Context: 

• According to the survey, ‘Leveraging E-commerce for the Growth of MSMEs, by Indian Council for Research on International Economic Relations, technology may represent a survival threat rather than an opportunity for MSMEs not integrated with e-commerce platforms. 

More on news: 

• Rising Inequities: Firms that are not integrated with e-commerce platforms find it challenging to access markets.
  • In contrast, firms integrated with e-commerce platforms are making deeper inroads into markets.
  • This is exacerbating inequities between firms linked to platforms and those which are not integrated.
• Technology Divide: Non-integrated firms have not joined platforms due to lack of knowledge and information about digital technologies and e-commerce platforms. 
• Rising profits with Digitalization: With e-commerce platform integration, over 85 percent of surveyed MSMEs reported an increase in their total sales and profit margins. 

MSME Definition:

• MSME stands for Micro, Small, and Medium Enterprises. They are classified in accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act 2006 as follows: 

Status of MSME in Indian Economy: 

• MSME Sector: 
  • It contributes approximately 33% to the country’s gross domestic product (GDP) and 50% of exports. MSPI Data)
• Gross Value Added (GVA):
  • In the fiscal year 2019-20, the share stood at 30.5%, which slightly declined to 27.2% in 2020-21 but rebounded to 29.2% in 2021-22  showing Fluctuating trend in the last three years.
• Manufacturing Output: The share of MSMEs in the overall Indian manufacturing output remained relatively stable, accounting for 36.6%, 36.9%, and 36.2% during the fiscal years 2019-20, 2020-21, and 2021-22, respectively.
• Share in exports: The share of MSME products in India’s total exports experienced a decline over the past three years. 
  • In the fiscal year 2020-21, MSME products constituted 49.4% of India’s exports, which decreased to 45.0% in 2021-22 and further to 43.6% in 2022-23.
• Employment: MSME sector has been a significant source of employment in India. 
  • As of August 2, 2023, the Udyam Registration Portal reported that the total number of persons employed in MSMEs registered between July 1, 2020, and August 1, 2023, amounted to an impressive 12,36,15,681. 

Significance of MSME Sector for India:

• Employment: MSMEs are the largest employer in India outside of agriculture, employing over 11.1 crore people, or 45% of all workers.
• MSME Contribution to Export in India: Specified MSME-related product exports accounted for 49.5% of India’s total exports in FY 21, compared to 49.8% in FY 20. 
• Connecting Remote Areas to Rest of the Country: By preparing key raw materials and finished goods with global demand, MSMEs in remote and backward areas help connect these areas with the rest of the country and the world.
• Inclusive Growth: By creating employment opportunities and connecting backward areas, the sector helps reduce regional imbalances across the country and increase equality among citizens.
• Driver of Make in India:  The MSME sector is an essential part of “Make In India” and its growth is critical to the success of the government initiative.

Challenges faced by the MSME Sector:

• Informal Nature of Sector: With over 90% of the MSME sector in the informal category, most of the micro-enterprises are unable to access formal credit or other government schemes or benefits.
  • Only about 16 per cent of MSMEs in India are financed through formal banking systems and the credit gap for MSMEs in India was estimated to be about Rs 16.66 trillion in 2018.
• MSMEs and the Global Market:
  • India’s domestic market accounts for only about 2 percent of the global market size for these industries.
  • However, to address the global market, India must aim for at least a 10 percent share of the global trade.
• Integration with ‘E-commerce’ Platforms:
  • The rise of e-commerce platforms means MSMEs can compete in the global arena.
  • However, India’s current e-commerce exports stand at a modest $2 billion, a mere 0.5 percent of our merchandise exports.
• Small Scale (Dwarfism):
  • It is nearly impossible for a typical small business to first find customers abroad, and then navigate the logistical, financial and compliance complexities of the export sector.
  • However, 85 percent of MSMEs are classified as “dwarfs” — older than 10 years but still smaller than 100 employees.
• Systemic Gender Discrimination: It is preventing the realisation of significant untapped potential, as only 18% of registered MSMEs are owned by women.
  • Majority of women entrepreneurs remain in micro-MSME strata and over 3,057 women-owned MSMEs closed post-pandemic. 

