Current Affair 1:

AVIATION SECTOR of India

 

The Indian aviation sector is the third biggest domestic aviation market worldwide and the ninth largest international aviation market. On the demand side, India’s passenger traffic grew at a 11% compound annual growth rate (CAGR) between FY16-20 to touch 341 million in FY20. On the other hand, 62 airports have been built between 2014 to date taking the total tally to 136 to boost airport infrastructure to cater to growing demand.

Government Initiatives

The Government of India has taken several steps for the growth of aviation sector in India. These include -

Regional Connectivity Scheme – UDAN (Ude Desh Ka Aam Nagrik):

Launched in October 2016, the aim of this scheme was to develop new regional airports, upgrade the infrastructure of existing ones, and develop subsidized air routes.

• To subsidize regional flights, a small levy of Rs 50 (US$ 0.6) is charged on flight tickets between major routes.
• Cap airfare at Rs 2,500 (US$ 32.8) for a 1-hour journey of 500 km.
• Develop 100 new airports, heliports, and water aerodromes between 2019-24, for which the airport authority of India (AAI) had set aside Rs 25,000 crores (US$ 3.3 billion).
• Allott 780 routes to airlines.
• The scheme detailed three types of concessions:

Central Government - Viability Gap Funding (VGF), provided to make air travel routes more viable for airlines.

State Government - reduction of Value-added Tax (VAT) to 1% or less for ten years to airports developed under the scheme, as well as providing land for airports at subsidized rates.

Airport Operators – waive parking, landing, and storage charges at participating airports, and no TNLC (Terminal Navigation Landing Charges).

Union Budget Incentives:

During the Union Budget for FY 2021-22, the Ministry of Civil Aviation announced few positive measures for the aviation sector:

• Tax holiday for capital gains income of aircraft leasing and financing companies, and tax exemptions for aircraft lease rentals or royalties paid to a foreign lessor.
• Custom duty was reduced from 2.5% to 0% on aviation sector components, including engines, for aircraft manufacturing done by PSUs of the Ministry of Defence. This will decrease the input cost for domestic manufacturers.

GST:

In March 2020, the GST rate for manufacturing, repair and operations (MRO) for services provided locally was reduced from 18% to 5%, and the place of supply for B2B MRO services was changed to the location of the recipient. This would help invite foreign investment in the aviation sector and generate meaningful employment.

FDI:

FDI is a huge driver of economic growth and a good source of non-debt financing for the country's economic development. In the aviation sector, FDI helps in setting-up new airports, and improving the infrastructure and services of existing airports. It encourages competition, helps lower the prices and provides the consumer with more choice. According to leading national credit agency CRISIL, FDI of up to US$ 6 billion is expected to flow into the Indian airport infrastructure by FY23.

Private sector investments:

To ensure accessibility, inclusivity and affordability, increased private sector contribution will also be required through Public-Private Partnership (PPP). Furthermore, for the first time in two decades, two new airlines will start operations in 2022 -

• Akasa is backed by billionaire investor Mr. Rakesh Jhunjhunwala and is looking to breach the ultra-low-cost carrier (ULCC) segment.
• Jet Airways 2.0 will begin operations in early 2022 with the plan to start services from metro cities, and gradually expand into tier 2 and tier 3 cities.

Current Affair 2:

MSME SECTOR – IMPERATIVE TO LIFT INDIAN ECONOMY

 

Micro, small and medium enterprises (MSMEs) are considered the pillars of Indian economy due to their considerable contribution to GDP, exports and employment generation.

The MSME sector has coordinated and worked with relevant ministries, state governments and stakeholders to develop India’s rural economy. India has an estimated 633.88 lakh MSMEs, of which 324.88 lakh MSMEs are based in rural areas and 309 lakh are from urban areas.

What are MSMEs?

 

MSMEs are mainly engaged in the development, manufacturing, processing or storage of goods and commodities. They are classified based on investment and turnover, as per the following criteria.

The sector has made significant contributions to the country's socio-economic growth and complemented major industries as well. MSMEs account for approximately 40% of India's total exports, 6.11% of GDP from the manufacturing sector and 24.63% of GDP from the services sector.

Key drivers of the MSME sector

 

• Favourable industrial policies: Ease of doing business is an essential factor, achieved through various policies, incentives, labour laws and regulatory clearance.
• Encouragement of FDIs: Liberalised FDI policies led to overall productivity and competitiveness in the MSME sector.
• Technology: Has played a crucial role in enhancing operations in the MSME sector and connecting with global value chains.
• Access to capital: The government finances MSMEs through schemes such as Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) and Credit Linked Capital Subsidy (CLCSS).

Policies and developments

The MSME sector is governed under the Micro, Small and Medium Enterprises Development Act, 2006. This act came into effect to facilitate and promote the sector and enhance its competitiveness. Schemes launched by the government under this act are:

• Prime Minister Employment Generation Program (PMEGP) – A bank-appraised and -financed programme to generate employment opportunities
• Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) – Jointly set by Ministry of MSME and Small Industry Development Bank of India (SIDBI) to catalyse the flow of credit to micro and small enterprises
• Interest Subvention Scheme – Introduced by Reserve Bank of India (RBI) to provide relief of up to 2% of interest to legal MSMEs
• Credit Linked Capital Subsidy Scheme – Providing upfront 15% subsidy to facilitate technology upgradation in MSMEs
• Gram Udyog Vikas Yojna – One of the two components of Khadi Gramodyog Vikas Yojana, aimed at promoting village industries.

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