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  • Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

    From informal to the formal economy: The crooked road

    The article discusses the issues around the informal workforce in the economy. What are the factors responsible for the high informal sector in India? How is this sector responding in times of COVID? Are there some easy solutions to mainstream the informal sector into our formal economy? These are some of the points one should ponder upon while reading this article.

    The vulnerability of the informal workforce

    • Developing countries such as India are economically vulnerable to Covid-19 because of the presence of huge informal workforce.

    • Lack of protection: This vast informal workforce, which has no labour, social or health protection, is woefully ill-equipped to cope with the medical and economic shocks of the virus.

    The humongous size of the informal economy in India

    • Share of the informal sector: As per Periodic Labour Force Survey, 2017-18, 90.6 per cent of India’s workforce was informally employed.

    • This estimate includes those who are employed in informal enterprises (unincorporated small or unregistered enterprises).

    • It also includes informal workers in the formal sector (workers in the formal sector who are not provided any social security benefits by employers).

    • Take another example: Between 2004-05 and 2017-18, a period when India witnessed rapid economic growth, the share of the informal workforce witnessed only a marginal decline from 93.2 per cent to 90.6 per cent. 

    • Covid effect: Looking ahead, it is likely that informal employment will increase as workers who lose formal jobs during the COVID crisis try to find or create work (by resorting to self-employment) in the informal economy.

    • Also, formal enterprises are likely to continue hiring informal workers as they seek more flexibility and attempt to cut labour costs to cope with the COVID-19 induced economic uncertainty.

    Why is the informal more favourable over the formal?

    • The basic reason: necessity to eke out a subsistence living in the absence of alternative employment opportunities.

    • The ‘not so basic’ reasons: Some self-employed persons choose to be in the informal economy voluntarily to avoid registration or taxation.

    • Many are deterred by the costs of formalisation or don’t see much benefit from formalisation.

    • Finally, the phenomenon of informalisation of wage employment in the formal sector is a consequence of formal firms trying to avoid payroll taxes and employer’s contributions to social security or pensions to reduce labour costs.

    Some solution to smoothen the crooked road

    • A multi-pronged and comprehensive approach is needed to facilitate the transition.

    • Labour intensive growth: It requires creating more formal jobs through labour-intensive growth so that informal workers can move to these jobs.

    • Registering and taxing informal enterprises: The Indian experience of compelling informal firms to register and become tax compliant through demonetisation and introduction of GST formalised them only in a legal sense.

    • There is a need for increasing productivity of informal enterprises and incomes of the informal workforce by providing them with technical and business skills, infrastructure services, financial services, enterprise support and training to better compete in the markets.

    • Promoting the path to entrepreneurship in the informal economy.

    • Many informal enterprises would welcome efforts to reduce barriers to registration and related transaction costs as they expect to reap the benefits of formalising.

    • Reducing decent work deficit: This requires protecting informal workers by providing them a social protection floor, ensuring a set of basic working conditions (adequate living wages, limits on hours of work and safe and healthy workplaces).

    A direct question based on the issue of the informal sector can be asked by the UPSC, for ex- “There is a humongous presence of the informal sector in the Indian economy. What are the factors responsible for this? Suggest ways to transform the informal sector into the formal sector.”

    Conclusion

    Questions around the role of government and who bears the onus of protecting workers deserve careful consideration in the backdrop of the rising incidence of informal employment in the formal sector and the growth of the gig economy. It is apparent that in our relentless pursuit of economic growth, we have ignored the voices of India’s informal sector for too long.


    Back2Basics: What is the informal economy?

    • An informal economy (informal sector or grey economy) is the part of any economy that is neither taxed nor monitored by any form of government.
    • Although the informal sector makes up a significant portion of the economies in developing countries, it is sometimes stigmatized as troublesome and unmanageable.
    • However, the informal sector provides critical economic opportunities for the poor.
  • Coronavirus – Economic Issues

    Globalisation 2.0 after Covid-19

    The article discusses the future of the Globalisation after Covid-19. Globalisation 2.0 which has been dominated by China will see several changes in the post-pandemic world. Investment decisions and Global Value Chains would undergo a paradigm shift. The article is concluded by expressing the hope that pandemic doesn’t end  Globalisation 2.0 but it will certainly usher in the new rules of capitalism.

