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SECURE SYNOPSIS: 17 May 2017

 


SECURE SYNOPSIS: 17 May 2017


NOTE: Please remember that following ‘answers’ are NOT ‘model answers’. They are NOT synopsis too if we go by definition of the term. What we are providing is content that both meets demand of the question and at the same time gives you extra points in the form of background information.


General Studies – 1;


Topic: Role of women 

1) “Improving the gender balance in labour force participation, entrepreneurship and growth is an important first step for India’s development.” Discuss. (200 Words)

Livemint

Introduction-

Despite its recent economic advances, India’s gender balance in labour force participation, entrepreneurship, and growth remains among the lowest in the world. Improving this balance is an important first step for India’s development and its achievement of greater economic growth and gender equality.

Present condition of women in India’s economic growth-

  • National Sample Survey (NSS) data for India show that labour force participation rates of women aged 25-54 (including primary and subsidiary status) have stagnated at about 26-28% in urban areas, and fallen substantially from 57% to 44% in rural areas, between 1987 and 2011. 
  • Women entrepreneurs in India are mostly concentrated in low-paying industries. This gender concentration in low-wage industries has increased over time.
  • In the manufacturing sector, tobacco products, apparel and textiles attract the largest count and share of women entrepreneurs, perhaps because these industries are known to have lower physical labour requirements.
  • Among services, it is the education, sewage, refuse disposal, sanitation and financial intermediation services that attract the largest share of female proprietors. There is a strong negative relationship between average industry wages and the share of female-led plants in the manufacturing sector. The association between the share of female-owned plants and average industry wages in the services sector is also negative.
  • Industries that show higher rates of female entrepreneurship and employment are also, broadly, the industries that show the highest segmentation in terms of female employees being matched to female owners. If people prefer to work with their own “types”, then in the case of India, gender of the owner overwhelmingly predicts the gender of the employees.
  • Despite many competitive reforms that India has undertaken, gender-based segmentation has increased over the years. For instance, the share of female employees in female-led informal manufacturing plants increased from 88% in 2001 to 93% in 2010. In the case of services, the share of female employees in women-led establishments increased from 75% to 87% during the same period. Likewise, the share of male employees in male-owned businesses has increased from 80% to 86% in unorganized manufacturing.

Reasons-

  • One possible reason for this is India is behaving according to the feminization U hypothesis. According to it, in the development process, female labour force participation first declines and then rises.
  • Another reason is that the rising education and incomes are allowing women to get out of menial and undesirable employment, while jobs deemed appropriate for more educated women have not grown commensurately.
  • The lack of availability of agricultural and non-agricultural jobs in rural areas appears to be driving the declining participation in rural areas says one study.
  • Structural change in India also led to a rapidly shrinking agricultural sector in favour of a rapidly expanding service and construction sector.
  • A study by Klasen and Pieters shown that rising household incomes and husband’s education, falling labour market attachment of highly educated women, as well as adverse development in district-level labour demand, have contributed to declines in female participation.

Why improving gender balance would be important step for development in India?

  • As India is now in the phase of “demographic dividend”, where the share of working-age people is particularly high, which can propel per capita growth rates through labour force participation, savings, and investment effects. But if women largely stay out of the labour force, this effect will be much weaker and India could run up labour shortages in key sectors of the economy.
  • Greater female participation will usher in financial independency which shall pave way for other aspects of development like health, education, sanitation etc.There is a wealth of evidence suggesting that employed women have greater bargaining power with positive repercussions on their own well-being and that of their families.
  • In addition to financial independency of women, gender balance will ensure that gender sensitive issues are addressed especially through social entrepreneurship at the behest of women.
  • As per the report by Mckinsey, India’s GDP will improve by 60% if India is able to bridge the gender gap.
  • A report, ”Investing in Women’s Employment,” published by the International Finance Corporation(IFC), confirms that better employment opportunities for women can also contribute to increased profitability and productivity in the private sector. Companies that invest in women’s employment often find that it benefits their bottom line by improving staff retention, innovation, and access to talent and new markets.

Conclusion-

Overall, better jobs for women benefit individuals, families, communities, companies, and economies. India which is riding on the high economic growth for last few years could ensure its sustainability by improving women’s participation in market. India can take cue from newly industrialized countries like China, South Korea, Malaysia etc which invested hugely in increasing the share of female in labour-force participation and are reaping its benefit.   

