LABOURED CHANGE
WHY IN NEWS?
The Labour Party’s historic victory in the UK general election marks the end of Tory rule after 14 years, focusing on economic reform, immigration policies, and strengthening ties with India amidst global challenges.
SUMMARY OF THE NEWS:
In a seismic political shift, Labour led by Prime Minister Keir Starmer ousted the Tories after their 14-year reign. Starmer vows sweeping changes including wealth creation, climate action, and immigration reform, amid widespread voter discontent over Brexit mishandling, economic woes, and scandals. The defeat of Rishi Sunak resonates in India, where pride in his Asian heritage contrasts with stalled trade negotiations. Starmer’s government faces immediate challenges in rebuilding ties with India and addressing domestic economic recovery.
LABOUR PARTY BACKGROUND:
Formation and Ideology: The Labour Party was founded in 1900 as a political representation of the British labour movement and socialist ideals. It emerged from trade unions and socialist groups aiming to give workers a political voice and advocate for their interests.
Over its history, the Labour Party has focused on social justice, workers’ rights, public ownership of key industries (nationalization), welfare state policies (including healthcare and education), and progressive taxation.
Leadership and Influence: Key figures like Clement Attlee, who served as Prime Minister from 1945 to 1951, implemented major reforms such as the establishment of the National Health Service (NHS) and nationalization of industries. Labour has alternated in power with the Conservative Party throughout much of the 20th and 21st centuries.
International Relations: Understanding Labour’s foreign policy stance, especially in relation to the European Union, international trade, and global security issues, is crucial. This includes their positions on conflicts, alliances, and multilateral organizations.
Recent developments, such as changes in leadership under figures like Keir Starmer, and their policies on Brexit, economic reforms, climate change, and social issues are also significant for understanding contemporary British politics.
PYQ:
Prelims 2018
– Question: Consider the following statements:
- The famous ‘Red Fort Declaration’ was a historic agreement signed between the British Labour Party and the Indian National Congress in 1929.
- The Cabinet Mission Plan was a proposal for the formation of a single independent dominion comprising both British India and the Princely States.
– Options:
– (a) 1 only
– (b) 2 only
– (c) Both 1 and 2
– (d) Neither 1 nor 2
Answer: (a) 1 only
– Explanation: The ‘Red Fort Declaration’ was indeed an agreement between the British Labour Party and the Indian National Congress.
FOOD COST LIFTS VEG THALI PRICE 10%
WHY IN NEWS?
Food prices surged in June, pushing vegetarian thali costs up by 10% to six-month highs, driven by significant inflation in essential ingredients like tomatoes, onions, potatoes, rice, and pulses, as per Crisil’s analysis.
SUMMARY OF NEWS:
In June, both vegetarian and non-vegetarian meal prices surged to their highest levels in six and seven months, respectively. Crisil’s food cost tracker highlighted double-digit inflation in essential ingredients like tomato, onion, potato, rice, and pulses. Vegetarian meal costs spiked 10% year-on-year to a six-month peak, while non-vegetarian meal costs hit a seven-month high. The rise was driven by significant increases in tomato, onion, and potato prices. Overall food inflation likely worsened from the 8.7% recorded in April and May, reflecting broader economic pressures on household budgets.
INFLATION BACKGROUND:
- Definition and Types of Inflation:
Definition: Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time.
Types: Demand-pull inflation (caused by excessive aggregate demand relative to supply), cost-push inflation (due to rising production costs), and built-in inflation (resulting from wage-price spirals).
- Measurement of Inflation:
Consumer Price Index (CPI): Measures changes in the prices of a fixed basket of goods and services purchased by households.
Wholesale Price Index (WPI): Tracks changes in the prices of goods traded in bulk by wholesalers.
GDP Deflator: Reflects price changes in the entire economy and is used to estimate inflation.
- Causes of Inflation:
Demand-side factors: Increase in consumer spending, investment, government expenditure, or exports.
