What are the Costs of Population Decline?

Syllabus: GS1/ Society, GS2/ Governance

Context

• The varied demographic trends across Indian states raise significant concerns about their broader implications.

Demographic Trends in India

• Total Fertility Rate (TFR): Between 2019 and 2021, Andhra Pradesh, Telangana, Kerala, Punjab, and Himachal Pradesh recorded a TFR of 1.5.
  • Conversely, Bihar (3), Uttar Pradesh (2.7), and Madhya Pradesh (2.6) had higher fertility rates.
  • A TFR of 2.1 is considered the replacement level needed to maintain a stable population.
• Aging Population Concerns: According to India Ageing Report (UNFPA) the elderly population in India is projected to increase from 10.1% in 2021 to 15% by 2036. 
  • In Kerala the elderly population is 16.5% whereas in Bihar it is 7.7%, in 2021.

Implications of Aging Population

• Economic implications;
  • Increased Public Spending on Pensions with growth in elderly population.
  • Old Age Dependency Ratio: Indicates the number of older adults for every 100 people of working age (18-59 years). A ratio exceeding 15% signals an aging crisis. Some southern states have already crossed this benchmark.
  • Reduced Consumer Demand: An aging population tends to consume less compared to a younger, more active demographic.
  • Pressure on Healthcare Infrastructure: In 2017-18, southern states accounted for 32% of India’s total out-of-pocket spending on cardiovascular diseases despite having only one-fifth of the population.
• Political Implications;
  • Interstate Resource Tensions: Southern states, despite contributing significantly to tax revenue, receive a diminishing share of central resources due to slower population growth. 
  • Delimitation and Representation: The expiration of the freeze on parliamentary seats in 2026 will lead to a new delimitation exercise that will alter state representation in the Lok Sabha, influenced by population changes.
• Social implications: The burden of supporting a growing elderly population can create tension between generations.
  • Also there will be more requirements for alternative support systems such as community-based care.

Global scenario

• In Japan the median age is over 48 years. This demographic shift has led to prolonged economic stagnation, shrinking workforce, and increased public spending on pensions and healthcare.
•  China’s one-child policy, enforced from 1979 to 2015, significantly lowered the birth rate, leading to a rapidly aging population.
• South Korea has one of the world’s lowest fertility rates, at 0.78 as of 2022. 

Way Ahead

• Policy Adjustments: Policies should focus on supporting families through paid maternity and paternity leave, and employment practices that mitigate the “motherhood penalty.”
• Gender Equity: States and countries with better gender equity maintain more sustainable fertility rates, as women are more willing to have children if they retain economic independence.
• Strategic Support: Implementing work-family policies that align with modern socio-economic expectations will support fertility rates and ensure balanced demographic and economic growth.

Lead Exposure Causes $6 trillion in Economic Losses

Syllabus: GS2/ Health

Context

• Recent estimates published in The Lancet Public Health highlight the grave repercussions of lead exposure, a potent neurotoxin, on global health.

About Lead (Pb)

• Brief: Lead is a heavy metal and a naturally occurring element found in the Earth’s crust.  It is soft, malleable, and has a relatively low melting point.
• Sources of Lead Exposure: Industrial Processes like Mining, smelting, manufacturing, recycling.
  • Product Usage likeLead-acid batteries (largest consumer), paints, pigments, stained glass, ceramics, ammunition.
  • Water Contamination by leaks from old lead-based plumbing.
• Health Effects: Brain and nervous system damage, Reduces cognitive abilities and kidney failure.
  • Over 1.5 million deaths in 2021 due to cardiovascular effects from lead.
• Environmental Effect: An increase in lead concentration in soil from 0 ppm to 1000 ppm significantly impacts

Actions to Mitigate Lead Exposure

• WHO clinical management guidelines for lead exposure.
• Global Alliance to Eliminate Lead Paint: It is a voluntary partnership formed by the UNEP and the WHO to prevent exposure to lead through promoting the phase-out of paints containing lead. 
• Banning use of leaded petrol.

State of Food and Agriculture (SOFA) 2024: FAO

Syllabus: GS3/Issues Relating To Poverty & Hunger

Context

• Recently, the Food and Agriculture Organisation (FAO) of the United Nations has released ‘The State of Food and Agriculture 2024’ (SOFA 2024).

