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Type: Op-ed

  • Fiscal management during a pandemic

    Context

    The fiscal deficit for the year 2022-23 is higher than what was recommended by the Fifteenth Finance Commission. However, if we consider the direction of consolidation, it is towards a reduction in the fiscal deficit.

    The budget focuses on capital investment

    • This year’s Union budget projects an increase in capex by Rs 3.14 lakh crore, as compared to the budgeted numbers of the previous fiscal.
    • Given the economy’s savings-investment profile and macroeconomic uncertainties due to the pandemic, private and household investments are likely to be reactive to the general economic environment.
    • Achieving sustainable recovery: For the government, making capital investment in such uncertain times assumes a much higher priority and is equally indispensable for achieving a strong and sustainable recovery from the pandemic.
    • Increasing share of government: As per National Accounts data, gross fixed capital formation by the general government (Centre and states) has shown an increase as a percentage of GDP from 3.48 in 2011-12 to 3.82 in 2019-20, while other sectors, particularly households, the share fell from 15.75 per cent to 11.39 per cent during the same period.
    • The fiscal stance taken in the post-pandemic budgets for higher capital spending, including the budget of 2022-23, is likely to further enhance the general government share in overall capital formation. 
    • Important role of the States: it is also important to recognise that two-thirds of the general government’s capital expenditure is undertaken by states and in this context, the announcement of the Rs 1 lakh crore interest-free loans to the states to increase public investment has been a significant step.
    •  Since states taken together have a higher share in the country’s public capital spending, effective absorption of this additional borrowing facility will be critical for higher public investment.

    Three broad trends on Fiscal Consolidation

    • 1] Increase in taxes: The increase in taxes by Rs 5.71 lakh crore between 2020-21 (the first year of the pandemic) and 2022-23 shows that the fiscal challenges have eased, but remain present as we navigate economic recovery in uncertain times.
    • 2] Reduction in revenue deficit: Between 2020-21 and 2022-23 (BE), the reduction in revenue deficit has been substantial — from 7.3 per cent to 3.8 per cent of GDP.
    • 3] Revenue deficit dominates fiscal deficit: Compositionally, revenue deficit continues to be more than 55 per cent of the fiscal deficit and the management of such a deficit has few important considerations for revenue expenditure, that is, interest payments and allocation under various centrally sponsored and central sector schemes.
    • Role of CSS in revenue deficit: Aggregate allocation under centrally sponsored and central sector schemes (CSS) as per the 2022-23 (BE) is Rs 3.83 lakh crore and the interest payment cost of the Union government is Rs 9.56 lakh crore.
    • Beyond scheme-wise allocations, it is also important to consider CSS allocation as an issue of macro-fiscal management issue at the Union and state level, especially when it is contributing to the high revenue deficit of the central government and binding state resources for matching contribution, thereby increasing states’ deficit.

    Understanding the direction of fiscal consolidation

    • The fiscal deficit for the year 2022-23 is higher than what was recommended by the Fifteenth Finance Commission.
    • However, if we consider the direction of consolidation, it is towards a reduction in the fiscal deficit.
    • Though in the medium-term, the fiscal story is about supporting recovery, it is also true that there is no “one-size-fits-all” solution to fiscal consolidation and debt sustainability. 

    Conclusion

    The direction of fiscal consolidation rather than a specific quantified path in an unprecedented time like this is probably the most appropriate consideration.

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  • Delinking Depsang from the ongoing Ladakh border crisis is worrying

    Context

    In a recent television interview, the Indian Army Chief, General M.M. Naravane, argued that “out of the five or six friction points (in Ladakh), five have been solved”.

    Friction points in Ladakh

    • ‘Friction point’ are the points of Chinese ingress into hitherto India-controlled territory in Ladakh, where this control is exercised by the Army and the Indo-Tibetan Border Police (ITBP) through regular patrols to the claimed areas.
    • These ‘friction points’ are Depsang, Galwan, Hot Springs, Gogra, North bank of Pangong Tso, Kailash Range and Demchok.
    • By asserting that only one of the friction points is remaining to be resolved —  Hot Springs or PP15, Army Chief implicitly ruled out Depsang as an area to be resolved.
    • This attempt to delink the strategically important area of Depsang from the ongoing Ladakh border crisis is worrying.

