Syllabus

• Mains – ECONOMY

Context: The World Development Report 2024 — authored by the World Bank — calls attention to the phenomenon of the “middle-income” trap, or the slowing down of growth rates as incomes increase.

Background: –

• Over the last 34 years, only 34 middle-income economies — defined as economies with per capita incomes between $1,136 and $13,845 — have transitioned to higher income levels.

Key takeaways

• The WDR details the policies and strategies necessary to break the trap based on the experiences of countries that did manage the transition. It highlights the importance of the “3i” approach: investment, infusion, and innovation.
• Economies must invest, ensure the infusion of new global technologies, and develop an environment conducive to domestic innovation.

Role of the state

• Most countries that broke the trap were part of the European Union which facilitated growth and mobility of capital and labour for its members. Such institutions that aid free factor mobility are not available for most countries.
• An important non-European country that managed to escape the trap is South Korea.
• The South Korean state was heavily interventionist, often directing the private sector’s activities and ensuring their participation in an export-driven growth model. Successful companies were rewarded with access to new technologies and supportive measures, while firms that did not perform were allowed to fail.
• Another economy that broke the trap was Chile. But it too, saw state intervention in ensuring the success of natural resource exporting sectors. The salmon industry, for instance, succeeded in Chile due to the targeted intervention of the state to ensure that the industry flourished.
• The South Korean government’s approach carries significant lessons. The state must be seen as being neutral amongst private players and ensuring those who do not make the mark are allowed to fail. The benefits firms receive from the state must be based on performance instead of closeness to power. The presence of powerful business houses can promote growth provided they invest, ensure the adoption and infusion of new technologies, and innovate.

The pitfalls

• South Korea’s success was built on manufacturing exports; such a strategy is not possible now. World export growth has slowed, with demand slowing down. Several countries have turned to protectionism due to perceived job loss.
• Several countries have been hit by ‘premature deindustrialisation’. Modern economies face a reduction in the income share of manufacturing at much lower levels of GDP compared to previous economies.
• Manufacturing is no longer an engine of growth for developing economies, and it remains to be seen whether the service sector is strong enough to break the trap.

Challenges facing India

• The power of billionaires in the Indian economy has increased, and they are seen as being close to the state, with the state unable — or unwilling — to ensure high rates of investment from domestic capital.
• The manufacturing sector has stagnated, and there has been a reversal of the process of structural transformation, with employment increasing in agriculture and in low-productive forms following the pandemic.
• While the government estimates a real GDP growth of around 7% in recent years, wages have not kept up. Wage earners have seen little to no real wage growth. An economy cannot break a middle-income trap if workers are unable to partake in the growth process, as reduced consumption demand will become a drag.
• South Korea’s export strategy was overseen by a military government that ruled till the 1980s. Chile deposed the democratically elected government of Salvador Allende by a coup. It is vital not to take the wrong lessons and think that democracy is an acceptable price to pay for higher growth. The challenge for policy is to promote state intervention to ensure growth while maintaining the sanctity of the democratic ethos.

Source: The Hindu

 Syllabus

• Mains – GS 4

Context: Former Tata Group Chairman Ratan Tata, whose dedication to integrity and social upliftment touched the hearts of many, breathed his last on Wednesday

Background: –

• Known for his ethical business practices and commitment to improving lives through social initiatives, Ratan Tata’s life serves as an example of how to bring change.

