Z-Morh Tunnel: A Strategic Corridor

The Z-Morh Tunnel is a significant infrastructure project aimed at establishing a strategic corridor between Kashmir and Ladakh, ensuring year-round connectivity.

Strategic Importance

• Located in Ganderbal district, it keeps Sonamarg accessible throughout the year, countering winter closures due to snowfall and avalanches. 

Security and Economic Impact

• Local hoteliers  express optimism for winter tourism expansion due to dependable road access.
• The tunnel, bypassing avalanche-prone areas, features an intelligent traffic management system, boosting adventure tourism.
• Constructed at a cost of ₹2,680 crore, the tunnel is a 6.5-km long, two-lane infrastructure.

Zojila Tunnel Connectivity

• Z-Morh leads to the Zojila Tunnel, Asia's longest tunnel under construction, costing ₹6,800 crore.
• The 13.14-km long tunnel will significantly reduce travel time between Ganderbal and Kargil from three hours to 20 minutes.
• Connectivity is crucial, with the Zojila Pass currently closing during winters, cutting Ladakh off for months.

Government Initiative on Export-Import Data Mechanism

The government has initiated a strategic move by setting up a committee aimed at establishing a consistent mechanism for publishing export-import data. This development follows a significant downward revision of the gold and silver imports data for the period of April-November FY25.

Background and Issue

• A technical glitch was identified in the data transmission from the Special Economic Zone (SEZ) portal to the Indian Customs Electronic Gateway (Icegate).
• This glitch led to calculation errors, affecting the accuracy of trade data.

Formation of the Committee

• The committee includes stakeholders from the Directorate General of Commercial Intelligence and Statistics (DGCIS), DG Systems (CBIC), and special economic zones.
• The goal is to create a robust mechanism for publishing consistent trade data.

Role of DGCIS

• DGCIS is tasked with collecting, compiling, and disseminating India’s trade statistics and commercial information.

Data Revision

• An "unusual surge" in imports of precious metals prompted a reconciliation exercise by DGCIS and DG (Systems), CBIC.
• The revision showed an overestimation of approximately $11.7 billion in gold imports for April-November.

Analysis of Legalizing Minimum Support Prices (MSPs) in Agriculture

The text outlines the complexities and potential drawbacks of legalizing Minimum Support Prices (MSPs) for agricultural produce, highlighting the importance of understanding market economies and the potential consequences of government intervention.

Market Dynamics and MSPs

• The price of agricultural products in a market economy is determined by demand and supply.
• If MSPs become legally binding, it could lead to situations where supply exceeds demand.
• Excess supply responsibility would fall on the government, raising questions about its capacity to purchase surplus produce.

Issues with Price Deficiency Payments

• Legalizing MSPs would eliminate market prices below MSP, making the government the de facto buyer of all MSP-declared commodities.
• Price deficiency payments could encourage traders to manipulate market prices, creating financial strain on the government.
• The example of Madhya Pradesh showed the difficulties in implementing price deficiency mechanisms.

Current MSP Implementation

• The current MSP policy stems from historical grain deficits and is effectively implemented only for rice and wheat in a few states.
• Only about 10% of farmers benefit from selling at MSP, questioning its efficacy.

Performance of Non-MSP Commodities

• Commodities without MSP, like fisheries and horticulture, have shown significant growth rates, outperforming MSP-covered staples such as wheat and rice.
• This suggests market-based systems can be more effective.

Distortions and Biases in Agri-Price Policy

• Government interventions often distort markets, leading to an anti-farmer bias in agri-price policies.
• India uniquely has negative Producer Support Estimates (PSEs) among G20 countries, indicating implicit taxation on agriculture.

Recommendations

• Advocates for freer markets and building agri-value chains, akin to the AMUL model, where farmers retain a significant portion of consumer prices.
• Opposes making MSPs legal, suggesting it would counteract economic liberalization efforts.

The text concludes with a personal perspective from the author, emphasizing the need for rational policymaking that supports farmers without undermining market mechanisms.

Minimum Support Price (MSP) Guarantee for Farmers

There is an ongoing debate about whether there should be a legal or otherwise minimum support price (MSP) guarantee for crops produced by farmers. This issue is expected to become less relevant over the next two decades due to the changing dynamics in agriculture.