    Significance of Depsang

    • Depsang is an enclave of flat terrain located in an area the Army classifies as Sub-Sector North (SSN), which provides land access to Central Asia through the Karakoram Pass.
    • The Army has always identified Depsang plains as where it finds itself most vulnerable in Ladakh, devising plans to tackle the major Chinese challenge.
    • SSN’s flat terrain of Depsang, Trig Heights and DBO — which provides direct access to Aksai Chin — is suited for mechanised warfare but is located at the end of only one very long and tenuous communication axis for India.
    • China, in turn, has multiple roads that provide easy access to the area.
    • This leaves SSN highly vulnerable to capture by the PLA, with a few thousands of square kilometres from the Karakoram Pass to Burtse, likely to be lost.
    • Nowhere else in Ladakh is the PLA likely to gain so much territory in a single swoop.
    • SSN lies to the east of Siachen, located between the Saltoro ridge on the Pakistani border and the Saser ridge close to the Chinese border.
    • On paper, it is the only place where a physical military collusion can take place between Pakistan and China — and the challenge of a two-front war can become real in the worst-case scenario.
    • If India loses this area, it will be nearly impossible to launch a military operation to wrest back Gilgit-Baltistan from Pakistan.

    Dangers of delinking Depsang

    • Invalidation of Indian claims: The biggest danger of delinking Depsang from the current border crisis in Ladakh, however, is of corroborating the Chinese argument, which invalidates the rightful Indian claim over a large swathe of territory. 
    • In sparsely populated areas like Ladakh, with limited forward deployment of troops, the only assertion of territorial claims is by regular patrolling. 
    • By arguing that the blockade at Y-junction predates the current stand-off — a ‘legacy issue’ that goes back years — the Chinese side can affirm that Indian patrols never had access to this area and thus India has no valid claim on the territory.

    Conclusion

    As was demonstrated by China in the aftermath of the 1962 War, there should be no holding back in painstakingly asserting one’s claims when it comes to safeguarding the territory.

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  • Artificial intelligence technologies have a climate cost

    Context

    While there is an allure to national dreams of economic prosperity and global competitiveness, underwritten by AI, there is an environmental cost.

    Issues with AI

    • Unfair race for dominance in AI:  A few developed economies possess certain material advantages right from the start, they also set the rules.
    • They have an advantage in research and development, and possess a skilled workforce as well as wealth to invest in AI.
    • Inequality in terms of governance: We can also look at the state of inequity in AI in terms of governance: How “tech fluent” are policymakers in developing and underdeveloped countries?
    • What barriers do they face in crafting regulations and industrial policy?
    • At the same time, there is an emerging challenge at the nexus of AI and climate change that could deepen this inequity.

    Climate impact of AI

    • The climate impact of AI comes in a few forms: The energy use of training and operating large AI models is one.
    •  In 2020, digital technologies accounted for between 1.8 per cent and 6.3 per cent of global emissions.
    •  In November 2021, UNESCO adopted the  In November 2021, UNESCO adopted the Recommendation on the Ethics of Artificial Intelligence, calling on actors to “reduce the environmental impact of AI systems, including but not limited to its carbon footprint.” , calling on actors to “reduce the environmental impact of AI systems, including but not limited to its carbon footprint.”

    Inequitable access to resources

    • Both global AI governance and climate change policy (historically) are contentious, being rooted in inequitable access to resources.
    • Developing and underdeveloped countries face a challenge on two fronts:
    • 1] AI’s social and economic benefits are accruing to a few countries.
    • 2] Most of the current efforts and narratives on the relationship between AI and climate impact are being driven by the developed West.

    Way forward

    • Assess technology-led priorities: Governments of developing countries, India included, should also assess their technology-led growth priorities in the context of AI’s climate costs.
    •  It is argued that as developing nations are not plagued by legacy infrastructure it would be easier for them to “build up better”.