Way Forward:

• Introduce Separate Micro-MSME division:  It will provide targeted support and policies to help micro enterprises grow and transition into small and medium enterprises.
• Bridging The Gap Between Integrated And Non-Integrated Firms (E-Commerce Platforms): It will require investments in technology, digital skills, information, enhancing the capabilities and productivity of MSMEs.
  • This can be achieved by providing them with infrastructure services, financial services, managerial and business skills and enterprise support and training.
  • Study by Institute of Governance, Policies and Politics shows that 1 per cent rise in imported digital services production inputs by MSMEs results in a 0.4-0.8 per cent rise in MSME employment, 0.1-0.2 per cent rise in MSME value addition and a 0.04-0.08 per cent rise in labour productivity.
• Initiate Support For Women-Owned Msmes: Implementing policies that promote women entrepreneurship.
  • Providing dedicated support, such as access to capital, training, and networking opportunities, will empower women-led micro MSMEs and contribute to inclusive economic growth.
• Improve Ease Of Doing Business: Simplified and streamlined regulatory processes specifically designed for micro-MSMEs can help reduce their compliance burden, allowing them to focus on their core business activities.
• Streamline The Rules Of Financial Regulation For Exports: Reduce the burden on MSMEs and give them the flexibility to price their products dynamically.
  • Implementing a one-stop trade portal that brings together all information and processes related to exporting, and places it into a single, streamlined workflow. 
• Digitalisation: There is a need for replicable digital solutions adapted for MSMEs, including digital enhancements for machinery and equipment currently in use. 
  • Initiatives such as the Digital Saksham and the interlinking of the Udyam, Atmanirbhar Skilled Employee-Employer Mapping (ASEEM) portals have shown commendable results.
• Formalisation of Sector: Udyam Registration is a positive initiative in this regard.
  • More than 13 lakh informal micro-enterprises that have now become formalised and there is room to expand this broadly across the MSME sector.

Source: Business Standard

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Context:

• India and Canada are dealing with an unprecedented diplomatic crisis, which can have political and geopolitical consequences.

More on News:

• India has issued a travel advisory for Indian nationals travelling to Canada, as well as a caution for the Indian community in Canada.
• Canadian Prime Minister Justin Trudeau(PMJT) alleged that India may have been involved in the murder of a Khalistani separatist named Hardeep Najjar in Canada in June 2023. 

Overview Of India-Canada Relations:

• Strategic Relations:
  • India and Canada have a long history of bilateral relations, underpinned by shared values of democracy, pluralism, and people-to-people ties.
  • The relationship was elevated to a strategic partnership in 2015, and both Prime Ministers have met on several occasions to discuss regional and global issues. 
  • Canada’s Indo-Pacific Strategy which aligns with India’s vision of a free, open, and inclusive Indo-Pacific.
• Economic Relations
  • Bilateral trade in goods amounted to USD 8.16 billion in FY2022-23 (Refer Image)
  • India and Canada are discussing a Comprehensive Economic Partnership Agreement (CEPA) and a Bilateral Investment Promotion and Partnership Agreement (BIPPA/FIPA). A virtual stocktaking meeting on CEPA and BIPA between India and Canada was held on 22 June 2020.
• Indian Diaspora:
  • India and Canada have strong people-to-people ties, with a large Indian diaspora living in Canada. They also have a close cultural relationship, with regular exchanges in film, music, and other art forms (Refer-Image).
• Indian students
  • Canada is an attractive destination for Indians, especially students. In 2022, nearly 300,000 Indians were pursuing higher education in Canada {India’s Bureau of Immigration(IBM)].
• Canadian tourists in India:
  • In 2021, 80,000 Canadian tourists visited India, making them the fourth largest group(IBM).
• Energy Cooperation:
  • During the visit of PMJT in February 2018, the scope of the Energy Dialogue was expanded to additionally include electricity, energy efficiency and renewable energy.
  • For Example: India Oil Corporation has a 10% participating interest in a Liquid Natural Gas project in British Columbia.
• Nuclear Cooperation:
  • A Nuclear Cooperation Agreement (NCA) with Canada was signed in June 2010 and came into force in September 2013. 
• Science and Technology
  • Indo-Canadian Science and Technology cooperation has been primarily focussed on promoting Industrial R&D which has potential for application through the development of new IP, processes, prototypes or products. 
  • Canada was a partner country for the Technology Summit 2017, held in New Delhi on 14-15 November 2017.

