Mains Current Affairs UPSC CSE -Sept Week 3
- India has made impressive gains in overcoming hunger, but the fight against “hidden hunger” remains a huge challenge.
- Nearly three out of five children below age 5 and more than half (54%) of all pregnant women in the country are anaemic.
- Close to two out of five kids in the same age group are stunted and more than one in every five is wasted, which means they are too thin for their height.
- The WHO describes hidden hunger as a lack of vitamins and minerals that occurs when the quality of food people eat does not meet their nutrient requirements.
- It’s a silent epidemic that cuts across gender and age divides in much of India’s heartland and beyond.
- The problem calls for persistent action on several fronts, but here is the good news.
- Researchers now say a potent weapon in this fight could be the humble wheat, a staple consumed across classes in the region.
- It’s a potential game changer that the Modi government, which launched the Kuposhan Mukt Bharat (Malnutrition-free India) campaign last year, has begun to take note of.
- Breakthroughs in breeding have produced new varieties of the cereal, called biofortified wheat, containing significantly higher amounts of zinc and moderately raised levels of iron — two micronutrients WHO identifies as the most lacking in diets globally.
Over the past few years
- Around 10 years ago, researchers at the International Maize and Wheat Improvement Centre in Mexico — better known by its Spanish acronym, Cimmyt, an institute set up by green revolution pioneer Norman Borlaug — began work on developing wheat with higher zinc and iron, under an initiative called HarvestPlus.
- Over the past few years, Govindan’s team in Mexico has released a number of varieties that have 20-30% higher zinc content than other wheat, along with elevated iron levels.
- The success of the programme has now led to a more ambitious plan to transfer the high zinc and iron traits into all elite wheat varieties developed by Cimmyt.
- The project is key because Cimmyt, through its partner agencies, is a major source of new wheat varieties around the world, particularly India.
- HarvestPlus ranks India at No. 3 out of 128 countries suitable for investing in zinc wheat.
- That’s not just because the country has the highest hidden hunger numbers but also since it is whole wheat grain that is consumed in India, mostly as chapattis, making it ideally suited to gain from zinc wheat as a good proportion of the nutrients lie in the outer layer of the grain — the bran — which is discarded in many countries.
- Eleven varieties of zinc wheat, adapted from Cimmyt’s strains by centres such as Punjab Agriculture University, Banaras Hindu University and private players, have been released in India so far.
- The Centre aims to include zinc wheat in the mid-meal programmes. But before that, a market segregation mechanism needs to be developed.
India is unlikely to meet targets set under the ambitious Poshan Abhiyan or National Nutrition Mission (NNM) for reduction in prevalence of stunting, underweight, low birth weight and anaemia in women and children by 2022 if there is no progress achieved in improving the rate of decline observed between 1990 and 2017, according to a new study published in The Lancet.
- The study points out that India will miss its target for stunting levels of 25% by 9.6%; underweight target of 22.7% by 4.8%; desired low birth level of 11.4% by 8.9%; anaemia level among women of 39.4% by 13.8%; and anaemia level among children of 44.7% by 11.7%, according to the Global Burden of Disease Study 1990-2017, released recently.
- The report is a joint initiative of Indian Council of Medical Research, Public Health Foundation of India (PHFI) and the Ministry of Health and Family Welfare.
- Poshan Abhiyan, the world’s largest nutrition programme, expected to benefit 10 crore people and launched in 2018 by Prime Minister Narendra Modi, aims to reduce stunting, underweight, and low birth weight.
- However, a senior official at government think-tank NITI Aayog, says that the findings are not worrisome.
- The study, however, points out that the desired rates of improvement are aspirational.
- The findings suggest that the malnutrition indicator targets set by NNM for 2022 are aspirational, and the rate of improvement needed to achieve these targets is much higher than the rate observed in this study, which might be difficult to reach in a short period.
- This slow pace of improvement needs to be accelerated, so that future prevalence of the malnutrition indicators is better than our projections based on trends so far.