    Globalisation 2.0 and issues with the flow of labour

    • What is Globalisation 2.0? In strictly economic terms, globalisation is about the free movement of capital, goods and labour across national borders.
    • Globalisation 2.0 began in the early 1980s and has lasted for four decades.
    • Under the 2.0 phenomenon, the labour flows were never as free as the movements of capital and goods.
    • This is because one does not necessarily see who produced the goods or capital coming into the borders.
    • But migrants are distinguishable, one can directly observe how ethnically, racially, religiously different they are from the mainstream.

    Rise of right-wing politics in the US and UK due to labour flows

    • Labour flows is a major reason for triggering right-wing politics of nativism in present times.
    • Donald Trump directed his political campaign against non-white immigrants, especially Hispanics and Muslims.
    • He criticised businessmen who, in search of lower costs, had made China the destination of their accumulated investments, transferring jobs away from America’s industrial heartland.
    • Thus, his policies to levy higher tariffs to curtail freer trade. These policies made sure that the American corporations bring capital back to the US.
    • In Europe, a similar politics has been led by the UK, though less vociferously.

    How China has benefited from Globalisation 2.0?

    • In 1980, China was the 48th largest economy in the world: with GDPs at roughly $200 billion, Indian and Chinese economies were similar in size.
    • In 2018, China, with a GDP of $13.6 trillion, was the second-largest economy in the world, behind the US ($20.5 trillion). But far ahead of Japan ($4.9 trillion), Germany ($4.0 trillion), Britain ($2.8 trillion), France ($2.8 trillion) and India ($2.7 trillion).
    • Not only in terms of GDP, but China had also become the largest trading nation in the world by 2018:
    • Exports: worth $2.5 trillion, substantially ahead of the US ($1.6 trillion).
    • FDI in China: In 2018, China attracted over $203 billion worth of net FDI, much more than India ($42 billion), and second only to the US ($258 billion).

    Is COVID-19 a sign of ending Globalisation 2.0?

    • Despite the pure economic logic of how easy it is to manufacture at scale in China, the global leader today are more concerned about the political overtones.
    • Given all the doubts about how China handled the information about the origins of the virus in Wuhan, anger against China in world capitals is evident.
    • Such anger can have impact on the rules of globalisation.
    • Strict regulation of labour laws: We can expect labour flows will now be more strictly regulated than before.
    • Political risks in investment decisions: Western investors will also have to factor in political risks in their investment decision-making.
    • National security concern: New concerns like what if China threatens supply disruptions for critical materials.
    • Instead of chasing lower labour costs, investors will either bring capital back to domestic shores or geographically restructure their supply chains.
    • To summarize it, Globalisation will not end, but it will be pushed into greater retreat. Thus, changing the rules of the BIG game of capitalism.

    A question based on the impact of the pandemic on the global trade, issues associated with and opportunities for India could be asked in the Mains Paper 3.

    Also the Idea of Globalisation is important from the aspect of paper 1 and Essay. “Globalisation’ vs ‘Nationalism’ was one of the topic in Essay paper in 2009.

    Conclusion

    For the foreseeable future, economic efficiency, the cornerstone of market-based systems, will not be high on priority. Politics will drive new economic policies, not market-based rationality.

  • Policy Wise: India’s Power Sector

    Global Energy Review 2020, Report

    Covid-19 is having a ripple effect on the global energy space. Consistent lockdowns have reduced energy demand by almost 30 per cent in India.

    Covid-19 shock global energy demand

    • The IEA’s Global Energy Review studies the impacts of the Covid-19 crisis on global energy demand and CO emissions.
    • The projections of energy demand and energy-related emissions for 2020 are based on assumptions that the lockdowns implemented around the world.
    • It projects a 6 per cent fall in energy demand in 2020 — seven times the decline after the 2008 global financial crisis.
    • Electricity demand is set to decline by 5 per cent in 2020, the largest drop since the Great Depression in the 1930s.

    Global Energy Demands

    • The countries in full lockdown are experiencing an average decline of 25% in energy demand per week, while in those with a partial lockdown, the fall in energy demand is about 18% per week.
    • Global energy demand declined by 3.8% in the first quarter of 2020 compared to the first quarter of 2019.
    • Further, it is expected that the impact of Covid‑19 on energy demand in 2020 would be more than seven times larger than the impact of the 2008 financial crisis on global energy demand.

    Considering the above scenario the global demand of various energy sources can be analysed as given below

       Coal Demand:

    • It has been declined by 8% compared with the first quarter of 2019.
    • The reasons for such decline include, China – a coal-based economy – was the country hardest hit by Covid‑19 in the first quarter and cheap gas and continued growth in renewables elsewhere challenged coal.

