1 June 2024 : Daily Current Affairs
1. Manufacturing sector’s growth lifts GDP to 8.2%
| Topic: GS3 – Indian Economy – Changes in industrial policy and their effects on industrial growth. |
| Context |
| ● India’s real GDP for FY24 grew by 8.2%, exceeding projections and accelerating from FY23’s 7% growth, driven by significant manufacturing sector expansion and robust services performance.
● The National Statistical Office’s provisional estimates highlighted strong economic momentum despite weather-related disruptions in agriculture. |
Analysis of the news:
- India’s real Gross Domestic Product (GDP) for FY24 grew by 8.2%, surpassing the projected 7.3% and improving from FY23’s 7% growth.
- Nominal GDP growth for FY24 was 9.6%, lower than the 14.2% growth seen in FY23.
- Real Gross Value Added (GVA) increased by 7.2% in FY24, up from 6.7% in FY23.
- Significant growth drivers included the manufacturing sector, which expanded by 9.9% in FY24 after a 2.2% contraction in FY23, and the mining and quarrying sector, which grew by 7.1% in FY24 after a 1.9% increase in FY23.
- Upward revisions in GVA of previous quarters contributed to the higher overall growth for FY24.
- Net taxes grew by 22% in Q4, continuing the divergence between GDP and GVA growth seen in Q3.
- Agricultural growth in Q4 was muted due to weather-related disruptions, while the manufacturing sector benefited from lower input costs and the services sector remained robust.
- Government capital expenditure played a key role in driving GDP growth, with expectations of 7% GDP growth for FY25.
| Importance of Manufacturing Sector For Indian Economy: |
| Importance of Manufacturing Sector in India
● Contributes approximately 15% to India’s GDP and employs around 12% of the workforce. ● Diverse industries include textiles, pharmaceuticals, automobiles, and consumer durables. ● Key driver of economic growth and essential for India’s industrial development. Challenges Faced by India’s Manufacturing Sector ● Inadequate tech-based infrastructure and skilled manpower. ● Limited access to credit, particularly for MSMEs. ● Shortage of skilled labour hindering sector growth. ● Complex regulations and poor supply chain management. ● Intense competition from other countries and dependence on foreign imports. Recent Government Initiatives for Industrial Sector Growth ● Production-Linked Incentive (PLI) scheme to boost domestic manufacturing. ● PM Gati Shakti for multimodal connectivity infrastructure. ● Bharatmala Project to improve connectivity in North East India. ● Start-up India to promote a culture of entrepreneurship. ● Make in India 2.0 to transform India into a global manufacturing hub. ● Atmanirbhar Bharat Campaign to reduce import dependence. Way Forward for Indian Manufacturing Sector ● Investing in infrastructure to attract more investment and businesses. ● Promoting export-oriented manufacturing to tap into new markets. ● Fostering innovation through research and development. ● Improving access to finance for SMEs and MSMEs. ● Streamlining regulations to reduce burdens on businesses. ● Encouraging skill development to address labour shortages and increase competitiveness. |
| Practice Question: Examine the role of the manufacturing sector in the Indian economy. How has it contributed to recent GDP growth, and what are its potential impacts on employment, exports, and overall economic development? (150 Words /10 marks) |
(Source – The Hindu, International Edition – Page No. – 1)
2. India eyes Mongolia for key minerals to bypass China route
| Topic: GS2 – International Relations |
| Context |
| ● India seeks to diversify mineral imports by exploring collaboration with Mongolia, aiming to secure coking coal and critical minerals like copper and rare earth elements while avoiding dependence on Chinese routes. |
Analysis of the news:
- India is seeking to advance into Mongolia to secure coking coal and critical minerals like copper and rare earth elements, aiming to reduce dependence on Chinese imports.
- Joint working groups with the Mongolian embassy have been established to explore collaboration opportunities.
- Evacuation of minerals poses a challenge, as India is reluctant to route through China, prompting exploration of alternative routes through Russia.
- Proposals include forming a consortium of state-run companies to set up required evacuation infrastructure.
- Mongolia is building a washing station for coking coal with a 2024 deadline, offering potential for coking coal exports to India.
- Joint venture tie-ups for copper mining are also being considered by the Mines Ministry.
| PYQ: ‘China is using its economic relations and positive trade surplus as tools to develop potential military power status in Asia’, In the light of this statement, discuss its impact on India as her neighbour. (150 words/10m) (UPSC CSE (M) GS-2 2017) |
| Practice Question: How does India’s exploration of collaboration with Mongolia for mineral imports reflect its strategic economic diversification efforts and geopolitical considerations? (150 Words /10 marks) |
(Source – The Hindu, International Edition – Page No. – 11)
3. Fiscal deficit in FY24 narrowed to 5.6% on better tax mop-up
| Topic: GS3 – Indian Economy – Issues relating to Planning. |
| Context |
| ● The Indian government’s fiscal deficit for 2023-24 stood at 5.6% of GDP, surpassing earlier estimates of 5.8%, attributed to increased revenue collection and reduced expenditure, as per official data released by the Controller General of Accounts. |
Analysis of the news:
- India’s fiscal deficit for 2023-24 was 5.6% of GDP, better than the previously estimated 5.8%, due to higher revenue and lower expenditure.
