Daily Answer Writing

Model Answer

Non-Conventional Energy Sources in India

India is rich in non-conventional energy sources, which are essential for sustainable development and reducing environmental impacts. Here are key sources and their contributions to eco-friendly energy solutions.

1. Solar Energy

India enjoys abundant solar radiation, averaging 5 to 7 kWh/m² for 300 to 330 days a year. This potential allows for significant solar power generation, with ambitions to reach 100 GW by 2022. Major solar energy hubs include Tamil Nadu, Karnataka, Gujarat, and Rajasthan, with the Bhadla Solar Park in Jodhpur being the largest globally. Solar energy is crucial for reducing reliance on fossil fuels, thereby minimizing carbon emissions. (Source: MNRE)

2. Wind Energy

India has a gross wind power potential of approximately 302 GW at 100 meters and 695.5 GW at 120 meters above ground level. Key states for wind energy include Rajasthan, Gujarat, Maharashtra, and Karnataka, with a target of 60 GW by 2022. Wind energy is a clean alternative that helps mitigate air pollution and greenhouse gas emissions. (Source: MNRE)

3. Bio-Energy

Derived from biological products like agricultural residues and waste, bio-energy has an estimated availability of 750 million metric tonnes per year in India. The surplus biomass could generate about 28 GW of energy, with a target of 10 GW from bio-power by 2022. This resource helps in waste management and provides a renewable energy source. (Source: MNRE)

4. Hydro-Energy

Small hydro power plants (≤25 MW) leverage India’s many streams, especially in hilly areas, with a potential of 20 GW. The target is to achieve 5 GW from small hydro by 2022. This energy is renewable and helps in flood control and irrigation. (Source: MNRE)

5. Tidal and Wave Energy

India’s tidal power potential is around 12,500 MW, while wave energy potential is 41,000 MW. Although not yet commercially utilized, these sources could significantly contribute to India’s energy mix. (Source: MNRE)

6. Geothermal Energy

Geothermal energy is still in its infancy in India, with promising sites identified in states like Bihar and Himachal Pradesh. This heat energy can provide a stable and eco-friendly energy source. (Source: MNRE)

Conclusion

Non-conventional energy sources are vital for India’s transition to a sustainable energy future. They are non-polluting, renewable, and play a significant role in reducing dependency on fossil fuels, contributing to a cleaner environment.

Model Answer

Importance of National Income Accounting

National Income Accounting (NIA) plays a pivotal role in understanding and evaluating the economic health of a nation. Here are some key reasons highlighting its significance:

1. International Comparison: NIA enables comparative analysis of economic growth and development across nations, aiding in assessing standards of living globally. Source: Investopedia.
2. Business Decision-Making: By delineating sectoral contributions to the economy, NIA guides businesses in strategic planning and resource allocation for future production endeavors.
3. Policy Formulation: NIA illuminates income distribution and resource allocation within an economy, facilitating governments in crafting effective policies to address disparities and foster national development.
4. Policy Evaluation: By discerning economic successes and shortcomings, NIA empowers citizens to evaluate governmental policies and initiatives accurately.
5. Budgetary Policy: NIA informs governmental budget planning, influencing decisions on taxation, borrowing, and expenditure to mitigate economic fluctuations like recessions or inflation.

Factors Influencing a Country’s GDP

Several factors intricately impact a country’s Gross Domestic Product (GDP), reflecting its economic prowess and potential:

1. Natural Resources: Abundance and strategic utilization of natural resources, such as minerals and timber, significantly influence a nation’s GDP trajectory.
2. Capital: Investment levels, influenced by factors like profitability and political stability, are pivotal in determining a country’s economic output.
3. Labor and Entrepreneurship: The quality and productivity of the workforce, guided by factors like education and training, are crucial in enhancing production capacity.
4. Technology: Technological advancements drive productivity and innovation, particularly vital for resource-scarce nations.
5. Government Policies: Government interventions shape the business environment, fostering investment and economic stability.
6. Political Stability: A secure political climate nurtures resource allocation and investment, while instability hampers economic progress.