    Oil Demand:

      • It has declined by 5% in the first quarter, majorly due to curtailment in mobility and aviation, which account for nearly 60% of global oil demand.
      • The report also estimates that the global demand for oil could further drop by 9% on average in 2020, which will return oil consumption to 2012 levels.
    •  Gas Demand:
      • The impact of the pandemic on gas demand has been moderate, at around 2%, as gas-based economies were not strongly affected in the first quarter of 2020.
    •  Renewables Energy Resources Demand:

      • It is the only source that has registered a growth in demand, driven by larger installed capacity.
      • Further, the demand for renewables is expected to rise by 1% by 2020 because of low operating costs and preferential access for many power systems.
    •  Electricity Demand:

      • It has been declined by 20% during periods of full lockdown in several countries.
      • However, the residential demand is outweighed by reductions in commercial and industrial operations.

    Indian scenario

    • The declines in electricity and transport demand in India have been among the deepest globally, but the contractions over the full year are likely to be smaller than the global average.
    • The impact of the crisis on energy demand is heavily dependent on the duration and stringency of measures to curb the spread of the virus.
    • At the same time, lockdown measures are driving a major shift towards low-carbon sources of electricity including nuclear, hydropower, wind and solar PV.

    Data on renewables

    • After overtaking for the first time ever in 2019, low-carbon sources are set to extend their lead this year to reach 40 per cent of global electricity generation — 6 percentage points ahead of coal.
    • Electricity generation from wind and solar PV continues to increase in 2020, lifted by new projects that were completed in 2019 and early 2020.

    Back2Basics: International Energy Agency (IEA)

    • The IEA is an autonomous organisation which works to ensure reliable, affordable and clean energy, headquartered in Paris, France.
    • It was established in the wake of 1973 (set up in 1974) oil crisis after the OPEC cartel had shocked the world with a steep increase in oil prices.
    • India became an associate member of the International Energy Agency in 2017.
  • Blockchain Technology: Prospects and Challenges

    E-Renminbi: China’s Official Digital Currency

    China in a significant move has launched a trial of digital yuan in four urban centres of the country for specific services even as the world grapples with the containment of Covid.

    What is a cryptocurrency? Discuss how a vibrant cryptocurrency segment could add value to India’s financial sector. (250 W)

    Prelims Perspective:-

    1. Subtle differences btn digital and virtual currency – e.g. Regulatory issues

    2. Which countries have official virtual currency – e.g. Petro of Venezuela

    e-RMB

    • It will be the electronic form of the renminbi, with a value equivalent to the paper notes and coins in circulation.
    • The People’s Bank of China, the country’s central bank, will be the sole issuer of the digital yuan, initially offering the digital money to commercial banks and other operators.
    • It will be launched in major cities of Shenzhen, Suzhou and Chengdu, as well as the Xiong’an New Area.
    • It aims to change the financial system in big ways — by cutting costs and making transactions easier, more convenient and more transparent.
    • The public would be able to convert money in their bank accounts to the digital version and make deposits via electronic wallets.

    Back2Basics: Cryptocurrency

    • A Cryptocurrency is an internet-based medium of exchange which uses cryptographical functions to conduct financial transactions.
    • It leverages blockchain technology to gain decentralization, transparency, and immutability.
    • The most important feature of a cryptocurrency is that it is not controlled by any central authority: the decentralized nature of the blockchain makes cryptocurrencies theoretically immune to the old ways of government control and interference.
    • It can be sent directly between two parties via the use of private and public keys.
    • Unlike decentralized cryptocurrencies, such as bitcoin, that allow users to transfer value with no central authority or third party involved, the government-backed digital currency is preferred.

    What are Blockchains?

    • Blockchain, sometimes referred to as Distributed Ledger Technology (DLT), makes the history of any digital asset unalterable and transparent through the use of decentralization and cryptographic hashing.
    • Blockchain consists of three important concepts: blocks, nodes and miners.
    • Nodes can be any kind of electronic device that maintains copies of the blockchain and keeps the network functioning.
    • Miners create new blocks on the chain through a process called mining.
  • Modern Indian History-Events and Personalities

    Significance of UK labor party’s remarks on Kashmir

    The UK Labour party’s newly appointed leader Keir Starmer said Kashmir was a bilateral issue for India and Pakistan to resolve peacefully. These remarks were seen as an attempt to re-position his party’s stance on Kashmir and reach out to the Indian community in Britain.

