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  • A new economics for inclusive growth

    Elements of Inclusive growth - INSIGHTSIAS

    Central idea 

    The central idea urges a reevaluation of India’s economic strategy, emphasizing the necessity to shift from an exclusive focus on high-end skills to inclusive growth. It underscores the mismatch between skills, jobs, and incomes and advocates prioritizing the small-scale manufacturing sector to foster sustainable and locally enriched economic development. The article suggests seizing the opportunity to attract producers and meet unmet needs for India’s growth.

    Key Highlights:

    • The book “Breaking the Mould: Reimagining India’s Economic Future” suggests a shift from manufacturing to exporting high-end services, challenging traditional economic strategies.
    • The mismatch between skills, jobs, and incomes is identified as a major obstacle to India’s growth, reflecting in social and political demands for better wages and security.
    • The growth pattern focusing on high-end skills has not generated sufficient decent jobs for the majority of India’s population.

    Key Challenges:

    • The Achilles heel of India’s economy is insufficient jobs and incomes, evident in demands from various sectors for fair wages and social security.
    • A critical mismatch between skills, jobs, and incomes poses a significant challenge to India’s growth and economic well-being.
    • The reliance on high-end skills has not translated into enough decent jobs for the majority, hindering inclusive growth.

    Key Terms and Phrases:

    • Leapfrogging manufacturing in favor of exporting high-end services.
    • Mismatch between skills, jobs, and incomes.
    • “India was Shining” era and its economic implications.
    • Inclusive and sustainable economic growth.
    • Small-scale and informal manufacturing sector.
    • The importance of richness of economic activity within local webs.

    Key Quotes:

    • “India cannot afford to neglect its small-scale and informal manufacturing sector any longer.”
    • “Investing in education and skills for ‘high end’ manufacturing and services will not benefit the masses if they cannot be employed.”
    • “There are no shortcuts to inclusive economic growth.”

    Key Statements:

    • The book’s recommendation challenges India’s traditional approach to economic development.
    • The focus on high-end skills has not translated into inclusive growth or sufficient employment opportunities.
    • Policymakers must reimagine the path for India’s growth and prioritize inclusive economic growth.

    Key Examples and References:

    • Reference to the book “Breaking the Mould: Reimagining India’s Economic Future” by Raghuram Rajan and Rohit Lamba.
    • Examples of social and political demands for better wages and security in various sectors.
    • Mention of the mismatch between India’s skills development and job creation.

    Key Facts and Data:

    • 60% of Indians are classified as “economically weaker sections” entitled to job reservations.
    • India invested in world-class institutions of science and engineering 70 years ago.
    • The growth pattern focusing on high-end skills has not generated sufficient decent jobs for India’s masses.

    Critical Analysis:

    • The article critiques the existing economic growth pattern for its failure to generate inclusive and sustainable development.
    • Emphasis on the importance of inclusive economic growth and challenges posed by the mismatch between skills and jobs.

    Way Forward:

    • Policymakers need to reimagine India’s growth path with a focus on inclusive economic growth.
    • There are no shortcuts, and investments in the small-scale and informal manufacturing sector are crucial for sustainable development.
    • India should leverage its unmet needs to attract producers and make more for India in India, thereby growing jobs and incomes.

  • The outlook for 2024, for the world and India

    Central idea 

    The editorial examines the heightened global risks in 2024, navigating a precarious era marked by challenges to the existing international order. It anticipates potential flashpoints, including the war in Ukraine and Middle East tensions, while also scrutinizing India’s prospects and internal dynamics. Emphasizing the importance of robust Center-State relations, the editorial envisions a turbulent period demanding strategic foresight and diplomatic acuity.