An independent fiscal watchdog for Parliament – The Parliament Budget Office
- When most people arrive at the ballot box, they vote with their gut. But getting there requires absorbing and shaping months and years of conversations, long-held opinions and ideally, hard facts and evidence.
- What is then important for our electorate and the representatives we vote for is that they have an independent, non-partisan source for these hard facts and evidence.
- This is particularly important for our Parliament, which controls where and how money flows into our government and our country.
- This body needs to be appointed not based on political allegiance or expediency, but on its expertise in budgetary, fiscal and economic matters.
- Regardless of a majority or minority government, this body serves parliamentarians equally and without prejudice.
- Even in a majority government, besides the few Ministers privy to expertise from the civil service, most parliamentarians do not benefit from timely access to good quality analysis on economic, fiscal or financial matters.
- This body exists in many countries around the world, going by many names but most commonly as Parliamentary Budget Offices (PBOs).
- These bodies help shape the debate and discourse around the state of the nation’s finances and the fiscal implications of significant proposals.
- The work done by PBOs naturally ends up in the public sphere; when they do, they help drive smarter, more focused debate in the media and with our electorate.
- What distinguishes India’s democracy, besides its diversity of views and opinions wrought by its size, is its ability to evolve and remain dynamic.
- What is gravely in danger is evidence-based discussion around important policies that affect the trajectory of our Republic, discussions which can quickly blur the line between fact and fiction.
Defence costing & PBO
- Take an example: the Rafale deal with Dassault Aviation. Part of the controversy resulted from uncertainty regarding the true lifecycle costs of the aircraft bought.
- In 2011, the Canadian PBO released a cost estimate for Canada’s purchase of F-35 jets. This estimate far exceeded the one presented by the Department of National Defence.
- Defence costing, typically the purview of the Defence Ministry, was a completely new area of analysis, information and research that parliamentarians could now access to hold the government to account.
- Besides costing policies and programmes, PBOs provide significant and sometimes the sole source of information on fiscal and economic projections.
- The role of such an office does not always mean challenging the government; it is often the case that economic and fiscal projections of a PBO and the Ministry of Finance are similar.
- This is unsurprising as data sources and economic methodologies for such projections are well established and uniform.
- However, without the existence of another data point, generated by an independent, non-partisan office, it is difficult for parliamentarians to ensure that these projections and estimates continue to be reliable enough for them to make decisions on.
- When these projections come into question, the Cabinet can tap the civil service for further research and analysis.
- Most parliamentarians do not have this luxury and may have to rely on poor quality third-party data and analysis, done without relevant expertise. This is a situation that must be avoided.
Co-existing with the Auditor General
- A question — and a reasonable one — that often arises is the necessity of such an office when we already have an auditor general. However, this misunderstands the role the Auditor General performs, which is to provide retrospective audits and analysis of the financial accounts and performance of government operations.
- These audits are often focused on the day-to-day goings on of government, and often hone in on the performance of the civil service.
- A PBO provides prospective, forward-looking economic and fiscal projections, as well as policy costings. This distinguishes it from an auditor general, which provides useful information, but only after the fact.
- Internationally, similar offices have been established across the world, with the most prominent being the Congressional Budget Office in the United States which provides impartial advice to both upper and lower houses of the legislature.
- Offices in the Netherlands, Korea, Australia and the United Kingdom have also been established for varying lengths of time. PBOs are also making an appearance in emerging economies in Sub-Saharan Africa and Southeast Asia.
- In some countries, including Australia, the Netherlands, and most recently, Canada, PBOs have been playing the unique role of costing electoral platforms during an election campaign.
- In this period, PBOs provide independent cost estimates of electoral platform measures to political parties.
- A PBO, or a similar independent fiscal institution, will not solve all these problems but is a relatively cost-efficient way to arrive at a solution.
- As the process toward the Union Budget 2020 has already kicked off, it would be prudent for parliamentarians to examine the case for a PBO more deeply.
- The amount of information parliamentarians need to scrutinise in Budget documents has exponentially increased and a PBO would assist parliamentarians in this process of scrutiny.
