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  • [op-ed snap] Where demand has gone

    Context

    That India is in the midst of a serious economic slowdown is no longer in question. The debates are now mostly about what to do about it.

    Where is the GDP growth coming from?

    Fall in consumption expenditure in absolute terms: The leaked National Sample Survey (NSS) consumer expenditure data -shows that real monthly per capita expenditure has in fact fallen in absolute terms between 2011-12 and 2017-18.

    • 8 % decline in a rural area: In rural areas, consumption expenditure decreased by 8.8 per cent.
    • 2% decline in an urban area: While in urban areas it increased by 2 per cent, leading to an all India decline of 3.7 per cent.
    • Where is the growth coming from: If average consumer expenditure is down, then where is the GDP growth coming from?
      • Consumer expenditure contribution: After all, according to National Accounts Statistics (NAS) consumer expenditure is around 60 per cent of the GDP.
      • And given the other contributors to GDP-investment and government spending- are not growing spectacularly, consumer expenditure should be growing rather than decreasing.
      • So, to get an overall 5 per cent growth rate, consumer expenditure should be growing at higher than 5 per cent.
    • NSS vs. NAS- a genuine puzzle: How can consumption expenditure be going down in absolute terms according to the NSS estimates and be growing at more than 5 per cent according to the NAS?
      • Variation in data a norm: That these two types of estimates of consumption expenditure do not match is well-known, and that is the case in other countries as well.
      • The discrepancy at alarming proportions: In the 1970s, consumer expenditure according to NSS estimates was around 90 per cent of consumer expenditure according to NAS, but in 2017-18 it was only 32.3 per cent.
      • Data from two different countries: It is as if we are looking at data from two different countries.
      • One where the consumption expenditure growth is positive and propping up the GDP growth rate and the other where it is actually falling.

    A few inferences that pertain to the state of the economy and the policy options.

    • Reasons for the discrepancy between NSS data and NAS data.
    • First- Presence of large informal sector:
      • 50% contribution to GDP: Informal sector accounts for nearly half of the GDP and employs 85 per cent of the labour force.
      • Guesswork on performance: In national income accounts, growth in the informal sector is estimated by extrapolating from the performance of the formal sector. Which is largely guesswork.
    • Second- Making effects of the expansionary policy less pronounced:
      • Expansionary fiscal policy more effective than appear to be: Because of the presence of the informal sector, expansionary fiscal policy will be more effective than what would appear from official statistics, as a big part of its impact will be felt in the informal sector.
      • Why is it so? The reason is that a big segment of the population is located in the informal sector; they are poorer and tend to spend a much higher fraction of their income on consumption.
      • This group has been seriously affected by the economic slowdown.
    • Third-Results of expansionary policy would be apparent after a delay
      • Apparent effects of policy much worse than what it would be: The effect of an expansionary policy on the budget deficit will look much worse than what it would be since the estimates of its effect on income expansion and tax collection will be largely based on the formal sector.
      • Informal sector boosting the formal sector: Some of the income generated in the informal sector will boost demand in the formal sector through consumer demand for mass-consumption items (for instance, biscuits, as opposed to automobiles).
      • Good medium-term pictures: Therefore, in the medium term, once the engine of the economy starts moving, the income expansion and deficit numbers will look better.
    • Final-Tax cuts will achieve little
      • Only 3-5% population affected: The tax cut will affect barely 3-5 per cent of the adult population.
      • Contribution of taxes in GDP: Income tax revenues amount to around 5 per cent of the GDP and corporate income taxes around 3.3 per cent.
      • Rich tends to save more: Most of the tax is paid by the richest among these groups (the top 5 per cent taxpayers contribute 60 per cent of individual income tax revenue), and the rich tend to spend a smaller fraction of their income (and save more).
      • Little impact on GDP: Irrespective of the number of people affected, and even if they spend the entire increase in their income as a result of the tax cut, the overall economic impact will be small relative to the GDP.
      • The futility of tax cut: Therefore, a tax cut for the rich would be less effective in raising spending compared to an equivalent amount being given to poorer groups who spend a much higher fraction of their incomes.

    Conclusion

    The government should not underestimate the role of the informal sector in the economy. To get the engine of the economy revving, an expansionary fiscal policy that harnesses the energy of the informal sector to boost aggregate demand is the order of the day.