    Key Highlights:

    • The editorial explores the expected global risks and uncertainties in 2024, highlighting a period of significant danger.
    • Challenges to the existing international order are emphasized, coming not only from its supporters but also from those declaring it outdated.
    • Potential flashpoints, such as the ongoing war in Ukraine and escalating tensions in the Middle East, are identified.
    • Changing geopolitical dynamics in West Asia, where emerging alliances challenge Western dominance, are carefully examined.
    • India’s prospects in 2024, including the upcoming general election and potential economic challenges, are concisely discussed.
    • Sino-Indian relations are predicted to remain strained, with a focus on possible provocative actions by China.
    • The editorial acknowledges challenges to India’s influence in its neighborhood and the evolving landscape of West Asia.
    • Internal dynamics in India, encompassing a politically charged atmosphere and turmoil in Parliament, are thoughtfully explored.
    • The editorial underscores the importance of strong Center-State relations for effective governance.

    Key Challenges:

    • The global landscape is filled with risks and uncertainties, presenting formidable challenges to stability.
    • The existing international order faces challenges not only from its critics but also from supporters questioning its relevance.
    • Potential flashpoints, including the enduring war in Ukraine and escalating tensions in the Middle East, increase geopolitical vulnerabilities.
    • Changing geopolitical dynamics introduce challenges to established Western leadership paradigms.
    • India faces potential challenges in the upcoming general election and contends with economic uncertainties.
    • Strained Sino-Indian relations and potential provocations by China introduce security challenges.
    • Internal challenges in India include heightened political tensions and parliamentary disarray.

    Key Terms and Phrases:

    • Global risks and uncertainties
    • Rules-based international order
    • Geostrategic contradictions
    • Flashpoints
    • Shifting geopolitical dynamics
    • Unforeseen challenges (“black swans”)
    • Adventurist actions
    • Center-State relations

    Key Quotes:

    • “Navigating an epoch of substantial peril.”
    • “Challenged by architects of the ‘rules-based international order’ and those deeming it antiquated.”
    • “An era fraught with substantial peril.”
    • “Potential ‘adventurist actions’ by China.”
    • “An impending period of turbulence.”
    • “Politically charged atmosphere.”
    • “Expulsion of the Trinamool Congress Member of Parliament, Mahua Moitra.”

    Anecdotes:

    • Exploration of the enduring war in Ukraine and its potential ramifications on the U.S. presidential election.
    • Insight into the Israel-Hamas conflict as a catalyst for heightened tensions in the Middle East.
    • Brief anecdote concerning the ruling dispensation’s assurance in India’s forthcoming general election.

    Key Statements:

    • “The world stands on the brink of a period marked by significant peril.”
    • “The existing international order grapples with multifaceted challenges.”
    • “Geostrategic contradictions are poised to escalate.”
    • “The internal landscape demands vigilant observation.”
    • “The nation approaches a potential turning point.”

    Key Examples and References:

    • The enduring war in Ukraine and its potential influence on the U.S. presidential election.
    • Israel-Hamas conflict as a driver of heightened tensions in the Middle East.
    • Shifting geopolitics in West Asia and emerging alliances challenging Western leadership.

    Critical Analysis:

    • The editorial furnishes a nuanced analysis of potential challenges and uncertainties on a global scale and within India.
    • Emphasis on the importance of fortified Center-State relations for efficacious governance.
    • Recognition of potential “black swans” and unforeseen challenges.

  • In news: Veer Bal Diwas

    veer bal divas

    Introduction

    • The Prime Minister paid homage to the courage and sacrifice of the Sahibzade, the sons of Guru Gobind Singh, the tenth Sikh Guru.
    • This day, announced on January 9, 2022, commemorates the martyrdom of Sahibzada Zorawar Singh and Sahibzada Fateh Singh.

    Veer Bal Divas: A Day of Remembrance

    • Inception: Veer Bal Divas was established to honor the young Sahibzade who were martyred at the ages of 6 and 9.
    • Guru Gobind Singh’s Legacy: Guru Gobind Singh, as the tenth Guru of Sikhs and founder of the Khalsa, holds a significant place in Sikh history.

