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Type: Op-ed

  • Taking the long view with China

    The article explains the various choices India faces in the geopolitical landscape shaped by emergence of two Asian giants.

    New challenges and hard choices on geopolitical front

    • As it moves to becoming the third largest economy in the world, India needs to have a clear-eyed world view and strategy as it makes hard choices.
    • It needs to reject the developing country regional mindset that has shaped India’s  national aims and foreign policy.
    • We have a “special and privileged strategic partnership” with Russia which provides more than three-quarter of India’s military equipment and a “comprehensive global strategic partnership” with the U.S.
    • India’s relationship with the U.S.-led Quadrilateral Security Dialogue (Quad), where the others are military allies, has rightly been cautious, as U.S. President Joe Biden sees China as a ‘strategic competitor’ rather than a ‘strategic rival’.
    • Realism dictates that India does not need to compromise on its strategic autonomy.
    • India faces two sides of the China conundrum: Defining engagement with its neighbour which is consolidating an expanding BRI while remaining involved with the strategic, security and technological concerns of the U.S.

    China’s dominance in financial sphere

    • In the financial sphere, there is the real possibility of the Chinese renminbi becoming a global reserve currency or e-yuan becoming the digital payments currency.
    • China is the world’s largest trading economy.
    • It could soon become the world’s largest economy.
    • China has stitched together an investment agreement with the EU and with most of Asia.
    • Relative attractiveness will determine when the dollar goes the way of the sterling and the guilder.
    • China, facing technological sanctions from the U.S., may well put in the hard work to make this happen soon.

    China: Partner, competitor, and economic rival

    • Some form of the EU’s China policy of seeing the emerging superpower as a partner, competitor, and economic rival depending on the policy area in question is going to be the global norm. 
    • This broad perspective is also reflected in India’s participation in both the Shanghai Cooperation Organisation, designed to resist the spread of Western interests, and in the U.S.-led Quad, with its anti-China stance.
    • Within the United Nations, India’s interests have greater congruence with China’s interests rather than the U.S.’s and the EU’s.
    • Sharing the COVID-19 vaccine with other countries distinguishes India, and China, from the rest.

    India’s engagement with the U.S.

    • The congruence between India and the U.S. lies in the U.S.’s declared strategic objective of promoting an integrated economic development model in the Indo-Pacific as a credible alternative to the BRI, but with a caveat.
    • Instead of an alternate development model, India should move the Quad towards supplementing the infrastructure push of the BRI in line with other strategic concerns in the region.
    • For example, developing their scientific, technological capacity and digital economy, based on India’s digital stack and financial resources of other Quad members, will resonate with Asia and Africa.

    India’s role in global governance

    • Another area where India can play a ‘bridging role’ is global governance.
    • President Xi Jinping’s “community with shared future for mankind”, and Prime Minister Narendra Modi’s “climate justice” and asking how long India will be excluded from the UN Security Council, challenge the frame of the liberal order without providing specific alternatives.
    • With respect to digital data, India has recently expressed that there must be reciprocity in data sharing, and this is the kind of ‘big idea’ for sharing prosperity that will gain traction with other countries.

    India’s growing influence

    • India’s recent policies are gaining influence at the expense of China and the West, and both know this trend will accelerate.
    • The steps to a $5 trillion economy, shift to indigenous capital military equipment, and a new Science, Technology and Innovation Policy underline impact, capacity and interests.
    • ASEAN remains keen India re-join its trade pact to balance China.
    • It is being recognised that India’s software development prowess could shape a sustainable post-industrial state different to the U.S. and China model.

    Consider the question “Examine how India’s foreing policy priorities and its role in global governance is shaped by China’s rise.”

    Conclusion

    As in the historical past, Asia is big enough for both Asian giants to have complementary roles, share prosperity and be independent of each other and of the West.

     

  • National Rail Plan for 2030

    The Budget unveiled the National Rail Plan 2030. 

    Key provision in the Budget for railways

    • First, there is a National Rail Plan (NRP) for 2030.
    • Second, the Western dedicated freight corridor (DFC) and the Eastern DFC will be commissioned by June 2022.
    • Parts of DFC will be in public-private partnership (PPP) mode.
    • Third, there will be an East Coast corridor (Kharagpur to Vijaywada), an East-West corridor (Bhusaval to Kharagpur/Dankuni) and a North-South corridor (Itarsi to Vijayawada).
    • Fourth, all broad-gauge routes will be electrified by December 2023.
    • Fifth, there will be safety and passenger amenity measures.

