Mains Q & A 1 February 2023

Q1. An “Unicorn revolution” is taking place as India quickly establishes itself as a hub for startup funding. To guarantee they live up to their promise despite the hype, the proper regulatory guidance and policy support are necessary. Examine. (250 words)

Paper & Topic: GS II Government Policies and Interventions

Model Answer:

Introduction:

Any startup that receives a valuation of $1 billion is referred to as a unicorn in the venture capital sector. Aileen Lee, a venture capitalist, first used the term in 2013. Most of the time, unicorns have caused a commotion in the industry they work in. For instance, Uber transformed how people commuted. When travelling, Airbnb altered how people scheduled their accommodations, and Snapchat upended how people used social media, among other things.

India is now ranked third globally in terms of the proportion of businesses that have achieved unicorn status.

Body:

Unicorns in India confront the following obstacles:

Capital: A sizeable quantity of working capital is needed to run a business from inception to unicorn status. Many firms, especially those in their early stages, are bootstrapped, or self-funded using money from friends and family or the founders’ personal savings.

Complex regulatory environment: To make it easier for entrepreneurs to conduct business, the Indian government has introduced new laws.

The current regulatory environment, however, is often regarded as being complex, ineffective, and unpredictable.

Bureaucratic procedures: Businesses in India frequently feel weighed down by bureaucratic procedures that seem to be lacking in fundamental norms.

There aren’t enough opportunities for them to find information, and there isn’t any planning assurance for how long processes might take.

Additionally, rules may abruptly alter or startups may get unexpected alerts.

Startups are forced to come up with annoying workarounds, spend time, or change their company model as a result.

Getting their items on the market is another difficulty for entrepreneurs because it seems impossible to break into the Indian market.

Competitive environment: Often, a large number of businesses enter the market and a large number of others expand their presence there.

The disadvantage startups face in comparison to established businesses is a second factor.

Uncertainty abounds: Recently, the largest initial public offering (IPO) to ever list on the Indian stock exchange failed miserably on the first day of trading, with shares trading for less than 27% of the IPO price.

One reason for this is that major market actors are better equipped to deal with bureaucratic restrictions.

On the other side, government contracts with well-established businesses are preferred because public procurement is viewed as weak.

Due to the inherent risk that the startup may fail, joining one as an employee is often not a desirable career path for job seekers.

Correct regulatory mechanisms are required:

The availability of private equity capital, greater Internet use and digital payment volume, improved infrastructure, and an expanding talent pool are the elements promoting unicorn growth.

However, the country’s politicians, risk-taking corporations, and funding organisations need to establish an environment that will make it easier to access domestic capital given the focus on creating an Aatmanirbhar Bharat.

As business models become increasingly intricate and intertwined, regulators must take a more proactive approach to creating the right rules that support and foster innovation rather than stifle it.
In addition to encouraging local finance, the government and business organisations may need to invest heavily through top academic institutions to ultimately reduce the risk of start-up investments.

It seems that by anticipating exponential demand growth over longer time periods, businesses and valuation specialists overestimate the Indian economy’s capacity to absorb services.

In an effort to get customers to become accustomed to these platforms so that they will use them even if the costs are raised, businesses invest a lot of money in offering them steep discounts. On the long run, this can result in cartelization and market monopoly.

Conclusion:

India can develop a truly innovative and resilient economy by providing the “minicorns” (start-ups valued at $1 million or more) and “soonicorns” (funded by angel investors or venture capitalists and likely to soon join the unicorn club) with the proper regulatory environment and local sources of funding.

Q2. Comprehensive policies that address the institutional and administrative deficiencies, political distortions, and structural inequities that exist in India would give the country’s rural development a new lease on life. Comment. (250 words)

Paper & Topic: GS II Government Policies and Interventions

Model Answer:

Introduction:

Rural development remains the cornerstone of the country’s overall development. According to the 2011 Census, 68.84% of people live in villages. According to the 2011 Agricultural Census, 61.5% of Indians are thought to be dependent on agriculture. Technical developments in agriculture have expanded the gap between rich and poor farmers since the wealthier farmers adopted modern farm technology to a greater extent than the small farmers. Nearly one-third of people still live in poverty in rural India.

