Development Watch – Week #3 November ’22

Development News

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Cover Image: New Terminal 2 at Bengaluru international airport (Source: Conde Nast)

Supply-chain Finance for Agriculture Sector

India is among the top 3 producers for more than 20 major crops, pastoral, and dairy products. However, farmers are yet to see a significant change in their incomes. Bolstering Indian agriculture with supply-chain finance will lead to stronger, sustainable growth in the sector. Nearly 55% of the Indian workforce is employed in agriculture, while contributing less than 20% of the national GDP. Between 2012-2019, average monthly income of farm household registered a small growth from Rs. 6,500 to Rs. 10,200/-. Also, 90% of the Indian farmers are small and hold less than 2 acres of land each.

Lack of access to formal finance or supply-chain finance (SCF) is a major impediment. It is also difficult to assess the creditworthiness of small enterprises, which makes farmers vulnerable to informal, local sources of funding at exorbitant interest rates. There are complexities in the farmer to commission agent, while commission agent to trader, which lacks collateral as per traditional banking systems. Lack of liquidity also adds stress.

A customized and demand-based credit will move focus from survival to improving efficiency, will foster innovation, and investment in better methods of farming. SCF as a ‘metered’ credit will be linked to actual trade transactions and the cash flows of borrowing farmers. It will address finance to all stakeholders at various levels including retailers, distributors, traders. New credit models like Farmer Producer Organizations (FPOs) and Joint Liability Groups (JLGs) are also being adopted by banks. Verifiable KYC data is making the process easier. It has also been observed that farmers with formal credit earn 17% more than those with informal financing.

Southern India’s first Vande Bharat train flagged off

The Prime Minister flagged off south India’s first Vande Bharat Express train on Friday, November 11. The PM visited Krantiveera Sangoli Railway Station in Bengaluru. This Vande Bharat train connects Mysuru and Chennai, via Bangalore.

He also flagged off the “Bharat Gaurav Kashi Darshan” train operated by Karnataka’s Muzrai Department, under the “Bharat Gaurav” train policy. The train covers holy places like Varanasi, Ayodhya and Prayajrag. Government of Karnataka also gives cash assistance of Rs. 5,000 to Kashi Vishwanath Yatra pilgrims.

Arunachal connected to Mumbai, Kolkata by Air

To enhance connectivity in the northeast part of India, Indigo airlines has announced Itanagar, capital of Arunachal Pradesh, as its 75th domestic destination in the 6E network. Indigo will begin flights from the newly constructed Donyi Polo Airport from November 28. This is Arunachal Pradesh’s first civil airport. Flights to Kolkata and Mumbai will also commence from Hollongi, around 15 km from Itanagar.

Developed by AAI, Donyi Polo is a green field airport costing Rs. 645 Crores. It can accommodate 200 passengers during peak hours. Spread over 4,100 sq m, the name Sun (Donyi) and Moon (Polo), represents the reverence of indigenous peoples towards nature. It also symbolizes the rich cultural heritage of the tribal-dominated state.

Terminal 2 of Bengaluru Airport inaugurated

New terminal 2 for Kempegowda International airport in Bengaluru was inaugurated by the Prime Minister on November 11. Terminal 2 has been nicknamed “Terminal in a garden” due to its extensive use of bamboo. Eco-friendly terminal has been constructed by L&T at a cost of approx Rs. 5,000 crores. Terminal 2 will cater to 2.5 Crore passengers annually. The passengers’ experience is designed to be a walk in the garden. It has hanging gardens and lush greenery both within and outside. The theme was conceptualized by Skidmore Owings and Merrill, an American firm. It will be fully operational by December end of 2022. Initially, the terminal will handle only domestic air traffic and international flights will operate out of Terminal one only.

$90 trillion needed by 2030 in world Climate funding

At COP 27, world leaders have assembled at Sharm-el-Sheikh in Egypt to develop approaches to mitigate impact of climate change by reducing emissions. To achieve this, suitable infrastructure needs to be built based on green energy. As per World Bank, all countries need to make collective investment of $90 trillion by 2030. Transition to green economy will also create more jobs and opportunities. This concept is known as climate funding.

Several pension funds and investment firms are also moving at scale with asset managers and companies to decarbonize and align with net-zero targets. However, most developed countries did not meet their targets of $100 billion per year by 2020 to support developing countries. There is a pressing need to transform sectors such as energy, transport, agriculture, food, land-use, etc from carbon-intensive to carbon sequestering.

India is also in the process of issuing maiden sovereign green bonds to fund projects in 9 categories. These include renewable energy, pollution control, green building, clean transportation and water and waste management. Proceeds from the issue will also be used to fund hydropower plants larger than 25 megawatts, nuclear projects, or any biomass-based power generation with biomass originating from protected areas. The union government has set up a Green Finance Working Committee, headed by Chief Economic Adviser V. Anantha Nageswaran. The committee will oversee selection of projects and fund allocation.

Rs. 25,000 Crores additional funding likely for MGNREGS

Finance Ministry may give additional Rs. 25,000 crores for MGNREGS being run by Ministry of Rural Development. However, the Ministry has asked to identify and remove inefficiencies to cater to this demand. In the past 3 years, actual outlay has exceeded the budget estimates. For two years, it has been above or close to Rs. 1 trillion. As per the scheme website, October work demand was lowest during FY 2022.

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