DAILY CURRENT AFFAIRS IAS | UPSC Prelims and Mains Exam – 24th December 2024
Archives (PRELIMS & MAINS Focus) REVERSING THE SLOWDOWN Syllabus: Mains – GS 3 Context: With the new year around the corner, it is important to think ahead and recognize that the big economic issue in India in 2025 is likely to be the growth slowdown. Background: – For a rich country like the US with an annual per capita GDP of $86,000, slowing growth does not hurt a lot. But for a poor country like India, with a per capita GDP of only $2,700, slowdowns are painful and worrisome. Key takeaways The recently released GDP growth figures have triggered discussion over whether the slowdown is a temporary blip or a warning of a serious trend. Official statistics show that growth has declined in four out of the last five quarters. Consumption demand has been subdued. Partly as a consequence, private investment has been weak. While government investment has been growing over the past few years, propping up demand, it is soon going to run into fiscal constraints. There is one major opportunity for reigniting growth. India’s GDP is roughly $4 trillion while global GDP is a little more than $100 trillion. That means that India’s share of the global economy is around 4 per cent. But its share in global goods exports is much smaller, less than 2 per cent. Assume that India decides to bring its export share in sync with its share in the global economy. If this could be achieved, it would do wonders for growth. Many multinational companies are wanting to move out of China. And the only other country with a large population base and strong growth prospects is India. There is now a historic opening to attract foreign direct investment (FDI) in manufacturing, which all across Asia has been the key to increasing countries’ global export market share. The government, to its credit, has been trying to seize this opportunity by rolling out the well-funded Production Linked Incentives (PLI) subsidy scheme. India should adopt a well-defined export-led growth strategy, the critical component of which would be minimising risk and policy uncertainty. To give an important example, the country needs a consistent and coherent trade policy that does not involve frequent changes in import tariffs or worse still, import or export bans. Source: Indian Express CII SEEKS REFORMS IN INDIA’S PRIORITY SECTOR LENDING FRAMEWORK Syllabus: Mains – GS 3 Context: Industry body CII has proposed reforms in India’s Priority Sector Lending (PSL) framework, suggesting the inclusion of emerging sectors and high-impact sectors like digital infrastructure, green initiatives, healthcare, and innovative manufacturing. Background: – CII also suggested setting up of a high level committee to look at the revision of PSL norms and explore the need for any new Development Finance Institutions (DFIs) to cater to some of the new and emerging sectors. Key takeaways Priority Sector Lending is a policy tool aimed at ensuring that key sectors crucial to the nation’s development receive adequate financial support. Mandated by the Reserve Bank of India (RBI), PSL obligates banks to allocate a specified proportion of their loans to sectors such as agriculture, education, housing, and small industries etc. Despite success, the PSL framework requires regular recalibration to remain relevant. This recalibration is essential to ensure that the financial resources are optimally distributed. For instance, while agriculture contributes 14 per cent of the GDP today, its PSL allocation remains at 18 per cent, unchanged from when its GDP share exceeded 30 per cent. Similarly, sectors like infrastructure and innovative manufacturing lack adequate PSL focus despite their potential to drive economic growth. Source: Livemint INDIA’S RELIANCE ON CHINA FOR CRITICAL MINERALS Syllabus: Mains – GS 2 Context: The Ministry of Mines has identified 30 critical minerals. While it highlighted India’s complete import dependency for 10 critical minerals, it did not fully address a more pressing concern — the extent and nature of dependency on China. Background: Transitioning away from China will require sustained investment and long-term commitment. Is China a dominant player? China’s unparalleled dominance in critical minerals stems from its vast resource base and strategic investments across the value chain. Reserves of minerals, particularly copper, lead, zinc, nickel, cobalt, lithium, gallium, germanium, and crystalline graphite, increased significantly, supported by robust exploration investment. China’s dominance extends beyond reserves to include processing and refining, with control over 87% of rare earth processing, 58% of lithium refining, and 68% of silicon processing. Furthermore, China has strategically invested in overseas mining projects and built unparalleled midstream refining capabilities, raising supply chain vulnerabilities for countries including India, the U.S., and EU nations. What about China’s export controls? When it comes to China’s approach to weaponising critical mineral exports, it is strategic and calculated. Beijing primarily targets minerals deemed critical by West and their allies, especially those essential for semiconductors, batteries, and high-tech manufacturing. However, China carefully balances these decisions against two constraining factors: it avoids controlling minerals which heavily depend on Western raw material imports, and it refrains from actions that could disrupt its domestic industry or export-dependent sectors. This strategy was evident in China’s 2010 rare earth embargo against Japan, its recent restrictions on antimony, gallium, and germanium exports, and its December 2023 ban on rare earth extraction and processing technologies. Is India dependent on China? An in-depth examination of import data of 30 critical minerals spanning 2019 to 2024 reveals India’s acute vulnerability to Chinese supplies, particularly for six critical minerals where dependency exceeds 40%: bismuth (85.6%), lithium (82%), silicon (76%), titanium (50.6%), tellurium (48.8%), and graphite (42.4%). Why does India rely on imports? India’s heavy reliance on imports stem from several structural challenges in its mining and processing ecosystem. Many critical minerals are deep-seated, requiring high-risk investments in exploration and mining technologies — a factor that has deterred private sector participation in the absence of adequate incentives and policy support. The country’s processing capabilities are also limited. This is particularly evident in the case of the recently discovered lithium deposits in Jammu and Kashmir, where despite the presence
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