The HINDU Notes – 01st February 2020 - VISION

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Saturday, February 01, 2020

The HINDU Notes – 01st February 2020

πŸ“° CEA sees growth rebounding to 6%

Economic Survey admits to slowdown, seeks end to norms stifling industry’s global competitiveness

•The Economic Survey for 2019-2020 seems an exercise driven by 20/20 hindsight, combined with an optimistic 20/20 vision for the year to come, as it expects GDP growth to revive from the 5% estimated for this year to a range between 6%-6.5% next year.

•The Survey hints at going easy on fiscal deficit targets in a bid to shore up growth and makes a valiant attempt to evangelise wealth creation by entrepreneurs instead of demonising them.

•It also calls for unravelling multiple regulations stifling Indian industry’s global competitiveness and urges policy makers to stop being “judgemental” about importing inputs, assembling them and re-exporting them, even if it means little value-added at home. Focussing on just six such ‘network’ sectors, could generate 4 crore jobs by 2025 and 8 crore jobs by 2030 and reverse the country’s tepid job creation record, the Survey said.

Blames UPA

•While admitting there has been a slowdown in economy, poised to grow at just 5% in 2019-20 — the slowest in 11 years — Chief Economic Adviser (CEA) Krishnamurthy Subramanian, who had in his last Survey projected 7% growth for the year, attributed the deceleration to slower global growth and domestic financial sector woes that need urgent attention.

•But he added that the seeds for the growth decline since 2017 were sowed under the UPA regime in 2013, when private investment began tapering off due to a credit boom-bust.

•To make a point about how being pro-crony is different from being pro-business, the Survey refers to the gains made unfairly by stocks of connected companies before the CAG report on the 2G spectrum allocations came out in 2011, again rejuvenating UPA-era malfeasance memories.

•While food inflation has spiked, the Survey uses behavioural economics to show that eating a thali has become more affordable in recent years, more so for vegetarians.

•Since 1 A.D, the CEA said, India has been a dominant economic powerhouse, driving wealth creation in the world for three-fourths of known economic history.

•Indicating that it was time to get away from misplaced socialistic instincts to return India to its past glory, Mr. Subramanian called the Survey a synthesis of old ideas with new ones, juxtaposing contemporary evidence with ancient texts.

•The Survey delves into texts from 4th century BC and cites Tamil poet Tiruvalluvar’s Thirukural and Kautilya’s Arthashastra to espouse the virtues of the invisible hand of the market combined with trust in wealth creation.

•It then goes on to tap Wikipedia to identify the 100 largest banks in the world where just one Indian bank figures. The Survey hopes for at least eight domestic entities to join the league so that India can be a $5 trillion economy.

•The higher growth hopes for the coming year are actually based on ‘conservative’ estimates, asserted Sanjeev Sanyal, Principal Economic Adviser to the Finance Ministry.

πŸ“° Foreign Secretary unveils major MEA revamp

Seven additional secretaries empowered to look at long-term solutions

•The Ministry of External Affairs (MEA) has undertaken a major overhaul of departments and reporting structure that will effectively empower seven different Additional Secretaries and re-organise their tasks along themes like culture, trade and development, and consolidated geographical divisions for better coordination.

•According to three orders issued on Thursday by the new Foreign Secretary Harsh Vardhan Shringla less than a day into his tenure, the silos that will be managed by the Additional Secretaries will range from cultural power, to be managed by Dinesh Patnaik, economic and trade coordination managed by P. Harish, all international organisations and summits including UN, G-20, BRICS etc. by Vikram Doraiswami, and all development partnerships by Akhilesh Mishra. All of Europe has been merged under Suresh Reddy, all of Africa and West Asia under Nagma Mallick and all of the Indian Ocean and Indo-Pacific region under Neena Malhotra.

•The restructuring was done in consultation with External Affairs Minister S. Jaishankar, who as a former foreign secretary (2015-2018) managed the Ministry himself, and authored the plans, sources said.

Burdened by routine

•At a meeting to discuss the changes, Mr. Jaishankar reportedly spoke to Foreign Service officers of his belief that secretary-level officials are “overburdened and overworked” with day-to-day duties, and lack much-needed time to strategise. In the new structure, additional secretaries will be empowered to look at more long-term solutions rather than only “firefighting”, and will travel and give political direction to their assigned portfolios.

•At the secretary level there are now four officers apart from the Foreign Secretary, with Sanjay Bhattacharya, who returned from his tenure as Ambassador to Turkey to take over the Secretary, (Consular, Passport, Visa and Overseas Indian Affairs) Division, and will also oversee officials on the Gulf and West Asia/North Africa (WANA) divisions.