- Legislatures across the world have witnessed an increasingly stronger executive try to wrest away its rightful power of the purse. A PBO would help resuscitate these powers that have fallen into disuse.
- This is why India’s Parliament and government need to work quickly and energetically to establish such an office; it is in everyone’s interests to do so.
Why India’s growth figures are off the mark
- During the global financial crisis, it was said that the experts were behind the curve.
- The International Monetary Fund (IMF) and financial sector experts continued to predict till October 2008 that the global economy would grow rather than shrink.
- They were way off the mark since the global economy was rapidly slipping into a great recession.
- Is India facing a similar situation at present?
- The economic growth rate (quarterly) has been sliding for the last five quarters from 8% to 7% to 6.6% to 5.8% and now to 5%.
- Yet, experts have been talking of a 7% annual rate of growth; every quarter when the rate of growth has been announced, they have argued that things have bottomed out and that the rate would rise henceforth.
- The Economic Survey in July talked of a growth rate of 7% for the current year.
- The Reserve Bank of India (RBI), in its August policy statement, talked of a slowdown to 6.9%, from the 7% predicted in June and 7.2% predicted before that.
- The Asian Development Bank cut its growth forecast from 7.2% to 7% in April 2019.
- Similar is the case with the IMF which cut its forecast for the year from 7.3% to 7%. So, they all talked of a 7% rate of growth when a year earlier it had fallen below that.
How could these agencies be so far off with their estimates?
- The reason is that they are not independent data gathering agencies and depend on official data.
- So, if official data is erroneous, their projections would also turn out to be incorrect.
- Clearly, the government is interested in projecting a good image and so discounts bad news and ramps up data.
- The question to ask is, if the economy is growing at 5 or 6%, which is historically a good rate of growth, why is investment rate not rising and consumption in the economy stagnant? Where is growth dissipating?
- The alternative explanation is that the rate of growth is much less than 5%; that is why investment rate and consumption are stagnating or declining.
- The investment rate has hovered at around 30% for the last several years because the capacity utilisation in the economy has been around 75%.
- Unless this rises, fresh investment will mean even lower capacity utilisation and lower profitability since capital will be underutilised.
- In June, the stock market was at a record high and yet the investment rate did not rise. Data from the Monitoring Indian Economy Pvt. Ltd. shows that investment proposals are at a 14-year low.
- In the last year, the RBI has cut interest rates four times and by a total of more than 1%; but the investment rate has not budged.
Impact of announcements
- The government has been in denial but now experts in the Economic Advisory Council to the Prime Minister, in NITI Aayog and the RBI have admitted that there is a slowdown.
- The Ministry of Finance has now gone into hyper drive to make major announcements so soon after the full Budget was presented in July. This is an admission of there being a slowdown in the economy.
- Unfortunately, none of these announcements will lead to a recovery since they do not address the source of the problem.
- An hour before the latest data on economy showing slowdown was to be announced, the government announced the big bank merger.
- Was this to divert attention from the data to be released? Be that as it may, bank mergers will have little impact on the immediate problem of the slowing economy.
- It may only further disturb a major chunk of the banking system in the coming year — and that would not be good for a slowing economy.
- The package for the automobile sector or making banks pass on interest rate cuts to businesses, announced a little earlier will also have little impact since the problem did not originate there.
- The announcement of a transfer of ₹1.76 lakh crore from the RBI to the government will only cover the shortfall expected in revenue (which is a result of an unduly high projection of revenue growth).
- It will allow the government to maintain the fiscal deficit target at 3.3%. But, this will not provide the needed stimulus.
- For that the fiscal deficit would have to be allowed to rise or there has to be an increase in expenditures on the basis of mobilisation of additional revenues.
- The fiscal deficit today is at about 9% if the States and the public sector units are taken into account. And how much can the government raise is a political decision that has not yet been taken.
- So, where does the problem originate from? It is from the unorganised sector which has been in decline since demonetisation.
- It was further hit by the Goods and Services Tax though it is either exempt from it or there is a simplified provision for this sector.