Challenges of the India-Canada Relationship:

Terrorism at the Heart of Tensions:

• The biggest issue for India is the safe haven that Canada has provided to separatist Khalistani groups.
• Canada is turning a blind eye to the activities of subversive and radical elements who are using Canadian soil to destabilise India and carry out political assassinations, and gangland killings, fund subversive elements, and support narcotics and human trafficking networks inside India.

Other Major challenges:

• Trade Tensions: India and Canada have been negotiating a Comprehensive Economic Partnership Agreement (CEPA) for several years, but the talks have been stalled over several issues, including tariffs and intellectual property rights. The lack of a trade agreement has been a source of frustration for both sides and has hampered trade and investment between the two countries.
• Diplomatic Disputes: In recent years, there have been a number of diplomatic disputes between India and Canada, including over the issue of Sikh separatism and the treatment of Indian nationals in Canada. These disputes have further strained relations between the two countries.
• Security Concerns: India has expressed concerns about the presence of Khalistani extremist groups in Canada and about the possibility of terrorist attacks on Indian nationals in Canada. Canada has assured India that it is taking steps to address these concerns, but the issue remains a source of tension.
• Human Rights Concerns: India has also expressed concerns about human rights abuses in Canada, including the treatment of Indigenous peoples and the alleged racial profiling of minorities. 
• Despite these challenges, India and Canada remain important partners to each other. They share a strong economic relationship and have close people-to-people ties. Both countries are also working together on several global issues, including climate change and terrorism.

Way Forward: 

• Establish a high-level Dialogue Mechanism: This mechanism could be led by the Foreign Ministers of the two countries, or by other senior officials to discuss and resolve sensitive issues.
  • Both India and Canada need to take steps to de-escalate the situation. They need to engage in dialogue and try to understand each other’s concerns. They also need to be transparent about their actions and intentions.
• Diplomatic Measures to Counter Anti-India Separatist Movements:
  • Convey to host countries that they cannot simultaneously have good relations with India while allowing anti-India separatist movements to operate on their soil.
  • Avoid public statements that could further damage the relationship. It is important to engage in constructive dialogue behind the scenes, rather than making public statements that could make it more difficult to resolve the issues.
• Reciprocal Arrangements with Canada, the UK, and the US.
  • Countries like the USA, UK, and Australia should join Canada in a united front to counter the issue of Khalistani separatism, which is supported by groups outside of India. (Similar to the steps that India has taken to counter Islamic terrorist organisations like ISIS.)
  • Through regular dialogue, cultural and educational exchanges, and other initiatives that promote understanding and trust between the diaspora and the Indian government.
• Devising a Mechanism for the Extradition and Deportation of Terrorist Operatives:
  • This can be done through bilateral treaties and other arrangements with the countries where these operatives are located.
• Countering Khalistani Propaganda: Increase cooperation in areas of mutual interest, such as trade, investment, education, and people-to-people ties. This could be done through joint initiatives, such as business delegations, student exchanges, and cultural events other initiatives that promote understanding and trust between the diaspora and the Indian government.

Source: Indian Express

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Subject: GS-03: Indian Economy

Context:

• Reserve Bank of India (RBI) revised ‘Draft Master Direction – Treatment of Wilful Defaulters and Large Defaulters‘ have been published for comments from stakeholders and members of the public.

“Understanding Willful Defaulters: Regulations and Laws”

• • Wilful defaulters are those who have the ability to pay a bank’s dues but do not or divert bank funds. Wilful defaulter: It means a borrower or a guarantor who has committed wilful default and the outstanding amount is Rs 25 lakh and above.
  • Large defaulter: It means a defaulter with an outstanding amount of Rs 1 crore and above, and whose account has been classified as doubtful or loss.
  • As per the RBI regulations, willful defaulter covers several broad areas:
    • Siphoning off of funds to the detriment of the defaulting unit.
    • Assets and proceeds have been misutilised.
    • Misrepresentation of records.
    • Disposal of securities without the bank’s knowledge.

• Laws dealing with Wilful Defaulters:The Fugitive Economic Offenders Act 2018: Provide for measures to deter fugitive economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts.

• Companies Act of 2013: It mentions punishments including imprisonment for someone found guilty of fraud.

