India’s tariff policy

Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Prelims and Mains focus: about import tariff regime in India; amended proposed to it and its implications

News: Some of the budget proposals have the potential to revive the import substitution regime of the pre-1991 liberalization era. The old regime, which sought to protect domestic industries, bred an uncompetitive manufacturing sector. Mint explains the pitfalls of protectionism.

Tariffs in India vis-a-vis other countries

At 11.7%, India’s weighted average tariff is much higher than that of South Korea, the US and Japan. India was also way behind these countries in terms of machinery and transport equipment exports.

How are import tariffs expected to change?

• The 2020 Union budget proposes to increase customs duties on imports of a variety of items. While one set of duty changes seeks to create a level playing field for micro small and medium enterprises, another is for promoting Make In India.

• In addition, the Customs Tariff Act, 1975, is proposed to be amended by way of the Finance Bill to give the government the power to impose safeguard duties and tariff rate quotas on imports on the pretext of threat of injury to the domestic industry. Customs duty exemptions are also being withdrawn from 80 items that were found to be outdated.

Will duty hikes push up domestic prices?

• Yes. Import substitution forces consumers to pay more for competitively produced imports, so that small producers, which will never become competitive, get protection. Prices will rise for porcelain or china kitchenware, padlocks, brooms, hand sieves, combs, vacuum flasks and appliances such as wall fans, grinders/mixers, water heaters, ovens, toasters, coffee/tea makers, insect repellents, footwear, mattresses, dolls and toys, compressors of refrigerators and ACs, furniture and stationery.

• Prices will also rise where customs exemptions have been withdrawn such as for skimmed milk.

Will there be unintended consequences?

Yes. Empowering government officials to take decisions on individual items raises the scope for corruption and policy errors. The outdated items on which customs duty has been withdrawn include CD writers, MP3/MP4/MPEG 4 players, and pre-recorded and audio cassettes. This also affects cassettes used by blind students and CDs used for educational purposes.

Will officials get more power and control?

• Yes. Like in the 1980s when bureaucrats exercised powers to decide duties on individual items, the scope for concentration and abuse of economic controls has risen.

• The budget proposes to introduce a new provision in the Customs Act, 1962, so that the Centre will have the power to prohibit the import and export of any item. At present, it has this power only for gold and silver. Instead, it needs to return to the strategy of lower, simplified and predictable tariffs to improve the ability of exporters to link up with evolving global value chains.

Will the economy turn more competitive?

• No. Being a global player and sustaining high growth demand a higher share of exports in global value chains. The report of the high-level advisory group found that with value chains, exports and imports build competitiveness.

• India’s tariff reduction in the post- reforms period led to simple, average tariffs in 2015-16 being only about a tenth of the level in 1990-91. Exports soared over 17 times from $18.1 billion in 1990-91 to $309 billion in 2014-15.

RBI steps in to revive economy

Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Prelims and Mains focus: on the steps taken by the MPC and their implications; repo rate; CRR; MPC; CPI

News: The Reserve Bank of India (RBI) stepped in to do the heavy lifting to revive the economy after the Union budget appeared to have few measures to spur credit growth and boost demand.

About the RBI’s move

The central bank introduced a direct incentive framework to boost credit growth, even as the six-member monetary policy committee (MPC) kept benchmark rates unchanged because of uncertainty in the inflation outlook. The repo rate, the rate at which banks borrow from RBI, remained unchanged at 5.15%.

What steps has it taken?

• To improve credit flow, RBI temporarily removed the cash reserve ratio (CRR)—which requires banks to set aside 4% of their deposits—for every new retail loan made to finance automobiles, homes, and to small businesses. This move, while making it attractive for banks to lend to retail and small businesses, essentially translates into a short-term cut in cash reserve ratio. This scheme will be available for new loans given till 31 July.

• In addition, the central bank will now conduct one- year and three-year term repo auctions to inject up to Rs.1 trillion into the banking system, giving lenders the opportunity to raise money at current rates. When viewed in the context of elevated headline inflationary pressures, this is another incentive for banks to lock medium-term funding at current low rates.

• This should encourage banks to undertake maturity transformation smoothly and seamlessly so as to augment credit flows to productive sectors.

Observations made by the RBI committee on inflation

• Given the uncertainty, MPC pegged consumer price inflation for the first half of FY21 at 5-5.4% as compared to 3.8-4% earlier. For the third quarter of FY21, the forecast stands at 3.2% with risks broadly balanced. According to the committee, the recent increase in prices of milk, pulses and crude oil are likely to weigh on inflation.

• MPC also noted that the inflation trajectory will be determined by several factors, including the pass-through of telecom charges, increase in prices of drugs and pharmaceuticals and the impact of new emission norms.

• MPC projected economic growth for fiscal 2021 at 6%—in the range of 5.5-6% in the first half and 6.2% in the third quarter. This is in line with its past GDP growth projections and that of the Economic Survey, which has pegged growth at 6-6.5%. The committee noted that the economy continues to be weak and the output gap remains negative.

Syllabus subtopic: Science and Technology- Developments and their Applications and Effects in Everyday Life.