    What was the Labour party’s stance before?

    • The party’s relations with the Indian diaspora have been strained, especially after its delegates passed an emergency policy motion in September 2019 criticizing India’s decision to revoke Article 370.
    • It maintained that the people of Kashmir should have self-determination rights.

    Why is the Labour Party’s relationship with the Indian diaspora important?

    • Indians are the largest ethnic community in the UK, numbering over 1.5 million people or accounting for over 2.3 per cent of the country’s population.
    • Therefore, they form a significant vote share for any party.
    • In the 2017 general elections, 50 per cent of the Indians living in the UK had voted for Labour.

    India in Labour Party (UK) manifestos

    Over the years, issues relating to India have found various mention in many election manifestos in the UK:

    • 1945: India’s freedom had been a campaign promise of the Labour party, its manifesto pledging “the advancement of India to responsible self-government”.
    • 1947: The Indian Independence Act, 1947, was passed when Attlee was Prime Minister.
    • 1949: all the Commonwealth Prime Ministers welcomed the free choice of India, Pakistan and Ceylon to join the Commonwealth as full and equal members.
    • 2019: Issue a formal apology for the Jallianwala Bagh massacre.
  • Wildlife Conservation Efforts

    Back in news: International Whaling Commission (IWC)

    Iceland will not be hunting any whales in 2020. Iceland, alongside Norway and Japan, has frequently broken the International Whaling Commission’s 1986 worldwide moratorium, which indefinitely “paused” commercial whaling.

    Regarding IWC, we can expect a statement based prelim question asking-

    1) If IWC has a UN or any other parent organization

    2) If India is a member/observer etc.

    About International Whaling Commission (IWC)

    • The IWC is an Inter-Governmental Organisation set up by the terms of the International Convention for the Regulation of Whaling (ICRW) signed in Washington, D.C in 1946.
    • It aims to provide for the proper conservation of whale stocks and thus make possible the orderly development of the whaling industry.
    • The main duty of the IWC is to keep under review and revise as necessary the measures laid down in the Schedule to the Convention which governs the conduct of whaling throughout the world.
    • The body is the first piece of International Environmental Legislation established in 1946.
    • Commercial whaling was banned by the IWC in 1986 after some species were almost driven to extinction.
    • 89 countries have the membership of in IWC and all the member countries are signatories to this convention.
    • India is a member state of the IWC.

    Earlier reference

    • Japan has last year withdrawn from the IWC citing domestic reasons.
    • Thus, it resumed commercial whaling after 31 years, meeting a long-cherished goal of its traditionalists.
  • Wildlife Conservation Efforts

    [pib] Sariska Tiger reserve

     

    The Ministry of Tourism’s Dekho Apna Desh webinar featured a presentation and virtual tour of ‘Destination- Sariska Tiger reserve’.

    Tourism and tourist sites carry high stakes for possible prelims questions.  Take time to quickly revise the Swadesh Darshan , PRASHAD Schemes.   Click here for the repository of all such initiatives.

    Sariska Tiger Reserve

    • It is located in the Aravalli Hills, 35 km from Alwar, 250 km SW of Delhi and 110 km NE of Jaipur.
    • The former hunting reserve of the Maharaja of Alwar, the Sariska valley is home to a variety of flora and fauna.
    • The park has populations of tigers, leopards, Nilgai, Sambar, chital etc.
    • The place is a paradise for bird lovers as it shelters a large population of Indian peafowl, crested serpent eagles, sand grouse, golden-backed woodpeckers, great Indian horned owls, tree pies, vultures and many others.
    • It is the first reserve in the world with successfully relocated tigers. It is an important biodiversity area in the Northern Aravalli leopard and wildlife corridor.

    Features of this episode

    • Alwar is a city dotted with heritage buildings, Forts, tombs and palaces. Some of the important sights not to be missed are Bala Qila, Vijai Mandir Lake Palaces, Fateh Jung ki Gumbad, Moti Doongri etc.
    • The sanctuary is strewn with ruins of ancient temples dating back to the 10th and 11th centuries.
    • Some of the highlights are the ruins of the Kankwari Fort and the 10th-century Neelkanth temples, which have Khajuraho-like carvings as key features.
    • Neelkanth Mahadeva houses the ruins of over 300 Hindu and Jain temples constructed between the 8th and 12th Centuries.
    • Chand Baoli (stepwell) at Abhaneri is enormous with 3500 steep steps built by the Nikhumbha dynasty is one of the largest step-wells in the world.