 


Topic: Urbanization – problems and remedies

2)  What do you understand by “transport as a service” (TaaS) concept? In a country where it’s difficult to build solid public transport infrastructure, discuss the importance of uberization for India. (200 Words)

Livemint

Transport as a service (Taas)-

Transport as a service” (TaaS) is a paradigm where people are using a hybrid combination of public and private transport, combined with the sharing economy, cashless payments with swipe cards and the GPS-enabled smartphone.

Vital stats

  • 55% commuters across India prefer hailing a taxi from an app-based aggregator.
  • Kaali-peeli taxi is the second choice for every third Mumbaikar.
  • 79% of app based cab drivers reported an increase in income from before.
  • App based cab drivers make the maximum number of trips per day compared to both autos and private taxis.
  • 50% or more of the income earned by app based cab drivers is derived from driver incentives paid by the aggregators.
  • Only 14% of app based cab drivers would continue to work for the aggregators without incentives

Importance of uberization in India-

  • Uberization denotes the increase in use of app-based taxi services like Uber, Ola etc by commuters in cities where public transport is usually inadequate to serve them efficiently.
  • Uberization will soon usher in the use of driverless autonomous vehicles, owned not by private individuals or cities, but by fleet owners and large companies. A recent report, “Rethinking Transportation 2020-2030” envisages huge and historic disruption in transportation in the coming decade.
  • The electric vehicle boom means demand for oil will drop from 100 to 70 million barrels a day, and oil prices will remain stuck at low levels, making a lot of the shale oil fields redundant stranded assets. The value in car manufacturing will reside not in conventional manufacturing or assembly, but in operating systems and TaaS platforms.
  • The report further says that demand for new vehicles will plummet by 70%, and the hardest hit in the value chain will be car dealers, maintenance and insurance companies.
  • Ownership of conventional non-electric cars will drop, and the aggregate miles driven by these cars will be less than 5%. Car utilization will, however, rise by more than 10 times.
  • The uberization phenomenon is spreading fast in Indian cities, and is already extending to logistics and trucking. Although it has run into a predictable conflict with taxi unions and conventional operators, the phenomenon is temporary and public usage is in any case increasing.
  • As taxi aggregators like Uber and Ola tie up with companies, this has the potential of reducing costs substantially because of the TaaS model. Car ownership will eventually decline (as it has started doing in the US) after peaking in the short term. Ironically, in the near future, as more Uber and Ola entrepreneurs take the plunge, car sales are increasing. 
  • India will also soon roll out an ambitious national policy for electric vehicles.
  • Uberization in combination with Internet, Self-driving vehicles, shared vehicles, special design and advanced propulsion system is capable of supplying TaaS at a radically lower cost, with lower congestion, much higher safety, reduced emission, higher energy efficiency and improved land use. For instance, in this system, just a fleet of 9,000 autonomous vehicles can replace all the taxis of the city, with an average waiting time of 36 seconds. 

Conclusion-

The phenomenon of Uberization is making fast inroads into Indian transport system and is poised to create its own space in the existing transport system. With increasing use of smart phones and internet penetration would make popularize this concept in India.

 


General Studies – 2


Topic:  Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

3) Do you think China’s motives behind the Belt and Road Initiative (BRI) truly benign? Critically comment. (200 Words)

Livemint

Introduction-

The inaugural meet of the ‘One Belt, One Road’ (OBOR) concluded in the Beijing on 14th-15th of May 2017. BRI involves the continental connectivity of China to Central and West Asia and onwards to Europe (the ‘belt’ part) and maritime connectivity of China’s southern coast to Africa via South-East Asia (the ‘road’ part). Although it is true that China’s plans to build huge infrastructural capacities in Asia that could help all the member countries to develop their economy, the project also seems to have hidden geo-political and geo-strategic dimensions.

Suspicion about China’s motives-

India was conspicuous by its absence in the inaugural meet and expressed its reservations just before the meet. Though India has sovereignty issue with the CPEC, the China’s previous projects in other countries make India apprehensive of joining OBOR.

These apprehensions do have historical basis. The previous Chinese investments in the continent of Africa as well as in India’s neighbourhood in Sri Lanka and Myanmar have faced strong local backlash for several reasons.

