sales.
• In some sectors such as advanced chemistry cell batteries, textile products and the drone industry, the incentive to be given will be calculated on the basis of sales, performance and local value addition done over the period of five years.
• The emphasis on R&D investment will also help the industry keep up with global trends and remain competitive in the international market.

Success in Smartphone Manufacturing:

• In FY 2017-18, mobile phone imports were USD 3.6 billion, while exports were a mere USD 334 million, resulting in a -USD 3.3 billion trade deficit.
• By FY 2022-23, imports reduced to USD 1.6 billion, while exports surged to nearly USD 11 billion, yielding a positive net exports of USD 9.8 billion.

Market Monopoly and Anti Competitive Practices

Why in News?

Recently, a dispute has emerged between Google and app developers, where Google removed almost a dozen firms out of its marketplace for Android apps.

What is the Issue Between Google and App Developers?

• Google's Android and Google Play dominate the Indian smartphone market.
• Indian app developers heavily depend on Google Play for app distribution and earnings.
• Google imposes fees on in-app purchases, which developers deem excessive and harmful.
• Major Indian app developers, such as Bharat Matrimony and Disney+ Hotstar, challenge Google's fees in court.
• The Competition Commission of India (CCI) has fined Google for anticompetitive practices.
• The conflict highlights concerns about platform monopolies, SMEs, innovation, and consumer welfare.
• Similar disputes globally involve tech giants like Apple facing scrutiny over App Store fees.
• Legal and regulatory actions in regions like the EU and the US set precedents for addressing antitrust concerns in digital markets.

What is Market Monopoly?

Market monopoly occurs when either a single company or a consortium of companies holds substantial control over a particular market or industry. In such a scenario, there is only one seller or producer of a specific product or service, with no close substitutes available to consumers. This dominant entity wields significant market power, enabling it to dictate market dynamics, establish prices, and manage the supply of goods or services.

• Single Dominant Entity: Monopoly entails the presence of a sole entity that monopolizes the entire market, serving as the exclusive provider of a particular product or service.
• High Entry Barriers: Monopolies often emerge due to significant obstacles preventing potential competitors from entering the market. These barriers may include substantial startup costs, exclusive access to resources, regulatory constraints, or strong customer loyalty to established brands.
• Absence of Substitutes: Consumers face limited or no alternative options for the product or service offered by the monopolistic company. Close substitutes are scarce within the market.
• Market Power and Price Control: Monopolies wield considerable market power, enabling them to set prices with minimal concern for competitive pressure. This can result in higher prices for consumers and potentially lower overall output.
• Influence Over Supply: The monopoly exercises control over the supply of the product or service, determining the quantity produced and adjusting supply levels to influence market dynamics.
• Limited Competition: Owing to the absence of competitors, monopolies operate within an environment devoid of direct competition for their specific product or service. This lack of competitive pressure may lead to reduced incentives for innovation and operational efficiency.

What are the Indian and International Initiatives to Deal with Market Monopoly?

Indian Antitrust Legislation:

• The Competition Act of 2002 serves as India's main law governing antitrust matters. It aims to foster and maintain competition in markets, prevent anti-competitive behavior, and safeguard consumer interests.
• The Competition Amendment Bill of 2022 proposes enhancements to the regulatory framework to tackle evolving challenges and bolster the enforcement of competition law.

Competition Regulatory Body:

• The Competition Commission of India (CCI) is the regulatory authority responsible for overseeing competition within the Indian market. It enforces the provisions outlined in the Competition Act of 2002 and comprises a Chairperson and Members appointed by the Central Government.
• The CCI investigates and takes action against practices such as anti-competitive behavior, abuse of dominant market position, and anti-competitive agreements.

Appellate Mechanisms:

• Initially, the Competition Appellate Tribunal (COMPAT) heard appeals against decisions made by the CCI.
• However, in 2017, COMPAT was replaced by the National Company Law Appellate Tribunal (NCLAT), which now handles appeals related to competition matters.

International Efforts:

• OECD Competition Committee: The OECD addresses anti-competitive practices through initiatives like the Competition Committee, which fosters collaboration among member nations on competition-related issues.
• UNCTAD: This organization provides guidance on competition policy and law through its Intergovernmental Group of Experts on Competition Law and Policy. It also works to protect consumers from abuse and reduce regulations that hinder competition.
• International Competition Network (ICN): The ICN comprises competition authorities from various countries, promoting communication and cooperation to tackle global competition challenges. It facilitates sharing of best practices and the development of guidelines on competition law.
• WTO: While primarily focused on trade, the WTO addresses competition policy through its Working Group on the Interaction between Trade and Competition Policy. Its goal is to ensure that competition policies do not create undue trade barriers.

Way Forward

• Advocates, such as public policy experts and industry representatives, propose regulatory reforms to enhance competition and mitigate the dominance of app store gatekeepers.
• It is important to include mandating transparency and fairness in app store policies, empowering developers with more payment options, and facilitating the emergence of alternative distribution channels.
• Balancing the interests of platform providers, developers, and consumers requires a nuanced approach that prioritises innovation, competition, and consumer welfare.