    The Legend of the Sahibzades

    • Meaning of Sahibzada: In Punjabi, “Sahibzada” means “son,” referring to the four sons of Guru Gobind Singh.
    • Sacrificial Week: The week from December 21 to 27 is observed in memory of the Sahibzades’ sacrifices for Sikhism and Hinduism.
    • Martyrdom for Faith: The Sahibzades, Ajit Singh, Jujhar Singh, Zorawar Singh, and Fateh Singh, were martyred defending their faith against forced conversion.

    Backstory of Their Martyrdom

    • Khalsa Panth and Anandpur Sahib: After establishing the Khalsa Panth, Guru Gobind Singh left Anandpur Sahib with his family in December 1704 amidst Aurangzeb’s invasion.
    • Capture and Martyrdom: The younger Sahibzades were captured by Subedar Wazir Khan of Sirhind and faced pressure for religious conversion, leading to their tragic martyrdom.
    • Elder Sahibzades’ Sacrifice: The elder Sahibzades, Ajit Singh and Jujhar Singh, were martyred in the battle of Chamkaur in 1705.

    Implications and Historical Impact

    • Guru Gobind Singh’s Response: Upon learning of their martyrdom, Guru Gobind Singh wrote the ‘Zafarnama’ to Aurangzeb, declaring the Khalsa’s readiness to challenge his empire.
    • Baba Banda Singh Bahadur’s Revenge: He avenged the Sahibzades’ martyrdom, punishing Wazir Khan and establishing Sikh dominance in the region.
    • Emergence of the Sikh Empire: This sacrifice paved the way for the later establishment of a vast Sikh empire under Maharaja Ranjit Singh.

    Significance in Indian History

    • A Watershed Moment: The martyrdom of the Sahibzades is a pivotal event in Indian history, remembered with both respect and sorrow.
    • Legacy in Sikh Tradition: The Sahibzades’ names are honored in the Sikh Ardas, symbolizing their enduring legacy in Sikh faith and history.

  • Goa’s Konsachem Festival and St. Bartholomew’s Feast

    Konsachem

    Central Idea

    • In Goa, August marks the formation of new rice grains, celebrated through the festival of Konsachem.

    Konsachem Festival and Its Traditions

    • Background: Konsachem, observed by Goan Hindus and Catholics, honors the new rice grains, known as konxeo in Konkani.
    • Shared Rituals: The first harvested rice sheaves are taken for blessings – to deities by Hindus and to saints by Catholics.
    • Catholic Celebrations: For Goan Catholics, the festival peaks on August 24, the Feast Day of St. Bartholomew, one of Jesus Christ’s 12 Apostles.
    • Observances: The celebration includes a procession, ritual cutting of grain, and a thanksgiving mass, with offerings made to St. Bartholomew.

    Bartholomew’s Legacy and Christian Faith in India

    • Missionary Journey: Bartholomew is believed to have landed in Kallianpur and preached along the Konkan coast, reaching as far as Karachi.
    • Lesser-Known Apostles: While St. Thomas’s mission in Kerala and Tamil Nadu is well-documented, St. Bartholomew’s contributions in India are less known but significant.
    • Martyrdom and Influence: He is revered for his martyrdom in Azerbaijan and his role in the Christianization of Armenia and Georgia.
    • Pre-Portuguese Christian Origins: Research by scholars underscores Christianity’s roots in India dating back to the Apostles, reinforcing its integral place in Indian faith traditions.

  • Century of Change in Indian Villages: Insights from Longitudinal Studies

    Central Idea

    • Historical Surveys: Starting in 1916-17, Gilbert Slater initiated a series of surveys in five Tamil Nadu villages, marking the beginning of a century-long study of rural India.
    • Unique Village Studies: Palakurichi and Palanpur stand out as unique Indian villages extensively studied over a century and decades, respectively.

    Methodology and Evolution of Village Studies

    • Initial Approach: Slater’s students, natives of the surveyed villages, used questionnaires to understand the socioeconomic conditions of rural households.
    • Subsequent Surveys: These villages were revisited for studies in subsequent years, including 1936-37, 1964, 1983, 2004, and 2019, providing a longitudinal perspective.