- This sector producing 45% of the output and employing 94% of the workforce, has been in decline, which is pulling down the rate of growth of the economy.
- But, why does it not show up in the growth data? In simple terms, the reason is that the data for this sector is collected once in five years (called reference years) since the sector has tens of millions of units for which data cannot be collected monthly, quarterly or even annually.
- In between the reference years, the data is only projected on various assumptions.
- The government document on estimating advance annual estimates and quarterly estimates makes this clear.
- For estimating quarterly growth it uses, “latest estimates of Agricultural Production, Index of Industrial Production (IIP) and performance of key sectors like, Railways, Transport other than Railways, Communication, Banking, Insurance and Government Revenue Expenditure”.
- Except for agriculture, these belong to the organised sector of the economy. Even for the annual estimates, basically data for the organised sector are used — like in the case of mining, banking, hotels and restaurants, and transport.
- For construction, steel, glass, etc are used which are also derived from the organised sector production.
- Thus, the implicit assumption is that the organised sector can be a proxy for the unorganised sector. But with the economy suffering three shocks in quick succession over the last three years which adversely impacted the unorganised sector, this assumption does not hold true.
- Most of the experts have implicitly accepted the government’s fallacious argument and have thus fallen behind the curve.
- In brief, the official data only represents the organised sector. To incorporate the unorganised sector, data from alternative sources need to be used.
- The decline in the workforce, the rise in the demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act, etc. suggests that the unorganised sector has declined by at least 10%.
- If this is taken into account, the current rate of growth is much less than 5%.
- If the government does not accept this, then it must reveal the rate of growth of the unorganised sector that it is using in its estimates and which is not based on using the organised sector as a proxy.
The slow climb to the trillion economy peak
- On Independence Day, the Prime Minister expressed confidence that India would be a $5-trillion economy in 2024, a line that has been picked up by ruling party leaders, Ministers and also senior government officers.
- However, this is surprising as the impact of economic growth on major development goals — examples being improvement in education, health and overall human development/human capital formation; expansion in productive employment for all and environmentally sustainable development, etc — depends on the nature and composition of growth.
- The economic growth experience in India in recent decades has shown that growth has had an adverse impact on all these developmental goals.
- To start with, Credit Suisse, for example, has shown recently that 1% of the wealthiest in India increased their share in wealth from 40% in 2010 to more than 60% in the last five years, and the richest 10% in India own more than four times wealth than the remaining 90%.
- That is, if we proceed on the same growth path, a large part of the increase in wealth and GDP will be claimed by the top 10% richest population in India.
- In other words, the top 10% will take away the lion’s share of the $5-trillion incomes if and when we reach the target of $5-trillion economy.
Gaps in education, health
- Our growth experience so far shows that the rate of growth of employment has declined with increasing economic growth; we have now reached a stage where the economy is suffering from the highest ever unemployment rate.
- With rising population and, consequently, the labour force, India will soon experience demographic disaster rather than demographic dividend.
- The story of health and nutrition is also quite similar. The literacy rate has grown very slowly and according to the United Nations, India’s literacy was 71.1% in 2015. India is now far behind many African countries such as Rwanda, Morocco and Congo in terms of literacy.
- According to the Annual Status of Education Report (ASER) 2018, about 70-74 % children (in the age group 6-14 years) go to school regularly; far fewer go to secondary school.
- The quality of education is far from satisfactory, if one is to read ASER 2018.
- There is an urgent need for a quantum jump in public expenditure on education in order to fill wide gaps in infrastructure, training and retraining of teachers and to ensure a strong follow up on the quality of education.
- However, as against the norm of 6% of GDP, the government spend is around 4% of GDP on education.
- It is the same when it comes to the story of health, where the decline in malnutrition, particularly among women and children is very slow; against the norm of 3% of GDP, the government spends around 1.5% of GDP on health.
- Finally, in the process of growth in India, there has been a severe depletion and degradation of environmental resources.
- A recent Intergovernmental Panel on Climate Change report has warned India of the seriousness of climate change and its severe adverse impact on the environment and the livelihood of masses.