- Actual fiscal deficit was ₹16.53 lakh crore, equivalent to 5.63% of GDP, with GDP growth at 8.2%.
- Revised estimate projected fiscal deficit at ₹17.34 lakh crore, or 5.8% of GDP.
- Revenue collection reached 101.2% of revised estimates, with net tax collection at ₹23.26 lakh crore.
- Expenditure totaled ₹44.42 lakh crore, representing 98.9% of revised estimates.
| Fiscal Deficit: |
| Fiscal Deficit
● Definition: Fiscal deficit refers to the difference between the government’s total expenditure and its total revenue excluding borrowing. ● Calculation: It is calculated as Total Expenditure – Total Revenue (excluding borrowing). ● Importance: Fiscal deficit indicates the extent to which a government must borrow to meet its expenditure needs. ● Funding: Fiscal deficit is often funded through borrowing from domestic or international sources. Impact of Higher Fiscal Deficit ● Increased Borrowing: Higher fiscal deficit leads to increased government borrowing, which can put upward pressure on interest rates. ● Inflationary Pressure: Increased government borrowing can fuel inflationary pressures in the economy. ● Crowding Out: Higher government borrowing can crowd out private investment by competing for available funds in the market. ● Debt Burden: High fiscal deficits can lead to a higher debt burden, increasing the risk of default and impacting long-term economic stability. ● Credit Rating: Persistent high fiscal deficits can lead to a downgrade in a country’s credit rating, making borrowing more expensive and challenging. Fiscal Reduction and Management Act, 2003: ● FRBM Act Overview: Enacted in 2003 to ensure fiscal discipline, transparency, and accountability in government spending. ● Fiscal Deficit Reduction: Mandates reduction of fiscal deficit to below 4.5% by 2025-26. ● Elimination of Revenue Deficit: Requires elimination of revenue deficit, which is the excess of government expenditure over revenue. ● Medium-term Fiscal Strategy: Government to formulate and implement a medium-term fiscal strategy outlining plans for deficit reduction over three years. ● Annual Fiscal Reports: Government obligated to present annual fiscal responsibility statement to Parliament. |
| PYQ: What are the reasons for introduction of Fiscal responsibility and Budget Management (FRBM) act, 2003? Discuss critically its salient features and their effectiveness. (200 words/10m) (UPSC CSE (M) GS-3 2013) |
| Practice Question: How did India manage to achieve a lower fiscal deficit in 2023-24 despite earlier estimates? Discuss the key factors contributing to this outcome. (250 Words /15 marks) |
(Source – The Hindu, International Edition – Page No. – 11)
4. India Emerges as a Global Hub for High-Tech Services with the Rise of GCC
| Topic: GS3 – Indian Economy |
| Context: |
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Analysis of News:
What are Global Capability Centers (GCCs)?
- Global capability centres (GCCs) represent offshore establishments set up by companies to deliver a range of services to their parent entities.
- Operating as internal entities within the global corporate framework, these centres offer specialised capabilities including IT services, research and development, customer support, and various other business functions.
- GCCs play a crucial role in capitalising on cost efficiencies, tapping into talent reservoirs, and fostering collaboration between parent enterprises and their offshore counterparts.
- Special Economic Zones (SEZs) can provide a fertile ground for GCCs to flourish by offering several advantages like tax breaks, simplified regulations and streamlined bureaucracy.
Evolution from BPO to High-Tech Services:
- India’s journey as a global service provider began in the early 90s with business process outsourcing (BPO), which evolved significantly by the late 90s and early 2000s into IT services, spearheaded by giants like TCS, Infosys, and Wipro.
- This evolution has now culminated in the establishment of sophisticated GCCs, driven by cost arbitrage and a highly skilled workforce. This shift marks a transition from basic outsourcing to more complex and strategic roles in global operations.
Key Drivers of GCC Growth
Several factors contribute to the growth of GCCs in India:
- Skilled Workforce: India boasts a large pool of engineers and IT professionals.
- Cost Advantages: Labor, real estate, and rental costs are relatively low.
- Regulatory Environment: Comparatively simpler labor laws and longer working hours.
- Government Initiatives: The Indian government is actively working on policies to double the number of GCCs in the next five years.
Major Players and Their Operations:
Leading multinational companies have established significant GCC operations in India:
- Goldman Sachs: Invested over $7 billion, with GCCs in Bengaluru and Hyderabad managing key banking functions.
