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25th March 2021 – Editorials/Opinions Analyses

Contents

  1. Doubling down on a resilient India
  2. Water, the looming frontier

DOUBLING DOWN ON A RESILIENT INDIA

Context:

Google, Facebook, Walmart, Samsung, Foxconn, and Silver Lake have been just a handful of the firms that made big ticket bets on India in 2020.

Due to this, even though India experienced one of the world’s sharpest economic contractions, it also saw the fastest growth in Foreign Direct Investment (FDI) inflows among all the major economies in 2020.

Relevance:

GS-III: Indian Economy (External Sector, Economic Growth and Development)

Mains Questions:

What are the reasons for the increase in Foreign Direct Investment (FDI) inflows into India during the COVID-19 Pandemic? Discuss the potential of the Indian market and how it can be leveraged to increase FDIs. (10 Marks)

Dimensions of the Article:

  1. What is Foreign direct investment (FDI)?
  2. About India’s FDI inflows in 2020
  3. Reasons for the Increase in FDI inflows towards the end of 2020
  4. Adapting to the Indian market
  5. Indian Opportunity
  6. Conclusion

What is Foreign direct investment (FDI)?

  • It is an investment from a party in one country into a business or corporation in another country with the intention of establishing a lasting interest.
  • Lasting interest differentiates FDI from foreign portfolio investments, where investors passively hold securities from a foreign country.
  • Foreign direct investment can be made by expanding one’s business into a foreign country or by becoming the owner of a company in another country.

About India’s FDI inflows in 2020

  • India has attracted highest ever foreign direct investment (FDI) inflows at over $65 billion during the first nine months of financial year 2020-21.
  • Compared to the same period in 2019, the FDI inflows flows were 22 per cent higher during April-December 2020.
  • Total inflows registered a year-on-year growth of 24 per cent in December compared to December 2019.
  • FDI inflows have constantly grown since August 2020 on a yearly basis; it recorded a substantial growth of more than 80% in the month of November 2020.
FDI in India: FDI inflows surge 18% in 2019-20 to record $74bn | India  Business News - Times of India
  • It was an unexpected outcome that India could emerge as a leading destination for FDI.
  • However, it needs to be taken into account that India’s latest FDI totals still lags behind the highest tallies in other markets such as China and Brazil. Also, a significant share of India’s FDI inflows arose from foreign investments directed solely at Reliance Jio.

Reasons for the Increase in FDI inflows towards the end of 2020

  • In 2020, schemes like production-linked incentive (PLI) scheme for electronics manufacturing, have been notified to attract foreign investments.
  • In 2019, the Central Government amended FDI Policy 2017, to permit 100% FDI under automatic route in coal mining activities.
  • Further, the government permitted 26% FDI in digital sector which has particularly high return capabilities in India as favourable demographics, substantial mobile and internet penetration, massive consumption along with technology uptake provides great market opportunity for a foreign investor.
  • FDI in manufacturing was already under the 100% automatic route, however in 2019, the government clarified that investments in Indian entities engaged in contract manufacturing is also permitted under the 100% automatic route provided it is undertaken through a legitimate contract.
  • In March 2020, Government permitted non-resident Indians (NRIs) to acquire up to 100% stake in Air India, and such moves have resulted in foreign investors indicating interest in the government’s moves to allow private train operations and bid out airports.

Adapting to the Indian market

  • India remains a complex and challenging place to do business even after 30 years since its economy was liberalised.
  • Frequent shifts in the policy landscape and persistent market access barriers are standard complaints levied against India by the business community.
  • “Aatmanirbhar Bharat”, “Make in India” and similar push to build a “self-reliant” India has also rattled investors and smaller companies that lack the resources to navigate on-the-ground hurdles.
  • However, leading corporate investors recognise that doing business in India or any emerging market for that matter comes with inherent risks but that adaptation in approach is critical to success.
  • Most importantly, they have the vision to understand that these are risks worth taking given the scale of the “Indian Opportunity”.

Indian Opportunity

Market size

  • What India offers through its nearly 1.4 billion people and their growing purchasing power is uniquely valuable for multinationals with global ambitions. No other country outside of China has a market that houses nearly one in six people on the planet and a rising middle class of 600 million.

Shifting Geopolitics

  • Rising U.S.-China competition is redefining the global landscape for investment and manufacturing, forcing multinationals to rethink their footprints and production hubs.
  • Countries such as Vietnam have capitalised on this opportunity to great effect, but India is finally getting serious about attracting large-scale production and exports.

Rising Digitalization

  • Cheap mobile data have powered a revolution across India’s digital economy and connected an estimated 700 million Indians to the Internet.
  • Domestic Indian companies have also demonstrated their ability to innovate and deliver high quality services at scale, and the partnerships and FDI flows linking multinationals and Indian tech firms will continue to unlock shared market opportunities for years to come.

Resilience shown during the Pandemic

  • India has managed the pandemic better than many of its western peers and restored economic activity even before implementing a mass vaccination programme.
  • These are remarkable developments, and yet they speak to India’s underlying resilience even in the face of historic challenges.

Conclusion

  • Successful companies unlock opportunities in the Indian market by placing shared value creation at the heart of their business strategy.
  • This is because unlocking opportunities in the Indian market cannot take the form of a one-way wealth transfer, and companies should not expect a warm welcome without continuously demonstrating their commitment to India.