  • Many of the projects have proved economically unviable, thus impeding the ability of recipient countries to service the loans. A debt to equity swap leaves them with the undesirable option of China owning strategic assets in their countries which can likely be used for military purposes.
  • The tempting loans come with many riders and the recipient countries have to source much of their material from China. Often, a Chinese state-owned enterprise leads the project and large numbers of labourers, including low-skilled ones, are imported from China itself.
  • All kinds of charges, ranging from environmental degradation to labour exploitation, have been levelled against Chinese companies.
  • The BRI has not had a better start. Pakistan, which has been slavish in accepting Chinese demands, has baulked at the tariffs for power produced by projects under Cpec.
  • The refinery built by a Chinese state-owned company in Kyrgyzstan has found it difficult to source crude oil. Political and social discontent in the Central Asian country is already growing.
  • One should remember that not long ago, entire national election campaigns were held on an anti-China plank in countries like Zambia and Sri Lanka.

All these facts make China’s motives behind the project suspicious. Even those countries who have been part of inaugural meet of OBOR have hidden apprehensions but could not resist the temptations receiving huge sums of money as loans.   

Conclusion-

A wait-and-watch strategy on the BRI does no harm for the moment but New Delhi should simultaneously step up its infrastructure building in India and the neighbourhood. It should look to pool its resources with the Japanese Partnership for Quality Infrastructure (PQI). Even if India and Japan cannot match the scale and ambitions of BRI, they will gradually begin to attract partners which will likely be alienated as the true costs and motives of Chinese investments begin to show

 


General Studies – 3


Topic:Various Security forces and agencies and their mandate

4) It is said that intelligence strategy continues to be India’s Achilles’ heel and there is an urgent need for its re-articulation. Discuss. (200 Words)

Livemint

Introduction-

Recently parliamentary standing committee on home affairs, in its report submitted in April, noted the increasing incidence of terror attacks which “exposed the deficiencies of our intelligence agencies” and lamented the lack of analysis of the “failure of the intelligence agencies to provide credible and actionable inputs regarding the attacks at Pathankot, Uri, Pampore, Baramulla and Nagrota”.

Why intelligence strategies continue to be India’s Achilles’ heel?

  • Deficiencies in the intelligence framework have often led to the growth of India’s intelligence ‘community’.
    1. After the Kargil intrusion in 1999, the Intelligence Bureau (IB) was designated as the premier counter-terrorism agency and authorized to create a multi-agency centre (MAC) which was to be an intelligence-sharing ‘fusion centre’ in New Delhi.
    2. The Defence Intelligence Agency (DIA), created in 2002, was mandated to collect, collate and evaluate intelligence from other service agencies. However, DIA resources continue to be under-utilized in the absence of a chief of defence staff (CDS).
  • The National Technical Research Organisation (NTRO) was set up in 2004 but fuelled controversy as its mandated task was already being performed by other intelligence agencies.
  1. After the Pakistan-sponsored Mumbai terror attacks in 2008, the security and intelligence architecture was revamped again. The National Investigation Agency (NIA) was established to investigate terror cases.
  • At present, the national MAC coordinates with 25 representatives from agencies in the Union home affairs, finance and defence ministries. As noted in the parliamentary committee report, the major contributors of inputs to the MAC in 2016 were the DIA (24.05%) and the Research and Analysis Wing (20.75%). But the contribution from state special branches was low, at around 11%.This points to the fundamental weakness of many of India’s state police forces.
  • The sweeping internal security reforms initiated by the Centre after 26/11 were followed by plans to create a National Counter Terrorism Centre (NCTC) and the National Intelligence Grid (NatGrid), a national, computerized, information-sharing network. However, the NCTC got embroiled in the quagmire of Centre-state relations while NatGrid is struggling to get off the ground.
  • The Indian intelligence system, which emerged as an extension of the British police system, has struggled to let go of its colonial legacy. The lack of a dedicated intelligence cadre and the continuing practice of staffing intelligence agencies with police officers have resulted in these agencies disregarding language experts, scientists, information technology professionals and cyber specialists. This often results in substandard intelligence making its way through the system up to the highest level of decision making.

From an appendage to the country’s diplomatic, military and internal security agencies to a multi-agency ‘community’ in itself, Indian intelligence has been growing. However, there is no overarching strategy for this growth, and most agencies still function in an ad hoc manner.

How to re-articulate India’s intelligence strategy?

