Smoke of the vaper: On e-cigarettes ban (The Hindu)

Mains Paper 2 : Health
Prelims level : e-cigarettes
Mains level : Problem arises with E-cigarettes

UK govt insists suspension of Parliament was not illegal (The Hindu)

Mains Paper 2 : International
Prelims level: Prorogation
Mains level: In terms of prorogation highlights the current status of Brexit

Context

• British Prime Minister Boris Johnson has prorogued Parliament for five weeks (till October 14).
• It is seen as an attempt to silence elected representatives on the key issue of Britain’s future ties with the European Union (EU).
• It will limit parliament’s ability to derail his Brexit plan by cutting the amount of time it will sit before EU exit day on October 31.

Define prorogation

• Prorogation is to bring a parliamentary session to end by the monarch on the advice of the government.
• Usually, Parliament is prorogued every year. But last year, then PM Theresa May didn’t recommend prorogation due to Brexit debates.
• This year, Queen Elizabeth II approved the Johnson government’s request, which he says that prorogation was long overdue.

What does it mean for Brexit?

• It has effectively curtailed lawmakers’ opportunities to reject his Brexit plans.
• This would have been a crucial time for rebel MPs to come up with legislation against a no-deal Brexit, which Mr Johnson has not ruled out.
• There’s an EU summit on October 17 and 18 in which Mr Johnson could seek a fresh Brexit deal.
• After the summit, if he has a new deal, he will present that to the lawmakers, which means the MPs will get only 9 working days to either pass or reject the deal.
• It is not sure whether PM Johnson will even have a Brexit deal that’s different from Ms. May’s deal.
• Thus, the threat of no-deal will be hanging over lawmakers.

What is the current status of Brexit?

• When PM Theresa May proposed deal that provides 21-month transition period for Brexit, MPs rejected her deal thrice. They failed to come up with an alternative plan either. The deadline for Brexit was extended to 31 October.
• The only thing they agreed regarding Brexit was to oppose a no-deal Brexit.
• In a no-deal scenario, the UK would immediately leave the EU with no agreement about the transition process.
• Now, to avoid a no-deal Brexit on 31st October, the UK government must pass a Brexit divorce plan into law, obtain another extension from the EU, or cancel Brexit.

Way ahead

• Legal bids to halt the suspension of Parliament was filed in Scotland and London.
• Scotland and London judges rejected the request for a temporary injunction.
• The appeal of the rulings will go directly to the U.K Supreme Court.

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Let’s not regulate the ease of doing business (Live Mint)

Mains Paper 3 : Economy
Prelims level: Ease of doing business
Mains level: FAQ releases on ease of doing business

Context

• In a set of FAQs on overseas direct investment published recently, RBI has said that Indian companies are barred from acquiring a stake in any offshore company if that firm has investments in any Indian entity. Still, no formal order or circular to this effect has been issued.
• It does not matter how big or small the foreign entity’s holding in an Indian enterprise is.
• The ownership of even a single share would put it on the no-go list for Indian investors.

Key Objectives

• The aim of this restriction is to check the round-tripping of money.
• Criss-cross investments spanning multiple jurisdictions can serve as conduits for dubious funds to be sent abroad and brought back into the country in some legal guise.
• It could also be a clamp-on tax evasion done by setting up firms in countries with easier tax regimes to hold assets of Indian companies that make money off the domestic market.

What are the problems with the ruling?

• If such practices are rampant, then specific probes need to be ordered, evidence gathered, and cases filed.
• Banning investments in foreign businesses that have Indian interests amounts to disproportionate action.
• In this era of globalization, the collateral damage of such moves to the economy could outweigh the gains.
• Even legitimate businesses wanting to expand their operations globally could find their plans thwarted.
• Not just the future investments, but those already made could also come under the scanner.
• Complying with the rule would be difficult for any enterprise with even moderate dealings abroad. An Indian exporter looking for an equity partnership with a foreign distributor would have to check if the latter has made an investment in India and need a special agreement that prevents the offshore entity from investing in a domestic set-up.
• In a world where such business decisions are freely made, the clause could be a deal-breaker.
• The foreign subsidiary of an Indian company would not be able to directly invest a surplus generated abroad in a domestic venture of its choice, even though such an investment would be above board.
• For decades after independence, over-regulation was the bane of enterprise in India.

Way forward

• Liberalization offered relief with whole categories of restrictions dumped to encourage greater business freedom. The country has made major gains in global rankings which measure the ease of doing business.
• Regulatory over-tightening puts those achievements at risk. Track down round-trippers and tax evaders.

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City data monetization could help our development roadmap (Live Mint)

Mains Paper 3 : Science and Tech
Prelims level: Data monetization
Mains level: Measures to be followed before setting up Data monetizing platforms

Context

• Data is the new oil.
• Like oil, data also needs to be refined for productive use. Advances in digital technology are making it possible to collect, store and process ever-expanding amounts of data.
• This explosion of data holds vast potential to boost innovation, productivity, and ultimately, economic growth and social value.

Why data monetization is required?

• Governments, especially city administrations, need to explore options to monetize the data, both structured and raw, so as to create revenue sources that would help cities become self-sustainable.
• It is all the more important for India, as cities are trying to optimize their urban service delivery by implementing “Integrated Pan City Smart Solutions" under the Smart City Mission by generating huge volumes of data.
• Meeting the operational and maintenance cost of digital infrastructure, estimated at 15-20% of capital annually, will be a daunting task, unless we monetize city data.