Supply-side factors: Cost increases in inputs like labor, raw materials, or energy.
- Effects of Inflation:
Redistribution of income: Debtors benefit while creditors lose.
Reduced purchasing power: Consumers can buy fewer goods and services with the same amount of money.
Uncertainty and economic distortions: Businesses may postpone investment, affecting economic growth.
- Control of Inflation:
Monetary policy-Adjusting interest rates, open market operations, and reserve requirements.
Fiscal policy – Government spending and taxation.
Supply-side policies – Improving productivity, infrastructure, and reducing bottlenecks.
- Inflation in India:
Recent trends and historical perspective.
Factors influencing inflation in the Indian context, such as food prices, global oil prices, and monetary policy actions by the Reserve Bank of India (RBI).
- Challenges and Policies:
Balancing growth and inflation control.
Impact of inflation on vulnerable sections like low-income groups.
International implications and India’s stance in a global inflationary environment.
PYQ:
Prelims 2020:
– Question: Consider the following pairs:
Economic Indicator: Related to
(1) Wholesale Price Index: Consumer Price Index
(2) Consumer Price Index: Inflation
(3) Index of Industrial Production: Export and Import Price Indices
Answer: Option (b) 2 only
Prelims 2019:
– Question: Consider the following statements:
- The Reserve Bank of India manages and services the Currency Chests.
- The Reserve Bank of India acts as the custodian of foreign exchange reserves of the country.
Answer: Both 1 and 2
Prelims 2018:
– Question: Consider the following statements:
- In India, the supply of currency notes comes under the roles and functions of the Government of India only.
- No coins can be issued in India without the approval of the Reserve Bank of India.
Answer: 2 only
Mains 2021:
– Question: What is the difference between inflation and disinflation? How can the Reserve Bank of India (RBI) control inflation while maintaining the economic growth of the country?
Mains 2020:
– Question: Discuss the trends in inflation in India during the last decade. How have these trends influenced the economic policies of the government?
Mains 2019:
– Question: “Inflation targeting is a framework within which central banks of different countries ensure that the inflation rate stays close to the target set by them.” Discuss the suitability of inflation targeting for India.
Mains 2018:
– Question: What is the significance of the Wholesale Price Index (WPI) in tracking inflation trends in India? How does it differ from the Consumer Price Index (CPI)?
WOMEN GETS ONLY 7 % MSME CREDIT
SUMMARY OF THE NEWS:
Neeraj Nigam, an Executive Director at the Reserve Bank of India (RBI), highlighted that women’s low participation in the labor force hampers their financial inclusion and overall economic growth. He pointed out that only 7% of outstanding loans to micro, small, and medium enterprises (MSMEs) are to businesses led by women. Despite women constituting a fifth of MSMEs, their access to credit remains disproportionately low. Nigam emphasized the need to increase credit availability to women entrepreneurs to promote economic development and gender equality. His remarks were made at the ‘Financing Women Collaborative’ event organized by Niti Aayog and Transunion Cibil.
MSME BACKGROUND:
Micro, Small, and Medium Enterprises (MSMEs) are vital components of India’s economy, contributing significantly to employment generation, industrial output, and exports.
- Definition: MSMEs are classified based on investment in plant and machinery or equipment for manufacturing and service sectors. For micro-enterprises, the investment limit is up to Rs. 1 crore, small enterprises up to Rs. 10 crore, and medium enterprises up to Rs. 50 crore.
- Contribution to Economy: MSMEs account for a substantial portion of industrial units and provide employment to a large number of people, particularly in rural and semi-urban areas.
- Challenges: MSMEs face challenges such as limited access to finance, technology obsolescence, lack of skilled manpower, and inadequate infrastructure.
- Government Initiatives: The government has launched several initiatives to support MSMEs, including the Prime Minister’s Employment Generation Programme (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and various skill development programs.
- Importance of MSME Sector: It plays a crucial role in promoting inclusive growth, reducing regional imbalances, and fostering entrepreneurship, particularly among marginalized sections of society.