•The additional charge indicates the importance of the Indian diaspora in the Gulf and WANA regions where about eight million Indian expatriates live, about a quarter of the world total, that account for more than 60% of the inbound remittances.

•Another change is the decision to move the “External Publicity” (XP) the media and public relations division to work under Secretary (West) Vikas Swarup, who has experience in the workings of the division, as he was spokesperson in the past.

Leveraging soft power

•As the new Director General for the Indian Council for Cultural Relations (ICCR), Dinesh Patnaik will consolidate the government’s push to promote its cultural, heritage, history, tourism objectives and showcase the diaspora, with the ICCR being rebranded as the government’s “soft power” vehicle.

•Mr. Shringla also reshuffled a number of joint secretary level postings on Thursday, including appointing Anupam Ray, who has returned from the U.S. — where he was Consul-General in Houston and organised the “Howdy, Modi” event — to head Public Policy and Research, which also entails planning the MEA’s flagship Raisina Dialogue conference in January.

•One of Mr. Shringla’s first big tasks after returning from Washington, where he was Ambassador, will be planning the 3-city, 3-day visit of U.S. President Donald Trump expected on February 24-26. He will be assisted by his replacement Taranjit Singh Sandhu who is moving from Colombo shortly, in order to work on the visit.

•New appointments to key capitals, including Singapore, Paris, Kathmandu, and Ottawa, have also been made, and decisions over the next envoys to London, and the two United Nations postings, Permanent Mission (PMI) in New York and Geneva will be due later this year.

•In other changes, 1999 batch Indian Foreign Service (IFS) officer Rudra Gaurav Shresth was appointed Officer on Special Duty (OSD) in the Prime Minister’s Office (PMO) on Friday. Mr. Shresth is currently Deputy Chief of Mission (DCM) in Thimpu, Bhutan. Earlier, he served as India’s High Commissioner in Mozambique and in the policy planning and research division in the MEA.

πŸ“° Economic Survey 2020 pitches divestment in public sector undertakings

Economic Survey says public sector units performed better than peers after privatisation

•The Economic Survey has aggressively pitched for divestment in public sector undertakings (PSUs) by proposing a separate corporate entity wherein the government’s stake can be transferred and divested over a period of time.

•Further, the survey has said privatised entities have performed better than their peers in terms of net worth, profit, return on equity and sales, among others.

Independent board

•“The government can transfer its stake in listed CPSEs to a separate corporate entity. This entity would be managed by an independent board and would be mandated to divest the government stake in these CPSEs over a period of time,” stated the Economic Survey presented on Friday.

•“This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs,” it added. The survey analysed the data of 11 PSUs that had been divested from 1999-2000 and 2003-04 and compared the data with their peers in the same industry.

•“Analysis shows that these privatised CPSEs, on an average, performed better post-privatisation than their peers in terms of their net worth, net profit, return on assets (ROA), return on equity (RoE), gross revenue, net profit margin, sales growth and gross profit per employee,” the Survey said.

•“More importantly, the ROA and net profit margin turned around from negative to positive, surpassing that of peer firms, which indicates that privatised CPSEs have been able to generate more wealth from the same resources... The analysis clearly affirms privatisation unlocks the potential of CPSEs to create wealth,” it added.

•Interestingly, according to the government document, the recent approval of strategic disinvestment in Bharat Petroleum Corporation Limited (BPCL) led to an increase in value of shareholders’ equity of BPCL by ₹33,000 crore compared to its peer Hindustan Petroleum Corporation Limited.

•“Aggressive disinvestment, preferably through the route of strategic sale, should be utilised to bring in higher profitability, promote efficiency, increase competitiveness and to promote professionalism in management in CPSEs,” stated the Survey.

•“The focus of the strategic disinvestment needs to be to exit from non-strategic business and directed towards optimising economic potential of these CPSEs,” it added, highlighting there were about 264 CPSEs under 38 Ministries or departments.

πŸ“° Death penalty | Supreme Court admits government plea seeking ‘victim and society centric’ guidelines

The application comes in the aftermath of the four Nirbhaya convicts separately and repeatedly approaching the courts for one relief or the other

•The Supreme Court on Friday admitted the government’s plea to issue some “victim and society centric” guidelines to prevent delay in execution of condemned people in death penalty cases, but added the rider that it would not consider any plea to alter past judgments or existing rights of death row prisoners.

•The government’s application delves on the point that the legal process leading finally to the actual execution of the condemned man is labyrinthine and susceptible to be misused by the convict to prolong the day of execution. Delay is a ground for commutation of death penalty. The long-winded process and consequent delay renders stale the expectation of the victim’s family and society for justice.