Beginning of the data monetization

• Copenhagen was the world’s first city to monetize public and private data through its City Data Exchange in 2016.
• It has set up a city exchange in collaboration with a private partner to create a marketplace for processed city data.
• Some of the data sets available on the platform relate to traffic and route planning, advertising, use of public spaces, tourism, cultural events and location-specific offerings.
• The exchange brings suppliers and consumers of data together and acts as a data market.
• Data suppliers monetize existing data and find new channels for information and services.
• Similarly, data consumers find access to multiple data sources, which enables new and improved applications as well as new inputs (for a price) for planning and forecasting. However, certain information that’s useful to citizens is provided free.

Data monetizing platforms

• Depending on the size of a city, its population and infrastructure, the opportunities for data monetization could be enormous.
• Data monetizing platforms (DMPs) can be created at city levels in India by integrating various data sources.
• These DMPs can act as data markets for the exchange of processed and analyzed data.
• For example, any data related to the environment or traffic may be useful for a research scholar, who could avail of it via the platform by paying a nominal amount.
• Similarly, geo-spatial data related to utilities will be useful to planners and developers, who will be willing to pay a premium for such data.
• Analytic firms and app developers can use raw city data to create applications and analytics, which can be used for business development.

Competency issues

• Keeping in view the competence required in terms of analytics and marketing, it is essential to have a Data Monetizing Agency (DMA), to be selected through a competitive bidding process.
• A long-term concession agreement could be executed between the DMA and a city government.
• The terms could vary, and revenue sharing mechanisms could also be worked out.
• Data prices should depend on the category of information. Some of the open-source data can be free of cost, whereas registered source data can be charged.
• The charges should keep in view the overall business model of the DMA and its sustainability over a pre-defined period. The government may have the right to collect a share of revenues, depending on the profitability of the system.

Privacy issues

• It is important to address privacy issues related to data before setting up DMPs.
• India is moving towards having a comprehensive Data Protection Act.
• City governments, as data fiduciaries, should lay down appropriate policies and safeguards to ensure that the rights of citizens (as data principals) are protected with regard to personal data, in consonance with existing laws.
• The proposed Data Protection Bill provides for some exemptions for the processing of personal data for research and statistical purposes.
• Data anonymization must be done prior to offering data on city platforms.
• The objective of the policy and regulatory framework should be to facilitate access to anonymized and aggregated non-personal urban data and information in both human- and machine-readable forms.
• The policy should pay particular attention to the overall readiness for such initiatives.

Way ahead

• The Government of India has been successful in creating an Open Government Data (OGD) platform, data.gov.in, for the support of open data.
• This platform lets government organizations publish their data sets in an open format for free public use.
• Till now, about 300,000 resources have been uploaded to the platform, which has gathered over 22.4 million views.

Conclusion

• Many of these data sources can be refined and customized. The government, through a transparent process, can find a technology partner as a DMA to monetize processed data.
• Expanding the present open data platform into a data monetizing platform provides a great revenue opportunity for future.

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A self-inflicted economic slowdown(The Hindu)

Mains Paper 2 : Governance
Prelims level: Not much
Mains level: Claiming policy paralysis is a major setback economic growth

Context

• It seems the government has failed to heed recommendations made by economists and bureaucrats on turnaround measures.

Ending the paralysis

• In the final 18 months of its 10 years, the Manmohan Singh-led United Progressive Alliance (UPA) government had moved the economy into repair phase.
• The policy paralysis —an administrative and political bottleneck — had ended.
• The fiscal and current account deficits had been compressed, and GDP growth was slowly picking up momentum year after year, a recovery that continued till 2016-17, the year of demonetisation.
• Inflation remained out of control, also, in part, due to the sharp uptrend in global crude prices.
• In May 2014, after Mr. Modi’s Cabinet was sworn in, it was made clear to the new government that purposeful steps would strengthen this recovery.
• Without reforms, though, the recovery would be difficult to sustain.

Ignoring advice

• The Reserve Bank of India (RBI) cautioned the government against demonetisation in writing; the former RBI Governor, Raghuram Rajan, did so orally.
• Ahead of the rollout of the Goods and Services Tax (GST), on invitation from the government, well-regarded economist and former Finance Secretary Vijay Kelkar briefed the Prime Minister and key Cabinet ministers on the criticality of avoiding the business-unfriendly rate structure and compliance system that had been worked out for introduction.
• He was invited to the midnight launch in Parliament’s Central Hall of the GST, but his advice went unheeded.
• The consequences of five years of ignoring advice are, well, hard to ignore now: the weak recovery inherited in 2014 has indeed petered out.
• A growth slowdown has been on for three years. The loss of growth momentum in the three years from 2016-17 to 2018-19 is significant: 8.2%, 7.2% and 6.8%. GDP growth hit a 25-quarter low of 5% in the April-June 2019 quarter.
• Scores of private sector jobs are getting axed. Growth in car sales, retail loans and property has plummeted to multi-year lows, as the impact of the slowdown spreads across the economy.