About the State of Food and Agriculture (SOFA)

• It is an annual flagship report published by the FAO of the United Nations that provides in-depth analysis and insights into key issues affecting global food and agriculture systems.
• SOFA 2024 delves into the true cost of food, emphasising the need for agrifood systems to be more inclusive, resilient, and sustainable.
  • It builds on the findings of the 2023 report, exploring the use of true cost accounting to assess the economic, social, and environmental impacts of agrifood systems.
  • SOFA 2023 introduced the concept of hidden costs and benefits in agrifood systems, proposing true cost accounting as a method to reveal these hidden aspects.

Key Findings: The State of Food and Agriculture (SOFA) 2024

• True Cost Accounting: The report highlights the importance of true cost accounting in agrifood systems.
  • It helps to uncover the hidden costs and benefits associated with food production and consumption, including environmental degradation, health impacts, and social inequalities.
• Global Context: Overall, the hidden costs of agrifood systems amounted to approximately $12 trillion annually, the analysis involving 156 countries found.

• In fact, globally, the dominant quantified hidden costs were those arising from unhealthy dietary patterns that lead to diseases and lower labour productivity. 
• India’s hidden costs are the third largest globally, following China and the United States, which have hidden costs of $1.8 trillion and $1.4 trillion, respectively.

• Health-Related Costs: The health-related hidden costs, which include productivity losses due to dietary-related diseases, form a significant portion of the total.
  • These costs are estimated to be around $846 billion annually, reflecting the burden of disease and reduced labour productivity.
• Dietary Risks and Non-Communicable Diseases: Unhealthy diets are a major contributor to global hidden costs, accounting for approximately 70% ($8.1 trillion) of these costs.
  • The report underscores the link between dietary risks and non-communicable diseases, highlighting the need for healthier food environments.

• Economic, Social, and Environmental Impacts: Agrifood systems generate significant benefits for society but also have substantial negative impacts.
  • The report identifies these hidden costs, which include economic losses from market and policy failures, and emphasises the need for comprehensive assessments to inform policy decisions.
• Global Scenarios and Case Studies: The report presents global scenarios and case studies that offer insights into the desired outcomes of national agrifood systems.
  • These scenarios help to illustrate the potential pathways for achieving sustainable and equitable food systems.
• Role of Consumers and Producers: The report emphasises the critical role of both consumers and producers in transforming agrifood systems.
  • It calls for greater consumer awareness and engagement, as well as equitable roles for producers in the supply chain.

Key Recommendations (Policy Interventions for Transformation)

• Promoting Healthier Diets: Encouraging the consumption of whole grains, fruits, vegetables, and beneficial fatty acids while reducing the intake of processed foods and sugars can significantly lower health-related costs.
• Sustainable Agricultural Practices: Implementing sustainable farming practices can reduce environmental impacts, such as greenhouse gas emissions and nitrogen runoff, thereby lowering environmental hidden costs.
• Improving Social Equity: Addressing the socio-economic conditions of agri-food workers through fair wages and improved working conditions can help reduce social hidden costs.
• These include incentivising sustainable practices, improving institutional and fiscal capacities, and engaging stakeholders in the transformation process.

Conclusion

• The $1.3 trillion hidden cost of India’s agri-food systems, as revealed by the FAO report, highlights the urgent need for comprehensive reforms. 
• By promoting healthier diets, sustainable agricultural practices, and social equity, India can significantly reduce these hidden costs and pave the way for a healthier, more sustainable future.

Europe’s Digital Euro

Syllabus: GS3/Economy

Context

• The European Central Bank (ECB) is about to start the trial phase for its Digital currency, its “preparation phase” commenced in 2023.

Digital Euro

• A digital euro would be a digital form of cash, issued by the central bank and available to everyone in the euro area, available free of charge to everyone.
• It will be accessible and accepted in all euro area countries.
• The currency is meant to be the government’s alternative to existing cashless options such as credit cards, apps, cryptocurrencies, and bank transfers. 
• Digital euro can be used to pay directly from a digital wallet, on a smartphone or computer, without involving a bank or payment gateway. 
• The digital euro differs from other types of digital payment options because the ECB issues it directly. 

What is Digital Currency?