Body:

Structural inequalities, institutional flaws, and political skewedness in rural India:

Rural India has seen a slowdown:

Costlier agricultural inputs, smaller landholdings, water scarcity, suitability of the soil, and pest control.

Farmers that are small and marginal bear a larger burden of debt.

inadequate MSP usage

The Green Revolution led to regional and other disparities.

Poor development of human resources:

sanitation and public health, literacy, especially among women, education and skill development, and health are all addressed.

Migration:

Numerous privately held facilities contributed to a climate that favoured business goals in healthcare and education. Because they were caught between state minimalism and commercial entrepreneurship, villages lost any potential for economic or intellectual resource regeneration.

All of these explanations, as well as the statistics upon which they were based, provided a handy excuse for the implementation of policies that encouraged a substantial section of the rural population to migrate to the city.

Unsuccessful land reform

Problems with eradicating the zamindari system:

Due to insufficient land records, it was difficult to implement these rules.

Because zamindars refused to turn over the documents they already had in their possession, the government was obliged to go through the time-consuming process of reconstructing the land records.

It was challenging to put the law into action because of the coordination between the landlords and lower-level revenue officers.

These problems with tenancy reforms exist:

Larger landowners took advantage of the rules that were put in place to protect small landowners, with the full cooperation of the tax officials.

the excessively long waits for new laws to be passed and implemented.

Legislation on the Problems with the Land Ceiling:

Post-independence Due to the fact that more than 70% of Indian landholdings were fewer than 5 acres, the governments imposed a rather high ceiling on existing holdings.

The majority of states permitted a substantial number of exemptions to the ceiling limits, acting on the Second Plan’s recommendation that particular categories of land might be excluded from restrictions.

Digitization of land records was unsuccessful.

inadequate knowledge Due to a lack of sufficient and accurate data as well as poor administration among the numerous entities responsible for maintaining land records, the information registered at different levels of government is not the same.

Rural development requires integrated strategies:

It is imperative to progressively and fundamentally reject the Green Revolution strategy of supporting industrial chemical-based, subsidised agriculture.

For all of India’s various agro-climatic cultural zones, a single “natural farming” approach will not be suitable.

It is instead necessary to combine regionally created and established sustainable agro-cultures that can be altered to eliminate their social inequities (such as bonded labour and tenancy) and make them compatible with the new climate trends.

Additionally, laws that provide access to a range of alternative economic practises and support networks as well as a fair division of resources, such as water and land, must be created.

Payments must be made in order to promote the growth of “restorative agriculture,” which renews our soil and water resources and promotes agro-biodiversity and seed diversity. Contrast this with debt moratoria, populist giveaways just before elections, and subsidies.

By aiding farmers in establishing collectives where resources, labour, skills, and knowledge are pooled for production, value addition, and marketing, the many ways that farmers are excluded from profits or benefits could be addressed.

Democratic and decentralised agricultural planning can be linked to the revival of environmentally friendly farming, the facilitation of local gathering and distribution, and the preservation of regional food traditions that can lower malnutrition.

A new seed policy that puts emphasis on assisting regional seed banks can help farmers avoid the problematic commercial seed business.

Supporting small businesses and processing facilities that assist rural areas in maintaining resources and skills while simultaneously providing jobs is the answer to the complex challenge of unemployment and migration.

For rural India, a new economic deal is required that corrects past mistakes and heals the scars caused by years of disregard for healthcare, education, and other sectors that enhance quality of life.

Public institutions like panchayats, anganwadis, schools, and basic health centres are just a few that urgently need reforms to ensure that rural populations are treated as citizens, not as supplicants, and to de-bureaucratize state-citizen relations.

Conclusion:

The expansion of the agricultural sector and rural entrepreneurship are key to turning a developing nation into a developed one. Promoting rural entrepreneurship is essential for generating profitable employment and reducing the widening inequalities between the rural and urban areas. By providing the right information at the right time, timely and adequate financing, and continual encouragement of bankers, Panchayat union leaders, and volunteer service organisations, rural entrepreneurship would increase as a result of monitoring rural development activities.