01 February 2025 : The Hindu Analysis (Daily Current Affairs)

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1. Economy’s fundamentals robust amid ‘strong downsides’: Survey

(Source – The Hindu, International Edition – Page No. – 1)

Topic: GS3 – Indian Economy

Context

• The Economic Survey 2024-25 outlines India's growth potential, investment challenges, and the necessity for deregulation.

Economic Growth Projections

• India’s economy is projected to grow between 6. 3% and 6. 8% in 2025-26, a slight increase from the estimated 6. 4% this year.
• The Economic Survey recognizes robust economic fundamentals but also points out external risks impacting investment and output.
• Private sector investment growth remains muted due to political uncertainties, global challenges, and overcapacity in certain industries.

Challenges in Achieving ‘Viksit Bharat’

• India aspires to attain developed nation status (Viksit Bharat) by 2047, necessitating sustained GDP growth of 8% for at least a decade.
• The investment rate must rise from the current 31% of GDP to 35% of GDP to support high growth.

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Focus on Domestic Growth Drivers

• As global trade slows due to geopolitical tensions, India needs to increasingly depend on domestic economic drivers.
• The Survey indicates that deregulation is vital for enhancing investment and economic growth.

Reducing Government Control

• The government should minimize excessive regulations and micromanagement to foster a business-friendly environment.
• Streamlining compliance processes and reducing bureaucratic delays will enable businesses to concentrate on growth.

Building Trust in the Economy

• The Survey underscores the importance of closing the trust gap among government authorities, businesses, and citizens.
• Excessive regulations often benefit large enterprises, leading to unfair competition and hindering overall economic development.
• The government must place confidence in businesses and individuals to effectively stimulate economic activities.

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2. Higher profit share, stagnant wage growth slowing economy: Survey

(Source – The Hindu, International Edition – Page No. – 6)

Topic: GS3 – Indian Economy

Context

• The Economic Survey emphasizes the importance of balanced growth in corporate profits and wages to maintain economic expansion.

Growth in Corporate Profits vs. Wage Growth

• The Economic Survey asserts that corporate profits should increase alongside wages to stimulate the economy.
• Disparities between profits and wages may hinder demand, potentially slowing economic growth.

Concerns About Income Inequality

• A modest increase in the labour share of GVA (Gross Value Added) has been observed, yet significant corporate profits remain a pressing issue.
• High corporate profits coupled with stagnant wages can lead to reduced consumer spending, constraining economic demand.

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Economic Growth and Employment Incomes

• Sustained growth relies on enhancing employment incomes to promote consumer spending and investment in production.
• An equitable distribution of income between capital and labour is crucial for long-term stability.

Profit Growth and Employment

• Corporate profitability reached a 15-year high in FY 2023-24, primarily driven by the financial, energy, and automobile sectors.
• Profits increased by 22. 3%, while employment rose by only 1. 5%.
• Wage growth has decelerated, with employee expenses rising just 13% in FY24.

Improved Labour Market Indicators

• Post-pandemic recovery and formalization have led to better labour market indicators in India.
• Unemployment has decreased, and labour force participation has increased.
• Sectors such as the digital economy and renewable energy present opportunities for job creation.

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3. Excessive financialisation can hurt India’s economy, cautions Survey

(Source – The Hindu, International Edition – Page No. – 6)

Topic: GS3 – Indian Economy

Context

• The Economic Survey raises concerns about the risks associated with financialisation, advocating for a balance between the growth and stability of the financial sector.

Financialisation Risks for India

• The Economic Survey cautions against excessive financialisation, noting that increasing household investments in the stock market may be detrimental to the economy, particularly in low-to-middle-income countries such as India.
• Over-reliance on financial markets can elevate public and private sector debt, making economic growth contingent on rising asset values.
• This trend can exacerbate inequality and affect policy decisions.

Need for Balance

• India must find a balance between the development of the financial sector and financialisation.
• This entails considering the country's unique context, which includes household savings, investment requirements, and levels of financial literacy.
• Policies should be designed to align the financial sector’s incentives with national growth objectives.