    Significance of Longitudinal Studies

    • Contrast with Cross-Sectional Surveys: Unlike the National Sample Survey Office’s cross-sectional surveys, village studies are longitudinal, focusing on in-depth analysis over time.
    • Objective: The aim is to trace changes in the specific village over time, providing micro-level insights that complement macro-level data.

    Key Findings from Recent Surveys

    • Economic Shifts: The 2019 survey of Palakurichi revealed a decline in agriculture’s dominance, with only 43.3% of the workforce engaged in farming, down from 85% in 1983.
    • Diversification of Workforce: Similar trends were observed in Palanpur, with a significant shift from agriculture to non-farm jobs over the decades.

    Changing Social Dynamics

    • Diminished Dominance of Traditional Landholders: In both Palakurichi and Palanpur, traditional upper caste landholders’ power has declined, with middle castes and Dalits gaining more land ownership.
    • Economic and Social Mobility: These changes reflect broader social and economic mobility within these rural communities.

    Policy Implications and Challenges

    • Land Leasing Practices: As some communities move away from agriculture, land leasing becomes common, often based on oral agreements to avoid legal complications.
    • Need for Policy Reforms: There’s a need for policies that balance the interests of landowners and tenant farmers, encouraging investment in land improvement.
    • Sustaining Agricultural Productivity: With rural India becoming less dependent on agriculture, ensuring continued or improved farming practices on existing agricultural lands is crucial.

    Conclusion

    • Insights from Micro-Level Studies: Longitudinal village studies offer valuable insights into the patterns of change in rural India, informing policy and understanding of rural dynamics.
    • Balancing Agricultural and Non-Agricultural Growth: These studies highlight the need for balanced development policies that support both agricultural sustainability and non-farm employment opportunities.

  • Self-pollination in Field Pansy Flower  

    Field Pansy Flower

    Central Idea

    • Researchers have found that a flower species in Paris, the field pansy (Viola arvensis), is evolving rapidly, exhibiting reduced nectar production and smaller flower sizes.
    • This study aims to understand the impact of these evolutionary changes on plant-pollinator interactions.

    Changing Nature of Field Pansy

    • Decreased Nectar and Size: The wild pansy variety in Paris showed a 20% reduction in nectar production and a 10% decrease in flower size.
    • Comparative Analysis: Scientists compared current flower growth with seeds from 20-30 years ago, observing notable changes.
    • Adaptation to Pollinator Decline: The evolution towards self-pollination in field pansies is attributed to the decreasing availability of insect pollinators.
    • Experimental Design: The study employed the “resurrection ecology” method, planting seeds from the 1990s and 2000s alongside their 2021 descendants.

    Implications of Self-Pollination and Evolutionary Shifts

    • Contrast with Angiosperm Convention: The move towards self-pollination deviates from the typical reliance of angiosperms on insects for pollination.
    • Long-Term Coevolution: The traditional plant-insect relationship, involving nectar production for pollination, has evolved over 100 million years.
    • Genetic Analysis: Population genetics analysis revealed a 27% increase in selfing rates, with consistent trait shifts across studied populations.

    Concerns and Potential Consequences

    • Short-Term Benefits, Long-Term Risks: While self-pollination may offer short-term advantages, it poses long-term survival threats to plants amid environmental changes.
    • Feedback Loop Risks: Reduced nectar production could lead to further declines in pollinator populations, creating a detrimental eco-evolutionary feedback loop.
    • Network Degradation: The study highlights the degradation of plant-pollinator networks, as observed in previous research.

  • RBI reports reduced risk of Stagflation in India

    stagflation

    Central Idea

    • The Reserve Bank of India (RBI) officials have reported a decreased risk of stagflation in India, now estimated at 1%, down from 3% in August

    What is Stagflation?