    National Rail Plan provisions

    • The NRP is meant to increase the share of railways in freight, rectifying the pre-Independence and post-Independence bias
    • It also aims to develop capacity that will cater to demand in 2050.
    • It provides for mapping of the existing railway network on a GIS platform.
    • The primary value addition of the NRP is an analysis of the existing network, with expected additions (such as the National Infrastructure Pipeline) also built in.
    •  NRP bases decision making on objective criteria.

    Pricing and cross-subsidy issue

    • In 2018-19, as per the NRP, India’s operating ratio (OR) was 0.59 for freight and 1.92 for passenger traffic.
    • The problem is low passenger fares and artificially high freight rates required to cross-subsidise those.
    • This is not the complete picture since normally, freight and passenger trains share common sections of track and passenger trains are given preference over goods trains in getting a path (route from point A to point B).
    • Therefore, the average speed of a freight train is 24 km/hour — average speed is a surrogate indicator.
    • A superior indicator is transit time — the time taken for a consignment to reach from one point to another.

    Need for decreasing the cost and increasing the average speed

    • Indian Railways has a system of HDN and HUN identification for the present network.
    • HDNs are high-density routes.
    • HUNs are highly-used networks with multiple origins and destinations and no clear single haul corridor.
    • HUNs are primarily for passengers.
    • For freight, HDNs are important.
    • HDNs and HUNs carry 80 per cent of the traffic and there are sections where capacity utilisation is more than 100 per cent.
    • With traffic increasing, capacity utilisation will worsen.
    • If the intention is to increase rail share in the total freight carried to 44 per cent, the average speed must increase and costs must decline.
    • With the Western and Eastern DFCs, both should happen.

    Consider the question “What are the factors responsible for preventing the railways from realising its contribution in the development of the country. How far will the National Rail Plan help railways deal with these factors?” 

    Conclusion

    The implementation of the NRP will help railways deal with the issues faced by it.

    Back2Basics: Operating Ratio

    • The operating ratio shows the efficiency of a company’s management by comparing the total operating expense of a company to net sales.
    • An operating ratio that is decreasing is viewed as a positive sign, as it indicates that operating expenses are becoming an increasingly smaller percentage of net sales.

    OR = (Operating Expenses + Cost of Goods Sold)/ Net sales​ 

     

  • Need for rigorous scrutiny of constitutionality of the bills

    Farmers’  protests against the farm laws and staying of  implementation of these laws by the judiciary have once again brought into focus the process followed in the passage of laws by the parliament. This article highlights the importance of parliamentary committees.

    Need for introspection on the role of parliament

    • The Supreme Court’s order on the farm laws staying their implementation crossed the line of separation between the legislature and judiciary.
    • The order should trigger introspection in Parliament.
    • Since 2019, the constitutionality of statutes passed by it, like the abrogation of Article 370, the Citizenship Amendment Act and recently the farm laws, has been challenged before the SC.
    • The highest lawmaking body should be asking itself whether it rigorously scrutinises the constitutionality of bills.

    Three mechanisms to examine the constitutionality

    • Parliament has three mechanisms for examining whether a government bill adheres to constitutional principles.
    • First, any member of the Parliament can oppose the introduction of a bill by stating that it initiates legislation outside the legislative competence of the Parliament.
    • Second, MPs also get an opportunity to discuss a bill’s constitutionality while debating it in the Lok Sabha and Rajya Sabha.
    • But on both these occasions, the strength of the argument does not determine the legislative outcome.
    • The Parliament’s decision depends on the numbers that the treasury and opposition benches command on the house floor.
    • Third, the opportunity for probing a bill’s constitutionality arises when a parliamentary committee is examining it.

    Advantages of scrutiny of the bill by  parliamentary committee

    • The most important opportunity of the above mentioned three opportunities is scrutiny by the parliamentary committee.
    • In the past too, the parliamentary committees have subjected the bills to strict scrutiny on the issue of constitutionality.
    • For example, the committee examining the land acquisition bill 2011 was concerned about the bill infringing upon the state governments’ power.
    • Similarly, during the deliberations on the Citizenship Amendment Bill 2016, the joint committee explicitly asked the government whether the bill would violate the spirit of Articles 14 and 25 of the Constitution.
    • The committee process also has the advantage of drawing on constitutional expertise outside of the law ministry.
    • The government has also fielded the attorney general to appear before parliamentary committees.

