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GS Paper: GS3-12.Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

  • Spectrum auction

    The article analyses the factors influencing the outcome of the spectrum auction and suggests the measures to ensure the success and avoid the repeat of 2016 auction.

    Details of the auction

    • Based on the recommendation of the Telecom Regulatory Authority of India (TRAI), the government is planning to auction spectrum in the sub GHz bands of 700, 800, and 900 MHz along with mid-band frequencies in bands of 1800, 2100, 2300, and 2500 MHz across the 22 Licensed Service Areas (LSAs) of the country.
    • The cumulative reserve price — and hence the potential revenue accrual to the government at reserve prices — is about $50 billion.
    • The total reserve price of spectrum put on auction in 2016 was about $90 billion while the realized value was just about one-tenth of that.
    • Hence, while the 2016 auction could be considered as a failure from the auctioneer’s point of view.

    Factors determining the success of  the spectrum auction

    1) Right reserve price

    • Research on a cross-country spectrum database shows that the reserve price significantly and positively correlated to the winning bid price.
    • However, a higher reserve price also inhibits bidders from bidding for more spectrum blocks.
    • If the quantity effect is more than the price effect, then it results in reduced revenues for the government exchequer, as happened in 2016.

    2) Role of Over The Top (OTT) provider

    • Over The Top (OTT) providers who are providing substitute goods such as Voice Over Internet Protocol (VoIP); and capturing a greater mind share of customers while remaining relatively invisible to government regulators.
    • The rise of VoIP subscribers could have a positive effect on winning bid prices.
    • However, the erosion of the position of telcos in the overall digital value network of devices, connectivity, and apps, could result in a lower willingness to pay.

    3) Allocation of unlicensed spectrum for WiFi

    • By off-loading mobile data, Wi-Fi supplements the carrier network and reduces the demand for mobile network capacity.
    • A number of countries including the United States have unlicensed the V-band spectrum in 60 GHz — pencil beam band.
    • Referred to as “wireless fiber”, the 60 GHz spectrum provides huge capacities in a limited area.
    • Wi-Fi 6 (a.k.a. IEEE 802.11 ax) that operates in the 2.4/5 GHz unlicensed band requires additional unlicensed spectrum allocation to provide Gigabit speeds.
    • The more the unlicensed spectrum allocation, the lower will be the demand for licensed spectrum.

    4) Clarity on the availability of spectrum for auction

    • While there is an indication by the government that the spectrum for the 5G auction, namely 3.4-3.6 GHz, will be held in late 2021, the amount of spectrum that will be made available is not clear.
    • There is still uncertainty about the release of 26 GHz by the Department of Space for mobile services.
    • With this limited visibility, the bidders will be in a quandary whether to acquire the spectrum now or wait for subsequent auctions.
    • Further, some part of the current spectrum holding of all the operators is coming up for renewal in mid-2021, and hence there is additional pressure on them to retain them in the forthcoming auction.

    Steps need to be taken

    • A re-visit of reserve prices and lower it further, especially that of 700 MHz which is the “golden band” for covering the hinterlands of the country.
    • Releasing more unlicensed spectrum in 2.4/5/60 GHz for proliferating Wi-Fi as a suitable complement to [the] carrier network.
    • This will also augment the deployments of the Public Wi-Fi project which the cabinet approved recently.
    • Provide visibility of future auctions, especially the quantum of the spectrum that can be put on the block in 3.3/3.6/26/28 GHz.
    • The government should release guidelines on how OTT platforms will be regulated and what will be regulated so that the telcos and OTTs can join hands to provide superior services for the benefit of the consumers.

    Conclusion

    The government should follow the steps mentioned here to make the auction of the spectrum a success.

  • U.S. puts India on ‘currency manipulators’ monitoring list

    The U.S. Treasury has labelled Switzerland and Vietnam as currency manipulators and added three new names, including India, to a watch list of countries. Earlier it had removed India from the list in March 2019.

    What is Currency Manipulation?

    • Currency manipulation refers to actions taken by governments to change the value of their currencies relative to other currencies in order to bring about some desirable objective.
    • The typical claim – often doubtful – is that countries manipulate their currencies in order to make their exports effectively cheaper on the world market and in turn make imports more expensive.

    Why do countries manipulate their currencies?