- Another major concern about reaching the aim of a $5-trillion economy is that at present the economy is experiencing a severe slowdown; it would be very difficult to raise the rate of growth to reach $5 trillion in 2024 unless we focus on human capital formation and address the real reasons for the slowdown.
- As NITI Aayog has observed recently, the present crisis is the worst crisis India is facing since the Independence.
- The rate of economic growth, at 5%, is the lowest in the last few years. Also, the rates of savings and investment in the Indian economy have declined, as also exports and total credit.
- Among the major industries, the automobile industry is experiencing continuous decline, which has led to the retrenchment of 3.5 lakh workers so far. Apart from the ancillaries of the automobile industry, many other industries are declining fairly rapidly too — examples are diamond cutting and polishing, textiles and garments, and several Micro, Small and Medium Enterprises (MSME).
Crisis in agriculture
- All this has affected trading and business units. Agriculture is in crisis today on account of rising costs of inputs and low prices of produces, and low public investments in this sector.
- Again, agricultural real wages are in decline and non-farm wages are constant if not declining; urban wages are also declining in recent years.
- As a consequence of all these developments, there is a crash in the aggregate demand in the economy.
- What is needed urgently is for the government to increase public expenditure in investing in agriculture — in infrastructure, inputs, extension, marketing and storage and training — and in providing profitable prices to farmers. It should also raise funds for the Mahatma Gandhi National Rural Employment Guarantee Act to push up demand by following a Keynesian approach.
- It should raise public employment by filling all vacant sanctioned posts in the Central and State governments, which would be around 2.5 million jobs.
- The government should also regularise contract, casual and “honorary” jobs and make them regular jobs.
- Increasing additional jobs for ensuring basic health and good quality education up to secondary level to all so that any meaningful skill formation is possible should be another aim. Human capital formation will give a big push to start-ups and MSMEs.
- And, finally, the government should also focus on promoting labour intensive sectors such as gems and jewellery, textiles and garments and leather goods.
- The government should not worry about the fiscal deficit ratio as these measures will address the major problems of the economy.
Fall in demand
- What we witness, however, is that public expenditure is declining continuously in the last few years, As the Centre For Monitoring Indian Economy Pvt. Ltd. has pointed out, public expenditure has declined to the minimum in the last five years.
- Steps such as rolling back some budgeted tax proposals, providing a stimulus package to industries, raising foreign direct investment flows, reducing Goods and Services Tax to help industries are not likely to increase much aggregate demand in the economy.
- Also, reduction in repo rate by the Reserve Bank of India and asking banks to pass on reduced rates to customers, recapitalisation of banks by ₹70,000 crore to raise liquidity in the economy and other steps to ease credit flows to the economy are all supply side measures; the real problem is a crash in the aggregate demand.
- Let us hope that the government looks at the weaker sectors and sections to get out of the crisis if not to improve their well-being.
The Aramco strike exposes our oil dependence again
- Recently, as simultaneous explosions went off at Aramco’s Khurais oilfield and Abqaiq processing facility in Saudi Arabia, an all-too-familiar sense of dread swept over Indian markets and consumers.
- Just how long will India allow itself to be held hostage by the global oil mafia?
- That 10 automated drones could disrupt 5% of the global oil supply is a cautionary note on their destructive powers but is also about how oil continues to be the lynchpin around which global business revolves.
- In the immediate aftermath of the attack, US oil futures spiked 14.7%, the biggest spike in the last 10 years.
- It forced US President Donald Trump to authorize release of oil from the country’s 645 million barrels of Strategic Petroleum Reserves.
- With analysts now saying that even a disruption of a few weeks could increase the risk premium in oil prices, the portents are grim for India whose dependence on oil imports for meeting its energy needs is at an alarmingly high 84% and whose strategic reserves are the lowest among the countries most impacted.
- Over the last few decades, many countries have kicked their earlier dependence on oil.
- Using its comprehensive natural geothermal resources, Iceland meets nearly 90% of its total energy requirement through non-fossil fuel energy sources while in Sweden the renewable share of total energy consumption has gone up from 33% in 1990 to 54% in 2018, thanks to its utilization of water and biomass.