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Financial Markets and Banking Sector Coordination

• As financial markets emerge as a key source of funding, it is essential that they coordinate with the banking sector to satisfy capital demands.

Regulatory Readiness

• India must prepare for the vulnerabilities associated with financialisation by implementing appropriate regulatory measures and government interventions when necessary.
• Banks must adapt to the digital economy and evolving household needs while maintaining their function in credit creation.

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4. ‘Indigenisation an urgent task for India’s electric mobility transition’

(Source – The Hindu, International Edition – Page No. – 6)

Topic: GS3 – Indian Economy

Context

• India must prioritize the indigenisation of EV technology and raw materials to decrease import dependence.

Indigenisation of Technology and Raw Materials

• India must concentrate on indigenising technology and raw materials for electric mobility to lower reliance on imports.
• The Economic Survey highlights the urgency of this initiative, especially in light of global trends aimed at reducing dependency on China.
• India's import intensity in electric vehicle (EV) production remains high, particularly with nations where trade deficits are significant.

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Challenges in Mineral Sourcing

• Many minerals necessary for EV manufacturing are either scarce or not processed within India.
• China dominates the global production and processing of essential minerals such as nickel, cobalt, lithium, and rare earth elements.
• Specifically, China represents 65% of nickel production, 68% of cobalt, 60% of lithium, and 90% of rare earth processing.
• The demand for lithium-ion batteries, critical for EVs, is projected to grow at 23% annually until 2030, further solidifying China’s dominance.

Supply Risks and Public Transportation Focus

• India’s Ministry of Mines has identified 24 out of 33 critical minerals as being at high risk of supply disruptions.
• The government supports enhancing public transportation systems to meet electric mobility objectives and reduce import reliance.
• Investing in efficient, reliable, and accessible public transit will assist India in achieving Net Zero targets while decreasing import dependence.

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5. India should not shut coal plants without ‘alternatives’: Survey

(Source – The Hindu, International Edition – Page No. – 6)

Topic: GS3 – Indian Economy

Context

• The economic survey addresses the challenges India faces in its energy transition while balancing development, energy security, and sustainability objectives.

India’s Path to Development and Low-Carbon Future

• India aspires to be a developed nation by 2047 while pursuing a low-carbon pathway. To achieve this, it must utilize its best resources, advanced technologies, and expertise.
• However, coal-fired power plants should not be decommissioned without dependable alternatives to prevent disruptions.
• Energy Transitions Driven by Commercial Interests

Energy Transitions Driven by Commercial Interests

• Historically, energy transitions have been more influenced by commercial interests than by emission reduction efforts.
• Energy security and commercial interests remain the primary factors shaping the shift to cleaner energy.
• Both developed and developing nations are affected by these considerations in their energy decisions.

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Global Examples of Energy Transition

• The Economic Survey highlights France’s transition to nuclear power in the 1970s, prompted by oil embargoes. In 2022, the European Union introduced the REPowerEU plan, investing €10 billion (₹90,000 crore) in liquefied natural gas (LNG) infrastructure to decrease dependence on Russian gas.
• In 2023, the U. S. administration approved its largest oil-drilling project in Alaska, underscoring continued reliance on fossil fuels.

Challenges for Developing Nations

• Developed nations persist in their dependence on fossil fuels while advocating for developing countries to adopt more expensive and less efficient energy solutions.
• For India, closing coal plants would result in the underutilization of substantial investments made during the 2010s.

India’s Net-Zero Emissions Goal

• India’s ambition of achieving net-zero emissions by 2070 must remain a priority.
• The country should concentrate on innovation and investment in renewable energy, battery storage, grid infrastructure, and critical minerals.
• Transitioning to renewable energy faces challenges such as increased electricity prices and the complexities of managing both fossil fuels and renewables.

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6. ‘Regulatory framework holding back MSMEs, limiting growth, innovation’

(Source – The Hindu, International Edition – Page No. – 7)

Topic: GS3 – Indian Economy

Context

• The economic survey addresses the challenges and government initiatives aimed at supporting and formalizing MSMEs in India.