Way ahead

• Several policy pronouncements have been made since the day the courtesy call was paid.
• These include the July 5 Budget and the weekly press conferences of the Finance Ministry aimed at announcing measures for accelerating GDP growth.
• That the measures fall woefully short of the recommendations made by economists and bureaucrats over the last five years is an understatement.
• The government has also failed to take the steps required urgently at this stage of the slowdown.

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The Taliban problem: On the Afghan crisis (The Hindu)

Mains Paper 2 : International Relations
Prelims level: Not much
Mains level: Taliban problem arises on Afghan crisis

Context

• The U.S.-Taliban talks collapsed last week, the insurgent group threatened to step up attacks in Afghanistan.
• It made good on its pledge on using two suicide bombers who killed at least 48 people by targeting a rally being addressed by Afghan President Ashraf Ghani north of Kabul, and also the capital.
• These attacks are yet another warning of the security challenges Afghanistan faces, especially when it is gearing up to the September 28 presidential poll.

Background

• Both the 2014 presidential election and last year’s parliamentary poll were violently disturbed by the Taliban.
• This time, the group has asked civilians to stay away from political gatherings, making all those who participate in the political process potential targets.
• Rising attacks against Afghan civilians make the Taliban’s claim that it is fighting on behalf of them against the foreign invaders hollow.

Taliban

• The Taliban did not suspend its terror campaign even while holding talks with the U.S. in Qatar.
• In July, when the talks were under way, Amrullah Saleh, Mr. Ghani’s running mate and the former intelligence chief, escaped a serious assassination attempt. Now that the talks have collapsed, a vengeful Taliban is unleashing itself on the Afghans.
• The Afghan government seems determined to go ahead with the election.
• It has deployed some 70,000 troops to protect over 5,000 polling stations. But the threat from the Taliban is so grave that the President is largely addressing campaign rallies through Skype.
• Even if the elections are over without further attacks, the Taliban problem will remain.

What are the steps needed from Afghan government?

• Afghanistan needs a solution to this crisis and regional and international players should help the new government.
• The fundamental problem with the U.S.-Taliban peace process was that it excluded the Kabul government at the insistence of the insurgents, which itself was a major compromise by the U.S. On the other side, the Taliban was not even ready to cease hostilities.
• A peace agreement dictated by the Taliban won’t sustain. The Taliban can’t be allowed to have a free terror run either.
• A permanently unstable Afghanistan and an insurgent group growing further in strength is not good news for any nation, including Afghanistan’s neighbours.
• Afghanistan needs a comprehensive peace push in which all stakeholders, including the government, the U.S., the Taliban and regional players will have a say.
• The U.S. should continue to back the Kabul government.
• It put pressure on Pakistan to crack down on the Afghan Taliban, double down its counter-insurgency operations in Afghanistan and invite regional players such as Pakistan, Iran, Russia, India and China to take part in the diplomatic efforts.

Conclusion

• In other words, the Taliban should be forced to return to talks. The U.S.-Taliban peace talks may have collapsed. But it need not be the end of the road for finding a settlement for the Afghan crisis.

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How waived loans impact states (Indian Express)

Mains Paper 3 : Economy
Prelims level: Internal Working Group
Mains level: Farm loan waiver process

Context

• The RBI recently shared the report of an Internal Working Group (IWG) set up to primarily look at the impact of farm loan waivers on state finances.

Requirement of IWG

• A farm loan waiver by the government implies that the government settles the private debt that a farmer owes to a bank.
• Since 2014-15, many state governments have announced farm loan waivers for a variety of reasons including relieving distressed farmers.
• Farmers were, notably, struggling with lower incomes with repeated droughts and demonetisation.
• In this context, the RBI set up the Internal Working Group (IWG) in February 2019 to analyse the impact of farm loan waivers.

How have loan waivers been?

• Once announced, farm loan waivers are staggered over 3 to 5 years.
• Between 2014-15 and 2018-19, the total farm loan waiver announced by different state governments was Rs 2.36 trillion.
• Of this, Rs 1.5 trillion has already been waived.
• In comparison, the last big farm loan waiver by the Centre was announced by the UPA government in 2008-09 and it was Rs 0.72 trillion
• Of this, actual waivers were only Rs 0.53 trillion, staggered between 2008-09 and 2011-12.
• In other words, in the past 5 years, just a handful of states have already waived three-times the amount waived by the central government in 2008-09.
• The actual waivers peaked in 2017-18 in the wake of demonetisation and its adverse impact on farm incomes.
• It amounted to almost 12% of the states’ fiscal deficit.

How do waivers affect state finances?

• Farm waivers eat into the government’s resources, which, in turn, leads to one of the following two things: the concerned government’s fiscal deficit (or, in other words, total borrowing from the market) goes up; and government has to cut down its expenditure.
• Even at the state level, a higher fiscal deficit implies that the amount of money available for lending to private businesses (big and small) will be lower.
• It also means the cost at which this money would be lent (interest rate) would be higher.
• If fresh credit is costly, in turn, there will be fewer new companies and less job creation.
• So, if the state government does not prefer borrowing from the market and wants to keep to its fiscal deficit target, it will be forced to cut expenditure to manage.
• More often, states choose to cut capital expenditure instead of the revenue expenditure.
• [Capital expenditure is that which leads to the creation of productive assets such as more roads, buildings, schools etc.
• Revenue expenditure is in the form of committed expenditure such as staff salaries and pensions.]
• The point to note is that cutting capital expenditure undermines the ability to produce and grow in the future.