- Recent Developments: Efforts are underway to enhance MSME competitiveness through digital platforms, technology upgradation, and improving ease of doing business.
- Impact of COVID-19: The pandemic highlighted vulnerabilities in the MSME sector, leading to initiatives like the Emergency Credit Line Guarantee Scheme (ECLGS) to provide financial support and revive economic activities.
PYQ:
Year 2019(mains): Discuss the role of Micro, Small and Medium Enterprises (MSMEs) in promoting economic growth and reducing poverty in India.
Year 2015(Mains): Explain the salient features of the Micro, Small and Medium Enterprises Development Act, 2006. Do you think the recent changes in the policy environment for small and medium scale enterprises (SMEs) suggest better prospects for them in the future? Discuss.
Here’s a previous year UPSC prelims question related to MSMEs along with its answer:
Year 2018(Prelims)
Question:
Which of the following categories would cover the employment generated by MSME (Micro, Small & Medium Enterprises) sector in India?
- Self-employed people only
- People employed in organized sector only
- People employed in organized and unorganized sectors
- Self-employed and people employed in organized sector
Answer: C. People employed in organized and unorganized sectors
SUMMARY OF THE NEWS:
Neeraj Nigam, an Executive Director at the Reserve Bank of India (RBI), highlighted that women’s low participation in the labor force hampers their financial inclusion and overall economic growth. He pointed out that only 7% of outstanding loans to micro, small, and medium enterprises (MSMEs) are to businesses led by women. Despite women constituting a fifth of MSMEs, their access to credit remains disproportionately low. Nigam emphasized the need to increase credit availability to women entrepreneurs to promote economic development and gender equality. His remarks were made at the ‘Financing Women Collaborative’ event organized by Niti Aayog and Transunion Cibil.
MSME BACKGROUND:
Micro, Small, and Medium Enterprises (MSMEs) are vital components of India’s economy, contributing significantly to employment generation, industrial output, and exports.
- Definition: MSMEs are classified based on investment in plant and machinery or equipment for manufacturing and service sectors. For micro-enterprises, the investment limit is up to Rs. 1 crore, small enterprises up to Rs. 10 crore, and medium enterprises up to Rs. 50 crore.
- Contribution to Economy: MSMEs account for a substantial portion of industrial units and provide employment to a large number of people, particularly in rural and semi-urban areas.
- Challenges: MSMEs face challenges such as limited access to finance, technology obsolescence, lack of skilled manpower, and inadequate infrastructure.
- Government Initiatives: The government has launched several initiatives to support MSMEs, including the Prime Minister’s Employment Generation Programme (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and various skill development programs.
- Importance of MSME Sector: It plays a crucial role in promoting inclusive growth, reducing regional imbalances, and fostering entrepreneurship, particularly among marginalized sections of society.
- Recent Developments: Efforts are underway to enhance MSME competitiveness through digital platforms, technology upgradation, and improving ease of doing business.
- Impact of COVID-19: The pandemic highlighted vulnerabilities in the MSME sector, leading to initiatives like the Emergency Credit Line Guarantee Scheme (ECLGS) to provide financial support and revive economic activities.
PYQ:
Year 2019(mains): Discuss the role of Micro, Small and Medium Enterprises (MSMEs) in promoting economic growth and reducing poverty in India.
Year 2015(Mains): Explain the salient features of the Micro, Small and Medium Enterprises Development Act, 2006. Do you think the recent changes in the policy environment for small and medium scale enterprises (SMEs) suggest better prospects for them in the future? Discuss.
Here’s a previous year UPSC prelims question related to MSMEs along with its answer:
Year 2018(Prelims)
Question:
Which of the following categories would cover the employment generated by MSME (Micro, Small & Medium Enterprises) sector in India?
- Self-employed people only
- People employed in organized sector only
- People employed in organized and unorganized sectors
- Self-employed and people employed in organized sector
Answer: C. People employed in organized and unorganized sectors
