Context

• India is at an inflection point, with rapid economic growth positioning it as a potential counterweight to China on the global stage.
• However, there are numerous headwinds to India's ambitions, particularly in terms of employment and the labour market.
• Therefore, it is important to examine the current economic situation in India, highlighting both its potential as an economic powerhouse and the significant challenges it faces in achieving this status.

India’s Labour Market Challenges

• High Unemployment Rates
  • India has a relatively high overall unemployment rate of around 8%, which is concerning for a country with a large young population entering the workforce annually.
  • Unemployment rates are particularly high among younger workers, especially those aged 20-24 years, with a reported rate of 44%.
  • This suggests a substantial mismatch between the skills young people possess and the jobs available to them.
  • Unemployment rates are also high among graduates (29%) and those with secondary or higher education (18%). This is indicative of a disconnect between the education system and the labour market.
• Small and Low-Productivity Firms
  • Indian firms tend to be smaller and grow more slowly compared to firms in other emerging economies like China and Mexico. Small firms often struggle with limited resources and face challenges in scaling up their operations.
  • The low productivity of many Indian firms limits their ability to demand a large workforce and offer competitive wages. This, in turn, affects overall employment rates and economic growth.
• Skill Deficit
  • Employers, especially in the white-collar service sector, often struggle to find workers with the requisite skills.
  • This is due to gaps in the education system and vocational training.
  • The quality of education in India has been a longstanding issue, with students often lacking the necessary training and practical experience needed for the modern workforce.
  • The Annual Status of Education Report (ASER) highlights issues in student learning and skill acquisition.
• Geographic Mismatch
  • Many employment opportunities are concentrated in urban areas, far from the rural regions where a large portion of the population resides.
  • This geographic mismatch presents challenges for workers who must migrate to urban centres for work.
  • Migration can be costly both financially and socially, and may lead to a disconnect between the aspirations of workers and the opportunities available to them.
• Gig Economy and Job Security
  • The rise of the gig economy has provided some opportunities, but these jobs often lack stability and security, leading to uncertain incomes and limited benefits.
  • The quality of available jobs is a concern, with many positions offering low pay, inadequate benefits, and limited opportunities for career advancement.
• Policy and Regulatory Challenges
  • Policy and regulatory challenges can hinder the growth of firms and the creation of new jobs. Complex regulations and bureaucratic hurdles can stifle entrepreneurship and business expansion.
  • India's labour laws can be restrictive and may not align with modern employment practices, creating challenges for firms seeking to hire and manage workers efficiently.

Clash of Aspirations in India’s Labour Market

• Worker Aspirations
  • Education and Skills
    • India's young workforce is more educated than previous generations, with many holding high school or college degrees.
    • This increased educational attainment leads to higher aspirations for career opportunities and job quality.
  • High Expectations
    • Young workers expect jobs that offer good salaries, stability, career growth, and opportunities for skill development.
    • They are also influenced by India's overall economic growth and its potential as a global economic power.
  • Mismatch with Available Jobs
    • Despite their education and skills, young workers often find that the jobs available to them do not match their expectations in terms of pay, job security, and career prospects.
    • This can lead to frustration and disillusionment.
• Entrepreneur and Firm Aspirations
  • Limited Growth Ambitions
    • Many Indian entrepreneurs and firms have limited ambitions for growth, often choosing to remain small.
    • This may be due to a variety of factors, including regulatory and tax challenges, risk aversion, and a lack of resources.
  • Risk-Averse Behaviour
    • Small entrepreneurs may prioritise stability over expansion, choosing to avoid the risks associated with scaling up their operations.
    • This can limit their ability to compete in global markets and create high-quality jobs.
  • Domestic Market Focus
    • Some firms focus primarily on serving the domestic market, which can limit their growth potential and competitiveness compared to firms that export.
    • This domestic focus may also discourage innovation and productivity improvements.
• Diverging Paths
  • Lack of Suitable Employment Opportunities
    • The limited ambitions of firms and entrepreneurs result in fewer suitable employment opportunities for young workers with high aspirations.
    • This mismatch can lead to underemployment and dissatisfaction among the workforce.
  • Impact on Economic Growth
    • The clash of aspirations can hinder India's economic growth by creating a labour market that fails to fully harness the potential of its young, educated population.