Companies will have to

  1. Build enduring partnerships and lasting relationships,
  2. Invest in Indian talent,
  3. Align products with Indian tastes, and
  4. Tackle the hardest problems faced by Indians.

For leading companies with global ambitions and a willingness to make big bets, the rewards of investing in the Indian market are substantial and well worth pursuing.

-Source: The Hindu


WATER, THE LOOMING FRONTIER

Context:

NITI Ayog and WaterAid, amongst others, have found that over 70% of India’s surface and groundwater is contaminated by human and other waste and is likely to carry viruses.

Relevance:

GS-III: Environment and Ecology (Water Resources and their Conservation, Environmental Pollution & Degradation)

Mains Questions:

How has the water crisis in India worsened due to the COVID-19 pandemic? What are the measures taken to deal with India’s water crisis? (10 Marks)

Dimensions of the Article:

  1. India’s water-woes
  2. Spread of virus through Wastewater
  3. Concern in India regarding uncontrolled Wastewater discharge
  4. Freshwater Sources
  5. Recent measures taken by the Government to address water crisis

India’s water-woes

  • According to the data provided by the Ministry of Water Resources (now Ministry of Jal Shakti) in 2017, average annual per capita water availability fell from more than 1800 cubic meters assessed in 2001 to just over 1500 cubic meters in 2011.
  • The data also highlighted the possibility of average annual water availability per person reducing further to 1341 and 1140 in the years 2025 and 2050 respectively.
  • The water availability of water stressed/water scarce regions of the country is much below the national average due to the high temporal and spatial variation of precipitation.
  • According to the Global Annual Report, 2018 by the WaterAid, the water and sanitation advocacy group, India ranked at the top of 10 countries with lowest access to clean water close to home, with more than 16 crore people not having such access.
  • According to a UNICEF Report in 2021, India has 4% of the world’s freshwater which has to cater to 17% of the world’s population.
  • The UNICEF report of 2021 says that nearly 40% of the population in India will have absolutely no access to drinking water by 2030 and 6% of India’s GDP will be lost by 2050 due to the water crisis.

Spread of virus through Wastewater

  • Indiscriminate human activity is often the reason for environmental degradation and pandemics. The practice of keeping animals locked together for mass production of meat produces an artificial environment that can birth mutations in erstwhile dormant viruses.
  • Once the virus has found its way into the human population, it is bound to proliferate in wastewater.
  • Several wastewater samples were tested and were found to carry traces of SARS-CoV-2 in various countries, and research indicates that the SARS-CoV-2 virus can spread through sewage water.

But such wastewater is often discharged into water bodies in India.

Concern in India regarding uncontrolled Wastewater discharge

  • Discharge of untreated wastewater is an alarming prospect for India, as river water or lake water, which carries human waste, sewage, and toxic waste, can be a very generous host for viruses.
  • Some water-transmitted viral pathogens are astrovirus, hepatitis A and norovirus.
  • Unlike in the developed world, a huge section of the population in India uses polluted water from sources like rivers, lakes, or groundwater for drinking.

Freshwater Sources in India

  • There are only two unpolluted fresh water sources left in the country. The first is the water lying below our forests; the second is the aquifers that lie below the floodplains of rivers.
  • Both these sources provide natural underground storage and are renewable – the rains provide natural recharge year after year and it is this recharge which can be used to water our cities and towns.
  • The aquifers underlying forests can provide healthy mineral water purely for drinking purposes. The river floodplains are a great source of water for cities.

Recent measures taken by the Government to address water crisis

Jal Jeevan Mission (JJM) [Urban and Rural]:

  • In the Budget 2021-22, Jal Jeevan Mission (Urban) has been announced under the Housing and Urban Affairs Ministry to provide universal coverage of water supply to all households through functional taps in all statutory towns in accordance with Sustainable Development Goal- 6.
  • It complements the Jal Jeevan Mission (Rural) which envisages supply of 55 litres of water per person per day to every rural household through Functional Household Tap Connections (FHTC) by 2024.

Jal Shakti Abhiyan:

  • Under the National Jal Shakti Abhiyan, Centre has decided to utilize the upcoming monsoon season to expand its water conservation efforts.
  • Ministry of Home Affairs, as per the Centre, has allowed to take up MGNREGA works/drinking water and sanitation works at the time of lockdown with priority to be given to water conservation and irrigation works. Jal Shakti Abhiyan was launched in 2019 and it covered 256 water stressed districts across the country.
  • Rejuvenation of the traditional water bodies, desilting of ponds and lakes, Catchment area treatment etc., are the various activities under this initiative.

MGNREGA for water conservation

  • Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), one of the biggest government-funded employment schemes in the world, has enabled the government to introduce water conservation as a project under the Act with the help of the huge workforce employed under the MGNREGA.
  • The government aims to improve groundwater harvesting and build water conservation and storage mechanisms through MGNREGA.

National Water Mission

  • The Government of India has launched the National Water Mission with the objective of conservation of water, minimizing wastage and ensuring more equitable distribution both across and within states through integrated water resources development and management.
  • One of the objectives of the Mission is to increase the water use efficiency by 20%.

NITI Aayog Composite Water Management Index

  • With the objective of achieving effective utilization of water, NITI Aayog has developed the Composite Water Management Index.
  • The index revolves around issues ranging from water scarcity and related issues like deaths due to lack of access to safe water, its projected increase in demand over the years and finding ways for its effective conservation.

-Source: The Hindu

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