Key values, quotes and examples from his life

• Kindness : Kindness is a virtue that encompasses the ability to be polite and caring towards others. It entails empathy and compassion towards others.
• During the 1984 anti-Sikh riots, Ratan Tata displayed extraordinary kindness by providing free trucks to Sikh survivors who had lost their vehicles and livelihoods in the violence. Tata Motors’ gesture helped these individuals rebuild their businesses and regain their livelihood at a time of immense hardship.
• Virtues such as kindness, empathy, and compassion play key roles in creating a positive environment, fostering a sense of safety, and building trust with others. Civil servants interact with diverse communities daily. By demonstrating empathy and kindness, they can build trust within the community.
• Spirit of Service: It is a quality of a person that encourages one to be committed to public service without any self motives.
• During the 26/11 Mumbai attacks, Ratan Tata, as Chairman of the Tata Group, led the restoration of the Taj Hotel and personally supported affected employees. He quickly established the Taj Public Service Welfare Trust to provide relief to victims and to help and rehabilitate those recovering from such tragic events in the future, demonstrating compassion and resilience in a time of crisis.
• Compassion: Compassion is defined as the emotional response when perceiving suffering and involves an authentic desire to help. Practicing compassion increases our well-being by enhancing a sense of connection to others.
• Ratan Tata is known for his love of animals, particularly dogs. A LinkedIn user shared a story of visiting Mumbai’s Taj Hotel, where she saw a dog being cared for by the staff. This act of compassion was due to Tata’s directive to treat animals kindly.
• Leadership: Leadership is the ability of an individual to guide and influence people. The values, decision-making style, ethics and interpersonal skills of leader profoundly influence the organization’s culture and public perception.
• Ratan Tata chose to work as an employee for his own company. He joined Tata in 1961 and worked on the shop floor of Tata Steel. He wanted to get hand-on-experience at the grass root level to understand the nuances and problem.
• “I don’t believe in work-life balance. I believe in work-life integration. Make your work and life meaningful and fulfilling, and they will complement each other.” This quote by Ratan Tata conveys that there is a need to adopt harmony in your job and personal life. Personal goals in the job and value systems in life should complement each other to give you satisfaction.
• Perseverance: Perseverance is continued persistence in doing what one considers to be right despite difficulties or delays in achieving the desired results. It implies unwavering steadfastness in pursuing the right course of action, even in the face of odds or failures.
• The Tata Nano faced multiple challenges before its launch. Initially set to be manufactured in Singur, West Bengal, protests forced Tata Motors to shift the plant to Sanand, Gujarat. Despite the setbacks, the Nano was launched in 2008.
• “None can destroy iron, but its own rust can. Likewise, none can destroy a person but his own mindset can”. A positive mindset is the key to success. The internal factors—negative thoughts, procrastination, self-doubt, lack of confidence, or a defeatist attitude- act as a barrier to achieving potential.
• Utilitarianism : Utilitarianism as a principle advocates that from an ethical point of view, an action is right if the sum total of the utilities produced by a particular act emerges greater than the sum total of utilities generated by any other act. “The greatest good for the greatest number.” said, Jeremy Bentham (the father of Utilitarianism).
• The Tata Nano was launched in 2008. Ratan Tata said it was “always meant for all our people”. The Nano was often referred to as India’s first ‘lakhtakia’ – a car that costs all of Rs 1 lakh, a few thousand more expensive than two-wheelers. His vision was an embodiment of utilitarianism and inclusivity.
• Philanthropy – Social Responsibility
• The Tata Trust, under Ratan Tata, has expanded to reflect a deep sense of social responsibility.
• “I admire people who are very successful. But if that success has been achieved through too much ruthlessness, then I may admire that person less”. Success at what cost, should be a prime question to be asked. Role modeling and admiration of a person’s achievement should not be based on materialistic gains especially if it is inhumane.

Source: Indian Express

 Syllabus

• Prelims & Mains – INTERNATIONAL

Context: Prime Minister Narendra Modi on Thursday said he looked forward to the deliberations with world leaders as he arrived in Laos for a two-day visit to attend the ASEAN-India and East Asia summits.

Background: –

• Modi will participate in the 21st ASEAN-India and the 19th East Asia summits.

About ASEAN

• Established: August 8, 1967, in Bangkok, Thailand through the signing of the ASEAN Declaration (Bangkok Declaration).
• Founding Members: Indonesia, Malaysia, the Philippines, Singapore, and Thailand.
• Current Membership: 10 countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
• Secretariat: Jakarta, Indonesia.