    • In general, countries prefer their currency to be weak because it makes them more competitive on the international trade front.
    • A lower currency makes a country’s exports more attractive because they are cheaper on the international market.
    • For example, a weak Rupee makes Indian exports less expensive for offshore buyers.
    • Secondly, by boosting exports, a country can use a lower currency to shrink its trade deficit.
    • Finally, a weaker currency alleviates pressure on a country’s sovereign debt obligations.
    • After issuing offshore debt, a country will make payments, and as these payments are denominated in the offshore currency, a weak local currency effectively decreases these debt payments.

    US treasury’s criteria

    To be labelled a manipulator by the U.S. Treasury:

    • Countries must at least have a $20 billion-plus bilateral trade surplus with the US
    • foreign currency intervention exceeding 2% of GDP and a global current account surplus exceeding 2% of GDP

    Implications for India

    • India has traditionally tried to balance between preventing excess currency appreciation on the one hand and protecting domestic financial stability on the other.
    • India being on the watch list could restrict the RBI in the foreign exchange operations it needs to pursue to protect financial stability.
    • This comes when global capital flows threaten to overwhelm domestic monetary policy.
    • The two most obvious consequences could be an appreciating rupee as well as excess liquidity that messes with the interest rate policy of the RBI.
    • Indian policymakers have to be sensitive for the unpredictable nature of policy-making in the US under Trump, especially concerning global trade.

  • Premature membership of RCEP would not serve Indian interests

    The article analyses government’s decision to stay out of RCEP and factors responsible for it.

    What India chose not to join RCEP

    • By joining RCEP, India would have further risked a flood of cheap Chinese imports in sectors like electronics.
    • India had tried and failed to win substantial concessions in areas like work visas for its information technology-enabled services.
    • Two of India’s proposals—an RCEP business travel card and an RCEP service supplier card—failed to find favour with a majority of the bloc’s members.

    Arguments in favour of India joining the RCEP

    •  First argument made is RCEP would have provided an excellent opportunity for Indian firms to get integrated with regional value chains.
    • However, merely joining a trade bloc does not automatically result in integration with global value chains.
    • The complex nature of global production networks requires a lot of economic and trade policy reforms on the domestic front.
    • Second important argument made is that India would lose an opportunity to access RCEP’s common market.
    • But this argument too doesn’t hold much water if Indian producers are not competitive.
    • Competitiveness is driven by factors both within and beyond the control of domestic industry.
    • So it would be an over-simplification to assume that Indian industry does not have the capability or appetite to be competitive.
    • Often, global competitiveness inside factory gates gets diluted by costs borne outside those gates.

    What past data suggests

    • India’s merchandise exports grew at an annual rate of more than 18% between 2000-01 and 2010-11, which was largely a pre-FTA period.
    • In this period, India activated only two FTAs—with Sri Lanka and Singapore.
    • India joined the FTAs in a big way from 2010 onwards.
    • It operationalized big trade agreements with the 10-nation Association of South East Asian Nations (ASEAN), Japan, Korea, and separately with Malaysia.
    • However, despite these deals, India could realize annual merchandise export growth of only 2.5% between 2010-11 and 2019-20.
    • This disappointing performance shows that FTAs are not conducive for exports.

    Conclusion

    While RCEP may theoretically offer India new opportunities for exports and integration with pan-Asian production networks, we have a lot of work to do internally before we are in a position to make the most of free-trade deals.

  • Steps needed to achieve Comparative advantage in Manufacturing

    The article suggests the policy approach to achieve industrial growth while avoiding the isolationist approach in pursuit of AtmaNirbharBharat.

    Issue of policy binary

    • The goals of the Make in India initiative and now the AatmaNirbharBharat Abhiyan are driving a major shift in policy.
    • Import duties are being raised.
    • Production-linked incentives are being offered to firms across a wide canvas of 10 priority sectors.
    • At the same time, there is considerable unease at the rolling back of trade liberalisation.
    • This binary is not very useful.

    Steps needed to gain competitive advantage

    1) Infrastructure

    • It would still take India many years to develop its physical infrastructure to the levels required for international competitiveness.
    • Until then, large industrial parks for textiles, electronics, toys or shipbuilding need to be developed by state agencies with soft financing.
    • Competitive logistics are essential.
    • This was critical for the success of the information technology (IT) industry where world-class infrastructure was created within the software parks.
    • High-speed broadband real-time connectivity to the US market was provided through public investment.
    • This was done well before general telecom modernisation began.

    2) Closing the financing gap

    • Long-term financing for world-class infrastructure is still a gap.
    • The central government can either use one of its existing financial institutions or create a new development financial institution to provide long-term low-interest rate debt.
    • The sovereign needs to provide risk-mitigation through an implicit guarantee. It can afford to do so.