While GDP remains a key economic indicator, it faces criticism for overlooking aspects like income inequality and social conditions. Supplementary indices like the Human Development Index (HDI) and Gender Inequality Index (GII) offer a more holistic view of economic well-being.

Model Answer

The economic reforms of 1991 marked a pivotal moment in India’s economic history, driven by a Balance of Payments crisis and soaring inflation. These reforms, encapsulated in the terms Liberalization, Privatization, and Globalization (LPG), fundamentally transformed the Indian economy.

Liberalization

• Delicensing: The reforms eliminated licensing for most industries, reserving only a few for the public sector, such as atomic energy generation. This shift aimed to reduce bureaucratic hurdles and promote industrial growth.
• Relaxation of MRTP Act: The requirement for prior government approval for new industries and expansions was abolished. This change encouraged fair competition and safeguarded consumer interests.
• Capital Market Liberalization: Under SEBI regulations, companies could issue shares and debentures without governmental consent, fostering a more dynamic investment environment.
• Flexible Exchange Rate: Introduced in 1993-94, the rupee became fully convertible for trade accounts, allowing market forces to determine the exchange rate.

Privatization

The government initiated disinvestment, selling stakes in public sector undertakings (PSUs). This aimed to enhance financial discipline and modernization. It encouraged PSUs to adopt efficient practices from the private sector, improving managerial decision-making.

Globalization

These reforms integrated the Indian economy with global markets, leading to the outsourcing of various services such as BPOs, accountancy, and banking from developed nations to India. This created significant employment opportunities and economic growth.

Conclusion

Overall, the 1991 economic reforms transitioned India from a restrictive License-Permit-Quota system to a more market-oriented approach, where the government acts as a facilitator for private sector growth. This comprehensive transformation laid the groundwork for India’s current economic landscape, promoting innovation and competitiveness.

Model Answer

Capital account convertibility (CAC) refers to the ability to convert local currency into foreign currency freely for investment transactions. It allows for unrestricted capital inflows and outflows, making it a form of Capital Asset Liberalisation. Currently, India practices full convertibility in the current account but maintains partial convertibility in the capital account. The Tarapore Committee Reports of 1997 and 2006 outlined a gradual approach toward achieving full CAC.

Advantages of Full Capital Account Convertibility

1. Improved Access to International Markets: Full CAC encourages foreign investment, leading to enhanced economic growth and liberalization. This would attract global investors looking for opportunities in India.
2. Financial Efficiency: An open capital account exposes the financial sector to global competition, fostering specialization and innovation. This can potentially reduce the cost of capital for businesses.
3. Increased Investment Choices: Indian residents would have the flexibility to base their investment decisions on global interest rates, allowing them to invest in foreign securities and assets, thereby enhancing their financial well-being.
4. Risk Hedging: Full CAC enables diversification of investment portfolios, allowing investors to protect the real value of their assets against domestic economic fluctuations.

Disadvantages of Full Capital Account Convertibility

1. Outflow of Domestic Savings: The risk of capital flight increases, as seen during the 1997-98 Asian financial crisis, when speculative activities led to significant capital outflows from several countries.
2. Tax Evasion: Full CAC could diminish the government’s ability to effectively tax domestic financial activities, thereby reducing public revenue.
3. Cost-Push Inflation: Market-determined exchange rates may exceed official rates, potentially raising import prices and contributing to inflation.
4. Economic Disruptions: Poor management of CAC could result in currency depreciation, affecting trade and capital flows negatively.

Preconditions for Full Convertibility

The Tarapore Committee set preconditions for full CAC, such as maintaining a fiscal deficit below 3.5% of GDP and an inflation rate between 3-5% over three years. These conditions need to be met for the potential benefits of CAC to be realized.

Conclusion

While full capital account convertibility presents significant advantages in terms of financial access and efficiency, it also poses substantial risks that must be managed carefully. India must address the outlined preconditions to harness the benefits of CAC effectively.