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IASbaba’s Daily Current Affairs – 6th February, 2016
ECONOMICS
TOPIC:
General studies 2:
- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
General studies 3:
- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
- Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth.
- Infrastructure: Energy, Ports, Roads, Airports, Railways, etc.
- Science and Technology – developments and their applications and effects in everyday life Achievements of Indians in science & technology; indigenization of technology and developing new technology.
Auto components: growth through innovation and competitiveness
- The vibrant automotive industry in India produced over 25 million vehicles (two-wheelers, three-wheelers and four-wheelers) in 2015, of which nearly three million were exported.
- The bedrock for this large-scale production has been the automotive components suppliers that now represent over 5% of the manufacturing gross domestic product (GDP) of India and employ over one million people.
Strong performance, significant growth potential:
- Over the last decade, the automotive components industry has scaled three times to $40 billion in 2015 while exports have grown even faster to $11 billion.
- This has been driven by strong growth in the domestic market and increasing globalisation (including exports) of several Indian suppliers.
- However, there is room for growth—Indian exports still form only 1% of global automotive components exports.
Investments are the key:
- Indeed, the industry has the potential to grow five-fold from $40 billion in 2015 to $180-200 billion in size by 2026, and could reach 10% of India’s manufacturing GDP.
- To achieve this potential, the automotive components industry will need to attract $80-100 billion worth of investments and ensure skill development of the existing talent pool.
Raising competitiveness and driving innovation:
- India’s manufacturing sector is still not operating at its potential.
- Across two key measures of the share of manufacturing in GDP (India at 13%, China at 33%) and share of exports in manufacturing (India at 23%, China at 40%), there is significant room for growth.
- The automotive components sector could become one of the torch-bearers of the ‘Make in India’ campaign by raising its competitiveness and driving vigorous innovation.
- Raising competitiveness will need growth in scale of the automotive suppliers across the tiers in India, and pursuing the next wave of cost excellence. Embracing advances in digital manufacturing to transform productivity and quality will also offer gains.
- Driving innovation will involve suppliers collaborating with the vehicle makers to design and develop new components and systems at uniquely lower price points, in turn enabling vehicle makers to enrich vehicles with greater functionality.
Economic profit: An important indicator
- One of the key measures that signals competitiveness of a company or a sector is the economic profit it is able to generate.
- Economic profit is a measure of the surplus a company has generated after repaying its cost of capital, and captures well the dual aspects of a company’s strength in the market and that of its operations.
- Across 2007–2014, among the top 100 automotive components suppliers in India, only one-third of the companies generated economic profit.
- In fact, the automotive components sector lies in the ‘mid zone’ of economic profit generation when compared to other sectors of the Indian manufacturing sector in general.
- Indian automotive components players need to generate substantially greater economic profit to match peers from China, Germany, US and South Korea.
- These countries with high economic profit generation signal their higher competitiveness that enabled them to attract over two-thirds of global investments in the last five years.
Enabling trade policy and ease of doing business:
- India could explore strategic trade agreements with export markets where India-like vehicles are in demand (for example, Nigeria, South Africa, Mexico, Colombia, Iran and Russia) towards growing the exports of Indian vehicles and automotive components manufacturers.
- The ease of doing business is critical to attract investments into the manufacturing sector.
- Based on the World Bank’s 10 themes for the ease of doing business, India ranked among the top 40 nations in the world in terms of investor protection and availability of credit.
- However, it needs to substantially improve on the ease of starting a business, dealing with construction permits and enforcing contracts.
- The push by the government under the ‘Make in India’ movement could be vital in creating the platform for attracting substantial investments needed to help the automotive components sector achieve its potential.
Way ahead:
- Notwithstanding the recent slowdown in the key automotive market segments in India, the auto components sector has the unique opportunity to sustain its growth trajectory by rapidly growing its export footprint while scaling its capacity to serve the domestic market that will return to its growing ways.
- However, achieving this will require the automotive components makers to further raise their competitiveness and drive vigorous innovation in products and processes.