    Consider the question “How Artificial Intelligence technologies could transform the world as we know it? What are the concerns with it?

    Conclusion

    It may be worth thinking through what “solutions” would truly work for the unique social and economic contexts of the communities in our global village.

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  • Missed opportunity to opportunity of employment-centred and inclusive growth

    Context

    India continues to rank poorly in various global indices that reflect the quality of life, human capital or human development in the country. In this context, it was expected that the current Budget would see an expansion in government spending on the social sector.

    Need for greater spending on social sector

    • In Human Development Index, India ranks 131 out of 189 countries and on the Global Hunger Index, it ranks 101 out of 116 countries.
    • The pandemic over the last two years has had a severe impact on the health, education and food security of the poor and informal sector workers.
    • The country has been experiencing increasing inequality over the last couple of decades.

    Marginal increase in allocation for school education

    • In the budget, the government announced that it will expand its ‘one class, oneTVchannel’ scheme instead of announcing enhanced allocations for schools  the government announced that it will expand its ‘one class, oneTVchannel’ scheme instead of announcing enhanced allocations for schools so that they can reopen with vigour.
    •  The budget for school education at ₹63,449 crore is a slight improvement over last year’s ₹54,873 crore (2021-22 budget estimates, BE) and a mere increase of 6% in nominal terms compared to 2020-21 BE of ₹59,845 crore.
    • After rechristening the school mid-day meal scheme as Pradhan Mantri Poshan Shakti Nirman, simply called PM Poshan, the allocation for the scheme has reduced from ₹11,500 crore last year to ₹10,233 crore this year.

    Low allocation for health

    • Despite repeated statements about strengthening the public health system, the overall budget for the Department of Health and Family Welfare at ₹83,000 crore has gone up by only 16% over the BE for 2021-22 and by less than ₹1,000 crore compared to the RE for 2021-22, which is ₹82,921 crore.
    • However, by including water and sanitation in the budget for health, there is an increase being shown in health spending as a proportion of GDP.
    • Also, even though the budget for the Jal Jeevan Mission has increased from ₹50,000 crore to ₹60,000 crore, only 44% of the allocated funds to the Department of Water and Sanitation for 2021-22 has been spent as on end December 2021.

    No indication of plan to extend the PMGKAY

    • 60% of the population are covered by ration cards currently under the National Food Security Act.
    • Those who were eligible benefited from the additional free foodgrains that they have been given under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).
    • However, the food subsidy (BE) for 2022-23 at ₹2.06 lakh crore is only enough to cover the regular NFSA entitlements.
    • The indication is that there is no plan to extend the PMGKAY.
    • The food subsidy RE for 2021-22 is ₹2.86 lakh crore.

    Other schemes

    • Budgets for important schemes such as Saksham Anganwadi, maternity entitlements and social security pensions are around the same as the allocations for last year.
    • The allocation for MGNREGA at ₹73,000 crore also does not reflect the increased demand for work or thethe pending wages of ₹21,000 crore.

    Continued negligence

    • The resources allocated for crucial government schemes in the fields of health, education, nutrition, and social protection have remained stagnant or show negligent increase.
    • In fact, the budgets for these schemes have been declining in real terms since 2015.
    • The World Social Protection Report 2020-22, brought out by the International Labour Organization, shows that the spending on social protection (excluding health) in India is 1.4% of the GDP, while the average for low-middle income countries is 2.5%.

    Conclusion

    This continued negligence does not bode well for inclusive development in India.

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  • The Supreme Court fails to decide key constitutional cases in time-bound manner

    Context

    Unless the Court strives in every possible way to assure that the Constitution, the law, applies fairly to all citizens, the Court cannot be said to have fulfilled its custodial responsibility.

    Landmark judgments

    • In the last few years, the Indian Supreme Court has delivered some judgments of far-reaching consequence.
    • It declared the right to privacy a fundamental right; decriminalized consensual sexual conduct between adults of the same sex; recognized transgender persons as the third gender; and outlawed triple talaq.
    • These decisions shore up the belief in republican values like liberty and equality reified in our Constitution.