    Weakness of parliamentary committee process

    • Our parliamentary committee process has a fatal flaw.
    • Government bills do not automatically go to committees for examination.
    • Ministers get an option to refer their bill to a select committee, they often don’t exercise this option.
    • While countries like Sweden and Finland pass their bills through two parliamentary committees.
    • One committee looks at the technical aspects of a proposed law, and a specialised committee focuses on a bill’s constitutional validity.

    Consider the question “Several laws passed by the government have been challenged before the judiciary on the ground of unconstitutionality. This highlights the importance of strict scrutiny of the bills by the Parliament. In light of this, examine the role played by the parliamentary committees in the scrutiny of the bills.” 

    Conclusion

    Lack of robust scrutiny processes weakens Parliament’s image as the highest legislative institution and encourages judicial encroachment on its powers. After all, lawmaking should not be a mechanical stamping of the government’s legislative proposals but their careful examination by the Parliament.

  • Role of dams in Uttarakhand floods

    The article explains the link between the disasters in the Uttarakhand and the construction of dams.

    How dams exacerbate disasters

    • The use of explosives has repeatedly been questioned for dam construction, and the construction of other infrastructure projects, such as roads, in the fragile Himalayan State.
    • Other than this, deforestation takes place when dams are constructed.
    • The construction material that is supposed to be dumped on separate land is often dumped into the rivers.

    The Chopra Committee report after Kedarnath flood

    • The Chopra Committee report of 2014 brings more clarity on how dams exacerbate a disaster such as floods.
    • Its report mentions how dams exacerbated the 2013 deluge, mainly as riverbeds were already raised from the disposed muck at the dam construction sites.
    • The report presents evidence to prove that dams are not only damaged in floods, they also cause immense damage in downstream areas.
    • This is because as floodwaters damage a barrage, they increase the destructive capacity of the water that flows downstream of the barrage.
    • In an affidavit submitted on December 5, 2014 in the Supreme Court, the Union Ministry of Environment, Forest and Climate Change acknowledged the adverse impact of dams in the 2013 floods.

    Impact of climate change and threat of earthquakes

    • Himalayan glaciers are receding and disintegrating as a result of climate change, and the snow cover in the Himalayas is also thinning.
    • Research shows an increase in number and volume of glacial lakes as a result of of increased temperatures.
    • For dams, this means rapid increase or decrease in the reservoir water level.
    • It also means that the projections on the life of a dam reservoir may not stand due to erratic events, such as floods, that could rapidly fill a reservoir with muck and boulders brought along with the floods.
    • In terms of earthquake risk, Uttarakhand lies in Seismic Zone-IV (severe intensity) and Seismic Zone-V (very severe intensity).
    • Ignoring this, many dams have been constructed in zones that are under high risk of witnessing severe earthquakes.

    Consider the question “Examine the role played by the dams in exacerbating the disasters in the Himalayan states”

    Conclusion

    It is clear that dams worsen disasters, and for this to be ignored by the State authorities is unfortunate.

  • India’s challenge in dealing with international criticism

    Tweets by international celebrities in support of farmers’ protests and the government’s response to it have brought focus the issue of international scrutiny of India’s policies. The article analyses this issue.

    Issue of external criticism of India

    • Recently, India has been at the receiving end of international criticism over its dealing with the farmers’ protests against recently passed farm laws.
    • But neither the negative international scrutiny nor the Indian nationalist rejection of it are new.
    • Mobilising nationalist sentiment and evoking territorial sovereignty in fending off external criticism have been consistent themes in the conduct of independent India’s foreign policy.
    • The intensity of international scrutiny has varied over time and space, but they are unlikely to ever disappear.
    • As India becomes more connected to the world, there will be more global interest in its internal dynamics.
    • At the same time, like all rising powers, India will push back against demands that it must always measure up to external expectations.