    3)  Prevent real exchange rate appreciation

    • Before considering specific increases in import duties, real exchange appreciation should be undone.
    • This would have the effect of raising tariffs across the board.
    • It is high time the government and the Reserve Bank of India (RBI) agreed on this objective.

    4) Change the regime for SEZ

    • Allow SEZ to sell into the domestic area with import duties at the lowest applicable rate with any trading partner and the same value-addition norms.
    • Tax exemption on profits could be dispensed with while continuing to provide a duty-free import regime.
    • This would create a level-playing field for production vis-à-vis competitive locations overseas.
    • Large zones would have to be developed by the state.
    • The private sector can be partners in the process, but achievement of scale is only possible by the state.
    • Production for the domestic as well as the global market would become easier.

    5) Encourage domestic value addition

    • Domestic value-addition can be incentivised by-
    • 1) Reducing duties to zero for all primary raw materials and inputs.
    • 2) then progressively higher rates for intermediates with the highest rate for the finished product.
    • In short, have just the opposite of the inverted duty structure we have had for computers.
    • This would change investment and production decisions if other costs of production in India have been made competitive.

    6) Commitment of procurement of full production

    • In some industries, commitment of procurement of full production for a few years would suffice to get investment.
    • Bids could be invited for solar panels, or for battery storage for the grid, for annual supply for, say, five years with the condition that full value-addition has to be done in India.
    • Such commitment would provide for amortisation of the capital investment and make it a risk-free investment.
    • If the bid size is large enough, the best global firms would come and invest.
    • If the bids are repeated, prices would come down and a competitive industry structure would be created.

    7) Encourage public investment

    • Public investment in firms should not be ruled out altogether.
    • In some cases, it may be the best way to create competitive capacity.
    • Maruti Suzuki is a good example in India.
    • Volkswagen was set up by a state government in Germany, which is still a substantial shareholder.
    • This is a policy instrument that can be used to create competitive advantage.

    8) Creation of fund

    • There should also be willingness to create a fund that looks at modest returns, but aims at creating national and global champions through start-ups.

    Conclusion

    The foundation of China’s incredible success was laid by Deng Xiaoping with the maxim on economic policy that one should not bother about the colour of the cat as long as it caught mice. India’s policies have tended to be doctrinaire. We need a heavy dose of pragmatism to achieve our full potential.

    Source:-

    https://www.financialexpress.com/opinion/industrial-growth-the-right-policy-mix-for-success/2136735/

  • PLI Scheme extended to 10 key Sectors

    Manufacturing holds key to the economic prosperity of the country. The article examines the significance of Production Linked Incentive Scheme to boost manufacturing in India.

    Need for increasing manufacturing capabilities

    • The world of manufacturing is now more interconnected than ever before with all major industries—automobile, electronics, pharmaceuticals, textiles, etc—operating as a global value-chain.
    • In order to integrate India as a pivotal part of this modern economy, there is a strong need to step up our manufacturing capabilities in sectors of high growth, including the cutting edge technology sectors.
    • A strong and dynamic manufacturing sector will fuel India’s economic growth by allowing companies producing in India to penetrate effectively into the global supply chains across various sectors.
    • Apart from enhancing exports, it will also reduce our import dependencies and spur domestic consumption.
    • ‘Atmanirbhar Bharat’ has brought manufacturing to the centre stage and emphasised its significance in driving India’s growth.

    Factors favouring India

    • India offers an attractive domestic market, with a large population in the educated and earning segment.
    • It also has a strong institutional framework which allows for a smooth functioning of the industry.
    • A concerted effort towards attracting substantial investments for the creation of large manufacturing facilities, combined efficiency and economies of scale, can help Indian companies globally competitive and integrate with the global markets.