     

     

  • Democracy Index 2019

     

    The latest edition of the Democracy Index spells gloom for India. The world’s biggest democracy slipped 10 places in the 2019 global ranking to 51st place.

    Democracy Index

    • The report is published by The Economist Intelligence Unit — the research and analysis division of The Economist Group, which is the sister company to The Economist newspaper.
    • It records how global democracy fared, analysing 165 independent states and two territories.
    • The 2019 survey attributes the primary cause of “the democratic regression” to “an erosion of civil liberties in the country”.

    India’s performance

    • India’s overall score fell from 7.23 to 6.9, on a scale of 0-10, within a year (2018-2019) — the country’s lowest since 2006.
    • India was graded in electoral process and pluralism (8.67), government functioning (6.79), political participation (6.67), political culture (5.63) and civil liberties (6.76).
    • In the Asia and Australasia region, India ranks eighth, behind Taiwan and Timor-Leste.
    • The report talks about the repeal of both Article 370 and Article 35A and various restrictions such as house arrests, internet shutdowns and excessive use of forces.

    India: A flawed democracy?

    The Index also categorizes India under “flawed democracies”, i.e. countries that hold free and fair elections and where basic civil liberties are respected, but have significant weaknesses in aspects of democracy, such as problems in governance, an underdeveloped political culture and low levels of political participation.

  • World Employment and Social Outlook: Trends 2020

    The report World Employment and Social Outlook: Trends 2020 (WESO) was recently released.

    About the Report

    • The WESO report is an initiative of the International Labour Organization (ILO).
    • ILO forecasts that unemployment will rise by about 2.5 million this year.
    • The ILO is a UN agency whose mandate is to advance social justice and promote decent work by setting international labour standards.
    • The report analyses key labour market issues, including unemployment, labour underutilization, working poverty, income inequality, labour income share and factors that exclude people from decent work.

    Highlights of the report

    • Global unemployment is projected to increase by around 2.5 million in 2020.
    • The number of people unemployed around the world stands at some 188 million.
    • In addition, 165 million people do not have enough paid work, and 120 million have either given up actively searching for work or otherwise lack access to the labour market.
    • In total, more than 470 million people worldwide are affected, the report said.
    • Almost half a billion people are working fewer paid hours than they would like or lack adequate access to paid work.
    • Not enough new jobs are being generated to absorb new entrants to the labour market.

    Data on working poverty

    • Currently working poverty (defined as earning less than USD 3.20 per day in purchasing power parity terms) affects more than 630 million workers, or one in five of the global working population.
    • Inequalities related to gender, age and geographical location continue to plague the job market, with the report showing that these factors limit both individual opportunity and economic growth.
    • Some 267 million young people aged 15-24 are not in employment, education or training, and many more endure substandard working condition.

  • Global Risks Report 2020

    The top five risks to humanity are recently published in the Global Risks Report of the World Economic Forum (WEF).

    Top five risks

    • An important finding of the report is that today’s younger generation, consisting of “Millenials” born after 1980 have ranked environmental risks higher than other older respondents in the short- and long-terms.
    • According to the report, the top five risks by likelihood over the next decade are:
    1. Extreme weather events like floods and storms
    2. Failure of climate change mitigation and adaptation
    3. Major natural disasters like earthquakes, tsunamis, volcanic eruptions and geomagnetic storms
    4. Major biodiversity losses and ecosystem collapse
    5. Human-made environmental damage and disasters

    Top 5 risks by severity of impact over the next 10 years

    • Failure of climate change mitigation and adaptation
    • Weapons of mass destruction
    • Major biodiversity loss and ecosystem collapse
    • Extreme weather events (e.g. floods, storms, etc.)
    • Water crises

    Top most strongly connected global risks

    • Extreme weather events + failure of climate change mitigation and adaptation
    • Large-scale cyber-attacks + breakdown of critical information infrastructure and networks
    • High structural unemployment or underemployment + adverse consequences of technological advances
    • Major biodiversity loss and ecosystem collapse + failure of climate change mitigation and adaptation
    • Food crises + extreme weather events

    Other risks

    • The report also warned about the increasing economic and societal costs due to non-communicable diseases and the lack of research on vaccines and drug resistance to address the threat of pandemics in the recent future.
    • “Economic confrontations” and “domestic political polarization” are significant short-term risks in 2020, the report said.
    • This is a warning for the global South including India and Africa where social unrest has seen a rise. For example, unrest has grown among India’s youth.