    About DekhoApnaDesh

    • Under this, a series of webinars will showcase the diverse and remarkable history and culture of India through a documentary series on various cities.
    • It will be including various monuments, cuisine, arts, dance forms, natural landscapes, festivals and many other aspects of the rich Indian civilization.
    • The objective of the webinar series is to create awareness about and promote various tourism destinations of India – including the lesser-known destinations and lesser-known facets of popular destinations.
    • The webinar will be available in the public domain through the Ministry’s social media handles- “Incredible India” on Instagram and Facebook.

    Back2Basics: Project Tiger

    • Project Tiger is a tiger conservation programme launched in April 1973 by during PM Indira Gandhi’s tenure.
    • It is administered by the National Tiger Conservation Authority.
    • The project aims at ensuring a viable population of Bengal tigers in their natural habitats, protecting them from extinction, and preserving areas of biological importance as a natural heritage forever represented as close as possible the diversity of ecosystems across the distribution of tigers in the country.
    • The project’s task force visualized these tiger reserves as breeding nuclei, from which surplus animals would migrate to adjacent forests.
    • The government has set up a Tiger Protection Force to combat poachers and funded relocation of villagers to minimize human-tiger conflicts.
  • Coronavirus – Economic Issues

    RBI’s job involves trade-offs, not conflicts

    The article discusses three things for the RBI to follow in fulfilling its role, these are- 1) Prudence 2) Flexibility 3) Acting within the mandate. Besides that, problems the RBI has been facing are also discussed. These things are discussed against the backdrop of Covid-19.

    Role of the RBI

    • A central bank like the RBI must replace intellectual certainty with the continuous debate over their actions.
    • RBI’s job involves complex trade-offs — next quarter vs quarter century, growth vs stability, and mandates vs expectations.
    • A global anthropological shock-like COVID makes these trade-offs — they are not conflicts — even harder.
    • The RBI must remember three things — acting prudently to balance the next quarter and quarter century, acting flexibly to blunt this economic cataclysm, and acting within their mandate to ensure institutional legitimacy and immunity.

    These three things are discussed below-

    1. Acting prudently

    • If everybody believed that in the long run we are all dead, we would never sit under trees planted by people who had no chance of sitting under them.
    • The coronavirus is a human tragedy but a central bank must not act like a commercial bank because that would compromise the balance between today and tomorrow.
    • A narcissism — bordering on solipsism — already reflects in global debt levels that steal from our grandchildren.
    • More importantly, India doesn’t have the economic strength to copy the US Federal Reserve’s $2.3 trillion offer to lend to businesses of all sizes and sorts.
    • And run anything close to this year’s expected US fiscal deficit of 15 per cent of GDP, or sustain Japan’s public debt levels at 240 per cent of GDP.
    • We are all in the same storm but we are all not in the same boat.

    2. Acting flexibly within the mandate

    • Renaissance physician Paracelsus had important advice for central banks; the dose makes the poison.
    • Anything powerful enough to help has the power to hurt; handling the inevitable tensions between the RBI’s dual mandate of growth and stability requires continuous work.
    • Our inflation targeting regime is a macroeconomic gift to India.
    • But recognising that is hardly inconsistent with acknowledging that inflation’s secular decline has many parents, some economic models are useful but all are incomplete, and the fog of war involves making second-best choices as long as they are reversible, proportional, and accountable.
    • Central banks often undertake liquidity management while leaving policy rates unchanged; current actions are not a conspiracy to undermine the MPC or its interest rate corridor (between reverse repo rate and MSF rate with repo rate midpoint targeting and call rate operating target).
    • They are a pragmatic encouragement for banks to lend to clients rather than lend Rs 7 lakh crore to the RBI.
    • Other virus flexibility includes repayment moratoriums (with 10 per cent provisions), bad loan accounting forbearance (despite past experience of breaking the thermometer doing little for the fever) and bank windows for NBFC/Mutual Fund liquidity.
    • Listening is hardly compromise.
    • Especially if accompanied by a will to unwind liquidity, asymmetry and forbearance when the planet’s gap year ends.