    Details
    Definition   An economic condition characterized by stagnant growth, high unemployment, and high inflation.
    Indian context Fluctuating growth rates; periods of slowdown have raised concerns about stagnation.
    Inflation Dynamics in India Historically high at times, often driven by rising food and fuel prices.
    Supply Shocks Vulnerable to global oil price fluctuations and agricultural supply shocks (e.g., monsoon variability).
    Past Episodes Elevated stagflation risks were noted during the Asian Crisis, Global Financial Crisis, taper tantrum, and COVID-19 pandemic.

    Methodology for Assessing Stagflation

    • Two-Pronged Approach: RBI assessment utilized two methods: analyzing periods of low economic growth with high inflation, and employing ‘at-risk’ frameworks, namely “Inflation at Risk” (IaR) and “Growth at Risk” (GaR), using quantile regression.
    • Determinants of Stagflation: Key factors identified include supply-side shocks, commodity price spikes, tighter financial conditions, and currency depreciation.

    Key Risk Factors for India

    • Financial Conditions and Rupee Depreciation: Financial conditions and the depreciation of the rupee against the U.S. dollar are significant risk factors for stagflation in India.
    • Empirical Evidence: The integrated IaR and GaR frameworks corroborate these findings, although the impact of crude oil prices on domestic fuel prices has limited predictive power for stagflation.
    • Global Concerns: Post-pandemic, higher commodity prices and the U.S. dollar’s appreciation raised global stagflation concerns.

    Back2Basics: Economic Conditions: Definitions and Concepts

    Explanation
    Depression A sustained, long-term downturn in economic activity.

    Characterized by significant decline in GDP, high unemployment, low spending, and reduced industrial output.
    Deflation A general fall in the price level of goods and services over some time, indicating negative inflation rates.
    Disinflation A decrease in the rate of inflation, i.e., a slowdown in the rate at which prices increase.

    Example: Inflation rate falling from 8% to 6%.
    Reflation Economic measures, such as increasing money supply or reducing taxes, aimed at stimulating the economy to reach its long-term growth trend after a downturn.
    Skewflation A situation where the price of some items rises significantly while others remain stable.

    Example: Seasonal rise in the price of onions while other prices are stable.

  • Review of ASEAN- India Trade in Goods Agreement (AITGA)

    asean

    Central Idea

    • India seeks to modernize the ASEAN India Trade in Goods Agreement (AITGA) to reduce the significant trade deficit with ASEAN nations in February 2023 with a target to complete the revamp by 2025.

    About ASEAN-India Trade in Goods Agreement (AITGA)

    Details
    Signing Date August 13, 2009, w.e.f. January 1, 2010.
    Objectives Eliminate tariffs and liberalize trade in goods.

    Facilitate economic integration between ASEAN and India.
    Key Features Gradual reduction and eventual elimination of tariffs

    Measures to facilitate trade and customs efficiency
    Member Countries ASEAN Members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam and India.
    Economic Impact Growth in trade between India and ASEAN countries – Diversification of trade basket.
    Recent Developments Discussions on reviewing and upgrading the agreement.
    Challenges Concerns over trade imbalances.

    Potential impact on certain domestic industries in India.
    Strategic Significance Part of India’s “Act East” policy.

    Step towards broader regional economic integration.

    Need for review

    • Significant Trade Partner: ASEAN countries, including Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar, and Cambodia, accounted for 11.3% of India’s global trade in 2022-23.
    • Existing Trade Imbalance: The current trade deficit with ASEAN stands at $43.57 billion, a substantial increase from $7.5 billion per annum when the pact was first implemented.
    • Trade Statistics: In 2022-23, India’s exports to ASEAN were valued at $44 billion against imports of $87.57 billion.
    • Rebalancing Trade: The primary goal is to address the disproportionate benefits that have favored ASEAN since the agreement’s implementation in 2010.
    • Modernization of the Agreement: The focus is on updating the FTA to reflect current global trade dynamics and include new elements like product-specific rules and trade remedies.

    Key Areas of Negotiation

    • Rules of Origin (ROO): Modifications in ROO are planned to increase market access for Indian products and prevent the rerouting of goods, particularly from China, through ASEAN countries.
    • Trade Remedies: A new chapter on trade remedies will aim to protect domestic industries from unfair trade practices and import surges.
    • Exclusion of New Areas: The agreement will not expand to cover additional areas like labor, environment, MSMEs, or gender to avoid complicating the pact.