    Important cases pending in the Supreme Court

    • Constitutionality of CAA: Many petitions were filed before the Supreme Court challenging the constitutionality of the Citizenship (Amendment) Act, 2019, that provides non-Muslim communities from Bangladesh, Pakistan, and Afghanistan a fast-track route to Indian citizenship.
    • More than two years later, the matter continues to languish in the apex court.
    • Dilution of Article 370: Innumerable petitions have been filed challenging the Presidential Order of August 5, 2019, that effectually diluted Article 370 of the Constitution.
    • To date, the court has done precious little to decide this vexed question of law.
    • Constitutionality of 103rd amendment: Petitions challenging the constitutionality of the Constitution(One Hundred and Third Amendment)Act,2019 that provides reservations in public educational institutions and government jobs for economically weaker sections are also languishing in the Supreme Court.
    • Challenges to the electoral bond scheme: The Supreme Court has failed to accord proper hearing in the last four years to the constitutional challenge to the electoral bonds scheme.

    Conclusion

    Unless the Court strives in every possible way to assure that the Constitution, the law, applies fairly to all citizens, the Court cannot be said to have fulfilled its custodial responsibility”.

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  • Why UNSC joint statement on nuclear weapons is important

    Context

    The leaders of five nuclear-weapons States — the US, Russia, China, the UK, and France, also known as the P5 issued a joint statement on preventing nuclear war and avoiding the ongoing global arms race.

    Overview of the P5 statement

    • It is not a binding resolution and reiterates some of the core obligations of the NPT.
    • The P5 statement reaffirms that a “nuclear war cannot be won and must never be fought” because of its “far-reaching consequences”.
    • The statement also expresses a commitment to the group’s Treaty on the Non-Proliferation of Nuclear Weapons (NPT) obligations and “to prevent the unauthorized or unintended use of nuclear weapons”.
    • Declaring that an arms race would benefit none and endanger all, the P5 have undertaken to:
    • (1) work with all states to create a security environment more conducive to progress on disarmament with the ultimate goal of a world without nuclear weapons.
    • (2) continue seeking bilateral and multilateral diplomatic approaches to avoid military confrontations, strengthen stability and predictability, increase mutual understanding and confidence”.
    • (3) pursue “constructive dialogue with mutual respect and acknowledgment of each other’s security interests and concerns”.

    Bold action on 6 measures

    • Bold action on six fronts is necessary.
    • 1) Chart a path for nuclear disarmament: That member states should chart a path forward on nuclear disarmament.
    • 2) Transparency and dialogue: They should agree to new measures of “transparency and dialogue”.
    • 3) Address nuclear crises: They should address the “simmering” nuclear crises in the Middle East and Asia.
    • 4) Strengthen global bodies: They should strengthen the existing global bodies that support non-proliferation, including the International Atomic Energy Agency (IAEA).
    • 5) Peaceful use of nuclear technology: They should promote the peaceful use of nuclear technology.
    • 6) Elimination of nuclear weapons: they should remind “the world’s people that eliminating nuclear weapons is the only way to guarantee that they will never be used.

    Peace education and the right to peace

    • Peace is necessary for rights, freedom, equality, and justice, and for that reason, we need what Justice Oliver Wendell Holmes Jr. called “education in the obvious”— namely, peace education.
    • This is required at multiple levels, ranging across the planetary, global, supranational, regional, national, and local levels of social cognition and action.
    •  UN Resolution 39/11 (November 12, 1984) proclaims that the peoples of our planet have a sacred right to peace and equally solemnly declares that the “preservation of the right of peoples to peace and the promotion of its implementation constitute a fundamental obligation of each State”.
    • The subsequent UN Resolution 53/243 B, declaring a program of action for a culture of peace (1999) also owes a great deal to Gandhi’s legacy and mission.