Objectives:

• To accelerate economic growth, social progress, and cultural development in the region.
• To promote regional peace and stability through respect for justice, rule of law, and adherence to the principles of the United Nations Charter.
• To promote active collaboration and mutual assistance in areas of common interest.

Key Principles: motto is “One Vision, One Identity, One Community”.

• Non-interference in the internal affairs of member states.
• Peaceful settlement of disputes.
• Respect for sovereignty and territorial integrity.
• Promotion of a zone of peace, freedom, and neutrality.

Key Initiatives and Agreements:

• ASEAN Free Trade Area (AFTA): Launched in 1992 to promote trade liberalization among member states.
• ASEAN Economic Community (AEC): Established in 2015 to integrate member states into a single market and production base.
• Regional Comprehensive Economic Partnership (RCEP): A mega trade agreement involving ASEAN countries and five dialogue partners (China, Japan, South Korea, Australia, New Zealand; India opted out of RCEP).
• ASEAN Regional Forum (ARF): Platform for dialogue on security issues in the Asia-Pacific.

Significance:

• Economic Powerhouse: ASEAN collectively forms one of the world’s largest economies, with diverse markets and significant trade relations.
• Strategic Importance: Located at the crossroads of major global sea routes, the region is critical for international trade and maritime security.
• India-ASEAN Relations: India has a strong strategic and economic partnership with ASEAN under the “Act East Policy” focusing on enhancing connectivity, trade, and security cooperation.

Challenges:

• Internal Diversity: Wide variations in political systems, economic development, and internal policies among ASEAN members.
• South China Sea Disputes: Territorial conflicts involving China and several ASEAN members, notably Vietnam and the Philippines.
• Balancing Superpowers: ASEAN must navigate the competing influences of China and the United States in the region.

India-ASEAN Engagements:

• India became a sectoral dialogue partner of ASEAN in 1992 and a full dialogue partner in 1996.
• ASEAN-India Summit is held annually since 2002.
• Trade in Goods Agreement (AITIGA): The AITIGA was signed in Bangkok in 2009, and entered into force on January 1, 2010.
• Trade in Services Agreement: The ASEAN-India Trade in Services Agreement was signed in November 2014.
• Investment Agreement: The ASEAN-India Investment Agreement was signed in November 2014.

Source: The Hindu

 Syllabus

• Prelims & Mains- ENVIRONMENT

Context: The 2024 Living Planet Index report is out.

Background:

• The Living Planet Report stresses the need for a collective global effort to tackle the dual crises of climate change and biodiversity loss.

About Living Planet Report

• The Living Planet Report is a comprehensive biennial publication by the World Wildlife Fund (WWF) that assesses the state of the planet’s biodiversity, ecosystems, and the impact of human activity on the natural world.

Key Findings

• Biodiversity Decline: The 2024 report highlights a staggering 73% decline in wildlife populations on average since 1970. This decline is tracked using the Living Planet Index, which monitors thousands of vertebrate species populations globally.
• When a population falls below a certain level, that species may not be able to perform its usual role within the ecosystem – whether that’s seed dispersal, pollination, grazing, nutrient cycling or many other processes that keep the ecosystem functioning, the report says.
• In India, the decline of three vulture species – white-rumped vulture, Indian vulture, and slender-billed vulture, has been alarming, WWF said.
• Ecosystem Health: The report provides a detailed analysis of various ecosystems, including forests, oceans, and freshwater systems, showing significant degradation and loss of habitat.
• Human Impact: It emphasizes the role of human activities such as deforestation, pollution, climate change, and overexploitation of resources in driving biodiversity loss and ecosystem degradation.