How significant are state finances?

• The National Institute of Public Finance and Policy (NIPFP) study of state finances reveals that all the states, collectively, now spend 30% more than the central government.
• Moreover, since 2014, state governments have increasingly borrowed money from the market.
• In 2016-17, the total net borrowings by all the states were almost equal (roughly 86%) of the amount that the Centre borrowed.
• In other words, state-level finances are as important as that of the centre’s for India’s macroeconomic stability and future economic growth.

Way forward

• Farm loan waivers are not advisable as they hurt overall economic growth apart from ruining the credit culture in the economy.
• This is because they incentivise defaulters and penalise those who pay back their loans.
• The IWG thus recommends that central and state governments should undertake a holistic review of the agricultural policies and their implementation.
• They should also evaluate the effectiveness of current subsidy policies with regard to agri inputs and credit.
• This should be towards improving the overall viability of agriculture in a sustainable manner.

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The GST Council should stop tinkering, focus on simplifying rate slabs (The Hindu)

Mains Paper 3 : Economy
Prelims level: GST council
Mains level: Simplifying GST slabs rate

Context

• The upcoming GST Council meeting is perhaps the most eagerly awaited one, as numerous industries, including automakers, have petitioned for lowering GST rates on their products to help them fight the slowdown.
• A more exigent issue before the Council is the declining GST collections and the consequent fiscal problems.

Shortfall in GST collection

• With total collection this year lower than the budgeted amount, the shortfall is a cause for worry.
• Of greater concern is the lower compensation cess being collected this fiscal year; only half the required monthly amount has been collected so far.
• Since this money is used to compensate States, if the growth in GST revenue is under 14 per cent, the Centre could have a problem meeting the payouts to the States this fiscal year.

Arguments behind GST rate cut

• With growth in corporate and income tax collections also in lower single digits so far this fiscal, there is little room for the GST Council to move rates lower across the board.
• Moreover, it is not clear whether a rate cut would be enough to spur demand. In the auto sector, for instance, total indirect tax incidence on automobiles was in fact higher in the pre-GST regime.
• While a rate cut, which will help reduce prices for the end buyer, may be tempting, it cannot be seen as a panacea for any sector facing a slowdown.
• In many sectors, the demand slowdown has already led to sharp discounts and price corrections, but that has not resulted in a significant delta in sales.
• That said, there is a need for rationalisation and simplification of GST rate slabs.

Way ahead

• India should move towards one rate between 12 and 18 per cent at which most goods and services can be taxed, with a lower rate for essential goods and a higher one for luxury products.
• A simplified rate regime can also aid in improving compliance. The annual growth rate in GST revenue promised to States of 14 per cent also needs to be renegotiated.
• It is obvious that the growth in tax base and the higher collections, originally envisaged, are not achievable immediately; as seen in the large shortfall in FY19.
• Also, with nominal GDP growth between 8 and 9 per cent, GST revenue projections need to be recalibrated.
• The GST Council also needs to pay serious attention to the problems in the GSTN, the IT backbone of the GST system.
• With invoice matching still not enforced, bogus claims of input tax credit are leading to revenue leakage.

Conclusion

• The fact that most taxpayers are still struggling to file the annual GST returns for FY18 shows that the GSTN is still far from being user-friendly and needs a thorough overhaul.
• Rolling back anti-tax evasion levers such as reverse charge mechanism in the GST system has also hurt tax collections.
• Unless this is brought back, the GST’s core objectives of expansion of the tax base or formalisation of the unorganised sector cannot be fully realised.

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Undesirable and divisive: on Amit Shah's push for Hindi (The Hindu)

Mains Paper 1 : Society
Prelims level: Hindi Diwas
Mains level: Regionalism

Context

• It may be customary for the Union Home Minister, who is also in charge of the Department of Official Language, to make a pitch for greater use of Hindi in official work on the occasion of ‘Hindi Diwas’, observed every year on September 14.
• However, Home Minister Amit Shah’s remarks this year have raised the anger among political leaders in some States that do not speak Hindi.

Reason behind pushback

• The possible reason for the pushback from south Indian leaders to his pitch is that he went beyond the usual general remarks on promoting Hindi, and made sweeping claims that Hindi alone could unite the country, and it was the language which should become India’s “identity” globally.
• Embedded in his tweets as well as a speech on the occasion was a note of bitterness against the continuing influence of English.
• The Kerala Chief Minister dismissed as absurd the claim that Hindi was a unifying force, and even saw in Mr. Shah’s remarks an attempt to trigger a controversy and to divert attention from real issues.
• Former Karnataka Chief Ministers Siddaramaiah and H.D. Kumaraswamy and DMK president M.K. Stalin questioned Mr. Shah’s remarks and saw in them an attempt to impose Hindi on their States.
• Few would disagree that imposing a language on the unwilling is hardly unifying, but could turn out to be dissenting with the majority opinion. Further, national identity cannot be linked to any one language, as it is, by definition, something that transcends linguistic and regional differences.