Ways Ahead to Address the Challenges in India's Labour Market and Unlock its Full Potential

• Demographic Dividend: Enhancing Education and Skills Development
  • Aligning educational curriculum with industry needs can help ensure that students acquire relevant skills and knowledge for the job market.
  • Expanding vocational training and apprenticeship programs can provide hands-on experience and job-specific skills to young workers.
  • Encouraging continuous skill development and retraining throughout workers' careers can help them adapt to changing job market demands.
• Promoting Firm Growth and Productivity
  • Providing easier access to credit and financial resources can help small and medium-sized enterprises (SMEs) expand and hire more workers.
  • Encouraging firms to adopt new technologies and innovate can increase productivity and competitiveness, leading to job creation and economic growth.
  • Simplifying business regulations and reducing bureaucratic hurdles can facilitate firm growth and encourage entrepreneurship.
• Reforming Labor Laws and Job Protections
  • Implementing more flexible labour policies can help firms adjust their workforce according to market demands, promoting job creation and economic resilience.
  • Ensuring fair and adequate job protections for workers can increase job satisfaction and stability.

Conclusion

• While India’s demographic dividend offers significant potential, the country must address the challenges in its labour market to fully capitalise on this opportunity.
• By creating a more ambitious and competitive entrepreneurial environment and ensuring a skilled workforce, India can transform its demographic dividend into sustained economic growth and establish itself as a major global economic player.

Why in News?

• According to a recent report, leading food and beverage brand Nestlé’s products for babies in Asia, Africa and Latin America were found to contain added sugars, while the same products sold in Europe did not have it.
• Currently, Nestlé controls 20% of the baby-food market, valued at nearly $70 billion.

What’s in Today’s Article?

• What the Report Says on Nestlé?
• What are Added Sugars?
• Why are Added Sugars Harmful?

What the Report Says on Nestlé?

• The report (‘How Nestlé gets children hooked on sugar in lower-income countries’ by a Swiss organisation Public Eye) faulted Nestlé for employing different nutritional standards in its products, depending on the country it served.
• Nestlé also did not make the quantity of sugar content clear on the products’ packaging.
• The product included the world’s biggest baby cereal brand Cerelac, which is meant for six-month-old babies.
  • Cerelac has no added sugars in Germany and the United Kingdom but contains nearly 3 grams per serving when sold in Indian markets and over 5 grams per serving in Ethiopia and 6 grams in Thailand.
• Sugar is generally not recommended for infants, although guidelines in several developing countries do not explicitly prohibit it, posing health risks for children.
• Nestlé's baby food products with added sugars are permitted under national legislation (of some countries) despite the fact that they go against World Health Organisation’s (WHO) guidelines.
  • In 2015, the WHO’s guideline recommended that adults and children reduce their daily intake of free sugars to less than 10% of their total energy intake.
  • It would be even healthier to consume less than 5% (roughly 25 grams per person a day) of free sugars.
• According to a Nestlé India spokesperson, the company has reduced added sugars by up to 30% (in the last five years), depending on the variant, in their infant cereals portfolio (milk cereal based complementary food).

What are Added Sugars?

• Sugar is a simple carbohydrate. Some food items have sugar that is naturally occurring.
  • For example, it is found in milk (lactose) and fruit (fructose) and any product that contains milk (such as yogurt, milk or cream) or fruit (fresh, dried) contains some natural sugars.
• Free sugar or added sugar is added separately to a food item during preparation or processing.
• It can include natural sugars such as white sugar, brown sugar and honey, as well as other caloric sweeteners that are chemically manufactured (such as high fructose corn syrup).
• Low- and middle-income countries are increasingly being exposed to free sugars with growing incomes and the proliferation of giant global food brands that mass produce their products.
• According to a UNICEF-supported study, of the 1,600 infant cereals, snacks and ready-to-eat meals marketed at young children in Southeast Asia, nearly half included added sugars and sweeteners.

Why are Added Sugars Harmful?

• Sugar consumption is supposed to be kept limited for health reasons. Excessive consumption can lead to increased overall energy intake in a person’s overall diet.
• It may be at the cost of food items having nutritionally adequate calories, eventually leading to an unhealthy diet.
• The risks of contracting non-communicable diseases, such as diabetes, obesity and heart-related ailments, are then increased.
• Sugar should not be added to foods offered to babies and young children because it is unnecessary and highly addictive, starting a negative cycle that increases the risk of nutrition-based disorders in adult life.
  • Tooth decay is also associated with early exposure to sugar.