    Challenges and Industry Perspectives

    • Need for Concessions: While India seeks to balance the trade deficit, concessions may be necessary to ensure mutual benefits.
    • Sectoral Focus: Industries such as chemicals, plastics, minerals, leather, textiles, and gems and jewellery are identified for potential growth in exports.

    Conclusion

    • Strategic Approach: India’s efforts to modernize the AITGA reflect a strategic approach to enhance trade relations while protecting domestic interests.
    • Balancing Act: The challenge lies in negotiating terms that benefit both India and ASEAN members, fostering a more equitable trading environment.
    • Long-Term Implications: Successful negotiations could significantly impact India’s trade dynamics, potentially reducing the trade deficit and strengthening economic ties with ASEAN nations.

  • India’s Disinvestment Strategy amidst upcoming Elections

    Central Idea

    • India’s disinvestment process, primarily focusing on minority stake sales rather than full privatisation, is expected to fall short of its fiscal year 2024 target.
    • The government’s cautious approach, influenced by the upcoming general elections, has led to a slowdown in the privatisation of major public sector undertakings (PSUs).

    Disinvestment Performance and Targets

    • Past Achievements: Over the past decade, disinvestment has generated over ₹4.20 lakh crore, but the current fiscal year’s target appears challenging.
    • FY24 Target: The government set a disinvestment goal of ₹51,000 crore for FY24, a reduction from the previous year’s estimate.
    • Major PSUs on Hold: Plans for the privatisation of Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and CONCOR have been deferred.
    • Progress So Far: Approximately ₹10,049 crore, or 20% of the budgeted amount, has been raised through IPOs and OFS.
    • Pipeline Projects: Strategic sales of CPSEs like SCI, NMDC Steel Ltd, BEML, HLL Lifecare, and IDBI Bank are planned but face delays due to various procedural hurdles.

    Factors Influencing Disinvestment

    • Political Considerations: Strategic disinvestment decisions are being influenced by the upcoming elections, leading to a cautious approach.
    • Challenges in Strategic Sales: The sale process involves multiple stakeholders and complex procedures, making it a lengthy affair.
    • Public and Political Resistance: Certain sectors, particularly defence and shipping, face opposition to privatisation, causing delays and policy reassessments.
    • Economic Think Tank Views: Observers note a recent slowdown in PSU stake sales, attributed to regulatory processes, global economic volatility, and shifting government priorities.

    Historical Context and Government Policy

    • Post-2014 Strategy: Since 2014, the government has revived its disinvestment policy, focusing on stake sales and listing of PSEs on the stock market.
    • Union Budget 2023-24: The disinvestment target for FY24 is the lowest in seven years, with the government yet to meet the target for 2022-23.
    • Reasons for Disinvestment: The government undertakes disinvestment to reduce fiscal burdens, finance deficits, invest in development, and retire debt.
    • Types of Disinvestment: The process includes minority disinvestment, majority divestment, and complete privatisation, managed by the Department of Investment and Public Asset Management (DIPAM).

    Recent Disinvestment Performance

    • Meeting Targets: The government has met its disinvestment targets only twice since 2014.
    • Challenges in Execution: Strategic sales have been complicated by various factors, including market volatility and political opposition.

    Future of Disinvestment in 2023-24

    • No New Additions: The government plans to continue with the already announced privatisation of state-owned companies without adding new ones.
    • Challenges and Vision: Observers suggest that disinvestment should align with the government’s long-term vision for privatisation and sectoral presence, rather than being driven solely by revenue needs.

    Conclusion

    • Strategic Policy Shifts: The government’s disinvestment strategy is evolving, balancing between raising revenues and managing political and public sentiments.
    • Impact of Upcoming Elections: With general elections approaching, the focus on disinvestment might shift, impacting the progress and priorities of stake sales.

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