- Lululemon: Uses data analysis from its India GCC to inform global inventory decisions.
- Target: Manages various operational needs from its Bengaluru tech center.
- AMD and Other Semiconductor Giants: India serves as a major R&D hub for companies like Intel, Texas Instruments, and Samsung.
Economic Impact and Future Projections:
- As of 2023, there are over 1,500 GCCs in India, employing more than 1.6 million people.
- This sector has seen a growth of over 60% since 2015, with significant contributions from North American companies.
- According to EY, the GCC market in India is projected to reach $110 billion by 2030, potentially housing up to 2,550 GCCs.
Emerging Trends and Challenges:
- While cities like Bengaluru, Hyderabad, and Chennai remain popular for GCC setups, tier-II cities such as Visakhapatnam, Jaipur, and Kochi are gaining traction due to improved infrastructure and lower costs.
- However, the sector faces challenges such as talent attraction and retention, building a pipeline of skilled workers, and navigating cost arbitrage.
Innovative Workforce Strategies:
- To address these challenges, GCCs are adopting innovative workforce strategies, including:
- Hire-Build-Scale: Developing talent internally to scale operations.
- Borrow-Augment: Leveraging external talent to supplement internal capabilities.
- Co-Create: Collaborating with educational institutions and industry partners to build a future-ready workforce.
Conclusion:
- The proliferation of GCCs in India highlights the country’s strategic importance in the global tech and services ecosystem.
- This trend underscores India’s transition from a back-office hub to a front-runner in high-tech services and innovation.
| Practice Question: Discuss the factors contributing to the growth of Global Capability Centres (GCCs) in India and the challenges these centres face. (250 words/15 m) |
PRELIMS FACTS
- Railways to construct canopy bridges across track in Assam gibbon habitat
| Context |
| ● The Northeast Frontier Railway (NFR) plans to construct canopy bridges in Assam’s Hollongapar Gibbon Sanctuary to aid the movement of Hoolock gibbons across a railway track that divides their habitat.
● This initiative aims to mitigate the risk posed to the gibbons due to forest fragmentation caused by the track. |
More information about Hoolock Gibbons:
- Species: Hoolock gibbons are primates belonging to the family Hylobatidae and are native to South and Southeast Asia.
- Appearance: They are characterised by a distinctive white brow band, black fur, and long arms used for swinging through trees (brachiation).
- IUCN Status: Endangered
- Habitat: Found primarily in tropical and subtropical rainforests, including evergreen, deciduous, and mixed forests. In India, it is primarily found in the North Eastern region.
- Diet: Their diet consists mainly of fruits, leaves, flowers, and occasionally insects.
- Vocalizations: Known for their loud and melodious calls, which are used for territorial defence and mate attraction.
- Conservation Status: Listed as Endangered on the IUCN Red List due to habitat loss, fragmentation, and hunting for bushmeat and traditional medicine.
2. RSS Chief Mohan Bhagwat Commences Year-long Celebrations of Ahilyabai Holkar’s 300th Birth Anniversary, Praises Her Exemplary Governance and Cultural Contributions
| Context: |
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Analysis of News:
Who is Ahilyabai Holkar?
- Ahilyabai (1725 -1795) was one of the women rulers of Medieval India who belongs to the Holkar dynasty of the Maratha Empire.
- She was married Khanderao Holkar in 1733 at the tender age of 8. Her husband was killed in the battle of Kumbher in 1754.
- Ahilyabai is famous for having built numerous forts and roads in the Malwa region, sponsoring festivals and offering donations to many Hindu temples. Her philanthropy was reflected in the construction of several temples, ghats, wells, tanks and rest houses stretching across the length of the country.
- She welcomed stalwarts such as Marathi poet Moropant, Shahir Ananta Gandhi, and Sanskrit scholar Khushali Ram into her capital.
- John Keay, the British historian, gave the queen the title of ‘The Philosopher Queen’. She had been an acute observer of the wider political scene.
3. Major Radhika Sen Honored with Prestigious UN Award for Exemplary Peacekeeping and Leadership
| Context: |
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Analysis of News:
Service and Impact:
- Major Sen served as the Commander of MONUSCO’s Engagement Platoon for the Indian Rapid Deployment Battalion from March 2023 to April 2024.
- She emphasized the importance of gender-sensitive peacekeeping, stating that it should be everyone’s business and highlighting the need to mainstream women in nation-building, especially in security and governance sectors.
Engagement and Community Outreach
- In her role, Major Sen led numerous patrols in North Kivu, engaging actively with conflict-affected communities, particularly women and girls.
- She earned the trust of these communities through her humility, compassion, and dedication.
- Her team addressed issues ranging from women’s health and education to gender equality and combating sexual violence.