• Digital currency refers to any form of money or currency that is stored and transacted electronically. 
• Unlike physical currencies like coins or paper bills, digital currencies exist purely in digital form and can be used for online transactions. 
• There are two main types of digital currencies:
  • Cryptocurrency: This is a decentralized form of digital currency that uses cryptographic techniques for security and operates on blockchain technology. Examples include Bitcoin, Ethereum, Ripple (XRP), and Litecoin.
    • It is not controlled by government or a central bank, making them different from traditional money.
  • Central Bank Digital Currency (CBDC): This is a digital form of currency issued and regulated by a central bank.
    • It represent a country’s official currency in digital form. 
• Digital currencies offer several advantages:
  • faster transactions, 
  • reduced transaction fees, 
  • and the ability to conduct global transactions without intermediaries. 

Digital Currency in India

• India’s digital rupee, also referred to as eRs or eINR, is a central bank digital currency (CBDC) issued by the Reserve Bank of India (RBI).
• The RBI initiated the e-rupee pilot, a digital counterpart to physical currency, in 2022. 
• The RBI is exploring two types of digital currencies:
  • Wholesale CBDC (e₹-W): This is aimed at improving the efficiency of interbank settlements and payments between banks and financial institutions.
  • Retail CBDC (e₹-R): This is aimed at the general public for retail transactions, similar to how people use physical currency today.

Features

• It represents a tokenized digital version of the Indian rupee, operating on blockchain or distributed ledger technology.
• It serves as legal tender, accepted by individuals, businesses, and governmental bodies. 
• It is issued in accordance with the RBI’s financial policies and can be converted into physical cash through commercial banks.
• Transactions using the digital rupee are processed more quickly and securely compared to traditional banking systems. 

Significance

• Replacement for cash: While UPI allows to transfer money among individuals or businesses, e₹ can be used for purchases to FDs.
• Control: e₹ can be controlled by the RBI to be used for specific purposes only – such as subsidies or other expenses, exclusively. This is unlikely to be a direct transfer that may be misused.
• Lower costs: By bypassing intermediaries like credit cards or debit cards, the E rupee could lead to lower transaction fees.
• Financial inclusion: E-rupee accounts held directly with the central bank could offer a low-cost or free option for those without access to traditional banks.

RBI Issues New Framework for Reclassification of FPI to FDI

Syllabus: GS3/ Economy

Context

• The Reserve Bank of India issued an operational framework for reclassification of investment made by a foreign portfolio investor (FPI) to foreign direct investment (FDI) if the entity breaches the prescribed limit.

Background

• Under current regulations, FPIs can hold a maximum of 10% of an Indian company’s total paid-up equity capital. 
• Exceeding this cap previously left FPIs with two choices: divesting the surplus shares or reclassifying them as FDI.

Foreign portfolio investment (FPI) – FPI consists of securities and other financial assets held by investors in another country.  – It does not provide the investor with direct ownership of a company’s assets and is relatively liquid depending on the volatility of the market. – FPI holdings can include stocks, American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), bonds, mutual funds, and Exchange-traded funds (ETFs). – It is different from Foreign direct investment (FDI), which is an ownership stake in a foreign company or project made by an investor, company, or government from another country.

New Framework

• Mandatory Government Approval: FPIs must seek necessary approvals from the government when their equity holdings surpass the set 10% threshold, indicating a reclassification to FDI.
• Timely Reclassification: The RBI mandates that the reclassification process should be completed within five trading days from the date of the transaction that breaches the limit.
• Compliance Requirements;
  • Investments must adhere to entry routes, sectoral caps, investment limits, pricing guidelines, and other FDI-specific conditions under the current rules.
  • The RBI calls for comprehensive reporting as per the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.
• Revised SEBI Guidelines: SEBI requires FPIs that opt for reclassification to inform their custodian, who will temporarily freeze any further equity transactions in the affected company until the conversion process is finalized.

Significance of the New Framework

• Regulatory Compliance: It ensures that the process of transitioning from FPI to FDI is systematic, minimizing regulatory breaches.
• Investment Oversight: It provides better oversight of foreign investments in Indian equity, maintaining the balance between capital inflows and national economic interests.

India’s 1st Space Defense Exercise Antariksha Abhyas 

Syllabus: GS 3/Space and Defence

In News

• The first-ever space exercise, ‘Antariksha Abhyas – 2024,’ hosted by the Defence Space Agency (DSA), has commenced in New Delhi.