Current Agricultural Challenges

• Agriculture is witnessing a significant diversion of fertile lands for real estate development and infrastructure projects, reducing land available for farming.
• The official number of operational farms is high, but the number of households earning more than half their income from farming might be as low as 40 million, and declining.
• The challenge is not just feeding a growing population but also retaining agricultural lands and talent.

Factors Influencing Agricultural Growth

• Past agricultural growth was driven by improved trade terms and new technologies such as hybrid seeds and genetically modified crops.
• The last decade has seen a decline in the terms of trade index and a slowdown in agricultural innovations.

Need for Price Assurance

• Assurance of price is crucial for farmers to invest in land and technologies to improve yields and reduce costs.
• Agriculture is unique with high production and price risks, which are exacerbated by climate change.
• Price risk is a critical area that needs to be addressed to ensure farmers continue farming.

Implementing a price deficiency payments (PDP) System

• The proposed PDP system would pay farmers the price difference when crops are sold below the government-declared MSP.
• This system would promote formalization and digitization of the farm produce trade, leading to more recorded transactions.
• Farmers would begin demanding receipts from buyers, detailing the quantity and price of their sold crops.
• States would be incentivized to set up APMC mandis or electronic trading platforms to facilitate the recording of transactions.
• The Centre's payment of price differences would be contingent on states generating necessary sales data.

Encouraging Crop Diversification

• Without basic price assurance, expecting farmers to diversify crops is unrealistic.
• There is a need for policies to encourage farmers to grow a variety of crops rather than sticking to traditional ones like paddy or sugarcane.

The article emphasizes the strategic importance of providing a legal MSP and its role in securing the future of Indian agriculture by ensuring farmers' livelihoods and encouraging agricultural sustainability.

Indian Economic Growth Forecast

The Indian economy is anticipated to grow by 6.6% in 2025 and 6.7% in 2026, as per the UN's World Economic Situation and Prospects 2025 report.

Key Growth Drivers

• The public sector plays a crucial role in funding infrastructure, digital connectivity, and social infrastructure.
• Strong investment growth is projected to continue into 2025.
• Expansion in the manufacturing and services sectors will drive the economy.
• Robust export growth in services and specific goods like pharmaceuticals and electronics is expected.

Agricultural Outlook

The 2024 favorable monsoon rains have boosted summer sowing, improving agricultural output expectations for 2025.

Regional Economic Projections

South Asia's economy is expected to grow at 5.7% in 2025 and 6% in 2026, primarily driven by India.

Risks to Economic Outlook

• Potential escalation of geopolitical tensions.
• Deceleration in external demand and ongoing debt challenges.
• Social unrest and vulnerability to climate hazards.

Inflation and Global Growth

Consumer price inflation is forecast to decrease from 4.8% in 2024 to 4.3% in 2025, within the RBI's medium-term target range of 2–6%.

Global growth is projected to remain steady at 2.8% in 2025.

Opportunities and Challenges

India and other resource-rich developing countries have opportunities to boost growth and create jobs through rising demand for critical minerals.

However, these opportunities come with risks, necessitating forward-looking policies, fair benefit-sharing, and sustainable resource extraction practices.

UN Secretary-General António Guterres emphasized the need for global cooperation to manage economic shocks and climate risks effectively.

Introduction of Self-Attestation Facility by EPFO

The Employees Provident Fund Organisation (EPFO) is set to introduce a self-attestation facility beginning in June, which will allow its 80 million active members to complete the Know Your Customer (KYC) process without requiring employer approval.

Current KYC Process

• KYC is a one-time process that verifies members' identities by linking their Universal Account Number (UAN) with KYC details.
• Currently, the process requires employer approval, causing delays and potential issues if a firm has closed.

The new self-attestation facility will eliminate paperwork and decrease claim rejections.

EPFO 3.0 and IT Infrastructure Upgrade

EPFO is upgrading its information technology (IT) infrastructure to accommodate the influx of new subscribers from three employment-linked incentive (ELI) schemes.

Features of EPFO 3.0

• Focus on scalability to provide enhanced services to members.
• Expected increase of active members to potentially reach 100 million.

New Withdrawal Facility

EPFO is considering a partnership with banks to introduce a new facility enabling members to withdraw money up to a certain limit without filing claims.

Union Labour Minister Mansukh Mandaviya mentioned efforts to develop a robust platform for hassle-free money withdrawal, akin to the banking system.

Planned EPFO 3.0 Launch

The EPFO aims to launch EPFO 3.0 by March, with a goal to resolve nearly all user queries through an effective redressal system.