    Conclusion

    The statement is politically significant given the unimaginable danger posed by the 13,000 nuclear weapons currently believed to be held by a handful of countries, and the growing specter of loose nukes, which may be deployed by armed terrorist groups for nefarious purposes.

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  • How India can adapt to global geoeconomic churn

    Context

    As India returns to a high growth path after a slowdown in the last decade, its geopolitical salience in the world will continue to rise.

    India’s growth story

    •  Today, India’s GDP is $3.1 trillion and could cross, according to some estimates, $8 trillion by the end of this decade.
    •  India’s total trade, which was about $38 billion in 1991-92, is expected to touch $1.3 trillion this year.
    •  This is about 40 percent of India’s GDP and underlines the fact that India is more deeply tied to the world than ever before.
    • The world itself is in a geo-economic churn making the transition to $8 trillion a challenging one.

    Geo-economic and geopolitical changes in the global order

    Geo-economic changes

    • It was Edward Luttwak, the well-known American strategist, who triggered a global discourse on the idea of geoeconomics in a seminal article in 1990 amidst the end of the Cold War.
    • Using economic dominance for political gain: The rapid economic rise of China in the last three decades and Beijing’s success in leveraging its growing economic clout for political gain is widely seen as a classic example of geoeconomics.
    • Economic interdependence: Luttwak’s warning against illusions of economic interdependence and globalization have been borne out by major changes in US-China relations in recent years.
    • The dramatic expansion of economic interdependence between China and America over the last four decades — what some called “Chimerica” — was the principal evidence for the thesis that geopolitics and ideology no longer mattered.
    • Chimerica was held up as an efficient economic fusion that underscored the virtues of economic globalization.
    • However, economic nationalism has re-emerged in both countries today.
    • The US is also strengthening domestic research and industrial capabilities to compete more effectively with China.
    • China too has adopted the economic strategy of “dual circulation” that focuses on strengthening domestic capabilities and reducing exposure to external factors.

    How geopolitical and geoeconomic changes are influencing India’s free trade policies

    • At the end of 2019, India has walked out from the Regional Comprehensive Economic Partnership (RCEP) suggesting that the costs of joining a China-centered regional economic order are unacceptable.
    • Deepening engagement with complementary economies: India’s move towards free trade agreements with countries like Australia, Britain, UAE, and Israel.
    • Domestic orientation: Much like the US and China, India is now taking a number of initiatives to promote domestic manufacturing in a range of sectors under the banner of “Atmanirbhar Bharat”.

    Way forward for India

    • Until now, India had the luxury of treating its foreign, economic, and strategic policies as separate domains.
    • An integrated approach to policies: Adapting to the current global geo-economic churn demands that Delhi finds better ways to integrate its financial, trade, technological, security, and foreign policies.
    • Above all India needs a strategy that can respond to the imperatives of building domestic capabilities, developing geo-economic partnerships, and constructing geopolitical coalitions with like-minded countries.

    Consider the question “How the current geo-political and geo-economic policies are shaping India’s trade policies? Suggest the approach India need to adapt to the structural changes taking place in the global order?” 

    Conclusion

    India’s selective trade arrangements and the policies to promote domestic manufacturing have drawn much criticism. While those arguments must continue, they must be related more closely to the structural changes in the international economic order.

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  • How the Budget can push India’s health system transformation

    Context

    After decades of low government expenditure on health, the Covid pandemic created a societal consensus on the need to strengthen our health system.

    Steps to strengthen our health system

    • The Fifteenth Finance Commission recommended greater investment in rural and urban primary care, a nationwide disease surveillance system extending from the block-level to national institutes, a larger health workforce and the augmentation of critical care capacity of hospitals.
    • The Union budget of 2021 reflected these priorities in a proposed Pradhan Mantri Aatmanirbhar Swasth Bharat Yojana (PMASBY) to be made operational over six years, with a budget of Rs 64,180 crore.
    • Broader vision of health: The Finance Minister also projected a broader vision of health beyond healthcare by merging allocations to water, sanitation, nutrition and air pollution control with the health budget.
    • Under the Ayushman Bharat umbrella the Digital Health Mission was launched in September 2021.
    • The Health Infrastructure Mission, launched in October 2021, was a renamed and augmented version of the PMASBY.
    • These missions join the two other components of Ayushman Bharat launched in 2018.
    • The Comprehensive Primary Health Care (CPHC) component is nested in the National Health Mission (NHM) while the Pradhan Mantri Jan Arogya Yojana (PMJAY) is steered by the National Health Authority (NHA).