Prelims and Mains focus: about the study and its significance; about cancer

News: In a series of papers published in the journal ‘Nature’, scientists from several international consortium have mapped the handful of genes whose mutation causes several different kinds of cancer.

Why is it important

Cancer is often said to be many diseases, rather than one disease, because of the vastly different way that different kinds of cancers are known to behave. This mapping raises hopes of treatment tailored for specific cancers.

About the research

• On average, cancer genomes contained 4-5 driver mutations when combining coding and non-coding genomic elements; however, in around 5% of cases no drivers were identified, suggesting that cancer driver discovery is not yet complete.

• About half of these mutations occurred in the same set of nine genes. The scientists analysed 2,658 whole-cancer genomes and their matching normal tissues across 38 tumour types from the Pan-Cancer Analysis of Whole Genomes (PCAWG) Consortium of the International Cancer Genome Consortium (ICGC) and The Cancer Genome Atlas (TCGA). Driver genes are genes whose mutations are linked to development of a disease, in this case cancer.

Significance of the research

• It is an exciting development. Identifying the driver gene means a lot because that decides whether doctors can do targeted treatment or go with traditional options like chemotherapy. But the time taken for developing a drug from identifying a gene varies. In case of ALK-1, identified as the driver gene for 5-7 per cent lung cancers, the time from its identification in 2006-7 to a drug was just five years.”

• However the path is not always as short. Currently, when a tumour is sent for genetic analysis, there is capacity to analyse about 1,000 genes in a standard laboratory. Of these, less than 200 are implicated in various cancers, of which there are medicines for less than 40,.

• For more than 30 cancers we now know what specific genetic changes are likely to happen and when these are likely to take place. Unlocking these patterns means it should now be possible to develop new diagnostic tests that pick up signs of cancer earlier.

About Cancer

• Cancer is a group of diseases involving abnormal cell growth with the potential to invade or spread to other parts of the body. These contrast with benign tumors, which do not spread.

• Possible signs and symptoms include a lump, abnormal bleeding, prolonged cough, unexplained weight loss, and a change in bowel movements.

• While these symptoms may indicate cancer, they can also have other causes. Over 100 types of cancers affect humans.

Syllabus subtopic: Achievements of Indians in Science & Technology; Indigenization of Technology and Developing New Technology.

Prelims and Mains focus: about the project and its significance

News: The government has cleared an ambitious gene-mapping project that is being described by those involved as the “first scratching of the surface of the vast genetic diversity of India”.

Background

• Steps to get the project underway started in 2017 when Infosys co-founder Kris Gopalakrishnan set up the Centre for Brain Research at IISc for research in ageing and diseases such as Alzheimer’s.

• As part of a two-pronged approach, Gopalakrishnan provided funding of Rs 275 crore for a rural pilot project in Kolar and Tata Trusts came up with Rs 75 crore to fund the corresponding urban project in Bengaluru.

• The group involved in the initiative then approached the central government for a nationwide project to sequence the Indian gene and push research in medicine.

• Referring to “new schemes” in the Budget 2020-21, the government said that mapping of India’s genetic landscape is critical for next generation medicine, agriculture and for bio-diversity management. To support this development, it will initiate two new national level Science Schemes, to create a comprehensive database.

About the project

• The Rs 238-crore Genome India Project, which will involve 20 leading institutions including the Indian Institute of Science (IISc) in Bengaluru and a few IITs, will be rolled out soon.

• Cleared by the Department of Biotechnology (under the Department of Science and Technology) the first stage of the project will look at samples of “10,000 persons from all over the country” to form a “grid” that will enable the development of a “reference genome”.

• The IISc’s Centre for Brain Research, an autonomous institute, will serve as the nodal point of the project and its director will be the coordinator.

• The project is said to be among the most significant of its kind in the world because of its scale and the diversity it would bring to genetic studies.

• The institutions involved will work on different aspects of the project, including providing clinical samples and assisting with research. Some IITs will help with new methods of computation, which are essential.

Benefits of collaborations

• To really arrive at a breakthrough with modern lifestyle diseases such as cardiac diseases, diabetes or other mental health issues, large collaborations were the need of the hour, combined with huge technological and computational endeavours.

• For instance, “Nature” and its affiliated journals reported the results of a decade-long global collaboration involving 1,300 scientists to map genetic mutations that drive the development of cancer. This is expected to play a significant role in reducing the mortality rate linked to cancer.

Significance of the project

• Mapping the diversity of India’s genetic pool will lay the bedrock of personalised medicine and put it on the global map.

• Considering the diversity of population in India, and the disease burden of complex disorders, including diabetes, mental health, etc., once we have a genetic basis, it may be possible to take action before the onset of a disease.

• Scientists linked to the Indian project say genetic studies so far are based on “almost 95% white caucasian samples”. “What makes the IISc’s pilot rural Kolar study unique is that it is not of urban and rich or middle-class samples, and that could potentially have revolutionary implications on world research.

• It is established that the first migrations of humans were from Africa to India, and then there were several waves of migration that provided vast horizontal diversity. And, with endogamy being practiced over many generations, across groups, the project may help to get a sharper understanding of diseases transmitted genetically down the line as well as some healthy attributes.