Major Themes

• Climate Change: The report underscores the urgent need to address climate change, which is exacerbating biodiversity loss and pushing ecosystems towards dangerous tipping points.
• Nature-Based Solutions: It advocates for nature-based solutions to mitigate climate change and restore ecosystems, such as reforestation, sustainable agriculture, and conservation efforts.
• Sustainable Development: The report calls for integrating biodiversity conservation into sustainable development goals and policies to ensure a balanced approach to economic growth and environmental protection.

Source: Indian Express

 Syllabus

• Prelims & Mains – ECONOMY

Context: The Union Cabinet recently extended the universal supply of fortified rice in all central government schemes providing free food grain under the National Food Security Act, 2021, in its present form, until December 2028.

Background: –

• The cost of rice fortification is around Rs 2,700 crore per annum — less than 2% of India’s annual total food subsidy bill.

About Rice Fortification

• The Food Safety and Standards Authority of India (FSSAI) defines fortification as “deliberately increasing the content of essential micronutrients in a food so as to improve the nutritional quality of food and to provide public health benefit with minimal risk to health”.
• India has very high levels of malnutrition among women and children. According to the National Family Health Survey (NFHS-5) conducted between 2019 and 2021, anaemia remains a widespread issue in India.
• Besides iron deficiency, other vitamin and mineral deficiencies, such as Vitamin B12 and folic acid, also persist, impacting the overall health and productivity of the population.
• Fortification of food is considered to be one of the most suitable methods to combat malnutrition. Rice is consumed by about two-thirds of the population. Per capita rice consumption in India is 6.8 kg per month.
• Various technologies, such as coating, dusting, and ‘extrusion’, are available to add micronutrients to regular rice. The last mentioned technology involves the production of fortified rice kernels (FRKs) from a mixture using an ‘extruder’ machine. It is considered to be the best technology for India.
• Dry rice flour is mixed with a premix of micronutrients, and water is added to this mixture, which is then passed through a twin-screw extruder with heating zones. Kernels similar in shape and size to rice are produced, which, as per Ministry of Consumer Affairs, Food and Public Distribution guidelines, must “resemble the normal milled rice as closely as possible”.
• The kernels are dried, cooled, and packaged. FRK has a shelf life of at least 12 months. The kernels are blended with regular rice to produce fortified rice.
• Fortified rice is packed in jute bags with the logo (‘+F’) and the line “Fortified with Iron, Folic Acid, and Vitamin B12”.

Source: Indian Express

Q1.) Which of the following statements about Fortified Rice in India is/are correct?

1. Fortified rice in India is enriched with Iron, Folic Acid, and Vitamin B12 to combat widespread malnutrition.
2. The ‘extrusion’ technology is considered the most suitable method for producing fortified rice kernels in India.

Select the correct answer using the codes given below:

a) Only 1

b) Only 2

c) Both 1 and 2

d) Neither 1 nor 2

Q2.) Consider the following statements regarding the Living Planet Report:

1. The Living Planet Report is published by the United Nations Environment Programme (UNEP) and assesses global biodiversity health.
2. It measures trends in global wildlife populations, using the Living Planet Index as its key indicators.
3. The report highlights the impact of human activities on wildlife populations, including habitat loss, climate change, and over-exploitation.

Which of the above statements is/are correct?

a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2, and 3

Q3.) Consider the following statements regarding the Middle-Income Trap:

1. The Middle-Income Trap refers to the economic stagnation that countries often face when they reach a certain level of per capita income, struggling to transition to high-income status.
2. The phenomenon is mainly caused by a lack of democracy.
3. South Korea is an example of a country that successfully avoided the Middle-Income Trap.

Which of the above statements is/are correct?

a) 1 only
b) 1 and 3 only
c) 3 only
d) 1, 2, and 3

Comment the answers to the above questions in the comment section below!!

ANSWERS FOR ’  11th October 2024 – Daily Practice MCQs’ will be updated along with tomorrow’s Daily Current Affairs

Q.1) –  b

Q.2) – d

Q.3) – d