1.Threats to India’s e-commerce (Live Mint)

2.The Warming offbeat (Nature)

1.Threats to India’s e-commerce (Live Mint)

Synoptic line: It throws light on the issue that India has taken an unfavourable stance on liberalizing e-commerce at the WTO, which may not help in making its SMEs competitive. (GS paper III)

Overview

  • India’s small and medium enterprises (SMEs), struggling to survive in the aftermath of demonetization and the introduction of the goods and services tax (GST), seem now to face the threat of global competition through e-commerce platforms.
  • In the recently concluded eleventh ministerial conference (MC11) of the World Trade Organization (WTO) held in Buenos Aires, developed countries sought to negotiate new global e-commerce rules which could liberalize e-commerce and benefit SMEs. India, however, has taken an unfavourable stance.
  • It has cited unfair market access to foreign companies in the currently ‘asymmetrical’ e-commerce space, with its power to hurt domestic e-commerce platforms, as well as SMEs, as the logic for such a stance. Such a stance, however, may not be in its own interests.

Importance of SME

  • SMEs, which contribute to almost 50% of India’s exports, can provide the basis for an export-led growth model. The challenge to the SME-led traditional growth models lies in the barriers that they face in growing their markets domestically and globally in a cost-effective manner. SMEs can use the e-commerce route to mitigate the challenges to their growth, as also to increase their competitiveness.
  • E-commerce can help SMEs expand their geographical reach to reap economies of scale, as also increase the speed and flexibility of business, with a positive impact on top-line growth. By tying up with reputed e-commerce marketplaces, SMEs can allay customer fears and mitigate the trust deficit associated with online transactions.
  • This would improve their profit margins by reducing overhead costs and upfront capital investments. At the same time, such e-commerce platforms also reduce transaction costs by eliminating the need for middlemen.
  • The internet economy, with its concomitant power of exponential growth, will prove to be a game changer in this regard. Active internet adoption for business activities by Indian SMEs, boosted revenue by 51%, profits by 49% and expanded the customer base of such SMEs by 7%, compared to SMEs which chose to remain offline.
  • Further, marketing and distribution spending were expected to be 60-80% lower than traditional marketing spending.

Increasing exports by SME

  • SMEs which used a wide range of internet tools to market, sell and support their products, called high-web SMEs, experienced a three-year sales growth of 19%, as opposed to13% growth experienced by low-web SMEs. More importantly, India’s export revenue from the sector was generated mainly by the technology-enabled SMEs.
  • Thus, 98% of such SMEs contributed to India’s export revenue, as opposed to only 11% of the traditional SMEs engaged in exports, which used the internet sparingly. SMEs that adopted e-commerce perceived it as a cost-effective medium for growing sales, ensuring business expansion, and increasing business profitability.
  • Indian SMEs have been slow in adopting e-commerce despite the strong evidence in its favour. It is critical that participants in the e-commerce ecosystem, as well as the government, understand and resolve the challenges associated with not adopting e-commerce, both on the demand and supply side.
  • The low rates of e-commerce adoption can be explained partly due to a lack of awareness of information technology products and services,and the e-commerce ecosystem as a whole. However, adoption rates by even those SMEs which had gone online were extremely low (27 %).
  • One important reason for the non-adoption of e-commerce on the sellers’ side is the perceived cost of technology adoption and maintenance. Lack of adequate financing for SMEs and confusion about the total cost of ownership and return on investment of technology adoption, as also the non-availability of ‘soft’ training and support required to sustain the usage of technology, act as factors causing the under-adoption on the sellers’ side.
  • On the demand side, issues pertaining to payment gateways, infrastructure, patchy internet connectivity, and the absence of a clear legal and regulatory environment, deter domestic adoption of e-commerce. Building trust regarding the timely and effective delivery of goods and services will prove to be the biggest challenge in building global demand for Indian SMEs’ products and services.
  • Changes in the information and communication technology (ICT) landscape, as well as global developments such as those represented by the WTO negotiations, will make SME-led global e-commerce a reality. It is important that India recognize this as an opportunity, and prepare and plan.

Way ahead

  • The government, in partnership with universities, can undertake active SME engagement to educate them on the power of the internet economy. SMEs can be made aware of the minimal investments, ranging from Rs99 to Rs3,000, required to establish an online presence or enter the e-commerce space, respectively.
  • At the same time, Indian SMEs can be encouraged to partner with global businessesto adapt to, or adopt, new technologies, innovations, and the quality needed to compete in global markets. It would be foolhardy to overlook the benefits to Indian SMEs of participating in the international value chains greater market access, improved efficiency and lower transaction costs that global e-commerce represents. The mantra should be join them to beat them.

Question How India’s stance on recent WTO negotiations may hurt India’s SME?

