Daily Current Affairs

Eastern Economic Forum (EEF) &Indias balancing act (GS Paper 2, International Relation)

Why in news?

• Recently, Russia hosted the seventh Eastern Economic Forum (EEF) at Vladivostok.
• The four-day forum is a platform for entrepreneurs to expand their businesses into Russia’s Far East (RFE).

 

What is the Eastern Economic Forum?

• The EEF was established in 2015 to encourage foreign investments in the RFE. The EEF displays the economic potential, suitable business conditions and investment opportunities in the region.
• Agreements signed at the EEF increased from 217 in 2017 to 380 agreements in 2021, worth 3.6 trillion roubles. As of 2022, almost 2,729 investment projects are being planned in the region.
• The agreements focus on infrastructure, transportation projects, mineral excavations, construction, industry and agriculture.

 

Major actors in the Forum:

• In 2022, the Forum aimed at connecting the Far East with the Asia Pacific region.

 

China:

• China is the biggest investor in the region as it sees potential in promoting the Chinese Belt and Road Initiative and the Polar Sea Route in the RFE.
• China’s investments in the region account for 90% of the total investments. Russia has been welcoming Chinese investments since 2015; more now than ever due to the economic pressures caused by the invasion in Ukraine.
• The Trans-Siberian Railway has further helped Russia and China in advancing trade ties. The countries share a 4000-kilometer-long border, which enables them to tap into each other’s resources with some infrastructural assistance. China is also looking to develop its Heilongjiang province which connects with the RFE.
• China and Russia have invested in a fund to develop northeastern China and the RFE, through collaborations on connecting the cities of Blagoveshchensk and Heihe via a 1,080 metre bridge, supplying natural gas, and a rail bridge connecting the cities of Nizhneleninskoye and Tongjiang.

 

South Korea:

• Besides China, South Korea has also been gradually increasing its investments in the region.
• South Korea has invested in shipbuilding projects, manufacturing of electrical equipment, gas-liquefying plants, agricultural production and fisheries.
• In 2017, the Export-Import Bank of Korea and the Far East Development Fund announced their intention to inject $2 billion in the RFE in a span of three years.

 

Japan:

• Japan is another key trading partner in the Far East. In 2017, Japanese investments through 21 projects amounted to $16 billion. Under Shinzo Abe’s leadership, Japan identified eight areas of economic cooperation and pushed private businesses to invest in the development of the RFE.
• Japan seeks to depend on Russian oil and gas resources after the 2011 meltdown in Fukushima which led the government to pull out of nuclear energy. Japan also sees a market for its agro-technologies which have the potential to flourish in the RFE, given similar climatic conditions.
• However, the momentum of trade that existed with Shinzo Abe was lost with the leadership of YoshihideSuga and Fumio Kishida. The trade ties between Japan and Russia are hindered by the Kuril Islands dispute as they are claimed by both countries.

 

India:

• India seeks to expand its influence in the RFE. During the forum, Indian Prime Minister expressed the country’s readiness in expanding trade, connectivity and investments in Russia.
• India is keen to deepen its cooperation in energy, pharmaceuticals, maritime connectivity, healthcare, tourism, the diamond industry and the Arctic.
• In 2019, India also offered a $1 billion line of credit to develop infrastructure in the region. Through the EEF, India aims to establish a strong inter-state interaction with Russia.
• Business representatives of Gujarat and the Republic of Sakha have launched agreements in the diamond and pharmaceuticals industry.

 

What does the EEF aim for?

• The primary objective of the EEF is to increase the Foreign Direct Investments in the RFE. The region encompasses one-third of Russia’s territory and is rich with natural resources such as fish, oil, natural gas, wood, diamonds and other minerals.
• The sparse population living in the region is another factor for encouraging people to move and work in the Far East. The region’s riches and resources contribute to five per cent of Russia’s GDP. But despite the abundance and availability of materials, procuring and supplying them is an issue due to the unavailability of personnel.
• The RFE is geographically placed at a strategic location; acting as a gateway into Asia. The Russian government has strategically developed the region with the aim of connecting Russia to the Asian trading routes.
•  With the fast modernisation of cities like Vladivostok, Khabarovsk, Ulan-Ude, Chita and more, the government aims to attract more investments in the region. Russia is trying to attract the Asian economies in investing and developing the Far East.
•  The Ukraine invasion is a worrying issue as it affects the economic growth of the country. However, Russia believes that it can survive the economic crisis and the sanctions with the help of China and other Asian powers.
• Although, the EEF is an annual gathering, the forum comes at an opportune time for Russia who is dealing with the impact of the sanctions. Moreover, the coming together of countries like Myanmar, Armenia, Russia, and China seems like the forming of an anti-sanctions group in the international order.