    How Production Linked Scheme (PLI) will help achieve these objectives

    • The Production Linked Incentive (PLI) Scheme is designed to incentivise incremental production for a limited number of eligible anchor entities in each of the selected sectors.
    • These selected entities will invest in technology, plant & machinery, as well as in R&D.
    • The scheme will also have beneficial spillover effects by the creation of a widespread supplier base for the anchor units established under the scheme.
    • Along with the anchor unit, these supplier units will also help to generate massive primary and secondary employment opportunities.
    • The sectors for PLI have been shortlisted on the basis of their potential for economic growth, extent of benefit to the rural economy, revenue and employment generation.
    • A key benefit of the PLI Scheme is that it can be implemented in a very targeted manner to attract investments in areas of strength and to strategically enter certain segments of global value chains (GVCs).
    • This will help bring scale and size in key sectors and create and nurture global champions.
    • The scheme incentivises upcoming technologies that represent the biggest economic opportunities of the 21st century.
    • The scheme intends to generate large-scale employment by incentivising the development of traditional, labour intensive sectors like Food Processing and Textiles.
    • The current basket of Indian manufacturing constitutes of large volume of low-value products.
    • The scheme aims to correct this by encouraging large manufacturers to bring technology and to build capabilities for high-value output thereby providing higher returns to the upstream producers.
    • It will also enable an increase in exports.
    • The scheme envisages globally-integrated manufacturing in sectors such as automobile and auto components, pharmaceuticals, telecommunications, white goods and steel.
    • These are crucial sectors in terms of their strategic importance, contribution to the GDP and employment-generation potential.

    Conclusion

    Given the scale of incentives, which is around Rs 1,96,000 crore, the manufacturing sector of the country is set to transform in the next few years. Its contribution to the GDP will significantly improve, leading to unprecedented investment and job creation.

    Source:-

    https://www.financialexpress.com/opinion/pli-scheme-will-help-india-nurture-manufacturing-giants/2128992/

  • [pib] PLI Scheme extended to 10 key Sectors

    The Union Cabinet has unveiled the Production-Linked Incentive (PLI) Scheme to encourage domestic manufacturing investments in ten key sectors.

    PLI Scheme

    • The PLI scheme aims to boost domestic manufacturing and cut down on imports by providing cash incentives on incremental sales from products manufactured in the country.
    • Besides inviting foreign companies to set shop in India, the scheme aims to encourage local companies to set up or expand, existing manufacturing units.

    UPSC can directly as the sectors included in the PLI scheme. Earlier it was only meant for Electronics manufacturing (particulary mobile phones).

    What was the earlier PLI Scheme?

    • As a part of the National Policy on Electronics, the IT ministry had notified the PLI scheme on April 1 this year.
    • The scheme will, on one hand, attract big foreign investment in the sector, while also encouraging domestic mobile phone makers to expand their units and presence in India.
    • It would give incentives of 4-6 per cent to electronics companies which manufacture mobile phones and other electronic components.
    • A/c to the scheme, companies that make mobile phones which sell for Rs 15,000 or more will get an incentive of up to 6 per cent on incremental sales of all such mobile phones made in India.
    • In the same category, companies which are owned by Indian nationals and make such mobile phones, the incentive has been kept at Rs 200 crore for the next four years.

    10 new sectors added

    The ten sectors have been identified on the basis of their potential to create jobs and make India self-reliant, include:

    1. Food processing
    2. Telecom
    3. Electronics
    4. Textiles
    5. Speciality steel
    6. Automobiles and auto components
    7. Solar photo-voltaic modules and
    8. White goods such as air conditioners and LEDs

  • Economic lessons from Vietnam and Bangladesh

    The article examines the emergence of Bangladesh and Vietnam as the major export hubs in the world and explains the lessons India could draw from it.

    Context

    • Bangladesh has become the second-largest apparel exporter after China.
    • Vietnam’s exports have grown by about 240% in the past eight years.

    Analysing Vietnam’s success

    • An open trade policy, a less inexpensive workforce, and generous incentives to foreign firms contributed to Vietnam’s success.
    • Vietnam’s open trade policy through Free Trade Agreements (FTAs) means trading partners do not charge import duties on products made in Vietnam.
    • Vietnam’s domestic market is open to the partners’ products.
    • Vietnam has agreed to change its domestic laws to make the country attractive to investors.
    • Over a decade or so, large brands such as Samsung, Canon, Foxconn, H&M, Nike, Adidas, and IKEA have flocked to Vietnam to manufacture their products.

    What explains Bangladesh’s success?

    • In Bangladesh, large export of apparels to the EU and the U.S. make the most of the country’s export story.
    • The EU allows the import of apparel and other products from least developed countries (LDCs) like Bangladesh duty-free.
    • India, as a good neighbour, accepts all Bangladesh products duty-free (except alcohol and tobacco).
    • Bangladesh may not have this facility in four to seven years as its per capita income rises and it loses the LDC status.
    • Bangladesh is working smartly to diversify its export basket.