Why in News?

• US Trade Representative highlighted that sorting out World Trade Organisation (WTO) disputes with India is a win for the agriculture and rural communities in the US.
• However, she raised some concerns on India’s wheat subsidies allegedly hurting American farmers.

What’s in Today’s Article?

• How India-US Settled WTO Disputes?
• Impact of Settling WTO Disputes on Indian and US Economy
• Case of India’s Wheat Subsidies and India’s Take on This

How India-US Settled WTO Disputes?

• The discussions on bilateral settlement of pending WTO disputes between both sides began during the annual Trade Policy Forum (TPF) meeting between both countries in January 2023.
  • The TPF aims to resolve trade and investment issues between both nations.
• Since these outstanding disputes were areas where both countries have had some wins and some losses, both countries have directed their officials to engage ‘aggressively’ on the matter.
• Thereafter (in June 2023), both sides decided to close half-a-dozen outstanding disputes at the WTO including the retaliatory tariffs India imposed on imports of some farm products from the US.
• The six disputes included -
  • India’s appeal against the US's imposition of tariffs on imports of steel and aluminium products from India;
  • The US appeal against India’s retaliatory tariffs;
  • India’s renewable energy subsidies for solar cells and modules under Jawaharlal Nehru National Solar Mission;
  • India’s appeal over similar subsidies for solar cells and solar modules by eight US state governments;
  • The US appeal against India’s export subsidy programmes;
  • India's imposition of countervailing duties on imports of certain hot-rolled carbon steel flat products from the US.
• The last dispute between the two, which was settled in September 2023, was on poultry import from Washington as part of which India agreed to cut import duties on some farm items.

Impact of Settling WTO Disputes on Indian and US Economy:

• The US was India’s largest trading partner in 2022-23 with bilateral trade rising 7.65% to $128.55 billion.
• Settling of disputes means improved access for chickpeas, lentils, almonds, walnuts, and apples benefiting farmers across the country.
• India agreeing to reduce tariffs on several US products means more market access for turkey, duck, blueberries, and cranberries benefiting farmers in the US.

Case of India’s Wheat Subsidies and India’s Take on This:

• According to the USTR, India’s wheat subsidies are distorting prices and making it harder for the USA’s farmers to compete in the Asian market.
• In discussions around its wheat subsidies under the MSP programme at the WTO, India has been maintaining that -
  • Its subsidies were well within the range prescribed by the WTO, and
  • Its food security programmes were necessary to support vulnerable farmers and feed the poor.

What’s in Today’s Article?

• Background (Context of the Article)
• How is Gold Price Determined (Globally, in India)

Background:

• Global price of gold (24 carat) on April 10 was $2,349.88 per ounce. In India it was ₹7,174 per gram.
• In recent weeks gold has witnessed phenomenal price increase, with expectations to rise further.
• There is a direct relationship between global price of crude oil and the international price of gold (positive correlation).
• On the other hand, there is an inverse relationship between the external value of the U.S. dollar and the international price of gold (negative correlation).
• Simply put, whenever global oil prices shot up, the price of gold also rose.
• Similarly, whenever the U.S. dollar declined in value against the currencies of its major trading partners, gold appreciated in price.
• Reason Behind these Positive & Negative Correlations:
  • Rise in international crude oil prices signaled the specter of global inflation.
  • This leads to an increase in the demand for gold as a hedge against inflation.
  • Gold being a real asset unlike financial assets and hence not subject to loss of value.
  • Similarly, since the global price of gold is expressed in U.S. dollars, its depreciation meant global price of gold had to rise.

How is Gold Price Determined Globally?