    Way forward

    • While much of the following needs to be done by the states, the Centre should incentivise and support such efforts by the states.
    • Link synergically: Primary healthcare services under the CPHC and linkage with water, sanitation, nutrition and pollution control programmes will strengthen the capacity of the health system for health promotion and disease prevention.
    • The budget of 2022 must not only fund these missions adequately but indicate how they will link synergically while functioning under different administrative agencies.
    • Allocate more funds: The NHM received only a 9.6 per cent increase in the 2021 budget.
    • PMJAY did not see an increase in allocation last year, because its utilisation for non-Covid care declined sharply in the previous year.
    •  More importantly, limiting cost coverage to hospitalised care reduces the PMJAY’s capacity to significantly lower out-of-pocket expenditure (OOPE) on health, which is driven mostly by outpatient care and expenditure on medicines.
    • Focus on Digital Heath Mission: The Digital Health Mission can enhance efficiency of the health systems in a variety of ways.
    • These include better data collection and analysis, improved medical and health records, efficient supply chain management, tele-health services, support for health workforce training, implementation of health insurance programmes, real time monitoring and sharper evaluation of health programme performance along with effective multi-sectoral coordination.
    • Improve the skill and number of healthcare workers:  We need to increase the numbers and improve the skills of all categories of healthcare providers.
    • While training specialist doctors could take time, the training of frontline workers like Accredited Social Health Activists (ASHAs) and Auxiliary Nurse Midwives (ANMs) can be done in a shorter time.
    • Upgrade district hospitals: District hospitals need to be upgraded, with greater investment in infrastructure, equipment and staffing.
    • In underserved regions, such district hospitals should be upgraded to become training centres for students of medical, nursing and allied health professional courses.

    Conclusion

    The expanded ambit of health, as defined in last year’s budget, must continue for aligning other sectors to public health objectives. The Union budget of 2022 can add further momentum to our health system transformation.

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  • Electoral bond scheme

    Context

    Ever since its introduction, the electoral bond scheme has envenomed the democratic process, by destroying altogether any notion of transparency in political funding.

    Issue of anonymity in electoral bond

    • The electoral bond scheme is designed to allow an individual, or any “artificial juridical person”, including body corporates, to purchase bonds issued by the State Bank of India during notified periods of time.
    • These instruments are issued in the form of promissory notes, and in denominations ranging from ₹1,000 to ₹1 crore.
    • Once purchased, the buyer can donate the bond to any political party of their choice and the party can then encash it on demand.

    Supreme Court’s opinion

    • The Supreme Court has allowed the scheme to continue unabated and has denied an interim stay on its operation.
    • In one such provisional order, the Court asserted that the bonds were not, in fact, anonymous.
    • According to the Court, since both the purchase and the encashment of bonds are made through banking channels, all it would take for a person to glean the identity of a donor was for her to look through every corporation’s financial statement — these records, the Court said, ought to be available with the Registrar of Companies.
    • What the order ignored was that there is no attendant obligation on political parties to provide details to the public on each donation received by them through electoral bonds.
    • Companies are also under no obligation to disclose the name of the party to whom they made the donation.

    Violation of voter’s right

    •  The Supreme Court has consistently held that voters have a right to freely express themselves during an election and that they are entitled to all pieces of information that give purpose and vigour to this right.
    • Surely, to participate in the electoral process in a meaningful manner and to choose one’s votes carefully, a citizen must know the identity of those backing the candidates.