  • LEGAL STATUS-
    1. Introduce legislation in Parliament for laying down the charters, functions and duties of intelligence organisations;
    2. Provide a legal basis for different tiers of accountability – executive, financial and legislative;
  • RECRUITMENT, DEPUTATION, PROMOTION, TRAINING-
    1. Have open and separate direct recruitment mechanisms for different intelligence agencies – advertising for the best talent available, specifying the qualifications required, including linguistic abilities – by using the existing mechanism of the Union Public Service Commission;
    2. Use deputation slots to induct experts from the military and science & technology streams;
  • Outsource to meet specialised needs;
  1. Improve training modules, including specialised training for analysts;
  2. Improve quality of trainers, bring in military trainers;
  3. Review the present system of writing Annual Confidential Reports (ACR) in intelligence agencies to eliminate subjectivity and bring about better objectivity;
  • Review in situ promotions to improve morale at middle, mid-senior levels.
  • ANALYSIS & OPERATIONS-
    1. Improve training for analysts in tools of modern prescriptive work;
    2. Improve quality of supervision in operational branches of intelligence agencies, reverse drift in operational work, discard useless and profligate sources;
  • Bring better financial probity in intelligence operations;
  1. Introduce concept of social welfare safeguards for assets who rendered valuable service for national security, but became casualties on the job.
  • TECHNOLOGY UPGRADE-
    1. Enhance in-house technical research and development capabilities especially in relation to signals decryption work, and cryptography capabilities;
    2. Examine feasibility of outsourcing relevant tasks to experts for improving output;
  • Fast track equipment procurement processes, with innovative association of financial experts at suitably high levels, so that balance is maintained between time frames and norms of financial propriety;
  1. Upgrade Open Source Intelligence (OSINT) capabilities; Use advanced commercial search engines;
  2. Upgrade offensive as well as defensive capabilities in cyber warfare.
  • RELATIONS BETWEEN INTELLIGENCE AGENCIES & MINISTRY OF EXTERNAL AFFAIRS-
    1. Introduce a system of interchangeability between various intelligence agencies and the connected Ministries of the Government of India;
    2. In case of external intelligence, institutionalize cover assignments in consultation with Ministry of External Affairs to improve cooperation;
  • Have regular inter-action between heads of intelligence agencies and Secretaries of the concerned Ministries, as also between their area desk officers;
  1. Resume the practice of posting a Joint Secretary level Foreign Service officer in external intelligence – for better coordination and liaison.
  • COORDINATION OF INTELLIGENCE-
    1. Appoint a National Intelligence Coordinator/Director of National Intelligence to bring about better interagency coordination, remove overlaps and duplications, end ‘turf-wars’ and ensure better utilisation of national resources. Alternatively, the National Security Adviser (NSA) may function independently under a Minister for National Security.
  • ACCOUNTABILITY-
    1. Strengthen financial accountability of intelligence agencies; annual reports to go to Comptroller & Auditor General (CAG)/NSA;
    2. Provide for an in camera audit of Secret Service Funds; l Have a separate intelligence ombudsman for IB, R&AW & NTRO;
  • Enhance staff support by posting intelligence professionals in external processing units serving the Cabinet Secretariat (for R&AW and NTRO) and MHA( for IB);
  1. Examine the option of having a Minister for National Security & Intelligence, who could exercise administrative authority on all intelligence agencies;
  2. Set up a Parliamentary Accountability Committee for oversight of intelligence agencies through legislation;
  3. Provide adequate professional secretarial assistance to the oversight committee through the Intelligence Ombudsman and a professionally staffed unit in the Cabinet Secretariat;

Conclusion-

Integration between all the organs of government dealing with intelligence, as well as seamless acquisition, processing and dissemination of tactical, operational and strategic intelligence, is the need of the hour.

 


Topic:  Linkages between development and spread of extremism

5) In your opinion, how can both government and security establishment help in bringing normalcy back in the Kashmir Valley? Critically comment. (200 Words)

The Hindu 

 

Introduction :- As the situation in the Kashmir Valley takes a turn for the worse and shrill rhetoric from various stakeholders grows louder the government must initiate steps for “visible outreach and engagement” in Kashmir. 

Kashmir valley is on the boil and it has become common sensual now that status quo is not going to make things any better. However, the Indian government has taken some significant steps off late – these are

  • Proposals for replacement of the notorious pellet guns being used.
  • Instructions to use only proportionate force against unarmed protestors.
  • Offers for talks with the government for almost anyone willing to discuss in a peaceful and constructive manner.

However, few media houses and former veterans have been towing an all too aggressive line even against the relatively peaceful protestors, and this toughened stand would only deteriorate the situation. Using weapons against unarmed would only condemn them to picking up arms themselves.

