Questions
Q1. Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (10)
Q2. What is the status of digitalisation in the Indian economy? Examine the problems faced in this regard and suggest improvements. (10)
Model Solutions
Q1. Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.
10
Introduction:
- MSMEs, forming the backbone of India's economic framework, contribute to nearly 30% of the country's GDP, account for about 48% of exports, and employ over 110 million people. Given their pivotal role in job creation, innovation, and boosting exports, MSMEs are indispensable for sustained economic growth.
Main Body:
- Government's Endeavors for Manufacturing and MSMEs:
- Make in India:
- Aimed at increasing the manufacturing sector's contribution to 25% of GDP by 2022 from around 16% in 2014.
- FDI inflow increased to $64.37 billion in 2019-20 from $45.15 billion in 2014-15, showcasing the initiative's impact.
- MSME Samadhaan:
- Addresses payment delays, a significant issue for MSME liquidity.
- By 2020, over 40,000 cases were registered on the portal, highlighting its active use by MSMEs.
- Credit Guarantee Scheme for MSMEs:
- Facilitates collateral-free credit.
- By 2020, cumulative loan sanctions under the scheme exceeded ₹ 2.2 lakh crore.
- National Manufacturing Policy (NMP):
- Targeted to create 100 million jobs by 2022.
- Establishment of NIMZs, like the one in Prakasam district in Andhra Pradesh, to spur industrial growth.
- Revised MSME Definition:
- Broadened in 2020 to include more enterprises.
- With the new criteria, a company with an investment up to ₹50 crore and a turnover of up to ₹250 crore is classified as a medium enterprise, benefiting a larger number of enterprises.
- Atmanirbhar Bharat Abhiyan:
- Emphasises local production and self-reliance.
- Under this, ₹3 lakh crore of collateral-free loans were announced for MSMEs in 2020.
- Make in India:
- Way Forward (Steps needed to strengthen MSME):
- Facilitate Easier Access to Credit:
- Dr. K.V. Kamath, former president of the New Development Bank, emphasised the need for simplified lending processes and digitally-driven credit evaluations to help MSMEs avail finances faster.
- Enhance Skill Development:
- The Abid Hussain Committee on Small Enterprises suggested setting up specialised institutions and training centres to upgrade the skills of MSME workers, making them globally competitive.
- Promote Technological Upgradation:
- Raghuram Rajan, former RBI governor, highlighted the importance of integrating technology into MSME operations, suggesting government subsidies or incentives for MSMEs adopting digital tools and platforms.
- Streamline Regulatory Processes:
- The Prime Minister's Task Force on MSMEs recommended reducing the regulatory burden by implementing single-window clearances and integrating various permissions for easier business operations.
- Expand Market Access:
- Arvind Panagariya, economist and former vice-chairman of NITI Aayog, underscored the need for MSMEs to access larger markets, advocating for enhanced participation in global value chains through trade agreements and partnerships.
- Infrastructure Development:
- The U.K. Sinha Committee on MSMEs emphasised improving logistics and infrastructure, suggesting the creation of MSME clusters and dedicated hubs to reduce operational costs and improve efficiency.
- Facilitate Easier Access to Credit:
Conclusion:
- While the government has made commendable strides to support the MSME sector, adopting expert recommendations can further solidify the foundation for these enterprises. By focusing on credit accessibility, technological integration, skill development, and infrastructure, the MSME sector's potential can be fully realised, driving robust economic growth.
Q2. What is the status of digitalisation in the Indian economy? Examine the problems faced in this regard and suggest improvements. (10)
Introduction:
- Digitalisation, dubbed the fourth industrial revolution, is transforming global economies. The world's fifth-largest economy, India, is rapidly shifting from cash-reliant to digitally driven. With e-governance, digital literacy, and online platforms, India aims for an inclusive digital realm but faces many opportunities and challenges.
Main Body: - Status of Digitalization in the Indian Economy:
- Digital Payments: UPI transactions reached a remarkable 3 billion in volume in October 2021, showcasing the massive adoption of digital payments.
- Government Initiatives: The Digital India campaign, initiated in 2015, birthed projects like DigiLocker, with over 50 million registered users, and eNAM, digitising agricultural markets across 16 states.
- Online Retail: With giants like Amazon and Flipkart, India's e-commerce market is expected to surpass $120 billion in 2021, indicating a shift in shopping patterns.
- Digital Identity: Aadhaar, providing digital identity to over 1.2 billion people, is the world's largest biometric ID system.
- Telecommunications: Internet users in India surpassed 700 million in 2021, largely fueled by affordable data plans from providers like Jio.
- Problems Faced in Digitalization:
- Digital Divide: Despite advancements, 50% of India's population remains offline, particularly in rural landscapes.
- Cybersecurity Concerns: As per CERT-In (Indian Computer Emergency Response Team), India witnessed over 1.16 lakh cyberattacks in 2020, underscoring the security vulnerabilities.
- Regulatory Challenges: Ambiguities in regulations, like those around cryptocurrency, reflect the lag in policy-making.
- Reliability on Cash: Even with digital transaction growth, the RBI reported in 2019 that cash circulation increased by 17%.
- Infrastructure Limitations: Frequent internet shutdowns hinder consistent digital access, especially in regions like Jammu & Kashmir.
- Suggestions for Improvement:
- Enhance Digital Literacy: The government's Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) aims to digitally literate 60 million rural households.
- Strengthen Cybersecurity Framework: The Justice B.N. Srikrishna Committee recommended a robust data protection framework to ensure user data privacy and security.
- Infrastructure Development: The BharatNet project, aiming to connect 250,000 gram panchayats via high-speed internet, can bridge the rural-urban digital divide.
- Regulatory Clarity: The draft National E-commerce Policy seeks to set clear e-commerce regulations, ensuring fair competition and consumer protection.
- Promote Inclusive Digitalization: Digital platforms in regional languages, like the UMANG app, cater to a diverse populace, making services more accessible.
Conclusion:
- India's digitalisation journey, though commendable, has challenges that need systematic redressal. By leveraging committee recommendations, data-driven strategies, and inclusive approaches, the nation can harness the full potential of the digital era.
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