  • ‘Time to Care’ Report

     

    The report ‘Time to Care’  was recently released ahead of the 50th Annual Meeting of the World Economic Forum (WEF).

    ‘Time to Care’ Report

    • It is published by Oxfam International.
    • Its calculations are based on the latest data sources available, including from the Credit Suisse Research Institute’s Global Wealth Databook 2019 and Forbes’ 2019 Billionaires List.

    Findings of the report

    • Although global inequality has declined over the past three decades, domestic income inequality has risen in many countries, particularly in advanced economies and reached historic highs.
    • The report said that the world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60 per cent of the planet’s population.
    • The report flagged that global inequality is shockingly entrenched and vast and the number of billionaires has doubled in the last decade, despite their combined wealth having declined in the last year.
    • The Oxfam report further said “sexist” economies are fuelling the inequality crisis by enabling a wealthy elite to accumulate vast fortunes at the expense of ordinary people and particularly poor women and girls.

    Income inequality in India

    • India’s richest 1 per cent hold more than four-times the wealth held by 953 million people who make up for the bottom 70 per cent of the country’s population.
    • The total wealth of all Indian billionaires is more than its full-year budget.
    • Regarding India, Oxfam said the combined total wealth of 63 Indian billionaires is higher than the total Union Budget of India for the fiscal year 2018-19 which was at Rs 24,42,200 crore.
    • It further said women and girls put in 3.26 billion hours of unpaid care work each and every day — a contribution to the Indian economy of at least Rs 19 lakh crore a year, which is 20 times the entire education budget of India in 2019 (Rs 93,000 crore).
    • He said women and girls are among those who benefit the least from today’s economic system.
    • They spend billions of hours cooking, cleaning and caring for children and the elderly. Unpaid care work is the ‘hidden engine’ that keeps the wheels of our economies, businesses and societies moving.

    Data on earnings

    • Oxfam said governments are massively under-taxing the wealthiest individuals and corporations and failing to collect revenues that could help lift the responsibility of care and tackle poverty and inequality.
    • As per the report, it would take a female domestic worker 22,277 years to earn what a top CEO of a technology company makes in one year.
    • With earnings pegged at Rs 106 per second, a tech CEO would make more in 10 minutes than what a domestic worker would make in one year.
    • Besides, direct public investments in the care economy of 2 per cent of GDP would potentially create 11 million new jobs and make up for the 11 million jobs lost in 2018, the report said.

  • Carbon Disclosure Project Report 2019

    The Carbon Disclosure Project (CDP) 2019 report was recently published.

    Carbon Disclosure Project

    • CDP is published by the Global Reporting Initiative.
    • It is aimed at measuring the carbon reduction activities undertaken by different companies and firms operating in various countries across the globe.
    • The report surveys corporate commitments to science-based targets (SBT) and evaluates the climate change risk that they are exposed to.

    India’s performance

    • India secured the 5th spot on the project report.
    • The CDP Report 2019 said that a total of 58 companies shared details about the environment-related activities undertaken by them in this year.
    • The report also claims that over 98 percent of top Indian companies have formed some type or committee or group within its organization to drive and address climate-related issues.
    • The report also showcased the changing mind-set of India Inc with nearly all major companies setting up some form of oversight to evaluate climate risk.

    Global scenario

    • The US topped the annual CDP report with 135 companies disclosing their climate-related activities, followed by Japan in the second position with 83 companies and the UK in the third position with 78 countries.
    • While France was placed fourth with 51 companies disclosing their details, India was placed fifth with 38 companies committing to the science-based targets.
    • In 2018, India had only 25 companies committing to the SBTs.
    • India is followed by Germany and Sweden with 30 and 27 companies respectively, while Switzerland and Spain had 23 and 22 companies respectively.
    • Netherlands was listed 10th on the list with 18 companies committing to SBT initiatives.

    Importance

    • India was ranked 5th, ahead of Germany and Sweden.
    • India is the first developing economy with a maximum number of companies committing to the science-based targets.

  • Vyom Mitra: ISRO’s half-humanoid

     

    ISRO unveiled its first ‘woman’ astronaut during the event ‘Human Spaceflight and Exploration’.

