MSMEs, Globalization, Black Money, Foreign Capital, Food Security, Demonetization, and Natural Resources in India
MSME
The Ministry of Micro, Small and Medium Enterprises, a branch of the Government of India, is the apex executive body for the formulation and administration of rules, regulations, and laws relating to micro, small, and medium enterprises in India. The Minister of Micro, Small and Medium Enterprises is Nitin Gadkari, and the Minister of State is Pratap Chandra Sarangi since May 31, 2019.
Under the Micro, Small and Medium Enterprises Development Act, 2006, the Government of India established The National Board for Micro, Small and Medium Enterprises (NBMSME) to examine the factors affecting the promotion and development of MSME. This board also reviews the existing policies and suggests recommendations to the Government for the growth of the MSME sector.
Importance and Features of MSME
The MSME sector is considered the backbone of the Indian economy that has contributed substantially to the economic development of the nation. It generates employment opportunities and works in the development of backward and rural areas. India has approximately 63 million MSMEs.
In addition, due to the following features, they are considered a viable source of income for those looking to venture into the manufacturing industry:
- Micro, Small, and Medium Enterprises (MSMEs) are entities that are involved in the production, manufacturing, and processing of goods and commodities.
Role in the Economy
MSMEs are a key part of the Indian economy, accounting for about one-third of the country’s GDP. They also provide employment opportunities, particularly for unskilled and semi-skilled workers.
Globalization
What is Globalization?
Globalization enables the coming together of individuals, corporations, and resources from different countries. The unique characteristics of globalization have allowed people with diverse backgrounds to interact freely. It is the vehicle that has helped global trade scale new heights in the last few decades.
Characteristics of Globalization
This concept has enabled economies of scale for companies in production and distribution. It has also encouraged outsourcing and technology transfer among companies and countries, thus increasing their interdependence on each other. The main characteristics of globalization are listed below:
- Free Trade – Globalization has helped improve trade volumes between nations with minimal interference. The reason is that governments are not micromanaging every minute aspect of business transactions.
- Liberalization – One of the main characteristics of globalization is the improvement in the business climate for corporations.
- Increase in Employment – Every industry is responsible for generating both direct and indirect jobs. And when production increases, it has a positive effect on employment. Globalization helps companies increase their production capacity and set up operations in different parts of the world.
Conclusion
Globalization has helped nations integrate their economy with the rest of the world, and it has reduced barriers to trade and increased economic activity manifold. It has also led to cultural, social, and technological exchanges that have helped governments tackle internal and external challenges with greater efficiency.
Black Money
What is called Black Money?
There is no one definition for black money in economics. In layman’s language, it is money that has been acquired through illegitimate means or money which is unaccounted for, that is, for which tax is not paid to the government. Spurious notes or counterfeit money is generally not counted as black money. Counterfeit notes are currency notes that are illegally printed by unauthorized agents. Black money is hidden from government authorities and is not reflected in the GDP of India, national income, etc.
White money is money that is earned through legitimate means and is accounted for, for which income or other tax is paid.
In an ideal economy, all money that is transacted should be accounted for. This would help the government to collect taxes.
Cash transactions without proper accounting are known as black money.
The illegal activities that can lead to black money generation are:
- Crime
- Corruption
- Non-compliance with tax requirements
- Complex procedural regulations
- Money laundering
- Smuggling
Effects of Black Money in India
Black money has some serious consequences on the economy of a country. It affects the financial system of the country. The central bank is not able to control money supply in the economy causing higher inflation. This will lead to a fall in the value of the currency.
Foreign Capital
An Introduction
The governments of every country around the world look forward to attracting a sufficient amount of foreign capital as it plays a constructive role in the economic development of the country. Here, foreign capital is defined as the inflow of capital into the home country from international countries.
The reason why the need for foreign capital arises in developing countries like India is that here domestic capital proves to be inadequate for economic growth. Foreign capital is viewed as a medium using which the gap between the domestically available supply of savings, government revenue, foreign exchange, and the planned investment can be filled to achieve the country’s development targets further.