 

Will India be able to achieve a balance between the EEF and the Indo-Pacific Economic Framework for Prosperity (IPEF)?

• The U.S.-led Indo-Pacific Economic Framework for Prosperity (IPEF) and the EEF are incomparable based on its geographic coverage and the partnership with the host-countries. India has vested interests in both the forums and has worked towards balancing its involvement.
• India has not shied away from investing in the Russia-initiated EEF despite the current international conditions.
• At the same time, India has given its confirmation and acceptance to three of the four pillars in the IPEF. The country understands the benefits of being involved in the development in the RFE but it also perceives the IPEF as a vital platform to strengthen its presence in the Indo-Pacific region.
• The IPEF also presents an ideal opportunity for India to act in the region, without being part of the China-led Regional Comprehensive Economic Partnership or other regional grouping like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership .
• The IPEF will also play a key role in building resilient supply chains. India’s participation in the forum will help in disengaging from supply chains that are dependent on China and will also make it a part of the global supply chain network.
• Additionally, the IPEF partners will act as new sources of raw material and other essential products, further reducing India’s reliance on China for raw materials. Although, India has refrained from full participation in the trade pillar of the IPEF, it does not signify an end to India’s role in the forum.

Tamil Nadus new breakfast scheme in schools

(GS Paper 2, Governance)

Why in news?

• Recently, Tamil Nadu Chief Minister, at the Madurai Corporation Primary School Aathimoolam II in Simmakal, Madurai, launched the Chief Minister’s Breakfast Scheme for students of Class I to V in government schools.

Coverage:

• The scheme covers around 1.14 lakh students in 1,545 schools which include 417 municipal corporation schools, 163 municipality schools and 728 taluk and village panchayat-level schools.
• A sum of ₹33.56 crore has been set apart for the scheme. The inauguration of the scheme marks an important milestone in the State’s history of providing free meals to school students.

 

How has the idea evolved?

• In November 1920, the Madras (now Chennai) Corporation Council approved a proposal for providing tiffin to the students of a Corporation School at Thousand Lights at a cost not exceeding one anna per student per day.
• P. TheagarayaChetty, the then President of the Corporation (the modern-day equivalent of which is Mayor) and one of the stalwarts of the Justice Party, said the boys studying at the school were poor, which affected the strength of the institution ‘greatly’.
• The scheme, which was extended to four more schools and facilitated higher enrollment of students, suffered a setback in 1925 when the British government disallowed the expenditure on the supply of mid-day meals to students from the Elementary Education Fund. It was revived two years later, benefitting around 1,000 poor students in 25 schools.

 

Post-independence:

• The concept saw a State-wide application in 1956 when the then Chief Minister K. Kamaraj decided to provide free noon meal to poor children in all primary schools across the State.
• The Budget for 1956-57 contained a provision for supplying mid-day meals to schoolchildren for 200 days a year, initially covering 65,000 students in 1,300 feeding centres.
• In July 1982, it was left to the then Chief Minister M. G. Ramachandran to extend the programme to children in the 2-5 age group in Anganwadis and those in 5-9 age group in primary schools in rural areas.
• Subsequently, the scheme now called PuratchiThalaivar M.G.R. Nutritious Meal Programmewas extended to urban areas as well. Since September 1984, students of standards VI to X have been covered under the scheme.
• Over the years, there have been improvements to the programme. M. Karunanidhi, as Chief Minister during the short-lived DravidaMunnetraKazhagam Ministry (1989-91), introduced the provision of boiled eggs once every fortnight, starting June 1989.
• His successor, Jayalalithaa, in March 2013, extended the scheme by including variety meals along with masala eggs as per the children’s choice.

 

What are the number of beneficiaries of the programme?

• As of now, there are nearly 46.7 lakh beneficiaries spread over 43,190 nutritious meal centres. This includes around 3,500 students of National Child Labour Project (NCLP) special schools.
• The State budget for 2022-23 has provided around ₹2,077 crore for the nutritious meal programme.
• Besides, as a consequence of the collaborative implementation of the Integrated Child Development Scheme (ICDS) and the nutritious meal programme, around 15.8 lakh children in the age group of 2+ to 5+ years receive nutritious meals.

 

What was the impact of the mid-day meal scheme on school education?