- Even Tajikistan whose fragile economy survives on remittances, uses hydroelectric plants to ensure that 64.1% of its energy needs are met by renewable sources.
- Meanwhile India has continued on a path of a predominantly oil-based economy despite substantial alternate energy sources like solar and wind.
- As a consequence, it is likely to surpass China to become the second largest oil demand growth centre globally in 2019, says research and consultancy group Wood Mackenzie.
- Significantly, the rate of growth in Chinese oil demand has slowed as the country embraces a less oil-intensive model of development while curbing vehicle usage to improve urban air quality.
- With provincial governments too pushing cleaner transport fuels and electric buses, diesel demand growth has come down.
- By contrast, India’s past choices have come back to haunt its quest for the right energy mix. In the years between 1999 and 2014, the Sheila Dikshit government in Delhi, obsessed with building expensive flyovers in the capital city, paid less attention to public transport.
- The results are there for all to see—more cars than ever before doing little to curb the traffic congestions the flyovers were built to address while contributing to some of the worst pollution levels in the world.
- It is time for India to change tack and to take charge of its future. Instead of worrying too much about the travails of traditional vehicle manufacturers, India should be concerning itself with encouraging innovations in alternate fuels and clean mobility technologies and promoting startups in the energy sector.
The worldwide crisis and situation of India:
- Oil is the single largest mover of geo-strategic affairs in the world.
- Thus, much of India’s oil needs could well be met by increasing imports from nearby Iran.
- In turn, the world’s fifth largest oil producer could use the earnings on modernizing and updating its vast oil capacities.
- Yet, the Opec collective along with the two superpowers US and Russia have their own battles with Iran and so India has to perforce rely on Iraq, Saudi Arabia and had to, in the past, on Venezuela.
- But US sanctions on Iran and Venezuela have meant that India has had to change its suppliers.
- Obviously the US, now the world’s largest oil producer, would like India to up its imports from there but given the distance and the far higher transportation cost involved that is clearly not the best option.
- In any case, all this twisting and turning renders India increasingly more vulnerable.
- The collapse of its much-hyped oil prospecting plans condemned the country to dangerous levels of dependence for its fuel imports on countries which are potentially geopolitical hotspots.
- China, the world’s largest importer of oil, took a call early on to develop renewable sources with the twin objectives of cutting pollution as well as reducing its reliance on fossil fuels with its concomitant strategic benefits.
- To power its vast manufacturing base it needed to up its total power generation capacity sourced mainly from coal and other fossil fuels till recently.
- But increasingly it has been boosting renewable sources (water, wind and sun). In a post on the subject in March 2018, John Mathews and Xin Huang say that if this pace of change is continued over the next decade, “China’s power capacity would be more green than black within the next decade—by 2028″.
- Also China’s economy incorporates a high export component and a significant part of its energy use is for export.
- Any cost-pressure emanating from an energy crisis such as the one we are witnessing today can be set off against its exports.
What lies ahead for India?
- By contrast India will always be one of the worst affected by any oil crisis and should therefore pursue a non-fuel based growth aggressively.
- The Narendra Modi government’s solar push over the last five years has been a step in the right direction but it is only a step.
- The time is ripe to turn this into a mass movement such that the tyranny of big oil can finally be ended. This moment of crisis, can be turned into India’s biggest opportunity in decades.
- As Sanjeev Pandiya writes in Value Research Online“At some point, as the threat from solar becomes clear, there will be a ‘race to the bottom’, as marginal producers realise that their oil reserves become useless if they hold onto them. At that tipping point, every drop in oil prices will actually result in an increase in production (subject to variable cost getting covered).”
- What author Peter Maass called “inebriating crude” has brought little joy to the countries that are its largest producers. Indeed countries like Japan and South Korea with no known oil reserves have trumped oil-rich nations like Iran, Nigeria or Venezuela.
- For the sake of its future, India needs to rid itself of its addiction to oil.
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