Different Types of Gaps Filled by Foreign Capital
Here mentioned are different types of gaps that are filled by the foreign capital:
- Foreign capital is required by the country to fill the gap between the targeted requirement of foreign exchange and those derived from the sum of the net export earnings and net public foreign aid. This is usually referred to as the foreign exchange or trade gap.
- An inflow of private foreign capital is required by the country to remove the deficit in the balance of payments over the time being
Conclusion
Foreign capital refers to the inflow of capital into the home country through international nations either in the form of foreign investment (FDI or FPI), loans from multilateral agencies, including the World Bank, or loans from the governments of international countries. It is the foreign direct investment that majorly contributes to India’s economic development. Read the above-mentioned article to know more about foreign capital and foreign direct investment in India.
Food Security
What is Food Security?
The Food and Agricultural Organization (FAO) states that food security emerges when all people at all times have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life. Food security has three important and closely related components, which are listed below
Laws on Food Security – India
In order to provide the Right to food to every citizen of the country, the Parliament of India enacted legislation in 2013 known as the National Food Security Act, 2013. Also called the Right to Food Act, this Act seeks to provide subsidized food grains to approximately two-thirds of India’s 1.33 billion population. Food Subsidy is the foundation on which the National Food Security Act 2013 is implemented in India.
Food Security Programs of India
- Public Distribution System – A major chunk of Government Expenditure on Food Security is spent on Food Subsidies which are implemented through the Targeted Public Distribution System.
- Mid Day Meal Scheme
- Integrated Child Development Services Scheme.
The food management system and food price policy, to ensure food security in India thus consists of three major instruments:
- Procurement at minimum support prices
- The maintenance of buffer stocks
- The Public Distribution System
The department has been allocated Rs 2,42,836 crore, which is 99% of the Ministry’s allocation (Ministry of Consumer Affairs, Food and Public Distribution). This is an annual increase of 48% over 2019-20 expenditure.
Demonetization
Demonetization is referred to as the process of stripping a currency unit of its status to be used as a legal tender. In simple words, demonetization is the process by which the demonetized notes cease to be accepted as legal currency for any kind of transaction. After demonetization is done, the old currency is replaced by a new currency, which may be of the same denomination or may be of a higher denomination. The impact of changing the legal tender status of a currency unit has a huge impact on the economic transactions that take place in an economy. Demonetization can cause unrest in an economy or it can help in stabilizing the economy from existing problems. Demonetization is usually taken by a country for various reasons. The objectives of demonetization are as follows:
- To stop the circulation of black money in the market.
- To help in reducing the interest rates of the prevalent banking system
- To help in the creation of a cashless economy
- To formalize the informal Indian Economy.
Natural Resources
What are Natural Resources?
Natural resources can be defined as the resources that exist (on the planet) independent of human actions.
These are the resources that are found in the environment and are developed without the intervention of humans. Common examples of natural resources include air, sunlight, water, soil, stone, plants, animals and fossil fuels.
Natural resources are naturally occurring materials that are useful to man or could be useful under conceivable technological, economic or social circumstances or supplies drawn from the earth, supplies such as food, building and clothing materials, fertilizers, metals, water and geothermal power. For a long time, natural resources were the domain of the natural sciences.
Different Types of Natural Resources?
- Renewable: resources that are available in infinite quantity and can be used repeatedly are called renewable resources. Example: Forest, wind, water, etc.
- Non-Renewable: resources that are limited in abundance due to their non-renewable nature and whose availability may run out in the future are called non-renewable resources. Examples include fossil fuels, minerals, etc.
Why is Natural Resource Economics Important?
Natural resource economics is important for a number of reasons. As previously mentioned, it can help to make certain that natural resources are used in a sustainable way, which can ensure that future generations will also be able to benefit from them. Additionally, natural resource economics can help to ensure that the benefits and costs of natural resource use are shared in a more equitable manner.