• After the improved version of the mid-day meal scheme in 1982, the Gross Enrollment Ratio (GER) at primary level (standards I to V) went up by 10% during July-September, 1982 as compared to the corresponding period in 1981.
• The rise in boys’ enrollment was 12% and in the case of girls, 7%, according to a publication brought out by the Tamil Nadu government on the occasion of the launch of the Chief Minister’s Breakfast Scheme. Likewise, attendance during July-September 1982 rose by 33% over the previous year’s figure.
• After the inauguration of the mid-day meal scheme in 1956, the number of primary schools went up from 15,800 in 1957 to 29,000 in 1962.

 

Where should the programme focus more?

• Anaemia is a major health problem in Tamil Nadu, especially among women and children, says the 2019-21 National Family Health Survey (NFHS)-5’s report.
• From 50% during the period of the 2015-16 NFHS-4, the prevalence of anaemia in children now went up to 57%.
• This and many other health issues can be addressed through the combined efforts of the departments of School Education, Public Health and Social Welfare and Women Empowerment.

 

Way Forward:

• Based on expert advice, those in charge of the implementation of the ICDS and the nutritious meal programme can enhance the component of nutrition to those children having specific problems. The latest Breakfast Scheme is a step in this direction.
• Besides, a continuous and rigorous review of the progress of the scheme and nutritious meal programmeshould be carried out in a sustained manner.

 

 

Climate action that runs on cooperative federalism

(GS Paper 2, Governance)

Context:

• India’s procurement of 5,450 electric buses and subsequent increase in ambition to have 50,000 e-buses on Indian roads by 2030 represent the immense potential for progress on climate and development goals through close collaboration between the Union and State governments. 

New business model:

• With the shared aim to rapidly electrify a key pillar of India’s public transportation, recent governance efforts have created a new business model for e-buses.
• If this sector is further developed, it can reduce air pollution in cities and fuel import bills, improve the balance sheets of State transport companies, and spur domestic manufacturing and job creation.

 

State of State-owned buses:

• There are currently around 1,40,000 registered public buses on India’s roads and at least 40,000 of these buses are at the end of their lifespan and must be taken off the roads immediately.
• However, most buses are owned and operated by State transport undertakings, which are in poor financial health. In part, they incur large losses because they play an important social function by providing subsidised fares to crores of Indians each day.
• With a few exceptions such as Mumbai’s Brihanmumbai Electric Supply & Transport Undertaking (BEST) of the BrihanmumbaiMahanagarpalika, when State transport undertakings go to the market to buy buses, they face problems of fragmented demand and high prices.
• Furthermore, there are limitations to nation-wide action on this issue as State governments control issues such as transit, urban governance and pollution control.

 

Example ofGrand Challenge 1:

• Until recently, there had never been a unified tender to address some of these challenges. Cooperative federalism can easily become a fraught issue. However, in the case of the Grand Challenge 1, a tender for 5,450 buses (across five major Indian cities — Kolkata, Delhi, Bengaluru, Hyderabad and Surat), the opposite happened.
• Convergence Energy Services Limited (CESL), a nodal agency of the Union government, acted as the programme manager in this effort at centralised procurement in concert, with State-led demand and customisation.
• Coordination between a range of Union government Ministries and State governments standardised demand conditions across these five cities and discovered prices that beat the increasingly outmoded internal combustion engines.
• On a cost-per-kilometre basis, the prices discovered were 40% lower than diesel and 34% less than CNG (without factoring in the subsidy through FAME-II).

 

FAME Scheme: FAME, the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-India) Scheme was launched under the National Mission on Electric Mobility in 2011/National Electric Mobility Mission Plan 2020, and unveiled in 2013. The scheme encourages the progressive induction of reliable, affordable and efficient electric and hybrid vehicles.

 

• With high fuel prices and energy security challenges in the wake of the war in Ukraine, the switch to electric vehicles appears even more sensible and lucrative.

 

How Grand Challenge 1 turned into huge success?

• This inflection point in unit economics was enabled by three key factors: collaboration, pace and transparency.
• First, the tender itself was a fully consultative process and varied contributions by participants already influenced the design of future tenders.
• Second, there was a shared sense of urgency that shaped this collaboration, which leveraged the bureaucracy’s power when working on time-bound and measurable schemes and increased receptivity to creative and new ideas.
• Finally, transparency was the most resilient quality of a public process. From the outset, there was clarity about the intention to engender trust and build a publicly available process and tender that invited bids from automakers and operators.