    3. Follow the mandate

    • Central bank governance is a fine balance; they function best when they don’t declare separation from the government and they aren’t considered a part of the finance ministry.
    • The difficulty of balance isn’t uniquely Indian.
    • The RBI must build on its track record of wisely balancing the trade-offs between depositors vs borrowers, companies vs banks, and stability vs growth.
    • And it must continue to stay out of the government’s domain.
    • The central bank crisis role debate is skewed by the great book, Lords of Finance, by Liaquat Ahamed that shows how central bankers of the 1920s failed to fight the Great Depression.
    • History matters but nobody knows if this is the beginning or ending of the virus.
    • Yet the global central bank COVID toolbox has been substantial; buying corporate bonds, making corporate loans, cutting interest rates, conducting open market operations, and reducing reserve ratios.
    • Additionally, banks have been permitted to grant loan moratoriums, hold less capital, restructure loans, pay lower deposit insurance premiums and delay bad loan recognition.
    • The emergency authority under Section 13 of the US Federal Reserve Act being used — prematurely — also exists in Section 18 of the RBI Act.
    • But emergency powers are the last resort. We are not there yet.
    • The recovery being V-shaped, U-shaped, or Bathtub-shaped is only modellable after the lockdown.

    Pre-existing problems facing the RBI

    • The RBI’s COVID balm is constrained by pre-existing conditions in Indian banking, which are given below-
    • Bad loans which peaked at Rs 14 lakh crore but still large.
    • Inadequate competition- scheduled commercial bank numbers have hovered between 90 and 100 since 1947.
    • Private bank governance- CEO so powerful that boards and shareholders are weak.
    • Public sector bank governance- shareholder so powerful that boards and CEOs are weak.
    • And the RBI’s own game (process, technology and human capital in regulation and supervision).
    • All these must be tackled with urgency when normalcy returns.

    A question based on the role of the central bank can be asked by the UPSC. Consider the following question “Crises have always tested the utility of central banks, be it the Great Depression, 2008 financial crisis or Covid-19. In light of this statement, explains the trade-offs involved in the RBI’s decisions and how shocks like Covid-19 makes these trade-offs even harder.”

    Way forward

    • Supplementing India’s fiscal and monetary policy interventions by announcing two bold reform plans — 90-day flick-of-pen and one-year structural — that tackle overdue reforms in labour, education, cities, finance, compliance, and civil services, will catalyse hope among employers, employees, banks, and overseas investors.

    Conclusion

    Creating a prosperous India needs many things. One of them is an independent, accountable, and boundaried central bank that listens.

     

  • Food Procurement and Distribution – PDS & NFSA, Shanta Kumar Committee, FCI restructuring, Buffer stock, etc.

    Three dimensions of food security amid Covid-19

    The article discusses the three dimensions of food security-1)Availability 2)Acces 3) Absorption. The first two are also dependent on job security. All these are now being threatened by the pandemic. Ways to safeguard food security along with its 3 dimensions are suggested at the end of the article.

    1. Availability of food in the market

    • The first is the availability of food in the market, and this is seen as a function of production.
    • Fortunately, thanks to the Green Revolution, today we have enough food in the market and in government godowns.
    • This is a great accomplishment by Indian farmers who converted a “ship to mouth” situation to a “right to food” commitment.
    • Yet we cannot take farmers’ contributions in terms of sustaining production for granted.
    • Some special exemptions have been given to the agricultural sector, farmers are confronted at the moment with labour shortages.
    • But many of the inputs, including seeds, are expensive or unavailable, marketing arrangements including supply chains are not fully functional, pricing is not remunerative, and public procurement is also not adequate.
    • There is no room for complacency, as in the absence of demand, the lack of storage or value addition facilities, especially for perishable commodities, we do not yet know exactly what the impact of the current pandemic will be on the kharif sowing and food availability in the future.

    2. Access to food

    • The second dimension is the access to food, which is a function of purchasing power, as unless you are a farmer and grow your own food, others have to buy it.
    • Fortunately, the government, through the National Food Security Act (NFSA) and the PDS, has assured some additional food to every individual during this crisis.
    • Strengthening the food basket: This should be further strengthened and the food basket widened by including millets, pulses and oil.
    • Hidden hunger: Steps should also be taken to avoid hidden hunger caused by the deficiency of micronutrients in the diet.
    • In light of the closure of schools and anganwadi centres, and the consequent disruptions in the provision of midday meals or other nutritional inputs, it is important to pay attention to the life cycle approach advocated in the NFSA, particularly the first thousand days in a child’s life, when the cognitive abilities of the child are shaped.
    • We may otherwise see negative effects on nutritional security in the medium to longer term.