    Lessons for India

    • The key learning from Bangladesh is the need to support large firms for a quick turnover.
    • Yet, most of Vietnam’s exports happen in five sectors, in contrast, India’s exports are more diversified.
    • The Economic Complexity Index (ECI), which ranks a country based on how diversified and complex its manufacturing export basket is, illustrates this point.
    • The ECI rank for China is 32, India 43, Vietnam 79, and Bangladesh 127.
    • India, unlike Vietnam, has a developed domestic and capital market.
    • To further promote manufacturing and investment, India could set up sectoral industrial zones with pre-approved factory spaces.
    • There should be no need to search for land or obtain many approvals.

    India should pursue organic growth

    • Most of Vietnam’s electronics exports are just the final assembly of goods produced elsewhere.
    • In such cases, national exports look large, but the net dollar gain is small. China also faces this issue.
    • Country’s Export to GDP ratio (EGR) indicates its export capacity.
    • Vietnam’s EGR is 107%, such high dependence on exports brings dollars but also makes a country vulnerable to global economic uncertainty. 
    • The U.S.’s EGR is 11.7%, Japan’s is 18.5%, India’s is 18.7%. Even for China, with all its trade problems, the EGR is 18.4%.
    • Most such countries, including India, follow an open trade policy, sign balanced FTAs, restrict unfair imports, and have a healthy mix of domestic champions and MNCs.
    • While export remains a priority, it is not pursued at the expense of other sectors of the economy.
    • The focus is on organic economic growth through innovation and competitiveness.

    Consider the question “While export is essential for the growth of the country, over-dependence on it and its promotion at the expense of the other sectors could do more harm to the economy than good. Comment.” 

    Conclusion

    With reforms promoting innovation and lowering the cost of doing business, India is poised to attract the best investments and integrate further with the global economy without increasing its dependence on export.

  • Regulation of Other Service Providers (OSP)

    The Department of Telecom (DoT) has eased the rules for registration, submission of bank guarantee and other norms for other service providers (OSP) in the business process outsourcing (BPO) and information technology-enabled services (ITes).

    Recall your basics from NCERT books… Sectors of the Economy … More precisely, the Tertiary, Quaternary and Quinary Sectors.

    What are Other Service Providers (OSP)?

    • OSPs or other service providers are companies or firms which provide secondary or tertiary services such as telemarketing, telebanking or telemedicine for various companies, banks or hospital chains, respectively.
    • As computers made their foray into the Indian information technology space, a number of such OSPs, which were either voice or non-voice based, came into the market.
    • The sector required minimal investment but gave great returns in business, which prompted a large number of individuals and companies to float other service providing firms.

    Registration of OSPs

    • The new telecom policy of 1999 suggested that all OSPs register themselves so that the government could keep a check on the usage of its resources.
    • Since most of these firms used leased telephone lines, this in turn used the telecom spectrum auctioned by the DoT, hence facing the regulation.
    • Further, the registration was also made mandatory to ensure that firms did not establish fake OSPs which swindled customers under the garb of providing telebanking and other such sensitive services.

    What were the various registration norms for OSPs?

    • To start services in India, OSPs had to register themselves with the DoT and declare to the government as to how many employees were working in the firm as well as the area of service it was engaged in.
    • For example, if a firm wished to provide telebanking services, it had to tell the government the number of people working with the BPO and the state that firms catered to.
    • Further, the OSPs also have to declare whether they were providing services to domestic firms or international firms, and the nature of services being offered.

    Significance of the new guidelines

    • The guidelines will make it easier for BPOs and ITes firms in many ways, such as cutting down on the cost of location, rent for premises and other ancillary costs such as electricity and internet bills.
    • The doing away of registration norms will also mean that there will be no renewal of such licenses and therefore will invite foreign companies to set up or expand their other service providing units in India.
    • This change, in line with the norms of countries in the West can also allow employees to opt for freelancing for more than one company while working from home, thereby attracting more workers in the sector.

  • Fixing the rules of economy

    The article discusses the three fundamentals which need an examination to fix the issues faced by the economy. 

    Re-examining the fundamentals

    • India has an incomes crisis: incomes of people in the lower half of the pyramid are too low.
    • The solutions economists propose are: free up markets, improve productivity, and apply technology.
    • These fundamentals of economics must be re-examined when applied to human work.

    Three solutions and issues with them

    1) Freeing up the markets

    • It is suggested that markets should be freed up for agricultural products so that farmers can get higher prices; and freed up for labour to attract investments.
    • Without adequate incomes, people cannot be a good market for businesses.
    • In fact, it is the inadequate growth of incomes that has caused a slump in investments.
    • Ironically, the purpose of freeing up markets for labour is to reduce the burden of wage costs on investors just when wages and the size of markets must be increased.