Importance of regional language

• It is time the Centre realised that the creation of linguistic States has eliminated the need for a campaign against a “foreign language” allegedly encouraging a slave mentality.
• Regional languages have become the official languages of the States, and the continued use of English has a strong utilitarian value.
• While the development of Hindi is undoubtedly a constitutional command the Union government cannot ignore, the manner in which it is done should not give the impression to the States that there is forceful imposition of Hindi.
• It was only a few months ago that the Centre defused a controversy when it got a paragraph removed from the draft New Education Policy that indicated the mandatory teaching of Hindi.
• The fact that the ruling Bharatiya Janata Party is seen as a ‘Hindi-Hindu’ party that encourages excessive homogenisation also works against it whenever such controversies emerge.

Way forward

• It would be disastrous for the country’s glorious diversity if the promotion of Hindi is considered a step towards a ‘one nation, one language’ kind of unity.
• Mr. Shah has spoken simultaneously about the increased use of the mother tongue, but those who disagree would only see it as an attempt to sugar-coat Hindi imposition and the sidelining of English.
• According a hegemonic role to the “most-spoken” language in the country may promote cultural homogenisation, but that is hardly desirable in a country with a diverse population. Promoting greater use of Hindi is fine, but the language of homogenisation is best avoided.

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Deadly spread: On ‘vaccine hesitancy’ (The Hindu)

Mains Paper 2 : Health
Prelims level: Measles cases
Mains level: Highlights of the Measles cases worldwide

Context

• With a 30% increase in measles cases worldwide in 2018, the World Health Organization, in January 2019, included ‘vaccine hesitancy’ as one of the 10 threats to global health this year.
• The threat from vaccine hesitancy, which is defined as the “reluctance or refusal to vaccinate despite the availability of vaccines”, only appears to have grown more dangerous to public health.

Highlights of the measles cases incident

• After a surge in measles cases in 2018, there have been around 3, 65,000 measles cases reported from 182 countries in the first six months of 2019.
• The biggest increase, of 900% in the first six months this year compared with the same period last year, has been from the WHO African region, with the Democratic Republic of the Congo, Madagascar and Nigeria accounting for most cases.
• There has been a sharp increase in the WHO European region too with 90,000 cases recorded in the first six months — more than the numbers recorded for the whole of 2018.
• The infection spread in the European region has been unprecedented in recent years — 1,74,000 cases from 49 of the 53 countries between January 2018 and June 2019.
• Last month the U.K., Greece, the Czech Republic and Albania lost their measles elimination status.

Needs to improve vaccine system

• A 2018 report on vaccine confidence among the European Union member states shows why vaccine coverage has not been increasing in the European region to reach over 90% to offer protection even to those not vaccinated.
• It found younger people (18-34 years) and those with less education are less likely to agree that the measles, mumps, and rubella (MMR) vaccine is safe.
• According to a March 2019 report, only 52% respondents from 28 EU member states agree that vaccines are definitely effective in preventing diseases, while 33% felt they were probably effective. More alarming is that 48% of the respondents believed that vaccines cause serious side effects and 38% think vaccines actually cause the disease that they are supposed to protect against. A striking similarity was seen in India too.

Way forward

• A 2018 study found low awareness to be the main reason why 45% of children missed different vaccinations in 121 Indian districts that have higher rates of unimmunised children.
• While 24% did not get vaccinated due to apprehension about adverse effects, 11% were reluctant to get immunised for reasons other than fear of adverse effects. Thus, much work remains to be done to address misinformation. With social media playing a crucial role in spreading vaccine disinformation, the commitment by Facebook to “reduce distribution” of vaccine misinformation will be helpful in winning the war against vaccine deniers.
• Measles vaccine not only provides lifelong protection against the virus but also reduces mortality from other childhood infections.
• This is because measles viruses kill immune cells, leaving the child vulnerable to infectious diseases for two to three years.

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Fire to fuel: On attacks against Saudi oil facilities (The Hindu)

Mains Paper 2 : International Relations
Prelims level: Khurais oilfield
Mains level: Oil supply crisis and impact on India

Context

• The last week’s drone attacks on the Saudi Aramco-owned Khurais oilfield and Abqaiq oil processing facility has been the suspension of more than half of Saudi Arabia’s daily crude oil output, thereby affecting contribution to global supply.

Key impacts

• The Saudis have restored a portion of the supply that was hit, the sudden disruption resulted in the highest spike (nearly 20%) in Brent crude prices in more than a decade before the U.S. President’s statement that America would release some of its strategic reserves resulted in the price easing back to $66 per barrel (a 10% increase over the day).
• While the Houthi militia fighting Yemen’s Saudi Arabia-backed government in a four-year-long civil war claimed responsibility for the attacks, the U.S. has suggested that Iran was responsible for them.
• The sudden disruption of global crude oil supply is the unintended consequence of the unravelling of the painstakingly crafted P5+1+EU-Iran nuclear deal, the Saudis’ reckless adventure in Yemen and the Iranian empowerment of its proxies in West Asia as a response.
• This development is bound to affect several emerging economies, including India’s.
• The Union Petroleum Ministry has sought to allay fears of a supply cut by relaying messages of assurance from Aramco officials, but there is already an indication that crude prices would rise further due to an increase in the risk premium, leading to increased fuel pump costs.

Way ahead

• With India importing more than two-thirds of its oil from West Asia, a price surge is expected to impact the current account, and will result in further currency depreciation as was the case on Monday.
• Higher fuel costs and the imported inflation could also hurt the consumer at a time of a slowdown in the economy.
• The government should be prepared to handle the fallout with steps such as re-evaluating the excise duties on petroleum products.

