US jobs-recession paradox
(GS-III: Effects of liberalisation on the economy)
Normally when the US Fed (central Bank) raises its interest rate to control inflation, it raises the fear of recession as consumption and demand decrease (people have less money) and so unemployment surges. However this time the US economy is creating jobs even as the Fed is hiking rates.
Economic output in the US is contracting in line with the Fed’s rate-tightening. But companies are still hiring in droves.
Over the past six months, jobs have been created in the US at the rate of nearly half a million a month.
Lowest unemployment: 5%, the unemployment rate is the lowest since 1970 in the US.
Reason for this Labour market paradox:
As against the previous crisis ( pandemic-induced 2020 recession, financial crisis of 2007-08, and the dot-com bust of 2000-01) have all been because of excessive debt-related built up in housing and Internet infrastructure, and it took nearly a decade for the economy to absorb them. By contrast, excess liquidity, not debt, is the most likely catalyst for a recession trend today. And so the economy is able to bounce back with more job creation.
Fed hikes’ impact elsewhere
A sharper-than-expected hike in rates in the US leads to:
foreign investors leaving emerging markets like India and investing more in the US (greater interest rate)
Impact on currency markets, stemming from outflows of funds: Depreciation of Rupee
What is a Recession?
It is a macroeconomic term that refers to a slowdown or a massive contraction in economic activities for a long enough period, or it can be said that when a recessionary phase sustains for long enough, it is called a recession.
It is a deep and long-lasting period of negative economic growth, with output falling for at least 12 months and GDP falling by over 10% or it can be referred to as a severe and prolonged recession.
Due to the drop in production of cotton, the price of cotton has remained high and subsequently government procurement (under MSP) has remained slow.
Reasons for High price:
Cotton productivity is low in India ( 450 kg to 500kg/hectare Vs global average of 877 Kg/hectare)
At least 80% of cotton grown in each of the nine cotton-growing states of India is Bt cotton.
Rathole Coal Mining
Recent mishap at Meghalaya coal mine. The incident happened in the Shallang area of West Khasi Hills district.
What is Rathole coal mining:
Rat-hole mining is a dangerous technique involving digging narrow vertical tunnels into the earth to extract coal. Since most of these tunnels are dug without following guidelines, they pose threat to workers.
Rat-hole mining is common in Meghalaya due to the thinness of coal found.
NGT had banned Rat-hole mining in 2014, but SC (2019) had over-ruled that mining done under proper rules and provisions of the Mines and Mineral Act will be legal.
Grameen Udyami Project (GUP)
Grameen Udyami Project launched in Ranchi to promote skill development and Entrepreneurship amongst the tribal youth, gives a boost to Skill India Mission
It is a unique multiskilling project, funded by National Skill Development Council that aims to train tribal students.
Implementation: Six states: – Maharashtra, Rajasthan, Chhattisgarh, Madhya Pradesh, Jharkhand, and Gujarat.
It is implemented under Sansadiya Parisankul Yojana.
Rules of Origin (ROO)
As per the Central Board of Indirect Taxes and Customs (CBIC), in case of conflict between Customs Rules, 2020 (CAROTAR) and Rules of Origin (under Free Trade Agreement), the provision of FTA on ROO will prevail.
FTA provisions are much more liberal than provisions given under CAROTAR
What is ROO?
Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.
If the product originated from UAE and was imported into India: It may invite zero or concessional import duty
if the product originated from China: substantial duty may be levied
So an importer cannot import goods from China and label them as ‘Made in UAE’ and then export them to India to avoid customs duty. CAROTAR prevents such misuse.
CAROTAR: It aims to plug duty evasion under FTAs. Under this importers need to show proof of 35% value addition in goods from the country of origin to claim duty concession under FTA.
In our example, a minimum of 35% value addition must be done in UAE to enjoy concession import duty under FTA.
India has FTA with a number of the country (such as UAE, Mauritius, Japan, Singapore etc.)
Gene Modification in Rice
In recent studies, it has been found that, adding a second copy of one of its own genes has boosted the yield of a Chinese rice variety by up to 40%.
It boosts grain yields and shortens the growth duration of rice.
When the second copy of a single gene (called OsDREB1C) is added to rice, it improves photosynthesis and nitrogen use, speeds up flowering and absorbs nitrogen more efficiently — offering larger and more abundant grains.
What is Gene Modulation?
Gene modulation refers to the process of temporarily altering gene expression levels without making heritable changes to the underlying cellular DNA.
Benefit for India in adopting this practice:
Added the same gene again, and not any foreign one ( it is genetic modulation and not a genetic modification (GM) or transgenic plant (i.e. carrying elements from another donor): Thus it reduces the risk related to GM or transgenic crops.
For example, BT cotton involves the transfer of the gene from the bacterium called Bacillus thurigiensis (BT) to be transferred to normal cotton.
No regulation on Gene Modification: India has exempted crops with certain kinds of genetic modifications from the regulations previously imposed on the commercialisation of all genetically modified crops.
Reduce the negative impact of the ‘Green Revolution’
India is the world’s largest exporter of rice (approx. 18.75 million metric tons exported to over 150 countries during the year 2021-22)