    Vyom Mitra

    • The AI-based robotic system is being developed at a robotics lab at the VSSC in Thiruvananthapuram.
    • Vyom Mitra will be used for an unmanned flight of ISRO’s GSLV III rocket in December 2020, which, along with a second unmanned flight in July 2021.
    • This will serve as the test of ISRO’s preparedness for its maiden manned space mission, Gaganyaan, being targeted for 2022 to mark 75 years of India’s independence.

    Functions of the humanoid

    • Vyommitra, equipped with a head, two arms and a torso, is built to mimic crew activity inside the crew module of Gaganyaan.
    • Attaining launch and orbital postures, responding to the environment, generating warnings, replacing carbon dioxide canisters, operating switches, monitoring of the crew module, receiving voice commands, responding via speech (bilingual) are among its functions listed.
    • It will have a human-like face, with lips synchronised for movement to mimic speech.
    • Once it is fully developed, Vyommitra will be able to use equipment on board the spacecraft’s crew module, like safety mechanisms and switches, as well as receive and act on commands sent from ground stations.

  • Blue Corner Notice

    Interpol has issued a Blue Corner notice to help locate an infamous fugitive self-styled godman weeks after the Gujarat Police sought the agency’s intervention for this.

     ‘Blue Corner’ notice

    • According to the Interpol website, “Notices are international requests for cooperation or alerts allowing police in member countries to share critical crime-related information.”
    • There are seven types of notices — Red Notice, Yellow Notice, Blue Notice, Black Notice, Green Notice, Orange Notice, and Purple Notice.
    • The Blue Notice is issued to “collect additional information about a person’s identity, location or activities in relation to a crime.”

    Blue notices a/c to CBI

    • The Central Bureau of Investigation (CBI) website refers to Blue Notices as ‘B Series (Blue) Notices’.
    • It says, “The ‘B’ series notices are also called ‘enquiry notices’ and may be issued in order to have someone’s identity verified; to obtain particulars of a person’s criminal record; to locate someone who is missing or is an identified or unidentified international criminal or is wanted for a violation of ordinary criminal law and whose extradition may be requested.”

  • [pib] SERVICE Initiative

    The Steel Authority of India Ltd has launched an initiative called SERVICE to promote Voluntary Philanthropist Activities (VPA) by its employees.

    About SERVICE

    • SERVICE stands for “SAIL Employee Rendering Voluntarism and Initiatives for Community Engagement (SERVICE)”.
    • It aims to promote and facilitate philanthropist activities by the employees in a structured manner.
    • The Minister also launched a portal for the employees to register for the scheme.
    • This dedicated portal will act as a platform for enabling faster interaction and communication amongst the various stakeholders.

  • 23rd January 2020| Daily Answer Writing Enhancement

    The topics covered in the upcoming AWE on 24th January are:

    Q.1) Political philosophies like communism, capitalism, socialism, etc.- their forms and effect on the society.

    Q.4) Case Studies 

     

    Question 1)

    Although Great Britain suffered temporarily due to the American Revolution, it eventually became an even more powerful and expansive empire as a result of it and strengthened its stronghold in the East. Examine. (15 Marks)

    Question 2)

    “Replacing the Speaker with “permanent tribunal” as adjudicating authority under anti-defection law would be a step in the right direction to achieve the objectives sought under the law”. Comment. (15 Marks)

    Question 3)

    Do you agree with the view that the huge presence of the informal sector in the Indian economy would make the government spending to revive the economy more beneficial than what would appear in the official figures. (15 Marks)

    Question 4)

    You are posted in a district as a public servant responsible for looking into the matters of violation of Right to Education Act. You came across a case in which a poor farmer had beaten his daughter for not going to take her fifth class annual exams. Eventually, he tied her up with his motorbike and took her to the examination hall. Corporal punishment to the children by parents or teachers is a punishable offence with three-month jail term. When you enquired about it the poor farmer explained that he had done so for ensuring a better future for her daughter as he does not want his children to live in poverty in which he is living. He also says that his economic condition is poor and if he is taken to jail his children will face severe hardships. (a) What are the options available to you? (b) Evaluate each of these options and choose the option which you would adopt, giving reasons. (15 Marks)

    Reviews will be provided in a week. (In the order of submission- First come first serve basis). In case the answer is submitted late the review period may get extended to two weeks.

    *In case your answer is not reviewed in a week, reply to your answer saying *NOT CHECKED*. If Parth Sir’s tag is available then tag him.

    For the philosophy of AWE and payment, check  here: Click2Join

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