    Why the Western criticism matters

    • Western power to turn sensible sentiments on democracy and human rights into consistent policies is rather limited.
    • Also, the issue of human rights has never been the sole factor shaping US foreign policy towards other nations.
    • But there is no denying that the Western power to create problems is real.
    • There are also implications of needless political arguments with the US over your domestic politics.
    • Asian realists also know that it is not difficult to neutralise Western liberal critics by emphasising engagement with others that might have commercial and security interests.

    Dealing with the criticism in the U.S. Congress

    • In the early 1990s, passing resolutions against India on Punjab and Kashmir in the US Congress was routine.
    • But once Delhi began to engage with US Congress and explained the complexity of the issues involved, the tide began to turn.
    • The Indian diaspora helped by reaching out to their representatives and pressing them to reconsider their positions.
    • Within a decade, supporters of separatism in Punjab and Kashmir could not even move the resolutions in the US Congress.

    Domestic polarisation and role of diaspora in international criticism

    • India’s problem is not with external criticism, India’s real challenge is the deepening domestic political divide.
    • India’s internal conflicts have inevitably enveloped the diaspora.
    • Sections of the diaspora that are opposed to Indian policies are actively mobilising the political class in their adopted countries to raise the voice against India.
    • They are also building wider coalitions to put the Indian government on the mat.
    • If the diaspora in the past helped India overcome some difficult problems with the US, it is the counter mobilisation of the diaspora that is shaping the western criticism of India.

    Way forward

    • The government’s ability to overcome external criticism depends on rebuilding the national consensus on key policies and healing the multiple social rifts.
    • Without a visible and sincere political effort to promote unity at home, internal divisions will get worse and make India more vulnerable to external meddling.

    Consider the question “Recently, India has been at the receiving end of the international criticism for its internal issues. What are the reasons for such criticism? Suggest the strategy to deal with such criticisms.” 

    Conclusion

    India’s own experience with Sri Lanka and Nepal underlines how hard it is to persuade other societies to accept Delhi’s preferences on the rights of minorities and federalism. In the end, democracy and pluralism can never be foreigner’s gifts. The struggle to construct and preserve democracies remains an internal one.

  • India’s Myanmar dilemma

    The coup in Myanmar poses several challenges for India. For one, it poses a dilemma in India’s dealing with Myanmar’s military. Also, it has implications for the Rohingya issue and containing the insurgency in north-east India.

    Implications of the coup in Myanmar

    1) Political realignment and role of Aung San Suu Kyi

    • Threat of sanctions from the United States and the West in the wake of the recent coup could lead to unique political realignments in Myanmar.
    • As a result, the international community may not have any alternatives than Aung San Suu Kyi when it comes to pursuing the restoration of democracy in the country.
    • The democratic credentials of Aung San Suu Kyi, remain deeply diminished today due to her justification of the ill-treatment meted out to the Rohingya,
    • Yet the recent events have brought her right back into the centre of the international community’s political calculations in Myanmar.

    2) Implications for Rohingya issus

    • International community will have to condone the government’s past actions against the Rohingya in order to highlight Suu Kyi as an anchor of democracy in Myanmar.
    • The case against Myanmar’s conduct during her government’s tenure at the International Court of Justice (ICJ) will most likely be put on the backburner.
    • Increasing global support for Ms. Suu Kyi could potentially negative consequences for the persecuted Rohingya.

    3) China factor

    • In the short run, the coup stands to hurt the interests of China, India and even the rest of the international community, all of whom were able to do business with Myanmar in their own unique ways.
    • For China, the coup has complicated its larger regional economic plans in Myanmar.
    • However, the international community’s sharp reactions will likely force the Tatmadaw (Myanmar’s military) to turn to China.
    • International sanctions are unlikely to have a major impact on the country’s largely inward-looking junta and its Generals.
    • However, it Generals would still expect Beijing to give them
    • For China, the coup has complicated its larger regional economic plans in Myanmar.
    • On the positive side for Beijing, decisive western sanctions will force the military to get closer to China.
    • To that extent, China will be its biggest beneficiary of the February coup by default.

    India’s dilemma

    • India faces the most challenging dilemma on how to respond to the military coup in Myanmar.
    • The dual power centres of the military and the civilian government that existed in Naypyitaw until recently, suited India.
    • While India’s national interests clearly lie in dealing with whoever is in power in Myanmar, India would find it difficult to openly support the junta given the strong western and American stance.
    • On the other hand, it can ill-afford to offend the junta by actively seeking a restoration of democracy there.
    • While Ms. Suu Kyi was getting cozy with Beijing, it was the Myanmar military that had been more circumspect.