About Defence Space Agency (DSA)

• Created in 2018, it is an integrated tri-services agency of the Indian Armed Forces headquartered in Bengaluru, Karnataka. 
• It is tasked with operating the space-warfare and Satellite Intelligence assets of India. 

Significance/Need of the Exercise

• Exercise Antariksha Abhyas is a first of its kind exercise being conducted and is expected to help secure national strategic objectives in space and integrate India’s space capability in military operations.
  • Space assets are essential in modern defense but increasingly vulnerable to threats like anti-satellite weapons, cyber-attacks, and space debris.
• As space is becoming increasingly congested, contested, and competitive, the space exercise intends to identify vulnerabilities in conduct of operations in the event of denial or disruptions of space based services.

Do you know? – In March 2019, India successfully conducted Mission Shakti (an anti-satellite missile test) and demonstrated its capability to intercept and destroy a satellite in outer space based on complete indigenous technology. – With this test, India joined an exclusive group of space faring nations consisting of the USA, Russia and China.

AI in Sustainable Development of Cities

Syllabus: GS3/Science and Technology/Infrastructure

Context

• The use of Artificial Intelligence (AI) systems can help solve some of the main data collection and coordination problems in the sustainable development and management of Indian cities.

About

• As India continues on its trajectory of economic development, it is expected to add about 270 million citizens to its cities over the next 20 years. 
• Such rapid urbanization will bring challenges, requiring to identify pathways of sustainable development to ensure that the country can realise the dream of Viksit Bharat 2047.
  • The vision for a developed nation in the 100th year of independence – for every Indian.

What is Artificial Intelligence?

• Artificial intelligence (AI) is a wide-ranging branch of computer science concerned with building smart machines capable of performing tasks that typically require human intelligence. 
• Artificial intelligence allows machines to model, or even improve upon, the capabilities of the human mind. 
• From the development of self-driving cars to the proliferation of generative AI tools like ChatGPT and Google’s Bard, AI is increasingly becoming part of everyday life — and an area every industry are investing in.

Sustainable development

• It refers to the concept of meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. 
• It emphasizes the balance between three critical pillars: economic development, social inclusion, and environmental protection. 
• In 2015, the United Nations (UN) adopted the 2030 Agenda for Sustainable Development, a global framework consisting of 17 Sustainable Development Goals (SDGs). 

Role of AI in Sustainable Development

• Predictive Analysis for Growth: AI can forecast urban growth patterns, helping planners make data-driven decisions regarding zoning, infrastructure development, and resource allocation.
• Ecosystem Monitoring: AI can help monitor biodiversity, forest cover, and other environmental indicators, supporting conservation efforts and protecting natural ecosystems within cities.
• Pollution Control: AI-based systems can predict air quality and suggest measures for controlling pollution.
• Data-Driven Governance: AI can assist city governments in making informed decisions by analyzing large volumes of data related to urban growth, resource use, pollution, and public services. 
• Transportation: For public transport to appear as a viable alternative to car owners, it is vital that last-mile connectivity to bus and Metro rail services be seamlessly and predictably available.
• Electric Vehicles (EV) Integration: AI can help manage the integration of electric vehicles into transportation networks, optimizing charging stations, route planning, and energy consumption.

Government Initiatives

• Make AI in India: The Government announced the formation of three centres for AI in the areas of agriculture, health, and urban sustainability with an overall budget of Rs 990 crore in its Budget Announcement of 2023-24 with the mandate to ‘Make AI in India and Make AI work for India’.
• The Smart Cities Mission, launched in 2015, aims to develop 100 cities into smart cities with advanced technology and infrastructure to improve the quality of urban life.
  • AI is a crucial component of this mission, helping cities address sustainability issues, optimize resources, and reduce environmental impacts.
• Promotion of Electrical Vehicles: India is promoting the adoption of electric vehicles (EVs), and AI plays a key role in optimizing EV operations and infrastructure.

Conclusion

• AI has the potential to be a game-changer in India’s quest for sustainable development, offering innovative solutions to the country’s most pressing challenges. 
• As India faces rapid urbanization, resource depletion, climate change, and socio-economic inequalities, AI can play a pivotal role in creating smart, efficient, and inclusive systems.