    After reading the article you’ll be able to answer the question such as this one- “In the ongoing crisis, maintaining the level of food security has become one of the most essential need. In light of the above statement, critically examine the priority areas for maintaining food security in the country. Suggest measures to make accessibility and availability of food easier for all.”

    Job security to ensure food security and access to food

    • Food security and access to nutritious, good quality food is also contingent on job security.
    • Today, a lot of people employed both on farms and in the non-farm sector are without jobs.
    • If job security is threatened, then so is food and nutrition security.
    • We have to ensure people do not lose their jobs, and one way of doing this will be to ensure value addition to primary products.
    • One example of such value addition is the Rice Biopark in Myanmar, wherein the straw, bran, and the entire biomass are utilised.
    • This would mean some attention to and investment in new technologies that can contribute to biomass utilisation.
    • The Amul model provides a good example from the dairy sector of improved incomes to milk producers through value addition.
    • Similar attention needs to be given to the horticulture sector on a priority basis.
    • Women farmers are at the forefront of horticulture and special attention needs to be given to both their technological and economic empowerment during this crisis.
    • A second pathway to livelihood security is strengthening the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
    • Need to cover skilled work: Given the lack of jobs and incomes during the COVID-19 crisis, it is imperative to expand the definition of work in MGNREGA to cover skilled work related to farmers and their farming activities.
    • This is particularly important for women farmers and workers, who should not just be given tasks of carrying stones or digging mud.
    • Apart from farming, they engage in a range of essential care tasks, including caring for children, the elderly and sick people.
    • These tasks, often invisible, need to be recognised as work and supported with appropriate education, including on nutrition.

    3. Absorption of food in the body and its utilisation

    • The third dimension of food security is the absorption of food in the body or its utilisation.
    • Absorption and utilisation of food is dependent importantly on sanitation, drinking water and other non-food factors, including public health services.
    • Ensuring that these services are functional depends on the capacities of the local panchayats and their coordination with other local bodies.
    • The lack of adequate clean water, in particular, has come to the fore in both rural areas and urban slums in the context of COVID-19, where one of the key measures for stopping transmission relates to frequent hand-washing.

    Food security threatened by pandemic

    • If we can ensure food availability, food access and food absorption, then we have a fairly robust system of food and nutrition security.
    • All the above dimensions are, however, now threatened by the novel coronavirus, as discussed earlier.
    • It is very critical to highlight the linkages between agriculture, nutrition and health.
    • The inability to harvest, transport and market perishable fruits and vegetables at remunerative prices during the current crisis has deprived farmers of incomes and livelihoods.
    • It has also deprived consumers of micronutrients in their diets.
    • Farmers making losses, and agriculture moving from being job-led to jobless, raise questions about the sustainability of the production cycle.
    • At the same time, this can have long-term consequences on nutrition and health security.

    A question based on the dimension of the food security can be asked by the UPSC for ex- “Food security involved the security of food in all three dimensions, availability of food, access to food and absorption of food. How far the food security act is effective in ensuring security in all three dimensions?”

    Conclusion

    India avoided what could have been a big famine in the 1960s through the help of technology and public policy, which actively worked with and supported farmers to achieve significant increases in yield. Through a combination of farmers’ cooperation, technological upgrading and favourable public policies in procurement, pricing and distribution, we can deal with the fallouts of the pandemic.

  • Coronavirus – Health and Governance Issues

    Strategy for calibrated opening of economy

    The article discusses the performance of India so far and the strategy for reopening of the economy. Dividing the districts based on the number of cases and adopting a suitable approach for opening the economy there while keeping the spread of the virus in control is suggested in the article.

    India performing better

    • While the OECD countries are reeling under the COVID-19 impact, India is clearly ahead of the curve.
    • This is not merely in terms of the confirmed cases in the country but is also strongly reflected in very low mortality numbers (8.5 deaths per lakh population) compared to other nations (4,040 in the UK and 1,930 in the US).
    • While the first cases were reported in most hotspot countries and India around the same time (last week of January), today, the outbreak is far more manageable in India than in most other countries.
    • It was pragmatic for a resource-poor country to be pre-emptive and declare a national lockdown when the total number of cases were still low at 500.
    • The subsequent growth of the pandemic clearly shows a perceptible decline in the number of cases due to the lockdown.
    • Though stringent, this was much-needed and a timely policy intervention by the government.
    • It is important, however, to appreciate the high and growing opportunity costs that are involved during a lockdown.
    • We must brace ourselves for long-term pandemic management (18 to 24 months) with significant economic impact on our lives.

