The HINDU Notes – 30th December 2019 - VISION

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Monday, December 30, 2019

The HINDU Notes – 30th December 2019

📰 Governance Index: On study of States on governance

Marking States on different parameters can incentivise performance

•The nation-wide comparative study of States on governance carried out by the Government of India, as seen in the Good Governance Index (GGI), is a welcome exercise to incentivise States to competitively deliver on public services to the citizens. This is not the first time that benchmarking of States has been carried out. Different agencies including NITI Aayog, the government’s policy think-tank, are evaluating the States on different parameters. The findings of the GGI’s inaugural edition are significant in many respects. Although Tamil Nadu has always had the reputation of being a better-run State, it is only now that it is ranked first in any study of this kind. Its strength has been the ability to ensure stable and smooth delivery of services without much ado. But it is not the only southern State to have put up an impressive performance. Three of its neighbours are among the top 10 of the big 18 States, one of the three groups formed for the study with the north-east and hill States and Union Territories being the other two. Of course, traditionally, the south has been ahead of others in several parameters of development. What is more significant about the GGI is that the dubiously-labelled “BIMARU” States are seeking to catch up with others in development. Of the nine sectors, Rajasthan, a “BIMARU” State, has finished within the top 10 in five sectors, Madhya Pradesh in four and Uttar Pradesh in three. In agriculture and allied sectors, almost all the “BIMARU” States are within the top 10 category and in human resources development, U.P. and Bihar figure. In the composite ranking, Chhattisgarh and Madhya Pradesh are ranked fourth and ninth, respectively. The key message is that these northern States can catch up with others in due course of time, if the political leadership shows the will to overcome historical obstacles and stays focused on development.

•Any index of this nature is bound to have some shortcomings, at least in the first round, a feature that the framers of the GGI have acknowledged. Some indicators — farmers’ income, prevalence of micro irrigation or water conservation systems and inflow of industrial investment — have been left out. The indicator, “ease of doing business”, has been given disproportionate weight in the sector of commerce and industries, to the virtual exclusion of growth rate of major and micro, small and medium enterprises. Moreover, there will always be an unending debate over which indicators — process-based or outcome-based — should get more importance in the design of such a study. Notwithstanding these shortcomings, what is noteworthy is that the Centre has made an attempt to address the problem of the absence of a credible and uniform index for an objective evaluation of the States and Union Territories. It goes without saying that the GGI requires fine-tuning and improvement. But that does not take away the inherent strength of the work that has been accomplished, keeping in mind India’s size and complexity.

📰 India needs a bottom-up growth model

The country requires an employment and income strategy to guide its industry and trade policies

•India’s bold decision to stay out of the Regional Comprehensive Economic Partnership (RCEP) until the needs of the country’s small enterprises, farmers, and poorest citizens are properly addressed dismayed many economists. The Indian government’s fear was that the resulting increase in Chinese exports would harm small producers and farmers.

•China and India, the two most populous countries in the world, both embarked on new journeys around the same time. More than 70 years later, China has progressed much faster. India, other the other hand, is yet to reach the development indicators that China attained back in the early 1990s.

People-centric policies

•A Chinese thought leader said 15 years ago that both countries have the same vision: of prosperity for their citizens. To reach there, they must cross a turbulent stream by feeling the stones underfoot. But how do governments do that?

•First, they need to make their policies people-centric rather than growth-centric. The Communist Party of China demands that local officials address the needs of citizens’ effectively, as does Singapore’s government. The Chinese government derives its legitimacy from citizens’ satisfaction with their well-being, not from a vote in an election, Singapore Minister Tharman Shanmugaratnam once said.

•In the case of India, its constitutional structure enables its States to adopt different models of development. Thus, there is a ‘Kerala model’, a ‘Gujarat model’, and now a ‘common man’s model’ implemented by the Aam Aadmi Party (AAP) in Delhi. Local, participative governance has been a distinction of Kerala’s model. and the State has been well ahead of the rest of the country, matching China in its Human Development Indicators in education, health, and women’s inclusion.

•Delhi’s AAP government has adopted a people-centric model of government. It has established School Management Committees with parental involvement. Teacher training budgets have increased five-fold. The performance of Delhi’s government schools is not only higher than the national average, it now exceeds the performance of private schools in Delhi. Public health expenditures have more than doubled. ‘Mohalla clinics’ have been set up in poor colonies to provide accessible and affordable health care.