Challenges Faced by MSMEs

• Micro, Small, and Medium Enterprises (MSMEs) employ 23. 24 crore individuals in India but encounter difficulties due to the regulatory environment.
• Compliance burdens in regulations impede formalization, diminish labor productivity, restrict employment growth, hinder innovation, and negatively affect overall growth.

Importance of MSMEs

• MSMEs are vital to the economy, second only to agriculture, as they create jobs at low capital costs.
• They stimulate economic growth, employment, and innovation but often remain small to evade regulatory oversight.
• This preference for staying small limits their access to capital, skilled labor, technology, and formal supply chains, resulting in low labor productivity and fostering an informal economy.

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Government Efforts to Support MSMEs

• The government has prioritized improving MSMEs' access to finance, enhancing technological capabilities, providing market linkages, and addressing structural challenges.
• In 2023, the Udyam Assist Platform (UAP) was introduced in collaboration with SIDBI to formalize informal micro-enterprises.
• Over 2. 39 crore informal micro-enterprises were formalized through this platform.
• The TReDS platform is designed to assist MSMEs in receiving timely payments with reduced financing costs.

Funding and Development Programs

The Micro and Small Enterprises-Cluster Development Programme (MSE-CDP) focuses on enhancing technology, skills, and quality through Common Facility Centres (CFCs).

The government has launched the Self-Reliant India (SRI) Fund with ₹50,000 crore to provide equity funding to MSMEs with scaling potential.

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7. Economic Survey 2024-25: Stability Amid Global Uncertainty, Calls for Deregulation to Boost Growth

(Source – Indian Express, Section – Explained – Page No. – 21)

Topic: GS3 – Indian Economy

Context

• The Economic Survey 2024-25 evaluates India’s economic performance against a backdrop of global uncertainties.

Analysis of the news:

Global Economic Challenges

• The Economic Survey identifies two primary issues affecting the global economy: rising trade protectionism and China’s dominance in manufacturing.
• The slowdown in trade and investment growth reflects a departure from globalization.
• Increasing uncertainty and fragmentation within the economy suggest signs of “secular stagnation. ”
• Furthermore, China’s significant contribution to global production, representing one-third of manufacturing output, presents challenges.
• Nevertheless, disruptions in global supply chains may create opportunities for economies like India.

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India’s Economic Performance

• In spite of global hurdles, India’s economy remains robust.
• Real GDP growth for FY25 is expected to reach 6. 4%, with estimates ranging from 6. 3% to 6. 8% for FY26.
• Private final consumption expenditure, a crucial driver of demand, is projected to increase to 61. 8% of GDP, the highest level since FY03.
• On the supply side, Gross Value Added (GVA) has surpassed pre-pandemic levels and aligns with the decadal average, showcasing a consistent economic trajectory.

Inflation and Employment Trends

• The Survey indicates that core inflation is easing, while food inflation has increased from 7. 5% in FY24 to 8. 4% due to supply chain disruptions and weather-related factors.
• Nonetheless, experts suggest that inflation, excluding certain volatile food items, is nearing the target.
• Employment indicators have shown improvement, bolstered by post-pandemic recovery and enhanced job formalization.
• Key metrics, including the unemployment rate and labor force participation, exhibit positive trends.

Policy Recommendations: Deregulation for Growth

• The Survey underscores the necessity of deregulating the economy to enhance employment, income generation, and consumer demand.
• The Chief Economic Advisor (CEA) advocates for the reduction of regulatory barriers, particularly for small businesses, to decrease operational costs and stimulate hiring.
• Referencing the Business Reform Action Plan (BRAP), the Survey proposes that enterprise-friendly policies can promote industrial growth, especially in aspiring and emerging states.

Shifting Tone in the Economic Survey

• While the Survey recognizes India’s recovery post-pandemic, it also highlights concerns surrounding domestic production capacity limitations.
• The CEA cautions that excessive regulation could result in stagnation.
• This cautious perspective contrasts with the optimism conveyed in the 2023 Survey, which anticipated strong growth momentum following the pandemic.
• The tonal shift indicates an acknowledgment of structural challenges that necessitate urgent policy interventions to facilitate long-term economic expansion.