    Electoral bond does not eliminate the role of black money in funding elections

    • As affidavits filed by the Election Commission of India in the Supreme Court have demonstrated, the scheme, if anything, augments the potential role of black money in elections.
    • It does so by, among other things, removing existing barriers against shell entities and dying concerns from donating to political parties.
    • Moreover, even if the bonds were meant to eliminate the presence of unaccounted currency, it is difficult to see what nexus the decision to provide complete anonymity of the donor bears to this objective.
    • It is for this reason that the Reserve Bank of India reportedly advised the Government against the scheme’s introduction.

    Conclusion

    The worries over the electoral bond scheme, however, go beyond its patent unconstitutionality. This is because in allowing anonymity it befouls the basis of our democracy and prevents our elections from being truly free and fair.

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  • How budget can generate higher growth, jobs

    Context

    Although the impact of Omicron is less on the economy, the loss of GDP in the last two years is high. Also note that the pre-Covid year FY20 had a low base with 4 per cent growth of GDP. Therefore, the need to focus on higher growth in the forthcoming budget and in the medium term, that is, beyond India@75, is obvious.

    Challenges in creating quantity and quality of jobs in the economy

    • Unemployment rate is high in both rural and urban areas;
    • Decline in work participation rates, particularly for women;
    • Recovery in employment is still below the levels of the pre-Covid period.
    • 85 per cent of the workforce is still in informal sector.
    • Lack of skill: Less than 5 per cent of India’s workforce has formal skill training.
    • Need for structural change: Manufacturing and services need structural change.
    • Focus on MSME sector is needed for higher employment.

    Policies needed to achieve higher economic growth and jobs

    1] Capital expenditure and infrastructure

    • The government outlined an infrastructure project pipeline worth more than Rs 102 lakh crore and asset monetisation pipeline of Rs 6 lakh crore to be implemented in the medium term.
    • Continuing focus on infrastructure and capex by the government is important as it is a key driver for the “future of India”.

    2] Focus on export growth

    • It is well known that rise in exports is one of the main engines of growth and also important for employment creation.
    • Export growth in India has increased and is expected to reach $400 billion by the end of FY22.
    • One worrying aspect of India’s export performance is the failure in expanding the share of labour intensive products in the export basket.
    • Protectionist trade policy: However, one problem in recent years is that India’s trade policy has become more protectionist by increasing import tariffs.
    • Join RCEP: India should also join the Regional Comprehensive Economic Partnership (RCEP) for integrating our industries with the value chains in Asia.

    3] Manufacturing and service sector growth

    • The share of manufacturing in GDP and employment has hardly increased over time.
    • Production Linked Incentive (PLI) schemes can improve performance.
    • However, more efforts are required to improve the manufacturing sector.
    •  Similarly, there are a lot of opportunities for India in the service sector.
    • Brand and customer centricity are important here.
    • India can also think of more business in the service sector.
    • Growing startups including unicorns in manufacturing and services is part of this effort.

    4] Banking reforms

    • Banking reforms are important as bank credit growth is a key indicator of economic growth.
    • Low credit-to-gdp ration in India: Credit to GDP ratio in India is only around 55 per cent compared to 100 per cent and 150 per cent in many other countries.
    • Credit should flow to all categories of economic agents like firms, households etc.
    •  The bad bank, a key initiative of the last budget, is yet to take shape.
    • The role of fintech companies in the financial sector has increased significantly.
    • They may not be able to replace banks although they are competing on payments.
    • The banks also have to focus now on ESG (environment, social and governance) while giving credit.
    • Big technology and digital push is also needed for banks.

    5] Deal with K-shaped recovery

    • The K-shaped recovery of the economy is still continuing.
    • The policies have to focus on giving a push to the MSME sector, increasing investment in agriculture and rural infrastructure, a social sector push including bridging divides in health and education, social protection measures like foodgrain distribution, cash transfers, MGNREGA in rural areas, urban employment guarantee schemes etc.
    • This will also create demand for the economy.

    Conclusion

    In the near term, fiscal policy has to play an important role in achieving the objectives of growth and jobs by expanding fiscal space while the fiscal deficit can be stabilised in the medium term. Increase in private investment may take some more time.

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