Daily Mains Practice Questions 10-02-2023

Q. 1

Question 1 

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KEY POINTS

·        The Reserve Bank of India’s decision to raise its benchmark policy rate yet again, albeit by a smaller quarter percentage point, reflects a welcome resolve in staying committed to ensuring durable price stability.

·        Governor of RBI  emphasised the significance of the MPC’s unwavering focus on inflation when he noted that medium-term growth.

·        The prospects would be best strengthened by ‘keeping inflation expectations anchored and breaking the persistence of core inflation’.

·        That inflation remains the key risk to the growth outlook, notwithstanding the easing in the headline print for retail price gains was stressed by the MPC.

·        Commodity prices are also expected to see upward pressure globally, given the lifting of most COVID-related restrictions, particularly in China.

·        The uptrend in Brent futures and the intensifying Ukraine conflict forebodes the possibility that oil costs may well upset the RBI’s assumption of an average price of $95 per barrel for India’s crude basket.

·        Indian economy has proved more resilient, underpinned by a rebound in domestic demand especially for contact-intensive services and discretionary spending, has provided a degree of comfort to monetary policymakers.

·        This was manifest in their upgrades to the GDP growth forecasts for the first two quarters of the coming fiscal year.

KEY POINTS

·        One of the reasons for the modest export performance of India’s textiles sector is high import duties in developed countries.

·        For example, the duty in the EU and the UK on most garments imported from India is 12 per cent. The duty in the US may reach 32 per cent.

·        Indian firms also get a level playing field with firms from Vietnam and Bangladesh, whose products enter the EU and the US at zero duty.

·        India expected a jump in exports, but it did not happen. India’s apparel exports during 2007-09 and 2019-21 increased from $121 million to just $197 million.

·        While India’s textiles exports to Japan are small, they are sizeable with respect to the US, the EU and other developed country markets.

·        India has 1,200 compliant factories supplying cotton products to FFI and other large buyers.

·        In India, factories with more than 300 workers need government permission to fire workers or exit business. Allow units to hire and fire with suitable financial safeguards like the firms in the services sector.

·        This simple step will increase the share of workers in the organised sector from the current 8 per cent to a far higher level, benefiting both the employer and the workers and increasing output.

KEY POINTS

·        The fundamental goal of MSP policy is to provide a cushion to farmers’ incomes in case the market prices fall below the support prices announced at the beginning of the marketing season.

·        A few States including Haryana, Punjab, Uttar Pradesh, and Andhra Pradesh contribute more than 60 per cent to the total procurement pool (FCI, 2021). There are disparities across these States as well.

·        The main thrust of the policy was to ensure consonance between the State’s regional needs under the National Food Security Act 2013 and procurement demand from farmers to ensure support prices.

·        Government policy should act as counter cyclical force to ensure stable prices in regions and to people who need it the most.

·        Such a thrust should also encourage portfolio diversification in favour of other commodities such as pulses and millets.

·        Institutionalising procurement mandates through these FPCs can ensure that they transition from merely being formed on paper to being vibrant SMEs.

·        Most FPCs have internal mandates to ensure that at least 33 per cent of its farmers belong to the small, marginal or are women and tribal farmers.

·        In the long run, if there is indeed one, these reforms along with provision of social safety nets are likely to be more beneficial.

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