• Fugitive Economic Offenders Act, 2018: Its objective is to punish such offenders in line with the  procedure established by the law.

“Wilful Defaulters Identification and Consequences: Guidelines and Procedures”

• Identification: It has allowed non-banking finance companies and cooperative banks to identify them.
  • All NPA’s above Rs 25 lakh need to be examined for wilful default.
• Review Panel: To provide an opportunity to the borrower for personal hearing.
• Actions: The compromise settlement shall be without prejudice to the continuation of the legal proceedings, including criminal proceedings, against the wilful defaulter.
• Credit Facilities: Wilful defaulters are debarred from any institutional finance. The draft norms said the wilful defaulters would not be eligible for restructuring credit facilities.
• Removal from the List: For an account that is on the list of wilful defaulters and has been resolved either through the Insolvency and Bankruptcy Code or the RBI’s norms, the name of such a defaulter should be removed from the list.
  • The name should not be removed for part-payment.

News Source: Business Standard

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Subject: GS-03: Environment and Ecology

Context:

• As we move from UN Climate Week to CoP-28, we need to stop ‘greenwishing’ and ‘greenwashing’ and start thinking about the instruments that will enable the private sector to channel more capital toward climate resilience and sustainable development.

About “The Three Greens”: Greenwashing, Greenwishing, and Greenhushing

• Greenwashing:

• • • Greenwashing refers to the deceptive practice of making false or exaggerated claims about the environmental friendliness of a company’s products, services, or practices.
    • For example: Starbucks introduces straw-less lid citing it will help reduce environmental footprint. However, it contained more plastic than the old lid and straw combined together.

• Greenwishing:

• • • It refers to organisations expressing a desire to be more environmentally responsible without taking concrete actions to achieve those goals.
    • It’s like making a wish for sustainability without any tangible actions directed in the required direction.

• Greenhushing:

• • It implies a situation where an organisation intentionally downplays their positive environmental achievements.
  • It might involve not publicising sustainable practices for various reasons, such as modesty, fear of criticism, or reducing external communication.

Private Investment, Sustainable Development, and the Challenge of Greenwashing:

• The sensible way to construct a profitable, long-term, climate-aligned, widely accessible investment strategy is to develop a diversified portfolio of assets that directly or indirectly support climate financing while avoiding the pitfalls of greenwashing.
• Climate-Resilient Infrastructure: Carefully selected Real Estate Investment Trusts (REITs) and exposure to greenfield developments through exchange traded funds are two ways to secure reliable returns from climate-adaptation efforts.
  • Such investments offer broader economic and societal benefits, including productivity growth, job creation and the provision of employment and housing for migrating populations.
• Green Commodities and the Challenge of Avoiding Greenwashing: An orderly transition to a more resilient future requires massive investments in the metals and critical minerals used in renewable energy and electric vehicles (EVs).
  • To avoid any ‘greenflation’ (inflation caused by decarbonization efforts) and supply bottlenecks, we need to boost production and lower the cost of securing these commodities.
• Climate-Aligned Portfolio: It should include assets that provide a hedge against inflation and geo-economic risks, such as inflation-indexed sovereign bonds and gold.

News Source: Mint

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Subject: GS-03: Indian Economy

Context:

• In the 1st quarter (Q1) of financial year 2024 (FY24), Assessing India’s GDP Growth rate witnessed inflationary pressures, a falling rupee, fluctuations in tax revenue streams and an apprehensive outlook on the agriculture sector.

India GDP growth rate of Q1 FY24: Insights and Projections

• The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation released the estimates of GDP for the quarter (Q1) of 2023-24.
• The Q1 data covering the GDP growth rate from April to June of FY24 boasts a nominal growth rate of 8% and a real growth rate of 7.8%.
• Agriculture sector currently reflects an uptick, growing at 3.5%. However, it is unlikely to be sustained due to pressure from the El Niño phenomenon.
• The services industry, with financial, real estate and professional services growing at 12.2%.
• Growth rate is expected to be sustaining around 6.5% for the current financial year.

Calculating Gross Domestic Product (GDP):

• Conventional way to assess a country’s economic situation is to look at the quarterly (three-month) and annual (12-month) GDP growth rate and compare it to previous quarters as well as years.

News Source: The Hindu

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