Shatrughan Chauhan case

•The government claimed that the reason for this delay is a series of guidelines laid down by the Supreme Court in its judgment in the Shatrughan Chauhan case in 2014. These guidelines had primarily held that unexplained delay in carrying out an execution would lead to commutation of death penalty to life imprisonment. The government called the 2014 verdict “accused-centric” and called for a change to appease the victims and society.

•“We (Supreme Court) have always rendered judgments with the victims in our mind. Our decisions are for the victims. It is the law of the land,” Chief Justice S.A. Bobde reacted to Solicitor General Tushar Mehta, for the government.

•The three-judge Bench led by Chief Justice Bobde questioned the government’s locus standi in filing the application. The CJI said both the review and curative petitions against the Chauhan verdict already stood dismissed.

•The court asked how the government could file an application now, seeking to modify or add to the guidelines laid down by the Supreme Court in 2014 as part of a judgment.

•Undaunted, Mr. Mehta repeatedly expressed the government’s concern for victims awaiting justice. He said the government was merely seeking some “additional” guidelines to the ones in the Chauhan verdict to balance the scale.

•Finally, the court agreed to issue formal notice, but the CJI clarified in its written order that the court would not entertain any alteration in the conviction or sentence in the Chauhan case.

•The Supreme Court had commuted the death penalty of 15 convicts to life sentence in the Chauhan case.

•In its application, the government has asked the court to set short deadlines for death row convicts to seek legal remedies. It wants the court to limit the time for filing curative petition. Mercy plea should be filed within a week of issuance of death warrant. If mercy plea has already been rejected, death warrant should be issued within the next seven days and execution carried out a week thereafter. The pendency of review or curative petitions of his co-convicts would be of no consequence for a man whose mercy plea has been rejected.

•The application came in the aftermath of the four Nirbhaya convicts separately and repeatedly approaching the courts for one relief or the other.

•Their execution dates were extended from January 22 to February 1.

πŸ“° Economic Survey 2019-20: ‘No evidence of wrong estimation of growth’

The Economic Survey also added that since 10% increase in new firm creation increases district-level GDP growth by 1.8%.

•In an effort to put to rest all speculation over the accuracy and reliability of India’s GDP data, India’s Chief Economic Advisor (CEA) Krishnamurthy Subramanian on Friday asserted that there is “no evidence” of mis-estimation of growth of the Indian economy.

•The debates on the issue were kicked off last year after Mr. Subramanian’s predecessor, Arvind Subramanian — in a research paper published by Harvard University last year — had said India’s GDP growth in the period 2011-12 to 2016-17 is likely to have been over-estimated. The former CEA had argued that GDP growth during that period was actually 4.5% rather than the 7% presented by the official data.

•“Concerns of a mis-estimated Indian GDP are unsubstantiated by the data and are thus unfounded,” the CEA said in the Economic Survey 2020, in which an entire chapter has been dedicated to the issue.

•The Survey noted that since investors deciding to invest in an economy care for the country’s GDP growth, uncertainty about its magnitude can affect investment. “...It is important that GDP is measured as accurately as possible. Recently, there has been much debate and discussion among scholars, policymakers and citizens alike on whether India’s GDP is estimated correctly.”

•“...the chapter carefully examines the evidence, leveraging existing scholarly literature and econometric methods to study whether India’s GDP growth is higher than it would have been had its estimation methodology not been revised in 2011. Using a cross-country, generalized difference-in-difference model with fixed effects, the analysis demonstrates the lack of any concrete evidence in favour of a mis-estimated Indian GDP,” the Survey said.

‘Global mis-estimation’

•It added that the models that incorrectly over-estimate GDP growth by 2.7% for India post-2011 also mis-estimate GDP growth over the same time period for 51 other countries, out of 95 countries in the sample. Several advanced economies such as U.K., Germany and Singapore turn out to have their GDPs mis-estimated when the econometric model is incompletely specified, the Survey claimed.

•Further, it added that correctly specified models that account for all unobserved differences among countries as well as differential trends in GDP growth across countries, fail to find any mis-estimation of growth in India or other countries.

•The Economic Survey also added that since 10% increase in new firm creation increases district-level GDP growth by 1.8%, and the pace of new firm creation in the formal sector accelerated significantly after 2014, the resultant impact on district-level growth and country level growth, must be accounted for in any analysis.

•It, however, added that, “The need to invest in ramping up India’s statistical infrastructure is undoubted,” and in that context, a 28-member Standing Committee on Economic Statistics (SCES), headed by India’s former Chief Statistician, is important.