Governments steps :- 

  • GoI cleared use of chilli grenades but use of pellet gun stays only during emergency
  • Govt to skill 50000 Kashmiri youth esp. Muslims for employment
  • One time cash compensation of Rs.5 lakh to families of victims of Militancy in lieu of employment
  • Enhancement of pension to widow of civilians killed in Militancy related violence
  • upliftment of curfew after 51 days of unrest
  • Mamta (love) & ekta (unity) considered as basic mantra in Mann ki baat to bring peace in Kashmir
  • Govt to invoke Public Safety Act to book all accused involved in creating unrest.
  • Track II initiative – Involving civil society members in bringing peace
    Thus, although the government is doing its best to control the situation, there needs to be
  • Curb in irresponsible debates and aggressive posturing in media.
  • Confidence building measures even with the fringes in Kashmir should be ensured.
  • Absolute ban on any lethal weapons against unarmed.
  • Greater restraint to be advocated on the part of security forces.
  • Last but not the last all inclusive and comprehensive talks taking into consideration all shades of opinions in the valley would lead the way.

 


Topic: Agriculture marketing and other issues

6) “A free market in agriculture can be the best antidote to crisis facing our farmers.” Critically discuss. (200 Words)

The Hindu

Introduction:- Farmers in some States are regretting their abundant yields this year as the prices of agricultural commodities have crashed. Chilli farmers in Andhra Pradesh and Telangana, tomato growers in Karnataka, and toor dal cultivators in Maharashtra are at the centre of a severe crisis that has witnessed prices fall by more than half in a matter of just weeks. 

Price fall in agricultural commodities recently as a result of glut of commodities resulted in the crisis of the farmers. The situation is even becoming bad due to trade cartels, infrastructure, etc.
Problems faced by farmers

  • Speculations: Higher commodities prices last year resulted in boosting of production due to which price fall occurred.
  • Stock limits: Limiting the stocks for agricultural products has also dampen the growth of commodity speculation that directly affects farmers.
  • Infrastructural issues: Due to lack of major infrastructure say cold storage, farmers are bound to sell at the prices much lower than they could, if better storage facilities are available.
  • Trade Cartels: Wholesale agricultural prices are determined by trade cartels that block competitive bidding.

For the Regulation of economy, Government regulate the agriculture market which affect the Farming as under :-

  • Recently the pulse price hiked in India and to stem the price and inflation, Government impose export ban of the pulse which affect the pulse growing farmers.
  • Apparel sector is one of the major employment provider. When the Cotton price increase, Indian textile became non competitive and there was job loss. To secure the Jobs in apparel sector, Govt impose “Maximum selling price” on cotton which hurt the interest of cotton growing farmer.
  • Till recently, it was mandatory for the Sugar farmer to sell his/her crop to the nearest sugar mill. This restrict the farmer choice and his/her income.

These factors suggest that Free market is antidote to farmer crisis but in many case, Farmer themselves seek government intervention as Market failed to serve farmers. Specially in case of the Wheat and Rice, Farmers of west India get Good price as Government procure product form them while east India farmers still not getting fair price as Government intervention is sparse there.

Thus Not free market but Fairly regulated market in agriculture can be the best antidote to crisis facing our farmers.

 


Topic: Awareness in computers

7) Discuss the nature of recent ransomware attack on computers worldwide, the dangers such attacks pose to individuals and government, and measures needed to prevent such attacks. (200 Words)

The Hindu

Introduction :- The menacing spread, starting last Friday, of the malicious software WannaCry, which has since infected thousands of computer systems in 150 countries, is a frightening reminder of the vulnerabilities of a connected world. 

There are many types of malware that affect a computer ranging from those that steal your information to those that just delete everything on it. Ransomware, on the other hand, prevents users from accessing their devices and data till a certain amount is paid to its creator as ransom. Ransomware usually locks computers, encrypts the data on it and prevents other software and apps from running. The WanaCrypt0r 2.0 bug, for instance, wants $300 to be paid in Bitcoins to unlock the affected computers. However, paying the ransom is no guarantee for getting the files will be restored and might just open up new attacks.

Impact of Ransomware attack :-

Depending on the critical nature of the computer involved, any malware attack can have serious implications in the highly digitised worlds we live in. In the WannaCry attack it is reported that many surgeries had to be put off, x-rays cancelled and ambulances called back. For many years it has been feared than an attack of this nature can bring public utilities or transport systems to a halt. And that is why a lot of stress is being laid on security of these properties across the world. If a service like an urban metro rail is target, you can rest assured that the ransom will be way above $300.