 

Cooperative federalism:

• Excessive centralisation can have limitations and contradict the federal principles enshrined in the Constitution.
• For instance, India’s States and districts vary vastly in their vulnerability to climate impacts, and decentralised decision-making and locally-led adaptation will help reduce potential damage to lives and livelihoods. Urban local bodies and gram panchayats can be the heart of climate action.
• However, in certain areas where India must move the needle quickly or where States lack size and financial clout, such as the electrification of mass mobility, centralised procurement and programme management can deliver architectural transformations rather than just incremental transitions.

 

Way Forward:

• Although a good start has been made, much work remains to be done to enable the electrification of mass mobility in India.
• The country’s shift to clean public transportation will require a suite of efforts, from ramping up manufacturing capacity to domestic battery production to building out charging infrastructure (ideally plugged in to a grid powered by renewables) to capacity building of State transport undertakings to developing financial instruments and structures.
• As India now ramps up its demand to deploy 50,000 buses across 40 cities, it will need to continue the spirit of true inter-ministerial and Union-State collaboration to fulfil its ambitious targets for green and inclusive economic development.

 

Should India choose manufacturing over services?

(GS Paper 3, Economy)

Context:

• Recently, the former Governor of the Reserve Bank of India, questioned the Central government’s production-linked incentive (PLI) scheme, arguing that it works against the interests of Indian consumers.
• In doing so, he revived the larger debate on the government’s efforts to promote the country’s manufacturing sector through subsidies, and on its relative importance vis-a-vis the services sector. 

 

Should government policy focus on promoting any particular sector of the economy?

Favour:

• All developing or industrialised countries made strategic interventions, or had an industrial policy.
• The government can’t do everything, prioritising certain sectors that have desirable features such as higher job creation or greater industrialisation is welcome.
• The latest example is the 2022 CHIPS (and Science) Act in the U.S., under which some $50 billion in incentives will be given to American companies to develop or to strengthen their semiconductor industry.
• Each of the East Asian countries such as Japan, South Korea, Taiwan, Malaysia, Thailand, China and Vietnam has a story of strategic interventions by the state and has become a manufacturing powerhouse running consistent trade and current account surpluses.
• In such a context, the Centre’s decision to promote the manufacturing sector is timely because India has favoured an agriculture and services-dominated economy over the years.

 

Against:

• No one have predicted that two-wheelers in India would fight off foreign competition pretty well while dozens of other manufacturing businesses would get butchered by foreign competition.
• It is not feasible for officials in bureaucracies to look at the industrial landscape and make speculative calls. The task of figuring out which sector to focus on is best left to the private sector. The job of the government is to create a broad enabling environment.

 

Should India focus on manufacturing over services?

• Services’ share of the economy has gone up to over 50% of the GDP. However, this sector has not been able to create enough jobs in a commensurate manner.
• The result is that agriculture still continues to sustain nearly half of India’s workforce, which means that 15% of GDP is supporting some 45% of the workforce.
• There is need more productive job opportunities for the workforce to shift away from agriculture. There is to focus attention on the manufacturing sector because of the direct and indirect jobs that it can create.
•  It is an empirical fact that manufacturing of all productive sectors has the highest backward and forward linkages. So, all together, there is significant potential for the manufacturing sector to create higher productivity jobs for people stuck in agricultural activities.  

Aren’t schemes like the PLI prone to the risk of cronyism?

• It is possible that the PLI would lead to some kind of cronyism. But when subsidies are linked to performance, there is little room for discretion.
• There are objective criteria which have been defined, such as getting a certain percentage in incentive if performance is better than last year. And of course, one can have third-party verification of performance to minimise misuse.
• Also, government can tighten the criteria further to things such as export performance, competitiveness and innovation. So, it is possible to have an incentive system and achieve most of the objectives without major problems.

 

Shouldn’t the government liberalise all sectors and let market forces decide outcomes?

New Sunrise sectors:

• The sectors that have been selected by the government include some of the new sunrise sectors, such as the semiconductor industry, which are highly import-dependent.
• Industries have been chosen based on where there is an opportunity to create new industries or reduce the dependence on imports, or where there are high spillovers or linkages to other sectors. So, industries benefiting from these subsidies have not been randomly chosen.
• Of course, one could argue that there are also other sectors that merit subsidies, but one has to start somewhere.

 

Conclusion:

• When India is trying to revive its economy, and want the investment cycle to pick up, it need to persuade investors to invest. And for that, some incentivisation is important, especially in the context of other countries offering incentives.

So, what has been done through the PLI, and the current focus of the government to promote the manufacturing sector, is the right thing to do at this moment.