    2) Increasing productivity

    • Productivity is a ratio of an input in the denominator and an output in the numerator.
    • The larger the output that is produced with a unit of input, the higher the productivity of the system.
    • Improvement of ‘productivity’ is key to economic progress.
    • Economists generally use labour productivity as a universal measure of the productivity of an economy.
    • Humans are the only ‘appreciating assets’ an enterprise has. They can improve their own abilities.
    • The values of machines and buildings depreciate over time, as any accountant knows.
    • Whereas human beings develop when they are treated with respect, and are provided with environments to learn.
    • For capital-scarce and human resource-abundant countries, such as many developing countries, the correct ratio of productivity is output per unit of capital.
    • This must be the driver of business as well as national strategies.
    • This was the strategy of ‘Japan Inc.’ to make Japan an industrial powerhouse.
    • This was E.F. Schumacher’s insight also.

    3) Use of technology

    • Schumacher, best known for his seminal idea ‘small is beautiful’ understood where capitalism powered with technology would be heading.
    • In his essay he wrote: “If we define the level of technology in terms of ‘equipment cost per work-place’, we can call the indigenous technology of a typical developing country (symbolically speaking) a £1-technology, while that of the modern West could be called a £1,000-technology.
    • The current attempt of the ‘developing ‘countries, supported by foreign aid, to infiltrate the £1,000-technology into their economies inevitably kills off the £1-technolgy at an alarming rate.
    • This results in destroying traditional workplaces at a much faster rate than modern workplaces can be created and producing the ‘dual economy’ with its attendant evils of mass unemployment and mass migration.
    • Schumacher had warned there was a malaise brewing beneath the drive to ‘Westernise’ and ‘technologise’ economies.

    Way forward: Social contract between society and workers

    • Workers provide the economy with the products and services it needs.
    • In return, society and the economy must create conditions whereby workers are treated with dignity and can earn adequate incomes.
    • Good jobs require good contracts between workers and their employers.
    • Therefore, the government should create a good society for all citizens, must regulate contracts between those who engage people to do work for their enterprises, even in the gig economy.
    • Goverment should push innovation in socially more beneficial directions to augment rather than replace less skilled workers.

    Conclusion

    The power balance must shift. Small enterprises and workers must combine into larger associations, in new forms, using technology, to tilt reforms towards their needs and their rights.

  • Controlling the distorting power of the global capital

    Issues with free trade are making themselves more evident in the aftermath of the Covid pandemic. The article analyses the growing influence of the capital and how it is benefiting the few.

    Issues with free trade

    • Debates about free trade revolves around value of economic growth vs. the values of justice.
    • The Economist (October 5) says “Investor-state dispute-settlement (ISDS) clauses of international trade and investment agreements give foreign investors the right to resort to a secretive tribunal to seek compensation when they are in disagreement with a host government.
    • They threaten governments who want to pass laws that seem self-evidently in their country’s and even the world’s interests.
    • The interests of remote financial investors are considered superior to the rights of local people represented by their own democratically elected governments.
    • TRIPS (the Agreement on Trade-Related Aspects of International Property Rights) is another egregious example.
    • Lobbies of multinational pharma companies want to protect their investors with intellectual monopolies under TRIPS, denying affordable medicines to the world’s poorer people.
    • New business models are throwing more workers into short-term contractual arrangements to make it easier for investors to do business.

    How it is relevant in India

    • The Environmental Impact Assessment (EIA) notification 2020 make it easier for investors to take over lands for projects by debilitating the assessment process which requires that communities be heard.
    • The new labour codes passed by Parliament to simplify regulations have also weakened the rights of workers to be represented by unions.
    •  In India, terms of trade have been stacked against small farmers to keep prices low for consumers.
    • Terms are also against small enterprises in financial markets, and also when they supply to large buyers in global supply chains.
    • The terms of trade are unfair for all workers who are on the supply side of labour markets vis-à-vis those who pay them.
    • Small people do not have clout in any market. Those with more money set the terms of trade.

    Governance crisis

    • Capitalism runs on the principle of property rights: Those who own more must have a greater say in the governance of the enterprise.
    • Money is speaking too much in fixing the rules of the game: It influences elections; it controls the media; it powers lobbies for reforms at international and national levels.

    Conclusion

    The way the rules of the economy and trade are made must change to create a more just and resilient world. Voices of the poorest people and their associations must be heard more loudly than the opinions of the rich and their lobbies.