What is the threat to a country like India?
As India goes increasingly digital, our vulnerability as well as the resultant impact increase too. For instance, a ransomware attack can easily hold a service like the Delhi Metro or a power utility to ransom, quite literally. Also, the fact that a lot of what we have online is now also connected to the Aadhar data of over a billion Indians makes the threat even more real and worrisome.

 

Dangers posed to Government and Individual

Can compromise personal data: Personal data like username, passwords related to banking and social sites can be compromised.
Strategic data: Data relating to strategic sectors like nuclear, defense if compromised would cost dear to the government as particular and people of India as a whole.
Money Loss: As hackers are demanding the $300 to unlock the files it may result in huge money loss to the people all over the world.

Measures needed
Use of authorized software As present ransomware mainly affects pirated windows XP version we should always use genuine version of operating system

Stakeholders: Stakeholders from all over the world like CERT-IN and different cyber security agencies should held meetings regularly to keep watch on hackers and cyber threats.
Impart education: In India, institutes and colleges should be opened to impart education relating to ethical hacking and government should provide incentives to such institutes and students to make a career in cyber security.

It is obvious now this type of threats will arise owing to the digitalization all over the world. We must be ready to face such threats in the letter and spirit.

 


Topic: Indian economy

8) What is Index of Industrial Production (IIP)? How is it calculated and what’s its utility? Discuss the concerns expressed regarding IIP data in recent days. (200 Words)

The Hindu 

Introduction :- The Index of Industrial Production (IIP) is an index for India which details out the growth of various sectors in an economy such as mineral mining, electricity and manufacturing. The all India IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period. It is compiled and published monthly by the Central Statistical Organisation (CSO) six weeks after the reference month ends.

The level of the Index of Industrial Production (IIP) is an abstract number, the magnitude of which represents the status of production in the industrial sector for a given period of time as compared to a reference period of time. The base year was at one time fixed at 1993–94 so that year was assigned an index level of 100. The current base year is 2011-2012.

The Eight Core Industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). These are Electricity, steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.

Calculation of IIP:-

  • The theoretical aim of the IIP is to capture the direction and the trend of industrial production in the country, not the absolute value of industrial production. Its chief utility is as an early indicator of turning points in the economy.
  • IIP is calculated by the Central Statistical Organisation (CSO). It is published every month keeping a gap of six weeks.
  • CSO takes the base year as 2004-05. Now, CSO takes into account 682 items. It includes the technologically advanced goods such as ipads and cell phones and thus able to give a broader and better picture of growth in the economy.
  • The products are selected from the results of the Annual Survey of Industries in 2004-05. All the products which contribute 0.20 percent or more to the total value of production at 2-digit industry of National Industrial Classification are included in the item basket.
  • Each item included in the basket is given an appropriate weight. Weight is determined on the basis of gross value added (GVA) from the industrial activity. The weights are considered in order to capture the different economic activities which needs to be reflected while measuring the performance of the entire industrial sector.
  • IIP is calculated as the weighted average of production relatives of all the industrial activities. In the mathematical calculation Laspeyre’s fixed base formula is used.
  • Industry is changing fast over time driven by up-gradation in technology, economic reforms and consumption pattern of the people. Over time, consumer behaviour has changed. The goods which were considered as luxury once are regarded as necessary now. So, it becomes necessary to revise the base rate from time to time in order to capture the changes in the economy.

 

Importance of IIP :-

 

  • IIP is considered as an important data for a number of reasons. For example, the data which is released after market hours is eagerly watched by stock market analysts to understand, if economic momentum is gaining traction. 
  • IIP is also an important indicator for the Reserve Bank of India, when framing its monetary policy. Though one must admit that the CPI inflation data has become a key for the RBI. However, if IIP data suggests that industrial activity is slack the country’s central bank may refrain from cutting interest rates. On the other hand, if IPP data is higher, it may hold interest rates steady.

 

Concerns regarding IIP data:-

  • Out of sync with the actual manufacturing output growth measured through ASI.
  • IIP IS not equipped to capture changes in the economy.
    As base year and item basket remained unchanged since 2004-05, If an entity shut down, its output fell to zero.
  • There is no statutorily-mandated system of regularly reporting production is in place,

There is need to update base year and item basket. And instead of the periodic baskets revisions, a permanent standing arrangement required to put in place to make sure that the IIP remains representative.