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The litmus test for free speech (The Hindu)

Mains Paper 2: Polity
Prelims level: Not much
Mains level: Free speech define under Indian Constitution

Context

• The freedoms of speech and liberty are enshrined in Articles 19 and 21 of the Constitution of India but with reasonable restrictions.
• The correct definition of reasonable restrictions would decide on various cases pending and validity of various judgements.

Litmus test

• In the United States of America’ Supreme Court, the ‘bad tendency’ test is used, wherein a restriction is regarded as reasonable if it were to adversely affect public interest (which can be the present or hidden and uncertain effect).
• While later on ‘clear and present danger’ test which considers a clear and present danger to the public interest in danger.
• Finally, in Brandenburg v. Ohio (1969), the ‘clear and present danger’ test was expanded, and the ‘imminent lawless action’ test was laid down by the U.S. Supreme Court according to which an act which can result in an imminent (present) lawless act can be restricted reasonably abridging the said Articles.
• This has been followed in India too according to which the decisions in the Bhima-Koregaon case, activist Shehla Rashid; and Pawan Jaiswal [case], the journalist who published a report that children in a primary school in Mirzapur, Uttar Pradesh, were getting only roti and salt in their midday meals etc, could be reversed to free the accused as their acts do not result into imminent lawless action.

Conclusion

• It is thus suggested that in these days when the liberty and free speech of people is being restricted on various grounds the judiciary should come to the rescue.

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The slow climb to the trillion economy peak (The Hindu)

Mains Paper 3: Economy
Prelims level: Not much
Mains level: Achieving $5-trillion economy in 2024

Context

• 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.

Share in wealth

• The economic growth experience in India in recent decades has shown that growth has had an adverse impact on all these developmental goals.
• Credit Suisse 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.

Highlights of the public expenditure spend by the government

• 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?

• The government has 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.
• 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.

Way forward

• 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.

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Clearing the air (Indian Express)

Mains Paper 3: Environment
Prelims level: Odd-even rule
Mains level: Measures needed to combating air pollution

Context

• Almost four years after it was first implemented in Delhi, the odd-even scheme will make a comeback in the city.

Combating with pollution

• Delhi Chief Minister announced that the road rationing scheme will be a part of a seven-point programme to combat pollution.
• The scheme will be implemented when Delhi’s air is at its worst post-festival pollution combines with smog from stubble burning in Haryana, Punjab and Uttar Pradesh particulate matter from tailpipes of vehicles.
• In the last three years, the government resorted to knee-jerk reactions which did very little to improve the city’s air quality.

Implementation of Odd-Even scheme

• The road rationing scheme allows vehicles to ply on alternate days, depending on odd and even number plates.
• It was introduced in 2016 as a desperate measure after the Delhi High Court asked the state government to submit a time-bound plan.
• A fight between the Delhi government and NGT came in the way of its implementation in 2017.
• The NGT said that any relaxation would come in the way of improving the city’s air quality. But the government wanted exemptions for two-wheelers.
• The government argued that Delhi’s public transport wasn’t equipped to handle the fallout of extending road-rationing to two-wheelers.

Way forward

• The government has nearly two months to iron out glitches and sort out differences that could come in the way of smooth implementation of the plan.
• It needs to ensure that the city’s public transport system is able to meet the needs of commuters on days when their vehicles will be off the roads.
• The odd-even scheme is not a magic bullet to clean up Delhi’s bad air. But the scheme is a part of a bouquet of pollution-control measures.

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The reality check (Indian Express)

Mains Paper 2: Polity
Prelims level: Article 370
Mains level: Aftermath situation of withdrawn Article 370

Context

• The satisfaction about the abrogation of Art 370 in the rest of India stems from years of frustration at the failure of our efforts to establish durable peace in Kashmir and the perception that its special status was a mistake.

Three principal arguments that the future holds

• Three principal arguments have figured in our national discourse: It has altered the terms of our engagement with Pakistan, better central control over a sensitive region, ushering in an era of peace and development in J and K, whose progress was hampered by its special status

Lessons from the past

• Pakistan’s questioning of J and K’s accession to India will not stop as the issue didn’t start with Art 370.
• The issue of Pakistan aggression in J and K to the UN, but the power politics of the day turned it into one of the futures of the territory.
• In the Simla Agreement, we agreed to hold bilateral negotiations for “a final settlement of Jammu and Kashmir”. We have not renounced this agreement.
• Since the late Eighties, when widespread terror and violence broke out in Kashmir, we have talked to Pakistan on this issue for various reasons: International pressure, To manage the relationship and reduce violence , The expectation that Pakistan could be moved in a positive direction through dialogue
• The role of international pressure has diminished considerably. J and K’s special status figured nowhere in these considerations.

Situation PoK

• On the return of PoK, we reiterated in every round of dialogue with Pakistan the finality of J and K’s accession.
• The remaining issue for discussion is the vacation of its parts under Pakistan’s illegal occupation.
• It is thought that our government’s move was aimed at forcing Pakistan’s hand to settle for the existing territorial status quo.
• But it is negated by the chorus for the recovery of PoK being our next step.
• Its recovery militarily will pit us against China, besides Pakistan, because of its deep interest in the so-called Gilgit-Baltistan, with its entry to the CPEC.