πŸ“° Thinking beyond farm sops

India needs well-tailored farm measures to balance the national requirement with farmers’ aspirations

•The year 2019 witnessed a series of interventions and disruptions in the farm sector. The first half of the year saw the launch of a grand farm sop in the form of the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) with a record allocation of ₹75,000 crore. The second half, however, was a disaster for the sector as many parts of the country witnessed drought and floods. The economic slowdown and the spiralling onion and vegetable prices burdened consumers (including farmers), providing a short respite to only a section of farmers.

•This clearly reflects two things: one, populist measures have a low bearing on the economy. Second, despite several measures to reduce vulnerability of climate-induced disasters, the farm sector and farmers continue to suffer losses. Therefore, taking cognisance of past experience and leveraging on opportunities that exist is a must to boost agriculture.

Focus areas

•Agriculture is a crucial segment for inclusive development and provides stimulus to the economy, especially when it is not doing too well. Since the country has several targets and commitments to be achieved in the next decade, it is imperative to lay a strong foundation by launching measures that can stem falling farm growth. First, the disparity in agriculture expenditure and growth drivers, mainly the subsidiary sectors, must be addressed. Despite higher growth in livestock and fisheries sector, only moderate to low expenditure was recorded. Expenditure on livestock and fisheries must be increased, as they are mainly connected with resource-poor families in rural areas and also to raise the decelerating growth rate. Moreover, the expenditure on research and development in agriculture needs to be raised from nearly 0.40% of agriculture GDP to 1% as it pays huge dividends in the long run in ameliorating poverty and improving livelihoods compared to any other investment. Considering India’s dependency on agriculture and recurring climate-induced disasters, it is imperative to expand the implementation of Climate Smart Villages of the Indian Council of Agricultural Research-National Innovations on Climate Resilient Agriculture (NICRA) across the nation.

•Second, the Farmer Producer Organisations (FPOs), which are currently facing operational and structural issues governed by different Acts and funded by various sources, may be strengthened by bringing them under one institution, preferably an FPO Development and Regulatory Authority. A structured impetus must be given to build block chain based e-market places connecting farmers, traders, agencies, institutions and exporters on a common platform to check price fluctuations and harness decentralisation. Further, affordable technologies must be developed and deployed particularly in rural and remote areas where digital literacy of farmers has improved considerably. Key farm institutions and organisations in the front line of farm service, dealing with perishables and low shelf life commodities, must digitalise so that they are efficiently managed.

Private sector involvement

•Third, large-scale investment in agriculture over several years have encouraged monoculture, threatening the environment and soil health (mainly in green revolution areas). Thus small-scale investment measures or an incentive-based system is essential to scale up sustainable practices such as agroforestry, climate-smart agriculture, ecosystem services, conservation agriculture and others. Increasing corporate social responsibility will help to tap more private investments besides encouraging private players in potential areas where production sustainability is possible.

•Fourth, the government must establish a farm data agency, which can consolidate, collate and maintain farm data available at various platforms. Ongoing efforts of digitisation of land records must also include farmer-centric advisories. The farm data agencies can also facilitate beneficiaries identification, better targeting of subsidies, support systems of various developmental programmes. Access to farm agency data for scientific institutions and all other relevant stakeholders can hasten the process of technology dissemination and aid research systems for better policies.

•Fifth, commissioning ease of farming index is necessary to ascertain the progress made by national and State governments on the key indicators of farming. Possibly, the exercise can be done with active involvement of proven private/public institutions or international agencies. This perhaps stands away from the conventional assessment of effectiveness of agriculture policies and programmes that are part of the farm support system. Moreover, the exercise may foster cooperative and competitive federalism besides encouraging States which are lagging behind to catch up.

Welfare commissions

•Last, the need of the hour is setting up two institutions; one, a national agricultural development council on the lines of the Goods and Services Tax Council under the chairmanship of Prime Minister for effective coordination and convergence of States on key reforms and policies; two, farmers’ welfare commissions (both at the Centre and State level), as an independent institutional mechanism which will act as a neutral platform for assessing all agriculture-related issues and schemes. Involvement of centrally-funded research organisations as knowledge partners would help to coordinate and refine existing developmental schemes in agriculture and allied sectors.

•It is pertinent to deliberate on an ‘Indian Agricultural Service’ on the lines of the Agricultural Research Service of the United States Department of Agriculture. In addition, to deal effectively with increasing droughts and floods and other extreme events, transfer of some subjects to the concurrent list is of prime importance.

•In the era of global uncertainty and domestic glitches, we need well-tailored farm measures beyond short-run sops to balance the national requirement with the farmer’s aspirations. Moreover, the right mix of direct benefits and price support with focused investment on resource conservation will bring stability in a farmer’s income. The promised achhe din for all must include farmers too which is only possible with steps engaging all stakeholders and sectors.