•The share of unauthorised colonies provided with piped water has increased from 55% to 93% in just five years, reducing the need for poor people to pay for expensive tanker-delivered water. But despite water subsidies for the poor, the Delhi Jal Board’s income has increased. Electricity supply has expanded to include 20% more consumers. Amongst Indian metros, Delhi provides the cheapest electricity. Yet, its distribution companies, all in the private sector, have improved their financial performance.

Increase in disposable incomes

•The government has computed that its programmes for improving the ‘ease of living’ of citizens by improving the quality and accessibility, and reducing costs, of a range of public services has increased savings per family by ₹4,000 per month. The increase in disposable incomes has resulted in additional consumer-buying power, estimated at ₹24,000 crore per annum.

•This proves that growth must be bottom-up to be equitable and sustainable. India has climbed many rungs on the World Bank’s ‘Ease of Business’ rankings. Yet, investments to expand production ventures have not increased much because consumer demand has slumped, even for basic items like packaged biscuits. It seems odd that democratically elected governments in many countries, including India, who should be focused on citizens’ well-being, have become so focused on making it easy for global capital to do business in their countries. This has made citizens rise up against the globalisation paradigm promoted by an ‘establishment’ of policymakers and economists. Citizens want their governments to put jobs in their countries first, and to implement policies that increase incomes at the bottom of the pyramid rather than facilitating only further growth at the top.

•India’s complex, socio-economic environmental system is under even greater stress. The country must improve on many fronts simultaneously. India ranks very low in international comparisons of human development (education and health), even below its poorer subcontinental neighbours. It is the most water-stressed large economy in the world; its cities are the most polluted. India’s economic growth is not generating enough jobs for its burgeoning population of youth: the employment elasticity of India’s growth (numbers of jobs created with growth) is amongst the worst in the world. Bold actions without an understanding of the whole system can cause great harm. The bold move to demonetise the currency notes in 2016 was an egregious example. Unemployment of persons with vocational education has gone up between 2011-12 and 2017-18, from 18.5% to 33%. India now has a larger number of frustrated youth.

More free trade not the answer

•The RCEP decision shows that India is now standing up to pressure from a rump of Washington Consensus economists who continue to advocate that more free trade is the solution to India’s economic problems, even when there is evidence that India has not benefited from the agreements it has entered into.

•India’s challenge now is to build an Indian ecosystem in which competitive enterprises will grow to create more opportunities for jobs for youth and for increasing citizens’ incomes. Growth of incomes in India will make India more attractive for investors. A stronger industrial system will give India more headroom in trade negotiations too. India’s industrial and entrepreneurial ecosystem’s growth must be accompanied by an improvement in environment. Policies must be managed with a whole systems view. While ‘Ease of doing Business’ gauges health from a business perspective, ‘ease of living’ should become the measure of the health of the whole system.

•Policy decisions invariably require compromises between competing interests. Here, Mahatma Gandhi’s talisman provides a good test. The government should think of the needs of the poorest citizens first. Reduced duties on imports benefit citizens as consumers. However, a citizen’s more fundamental need is for a good job and source of income to buy the imported goods. India urgently requires an employment and income strategy to guide its industry and trade policies.

📰 FATF puts 150 questions to Pak.

•A global watchdog for terror financing has sought more clarifications and data from Pakistan on actions taken by it against madrasas belonging to the banned outfits, weeks after Islamabad submitted a report to the Paris-based body detailing steps taken by the country to curb terrorism and money laundering.

•The Financial Action Task Force (FATF), which kept Pakistan on the Grey List for an extended period till February 2020, had warned in October that Islamabad would be put on the Black List if it did not comply with the remaining 22 points in a list of 27 questions. Pakistan submitted a report comprising answers to 22 questions to the FATF on December 6.

•In response to the report, the FATF’s Joint Group has sent 150 questions to Pakistan, seeking some clarifications, updates and actions taken against the madrasas belonging to the proscribed outfits. “We did receive a response from the FATF on our compliance report through an email in which they raised a set of 150 questions. Some of them are seeking more data, some clarifications, and most importantly questions related to madrasas and actions taken against them having affiliation with proscribed outfits,” The News quoted a top official source as saying.

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