Practice Question: The Economic Survey 2024-25 highlights India’s economic resilience amidst global uncertainties. Discuss the key challenges and recommendations outlined in the Survey and their implications for India’s long-term economic growth. (250 Words /15 marks)

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Prelims Facts

1. 40-million-year-old whale fossil stolen in Meghalaya; hope to retrieve it soon: CM

(Source – The Hindu, International Edition – Page No. – 2)

Context

• A 40-million-year-old fossil of a whale ancestor was reported stolen from Meghalaya, prompting a police investigation and raising concerns about its preservation.

Analysis of the news:

• The fossil, approximately 40 million years old, is associated with an ancestor of modern whales.
• It was discovered in a cave in Tolegre village, situated in the South Garo Hills district of Meghalaya.
• The fossil is believed to belong to either Rodhocetus or Ambulocetus, both genera of Palaeogene whales.

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• The discovery was announced in February 2024 by three speleologists from Core Geo Expeditions.
• This find is significant in the field of palaeontology, as it provides insights into the evolution of whales.
• The Meghalaya government intends to collaborate with specialists from the Geological Survey of India (GSI) to study and protect the fossil.
• The fossil was stolen in January 2024, leading to an ongoing police investigation.

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2. ‘India’s tiger population rose 30% over two decades’

(Source – The Hindu, International Edition – Page No. – 3)

Context

• A study indicates that India’s tiger population has grown by 30% over the last 20 years, attributed to effective conservation strategies, legislative support, and socio-economic factors.

Analysis of the news:

• A recent study reveals that India’s tiger population has increased by 30% in the past two decades.
• Despite high human densities and economic challenges, India has achieved significant success in tiger conservation.
• Protected areas and land-sparing strategies have enabled 85% of breeding populations to flourish.
• Tigers now coexist with over 66 million people, exemplifying successful coexistence.

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• Legislative frameworks such as the Wildlife Protection Act, Forest Conservation Act, and National Tiger Conservation Authority have aided in the species' recovery.
• Economic growth and cultural values have impacted tiger persistence, with regions experiencing lower poverty levels showing improved recolonization rates.
• Areas affected by Naxal activity in Chhattisgarh and Jharkhand have seen declining tiger populations.
• Tiger Population in India: India is home to 70% of the global wild tiger population. Government data from July 2024 indicates 2,226 tigers, an increase from 1,411 in 2006.

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3. FDA Approves Non-Addictive Painkiller Suzetrigine, Offering Hope in the Fight Against Opioid Crisis

(Source – Indian Express, Section – Explained- Page No. – 21)

Context

• The United States Food and Drug Administration (FDA) has approved suzetrigine, a new non-opioid painkiller.

Analysis of the news

What Are Opioids?

• Opioids are pain-relieving drugs derived from or mimicking natural substances in the opium poppy plant. 
• Common examples include oxycodone, morphine, codeine, heroin, and fentanyl. 
• These drugs work by binding to opioid receptors in the brain, blocking pain signals and producing a sense of pleasure or euphoria. 
• This euphoric effect makes opioids highly addictive, often leading to dependence and misuse.

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How Suzetrigine Works

• Suzetrigine targets pain signals before they reach the brain, unlike opioids, which alter pain perception in the brain. 
• It interrupts the pain pathway at the nerve level, preventing the brain from recognizing pain even when tissue damage exists. 
• Because it does not create euphoria, experts believe it has no addiction potential. 
• Suzetrigine is taken in 50-milligram doses every 12 hours, with an initial 100-milligram starter dose.

Significance of the Approval

• The opioid crisis remains a major public health issue in the U.S., with 82,000 opioid-related overdose deaths in 2022. 
• The country consumes 30 times more opioid painkillers than needed, leading to widespread addiction and illegal drug trade. 
• Former President Donald Trump declared opioids a national emergency in 2017, and has since threatened tariffs on Canada, Mexico, and China to curb fentanyl imports. 
• Suzetrigine’s approval offers a promising alternative that could help reduce opioid dependence and overdose deaths.

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