Security measures

• The central government will have direct control over law and order in the Union Territory of J and K.
• J and K’s statehood and special status were never serious impediments to operations by security forces against internal turmoil or their deployment for the defence of our external boundaries.
• The instrumentality of the Governor’s/President’s rule was available, when necessary.

Problems with the move on 370

• A key asset in a sensitive region is the loyalty of the local populace. The scrapping of the special status will not make much difference to the life of people in the Valley.
• The abrupt move, break-up, and downgrading of the state will feed into the already prevailing sense of alienation and religious radicalisation, which Pakistan has been exploiting.
• Peace as a prerequisite for the settlement of citizens from the rest of India in J and K and investment by them, faces serious challenges in the Valley and any turmoil there will not leave the Jammu region untouched.
• Influencing public opinion requires a massive effort to engage with the people, which has been missing in the last few years.
• Mainstream parties are marginalised and actively discredited by the government.
• Pakistan’s security establishment finds Kashmir as a means to for its institutional interest of keeping a stranglehold on the country’s polity and has using terrorism to keep the Valley on the boil. These considerations had nothing to do with J and K’s special status and will not disappear with its withdrawal.
• Pakistan has opportunistically sought to exploit the Indian move to bring international focus on Kashmir.

Way forward

• Addressing it requires a different set of measures, discussed at length from time to time, most recently post-Balakot.
• The best we can do is to devote our energies to building not only immediate but durable peace in the Valley, despite heavy odds.
• This requires engagement with the people and not shock therapies.

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No half measures (Indian Express)

Mains Paper 3: Economy
Prelims level: TARP
Mains level: Issues related public spending and investment

Context

• The government unveiled measures aimed at reviving the country’s troubled housing industry and exports.
• These include a Rs 20,000-crore refund to help the completion of affordable and middle-income housing projects that are Non Performing Assets and are not before the bankruptcy court or the National Company Law Tribunal, and which face last mile funding problems.
• The government will contribute Rs 10,000 crore to this stress fund and other investors will contribute the rest.
• A professional team will manage the fund that is estimated to potentially benefit 3.5 lakh housing units across the country.

Introducing TARP

• This may seem like the Troubled Asset Relief Program (TARP) in the US in which the government provided funds to help avoid foreclosures by home buyers.
• In the absence of details on how many projects would qualify and the selection of such projects, considering that there are hundreds of projects promoted by developers in which thousands of crores of money pumped in by home buyers and banks are stuck, this and the package for the export sector appear to be half measures.
• In the backdrop of sliding exports the data for August shows a decline of 6.05 per cent compared to a year ago.
• The finance minister announced a new export incentive scheme that will be WTO compliant, full electronic refund of GST to exporters by the end of this month, easier funding and annual mega shopping festivals in four cities by 2020.

Criticism

• These are not likely to help significantly reverse the trend in the near term given the escalating trade war and the global slowdown.
• Indeed, better infrastructure and a shift to zero rating of exports or levying of zero rate of tax on exports on the lines of countries which have implemented GST, thus easing the compliance burden, and unlocking capital that is locked up could provide a better boost competitiveness of Indian exports.
• Ultimately, countering the slowdown may hinge largely on the government stepping up public spending or investment in stalled projects.
• And at a time when revenue growth is far lower than projected so far this fiscal, it is also important that the GST Council also stand firm in rejecting the growing demand for a cut in GST to arrest the secular decline in auto sales.

Conclusion

• Fiscal orthodoxy and the spectre of bond vigilantism may deter the government from stepping up public spending.
• But it is interesting that in the face of weakening growth, fiscal rules are being overturned in the West.
• Monetary policymakers in Europe want governments to ramp up public spending to boost growth with the ECB having stepped up its bond buying programme.
• These should provide enough cues for the government here too.

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Let the farmer choose (Indian Express)

Mains Paper 3: Economy
Prelims level: ZBNF
Mains level: ZBNF analysis

Context

• Zero Budget Natural Farming (ZBNF) has received an endorsement from the NITI Aayog, FM and the PM.

Challenges with ZBNF

• India’s premier academy of agricultural scientists came out against this “unproven technology”.
• They say that it brings no incremental gain to either farmers or consumers.
• Since the mid-1960s, India’s annual foodgrain output has risen from 80-85 million tonnes (mt) to 280 mt-plus. It has risen from 20 mt to 176 mt for milk and by similar magnitudes in vegetables, fruits, poultry meat, eggs, sugarcane, and cotton.
• A significant part of these increases have come from crossbreeding or improved varieties/hybrids responsive to chemical fertiliser application, and crop protection chemicals to ensure that the resultant genetic yield gains aren’t eaten away by insects, fungi or weeds.
• Without IR-8 rice, urea, chlorpyrifos or artificial insemination, the nation would simply not have been able to feed itself.
• The basic idea of “zero budget” itself rests on very shaky scientific foundations. Agriculture can never be zero budget.
• Its propounder claims that nitrogen, the most important nutrient for plant growth, is available “free” from the air. But being in a non-reactive diatomic (N2) state, it has to be first “fixed” into a plant-usable form — which is what ammonia or urea is.
• Even maintaining indigenous cows and collecting their dung and urine in microbial, seed treatment and insect pest management solutions — entails labor cost.
• Crop yields cannot go up beyond a point with just cow dung that has only around 3% nitrogen (as against 46%t in urea), 2% phosphorous (46% in di-ammonium phosphate) and 1% potassium (60% in muriate of potash).