    Policy interventions by government and two major concerns

    • The immediate costs of the lockdown are borne by the most economically vulnerable people in society.
    • This perhaps was the rationale behind the first round of economic policy interventions announced by the finance minister within a few days of the lockdown.
    • They targeted front-loading of cash transfers through PM-Kisan, support to construction workers, self-help groups, food distribution through the public distribution system, among others.
    • Two major concerns: Beyond welfare concerns, there are significant growth concerns that are mounting with every day of economic inactivity in the country.
    • Companies are struggling to honour payroll and maintain their workforce against cancelling orders and declining demand for their goods and services.
    • These in turn will lead to greater delays and defaults in loan repayments, thereby further weakening the fragile banking sector and struggling credit markets.

    The RBI’s intervention and increasing damage to the economy

    • The Reserve Bank of India stepped in for some timely monetary interventions.
    • However, the longstanding climate of risk aversion within the banking sector will mean that transmission of these monetary interventions is unlikely to be timely or adequate.
    • All eyes are set expectantly in one direction.
    • Historically, when economies are faced with major calamities, governments step in to stabilise the environment and boost confidence within the business community.
    • We have seen this response from all major economies disrupted by COVID-19 over the last several weeks.
    • India will not be an exception to this as the government fine-tunes its strategy to support and kickstart our immobilised economy.
    • The opportunity cost of time, however, is ballooning with each passing day.
    • Just like the spread of the virus, we are up against the full force and power of compounding.
    • Mindful policy interventions, when timed well, can cut growing losses and the misfortune of many.

    How the states are performing against Covid-19?

    • While we have succeeded in slowing the growth of the virus at the national level, the true gains and pains are at the state and local level.
    • As the data reveals, currently we have three states that have made remarkable gains and “flattened the curve” of COVID cases.
    • These are Kerala, Haryana and Tamil Nadu where recoveries are growing and active cases are rapidly declining.
    • States like Karnataka and Telangana are improving their recovery rates consistently, despite fluctuations.
    • Every state and local administration has to keep eternal vigil and double down on containment and testing.
    • They have to aggressively improve their contact tracing efforts with the help of their police who are trained in debriefing, call record mapping and have more manpower than public health departments of local administrations.

    The article contains the policy and governance aspects which are important from Mains Paper-2, and economic issues such as the size of the package and opportunity cost of time involved are important from the Mains Paper-3 perspective. Take note of these issues.

    What should be the strategy?

    • Given the scale and variation in infection control across the country, our national strategy needs to be informed and calibrated.
    • Currently, there are more than 300 districts in the country which have reported zero COVID-19 cases.
    • This can be confirmed quickly with some random testing and the lockdown can be lifted effective immediately.
    • Then there are about 225 districts which have reported less than 10 cases each.
    • With adequate ring-fencing at the level of the block where these cases are reported, these districts too can afford to lift their lockdowns.
    • There are, however, approximately 30 districts across the country which have reported large numbers of confirmed cases and are identified as “hotspots”.
    • The lockdown in these places needs to continue with some relaxations for basic trade and essential services.
    • Not surprisingly, these “hotspots” are also important economic centres of the country.
    • The capacity of the local administration to develop and enforce appropriate strategies of containment, contact tracing and testing, should determine their decisions to ring-fence and isolate blocks while allowing other parts of the district/city to resume economic activity.

    Way forward

    • Given the uncertainty of the virus, we seem prepared for large hospitalisation and care if the need arises.
    • The efforts now must be to further contain the growth of the infection.
    • Acting against the power of compounding: If the current rate persists, we will reach over lakh cases within three weeks. That is the power of compounding we are against.
    • Public health support team: Beyond knowledge sharing across states and adopting successful containment strategies from each other, there is a role for the central government in providing “NSG-like” public health support teams to states that need them.
    • Economic package: On the economy front similarly, the central government’s timely economic package should flatten the curve of exponentially rising opportunity costs across the sectors.

    Conclusion

    Given the relative scale and virulence of the COVID-19 virus in India, the odds seem stacked in favour of a calibrated opening of the economy.

     

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