• Gold’s price is determined by supply and demand factors.
• Supply Side:
  • The production of gold by producing countries and the cost of mining gold are factors to be considered on the supply side.
  • Since most of the available gold in the world has already been mined, new production will involve digging deeper into the bowels of the earth, which is expensive, as goldmining is both an energy and labour intensive.
  • So when the prices of crude oil and natural gas rise, it contributes to the rise in the price of gold.
• Demand Side:
  • However more than gold’s supply, its demand contributes to periodic spikes in its price.
  • The demand for gold can be broken up into institutional, investor, consumer and industrial demand.
  • It is institutional demand in the form of central banks’ demand for gold that drives its price up to record levels each day.
  • Central banks buy gold to boost their reserve assets, as it is a store of value and forms the basis for the issue of new currency.
  • Faced with the threat of inflation against the backdrop of the current increase in crude oil prices (Brent crude touching $90 a barrel) and geopolitical uncertainty in the wake of the wars in West Asia and Eastern Europe, central banks worldwide, especially the Central Bank of China, are stocking up on gold.
  • Foreign currency reserves in central banks under the current situation are subject to risk and loss of value.
  • Investor demand comes from individuals as well as institutional investors, who would like to invest in physical gold or their financial derivatives and exchange traded funds (ETFs) as a component of their investment portfolio.
  • Return on investment is an investor’s primary concern, but diversification of risk and safety of investment, under uncertain geopolitical and economic conditions is driving demand from this group.
  • Consumer demand arises from individuals as well as jewelers.
  • In both China and India, the largest consumers and importers of gold, it is bought as a traditional store of wealth and as ornaments for special occasions. So, consumer demand is mostly seasonal.
  • Industrial demand is influenced by technology. Gold as a metal is preferred by industry for its intrinsic properties like malleability and conductivity.

How is Gold Price Determined in India?

• Demand and Supply:
  • The demand and supply largely influence the gold rate in the domestic market.
  • The price will be higher when the demand for gold exceeds supply.
  • But the price will fall if the demand in the market is lower than the supply of gold.
• Interest Rate:
  • The gold loan interest rate in India are monitored and changed by the RBI.
  • It is done to manage the capital flow in the Indian market.
  • In case of higher interest rates, gold sell-off will be heavy.
  • It leads to increased supply which means higher gold rates. But the low-interest rates increase demand and lower gold prices.
• Economic Situation:
  • People often invest in gold to hedge against inflation and recession.
  • Any adverse economic factors lead to a fall in the financial market.
  • In such a situation, investors have limited liquidity and more losses.
  • That's why they invest in gold because its demand increases in the domestic market.
• Rupee-Dollar Conversion Rate:
  • If the value of the dollar increases against the rupee, it becomes expensive for India to import gold from international markets.
  • Therefore, the price of gold also rises considerably in the Indian market.
• Mathematical Formula to Calculate Gold Prices:
  • The gold rate in India can be calculated using two mathematical formulas depending on the purity of gold.
  • The two formulas to calculate gold prices are as follows:
    • Purity Method (Percentage)
      • Gold value = (Gold rate x purity x weight) / 24
    • Karats Method
      • Gold value = (Gold rate x purity x weight) / 100

What’s in Today’s Article?

• Background (Context of the Article)
• About GFCF (Meaning, Importance)
• Low Private Investments (Current Trend, Reasons, Conclusion)

Background:

• Private investment in India, shown by how much businesses are spending on things like buildings and equipment compared to the total value of the economy, has been slow to grow.
• Since 2011-12, this kind of investment has been going down.
• The government expected big Indian companies to increase their spending, hoping this would boost the economy.
• To encourage this, in 2019, the government reduced corporate taxes from 30% to 22%, hoping that it would prompt companies to invest more.

What is GFCF and Why Does It Matter?

• GFCF stands for Gross Fixed Capital Formation.
• It refers to the growth in the size of fixed capital in an economy.
  • Fixed capital refers to things such as buildings and machinery, for instance, which require investment to be created.
• So private GFCF can serve as a rough indicator of how much the private sector in an economy is willing to invest.
• Overall GFCF also includes capital formation as a result of investment by the government.
• Importance of GFCF:
  • Fixed capital helps to boost economic growth and improve living standards by helping workers produce a greater amount of goods and services each year.
  • In other words, fixed capital is what largely determines the overall output of an economy and hence what consumers can actually purchase in the market.
  • Developed economies such as the U.S. possess more fixed capital per capita than developing economies such as India.

Current Trend in Private Investment in India:

• In India, private investment started to grow more after economic changes in the late 1980s and early 1990s made businesses more confident.
• Before these changes, private investment stayed around 10% of the total economy.
• On the other hand, government spending on projects (public investment) went up steadily from less than 3% in 1950-51 to more than private investment by the early 1980s.
• But after the economic changes, private investment became more important for building things like factories and infrastructure.
• Private investment kept growing until the global financial crisis in 2007-08.
• It went from about 10% of the economy in the 1980s to 27% in 2007-08.
• However, after 2011-12, private investment started to decrease, reaching a low of 19.6% of the economy in 2020-21.