Connecting the dots:
- Critically examine the performance of India in the recently released World Bank’s Ease of Doing Business and explain the measures taken by the government to promote India’s performance in Ease of Doing Business.
- Critically examine the reasons for low manufacturing base in India along with the measures taken by the government to promote manufacturing sector in India.
NATIONAL
TOPIC: General studies 2:
- Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
- Issues relating to development and management of Social Sector or Services relating to Health, Education, Human Resources.
Removing constraints in Higher Education
‘Commercialization’ of Education—A phenomena worth looking forward to?
Element of Resistance to privatizing education and foreign investment is often based on flawed assumptions that Privatization inevitably leads to
- Profiteering
- Compromises education
- Facilitate a “global trade in education”
- Benefit only a minority of students
- Public institutions always do a better job
Nature of Arguments—
- Points to a belief in an isolated, idealized form of egalitarianism that is unworkable in practice
- Indicates the manner in which those flawed assumptions can lead people to ignore the experiences of the countries that dominate higher education globally
Privatization—
Establishment of big universities with state-of-the-art facilities may not serve the purpose of educating and training every one of the multitude of India’s youth, but they raise the bar by creating healthy competition
Definite beneficial spill-over effects:
- Shall lead to establishment of enterprises dependent upon the human resources
- Drive the entire city’s urban growth (if integrated within the city)
Private institutions & India—
- Account for almost two-thirds of the higher education in India (according to a 2011 Report by Ernst and Young and Federation of Indian Chambers of Commerce and Industry)
- Stifled by barriers present at every level for these institutions—Entry, Operation and Exit
Issues with Private Universities and deemed universities—
No power to affiliate colleges, fix salaries of their faculty or even include courses in their colleges
FDI with unnecessary riders:
- Restrictions on entry of foreign universities, foreign faculty and foreign collaboration
- Not-for-profit principle
- Permitting only Section 25 companies with no foreign investment to invest in technical institutes
FDI:100% foreign direct investment (FDI) is allowed in the education sector
Way Ahead—
World Economic Forum’s latest Report “The Future of Jobs”: 65% of current primary schoolchildren will end up working in completely new jobs that do not exist yet
Need to—
Government needs to clear the ‘Foreign Universities Bill as well as amend and align the way different arms of the govt. treat FDI in the education sector
There exists a direct link between states that have higher “knowledge direction” and the state of their economies—States that lay more emphasis on the quality and depth of their higher education are economically better placed than those that do not
- Grant autonomy to private institutions,
- Liberalize laws for foreign entrants
- Formulate a common framework wherein the different wings of the government brainstorm and echo the same principals as well as aspirations, thus, ruling out disharmony and inconsistencies
- Evolve a dynamic course structure through a symbiotic association with both private and foreign partners, to keep pace with the world of nanotechnology, biotechnology, robotics and space research
- Involve research as an essential part of the curriculum and link it with the industry’s requirements.
- Digital India Fund set aside for education may be effectively used for complementing these objectives through information and communication technology (ICT) and massive open online courses (MOOCs)
- Crystal clear regulatory framework needs to be evolved: Having a strong monitoring and quality control process
- Need to work on the softer aspects/issues stifling the education sector:
- Should set up teacher training academies to bridge the shortage of teachers
- Make definite attempts to improve the quality of teaching staff
- Make teaching a career of choice and raise salaries to harness the potential of educators
Steps that have been taken:
Allocation of almost Rs 99,000 crore under the Rashtriya Uchchatar Shiksha Abhiyan (RUSA)—
- Improvement in higher education institutes, especially in infrastructure in the 12th and 13th Five- Year Plans
- Centre (Rs 69,675 crore); States (Rs 28,459 crore)
- States have thus become an important part in making this scheme a success
Setting up of an Indian Institute of Technology (IIT) and an Indian Institute of Management (IIM) in each state—
- High demand for seats in these institutes; this will make them more accessible for everyone
- Expected to have a rub off on other educational institutes in the state—act as a role model, for other colleges in the region to emulate.
Connecting the Dots:
- Higher education in India needs more than just reform. It requires a revolution. Think.
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