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Daily Financial News Analysis – 12th Nov’19 | PDF Download


How India can indigenize defence equipment?

  • Defence analyst Bharat Karnad: that indigenization of defence equipment will remain an elusive goal if India’s procurement policy relies on offsets.
  • Offset clause: requires a foreign manufacturer to invest a certain fraction of the purchase value in an Indian firm.
  • This can generate some emplyoment.
  • But can it result in the transfer of cutting-edge technology?
  • If we want to leapfrog up the value chain, Karnad argued, we must insist that the foreign manufacturer bring in top talent into the country.
  • In other words, what we really ought to be buying is human capital even if what we are ordering is fighter aircraft, missiles or combat rifles.
  • Indeed, the issue of human capital is almost completely absent from the debate on defence policy.
  • DYK? India was among the few countries—outside the Western powers—to develop a supersonic fighter plane in the late 1950s.

  • HF-24 Marut project started in 1955,
  • Started test flights in 1961
  • Inducted into the Indian Air Force in 1967
  • That’s a mere 12 years to go from drawing board to production.
  • India managed to achieve this feat because Jawaharlal Nehru’s government imported Kurt Tank.
  • Kurt Tank was a German engineer who had designed fighter aircraft for Nazi Germany.
  • After a short stint at Madras Institute of Technology, Tank was employed by Hindustan Aeronautics Ltd (HAL) in Bengaluru, where he set about building the supersonic Marut.
  • His team consisted of 18 German designers and over 800 Indian engineers and technicians.
  • One of the promising students Tank taught at Madras was a young man named APJ Abdul Kalam.
  • The Marut story highlights the importance of talent acquisition as a vital ingredient in the development of indigenous defence technological capacity.
  • China employed a number of Russian experts in its defence industries.
  • USA alone accounts for more than a third of the world’s high-skilled migrants.
  • In 2013, over half the science, technology, engineering and mathematics workers and 70% of software engineers in Silicon Valley were foreign-born.
  • US institutions dominate the Nobel prizes for chemistry, physics, medicine and economics, but more than half the American winners in roughly the past four decades were foreign-born.
  • US gained almost 200,000 inventors from abroad between 2000 to 2010.
  • Bureaucratic red tape and corruption not only push talented Indians to migrate abroad, but also deter high-skilled foreigners from coming to India.
  • We often hear India has all the talent required to produce indigenous defence equipment, and that the shortcomings lie in the “system“.

Fasal Bima Yojana under stress

  • Opted out of the government’s flagship corp insurance scheme, PM Fasal Bima Yojana (PMFBY)

  • For both the kharif and rabi seasons of the 2019-20 crop year.
  • Reason: quite high claims ratios

  • 13/17 companies participated in the bidding process this year.
  • This has also increased the premium and the burden on the government.
  • Under PMFBY, farmers pay a fifth of the required premium while the Centre and state governments contribute the balance amount on a 50:50 basis.
  • Before the launch of PMFBY only state-owned insurance companies were in the crop insurance business.
  • Insurance is taken by farmers before sowing and the premium quoted by the insurance companies is mainly based on monsoon forecast.
  • Under PMFBY, launched in 2016, farmers pay 1.5% of sum insured for rabi crops and 2% for kharif while it is 5% for cash crops.
  • The gross premium collected by insurance companies has been increasing through every season in the past three years while the number of insured farmers are either constant or have declined.

Credit ratings for MSMEs

  • The government is in the process of formulating a policy on credit ratings for MSMEs.
  • This will help investors and other players take informed decision.
  • Gadkari: MSME contributed 49% of India’s total export.
  • Government is using technology and innovations to boost agricultural and tribal sectors through new technologies and innovations.
  • Innovations and skill development in the MSME industry are being carried with the collaboration of German government to make Indian products more competitive in the International market.

Threats of cheap Chinese exports

  • Chinese factories are again threatening to drag down prices around the world as the cost of their goods decline by the most since 2016.
  • Cheaper goods may be a boon to foreign consumers as Christmas nears.
  • Potential spiral of falling prices worldwide as companies everywhere are forced to compete with Chinese rivals to protect profits.
  • That would add further tension to the US-China trade war.
  • Input costs and energy prices have fallen in China since June, reducing costs for producers.
  • A key problem is that while prices deflate, loans don’t, making it harder still for China’s indebted industrial sector to make ends meet.




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