Reasons for Fall in Private Investments:

• Some Indian economists believe that low consumer spending is the main reason private businesses aren't investing much lately, especially since the pandemic started.
• They think that when people spend more, businesses feel confident about future sales and invest more in things like factories and equipment.
  • So, they suggest that the government should give people more money to spend, which could boost business investments.
• However, looking back at India's history, more consumer spending hasn't always led to more business investments.
• In fact, when consumer spending dropped from 90% of the economy in 1950-51 to 54.7% in 2010-11, it was followed by a peak in business investments.
• Since 2011-12, consumer spending has gone up while business investments have gone down.
• On the other hand, some economists think that deeper issues, like government policies and uncertainty, might be the real reasons behind the drop in business investments.
• They point out that when economic reforms began in 1991, business investments went up.
• But in the last two decades, when reforms slowed down, investments dropped.
• Uncertainty about government policies can also make businesses hesitant to invest in long-term projects.

Conclusion:

• Low private investment can slow down economic growth because businesses aren't spending enough on things like factories and machinery, which are important for increasing production.
• Some people worry that when the government spends more, it can discourage private businesses from investing because there's less room for them to grow.
• On the other hand, some believe that when private businesses aren't investing enough, government spending can help make up for it.
• However, it's generally thought that private businesses are better at deciding where to invest money than the government.
• Also, taxes used to fund government spending can slow down the economy by taking money away from businesses and consumers.

Why in News? Despite the launch of the National Agroforestry Policy (2014), the uptake of agroforestry remains restricted to farmers with medium or large landholdings in India.

What is Agroforestry? A diversified land-use practice integrating crops, trees and livestock is broadly known as agroforestry. It can enhance farmer livelihoods and the environment and is slowly gaining in popularity after decades of monocropping inspired by the Green Revolution.

What are the Initiatives to Promote Agroforestry in India?

1. Trees Outside of Forests India’ (TOFI) initiative: It’s a joint initiative of the USAID and India’s MoEFCC. It seeks to enhance tree cover in 7 Indian states by identifying promising expansion opportunities
2. Jaltol: It is an open-source water-accounting tool developed by the Bengaluru-based WELL Labs to assess which trees don’t compete with the crops for water. For example, mango plantations don’t compete with kharif crops in the central Karnataka plateau.
3. Diversity for Restoration: It is a decision support tool that provides a tailored list of climate-resilient species that reverse land degradation while diversifying livelihood opportunities through agroforestry.
4. Payment for ecosystem services (PES): In PES, an ecosystem service user, e.g. a food processing company, volunteers to pay a service provider, such as a small farmer, for trees promoting a service like pollination.

Why is Agroforestry Remains Restricted to Medium or Large Farmers? Small farmers seldom grow trees because of their long gestation, a lack of incentive or investment-based capital, and weak market linkages. Water availability and government policies and schemes have been recurrent concerns for small farmers across states. For example, the Indian Forest and Wood Certification Scheme 2023 has an exhaustive list of eligibility criteria for farmers and industries.

How can Agroforestry be Widely Adopted by Engaging Small Farmers? Although secure land tenure is a prerequisite for agroforestry uptake, ensuring economic viability through market linkages while meeting the criteria of sustainable agroforestry is crucial to empower these farmers.

About Leaf Litter Frog:

• It is the most abundant species of frog in the forest community. 
• It utilizes its high-frequency screams as a survival strategy.
• Habitat: It inhabits primary and secondary forests and forest edges. It is usually found in the leaf-litter on the forest floor, or on leaves in low vegetation inside the forest.
• Appearance: They are tiny and the largest of the species are females. In size, they are barely up to 64 millimeters (2.5 inches) in length.
• Distribution: It is a species of frog endemic to the Brazilian Atlantic rainforest.
• Conservation status
  • IUCN: Least concern

What are Ultrasonic waves?

• These are sound waves whose frequencies are higher than those of waves normally audible to the human ear.
• The angular frequencies of the ultrasonic waves produced in laboratories lie from about 105 sec−1 to about 3 × 109 sec−1, the former value representing the limit of audibility of the human ear.