2.The Warming offbeat ( Nature) 

Synoptic line: It throws light on the issue of need of regional and global planning to combat extreme climate events. (GS paper II)

Overview

  • There have been unprecedented rates of glacier melts reported both in the Antarctic and the Arctic. Glaciers cover the terrain in both these regions, which have the only permanent ice sheets that still exist on earth today.
  • After enjoying a more or less stable temperature for the last 10,000 years, the earth is now seeing massive change in atmosphere, which has been speed up by anthropogenic activities. Though all the reasons for the temperature fluctuations observed are not yet entirely understood.

Melting Polar ice caps

  • The Antarctic ice sheet is 14million sq km in area and it holds a large amount of frozen fresh water. If all the ice over the Antarctic were to melt, sea levels would rise by about 60metres.
  • Antarctica and the Arctic are two very different environments, the former is a continent surrounded by ocean, and the latter is ocean enclosed by land. As a result, sea ice behaves very differently in the two regions; Studies show that globally, the decreases in Arctic sea ice far exceed the increases in Antarctic sea ice.
  • The Larsen Ice Shelf is situated along the northeastern coast of the Antarctic Peninsula, one of the fastest-warming places on the planet. In the past three decades, two large sections of the ice shelf (Larsen A and B) have collapsed. A third section (Larsen C) seems like it may be on a similar trajectory, with a new iceberg poised to break away soon.

Sea level rise in India

  • For the last several years, glaciologists have noticed that ice melt in the summer has increased and covers a larger area than previous years. Scientists now realize that a lot of the recent melt has been due to increasing surface melt, in addition to calving or breaking off of chunks of ice.
  • The Arctic Resilience Report found that the effects of Arctic warming could be felt as far away as the Indian Ocean, in a stark warning that changes in the region could cause uncontrollable climate change at a global level.
  • For India, the east coast, especially certain low-lying districts are extremely vulnerable to intensive storms, which then lead to flooding, salt-water intrusion, and loss of land and livelihoods. On the west coast, there will be generally fewer storms; the concern is coastal erosion and flooding from sea level rise. The discussion is not only related to sea level rise and coastal phenomena rather it is more related to economy of the state.

Reasons

  • There are several explanations for melting ice, such as it is affected by the temperature of the water, ocean currents and so on but other factors still not entirely understood, along with various positive feedback mechanisms that can speed up the melting.
  • It has been seen that when large chunks break away from an ice shelf, it speeds up the collapse of the entire shelf. Since this is attached to the rest of the glacier, these processes can increase the speed at which the glacier flows into the ocean.
  • The ice cap helps to cool sea and air temperatures, by reflecting much of the sun’s radiation back into space, and acting as a global cooler when winds and ocean currents swirl over and under it. Soot and dust carried by air from various places, bacteria and algal pigments in the melt water and any other pigments in the glacier, can all reduce the reflection of the sunlight, thus increasing the absorption of heat energy by the ice. This consequently increases ice melt, which then absorbs more solar radiation, thus accelerating a feedback process. The melt water flows into deep shafts or moulins and that then speed up the flow of the glacier.
  • Temperature variations are also other phenomena that have an influence on glacier melt. According to the Intergovernmental Panel on Climate Change (IPCC), when temperatures rise and ice melts, more water flows to the seas from glaciers and ice caps, and ocean water warms and expands in volume. This combination of effects has played the major role in raising average global sea level between four and eight inches in the past hundred years. Temperatures in Northern Greenland have been much warmer and in fact, surface melt has doubled Greenland’s contribution to sea level rise over the period 1992-2011.
  • Oceans are important sinks, or absorption centers, for carbon dioxide, and take up about a third of human-generated CO2.  Data shows that CO2 levels at the ocean surface are rising at about the same rate as atmospheric CO2. Carbon dioxide concentrations have crossed 400ppm in the atmosphere and are the highest they have been in the past 4,00,000 years.

Feedback mechanism

  • The Scientists have speculated for some years that so called feedback mechanisms, by which the warming of one area or type of landscape has knock-on effects for whole ecosystems that could suddenly take hold and change the dynamics of Arctic ice melting from a relatively slow to a fast moving phenomenon with unpredictable and potentially irreversible consequences for global warming.
  • For instance, when sea ice shrinks it leaves areas of dark ocean that absorb more heat than the reflective ice, which in turn causes further shrinkage, and so on in a spiral.

The way ahead

  • Enforcement of the coastal regulation zone, protecting vulnerable districts and the most vulnerable communities which rely on ecosystems and the sea for their livelihoods are areas that need strengthening. Regional agreements related to refugees from climate effects need to be initiated.
  • The global community is well aware that many large and densely populated cities are located along the coast and in low-lying deltas. Protecting the coast is an expensive undertaking and even then dikes, sea walls and similar structures provide only partial protection.
  • Expansion of the use of renewable energy and transformation of our energy system to one that is cleaner and less dependent on coal and other fossil fuels, this will decrease global emissions.
  • The Paris Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. For this all parties requires to put forward their best efforts through “Nationally Determined Contributions” (NDCs) and to strengthen these efforts in the years ahead. This includes requirements that all Parties report regularly on their emissions and on their implementation efforts.

Question: What should be the move on part of government to curb the threat of global warming ?