Way ahead

• Promoting techniques such as conservation tillage, trash mulching, green manuring and vermicomposting
• Reducing the use of chemical fertilisers and insecticides through integrated nutrient and pest management.
• Eliminating fertiliser subsidies to encourage their judicious use.
• Give farmers a fixed sum of money per acre, which they can use to buy chemical-based inputs or to engage the extra labour necessary for organic agricultural practices.

Conclusion

• Let the farmer choose between non-organic, organic or even ZBNF.

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Waiting for reforms: On the economic stimuli (The Hindu)

Mains Paper 3: Economy
Prelims level: Not much
Mains level: Highlights of the stimulus plan

Context

• Finance Minister Nirmala Sitharaman on Saturday presented the third round of stimulus measures to resuscitate the struggling economy, but once again these have largely failed to live up to the initial hype around them.

Highlights of the stimulus plan

Previous plan

• The previous two rounds of the stimulus plan, presented at press conferences held by the Minister over the last few weeks, focused primarily on reviving the automobile sector, boosting the confidence of foreign investors who were spooked by the Budget announcements in July, and improving the health of dangerously fragile state-owned banks by doing everything short of privatising them.

The present one

• This time around the focus has been on helping out the underperforming export and real estate sectors through piecemeal fiscal reforms.
• Among other things, Ms. Sitharaman announced a new tax refund scheme and greater priority sector lending for the export sector to incentivise exports.
• It is expected that the new tax breaks to the exports sector will cause a dent of up to ₹50,000 crore to the government’s revenue. Further, external commercial borrowing norms have been eased to make it easier for Indian real estate companies to tap funds from abroad, and funds worth ₹10,000 crore have also been allocated to aid the completion of affordable housing projects.

Limitations

• With lack of demand and major supply-side bottlenecks being the primary issues facing exports and real estate, it is doubtful whether the present measures will be enough to revive these flailing sectors.
• Overall, cutting across all three stimulus rounds announced till date, the government has been relying almost entirely on providing fiscal relief, in the form of tax cuts coupled with a tiny amount of government spending, to wade through what seems like a structural crisis in the economy.
• Without enacting any major supply-side reforms like land and labour reforms that can raise potential growth, it is also hard to see how greater spending can raise growth for very long.

Way forward

• This is, however, a far cry from what many expected from a government that promised radical structural reforms when it rose to power in 2014.
• The government may believe that the present slowdown, marked by five consecutive quarters of dropping growth, is merely a cyclical one.
• But given the size of its victory in two consecutive elections, the government should aim higher by trying to push through long-pending structural reforms that can raise India’s growth trajectory to the next level.

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Effort worth emulation: On Rajasthan’s public information portal (The Hindu)

Mains Paper 2: Governance
Prelims level: Jan Soochna Portal
Mains level: Utilisation of Jan Soochna Portal and its effectiveness

Context

• Fourteen years since the implementation of the groundbreaking Right to Information (RTI) Act, which has helped shed light on government works and administration, the launch of the “Jan Soochna Portal” (public information portal) by the Rajasthan government.
• It marks a milestone in increasing transparency and accountability in governance.

About the portal

• The portal details various schemes run by 13 government departments the employment guarantee programme, sanitation, the public distribution system among others, by not only explaining the schemes but also providing real time information on beneficiaries, authorities in charge, progress, etc.
• The information provided is in-depth, covering the whole gamut from the districts, blocks and panchayats, allowing access to details of schemes implemented at these levels.
• This is a laudable effort by the State government which is worthy of emulation by other States.
• The RTI Act had dealt with the citizen’s right to know about public information and required public authorities to expeditiously provide information on request from the citizenry.
• This aspect of the Act brought a sea change in accountability and has led to the possibility of a well-informed citizenry on the workings of the government.

Significance of RTI

• While RTI filings have increased exponentially and RTI-activism has become part and parcel of civil society, there have been dilutions in the Act pertaining to the appointments of information commissioners, therefore impinging on their autonomy.
• Besides, the response rate to RTI requests has also slowed down compared to the flurry in the immediate aftermath of the Act’s implementation.
• These problems with the RTI law apart, it is important to note that Section 4(2) of the Act, which specifically enjoins upon public authorities to publish information pro-actively, has not been implemented holistically so far.
• While government departments have successfully taken to e-governance and there has been a rapid release of public information on various government-run websites, this information has often been parcelled, dispersed and difficult to parse.
• Some of the better maintained central websites have also tended to deploy “dashboard” information, which is meant more to showcase data and records rather than release structured information for extensive study and for the knowledge of the citizenry.

Conclusion

• As a one-shot portal for public information on government programmes, the JSP, therefore, can advance the objective of transparency.
• The challenge would be to ensure that the information flow remains unhampered over time. Besides this, it is important to educate the citizenry about the use of data on the portal.
• While digital connectivity and literacy have increased over time, these have not adequately translated into digital knowledge of public affairs.

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Why India’s growth figures are off the mark (The Hindu)

Mains Paper 3: Economy
Prelims level: GDP data
Mains level: Economic growth projection data highlights

Context

• 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.

Explaining the markdown

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?

• The 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.

The source

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.

Way forward

• 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.

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