    India’s concerns

    • While a friendless Myanmar junta getting closer to China is a real worry for New Delhi, there are other concerns too.
    • For one, Myanmar’s military played a helpful role in helping India contain the north-eastern insurgencies.
    • Equally important is the issue of providing succour to the Rohingya in the wake of the military coup in Myanmar.

    Consider the question “Developments in Myanmar have several implications for the regional geopolitics. In light of this, examine the challenges India faces from the development in Myanmar.”

    Conclusion

    India is left with very few clear policy options. And yet, it must continue to maintain relations with the government in power in Myanmar while discreetly pushing for political reconciliation in the country. In the meantime, the focus must be on improving trade, connectivity, and security links between the two sides.

  • Making Budget work

    The article deals with the marked departures in this year’s Budget and the challenges in realising the changes.

    Three paradigm shifts from past in this the Budget

    1)Increased infrastructure spending

    • The main theme of the budget is a big thrust on infrastructure spending and public investment.
    • If the budgeted numbers are realised, capex would have grown from 1.6 per cent of GDP pre-COVID to 2.5 per cent in two years.
    • With India’s investment/GDP ratio falling by 5 percentage points over the last decade, a sustained public investment push — with its large multiplicative effects — is a much-needed impetus to reinvigorate growth and create jobs.

    Implications of increased spending

    • The certainty sustained public investment is likely to crowdin private investment.
    • The certainty of investment-led employment that is likely to reduce household precautionary savings.
    • However, higher capex spend is being paid for by disinvestment and privatisation.
    • Effectively, non-core public-sector assets that don’t generate positive externalities — and, in fact, potentially distort the sectors they compete in — are expected to be replaced with much-needed physical and social infrastructure.
    • This newly created physical and social infrastructure emanate positive externalities and necessarily suffer from under-provisioning by the private sector.
    • If successfully executed — this will not be a case of selling the family silver to pay a credit card bill.
    • Instead, it will be akin to a productivity-enhancing asset swap on the public sector’s balance sheet.

    2) Shift in the way for financing infrastructure

    • In stark contrast to the PPP model, infrastructure will now be financed off public sector balance sheets and, once operational and viable, will be monetised so as to recycle proceeds into the next project.
    • In theory, this is the appropriate division of public-private risk sharing.
    • It combines the public sector’s ability to better mitigate upstream risk while taking advantage of the glut of global liquidity potentially attracted to downstream projects.

    3) Shift is towards more conservative and transparent fiscal accounting

    • There has been much focus on bringing the Food Corporation of India (FCI) liabilities back on the budget.
    • Less appreciated is the conservatism with which tax revenues have been budgeted for.
    • Revised estimates peg this year’s gross taxes at 9.9 per cent of GDP.
    • But for that to happen, taxes, net of excise, will need to contract by 20 per cent in the last quarter.
    • So it’s very likely gross taxes will end up 0.5 per cent of GDP higher this year.
    • Not only is this a welcome departure from the past when revenues were consistently over-budgeted, but it sets the base for next year.
    • With nominal GDP expected to grow in double digits, it’s likely taxes, net of excise, will experience a higher-than-unitary-elasticity to growth, especially given the increased formalisation that COVID has spawned.
    • Tax collections are, therefore, likely to exceed budgeted levels in 2021-22.
    • It behooves a very uncertain macroeconomic environment and creates some buffer if crude prices keep rising or other revenues don’t materialise.
    • Credible accounting over time will bring down risk premia in bond yields, and paradoxically generate a stimulative impulse.

    Three challenges in realising these changes

    1) Execution challenge

    • The budget’s impact on shaping the macroeconomic narrative will depend on the speed and efficacy of simultaneously building and selling public assets.
    • It will be important, for instance, to front-load disinvestment and strategic sales to take advantage of buoyant equity markets before global central banks become more cautious.
    • With debt likely to rise to almost 90 per cent of GDP this year, it’s now incumbent on all stakeholders to consistently deliver the 10 per cent nominal GDP growth that’s needed to first stabilise debt at these levels and then bring it down.
    • Viewed from this lens, it is a budget where execution is vital.

    2) Withdrawal of the policy support at appropriate time

    • While fiscal policy is being appropriately counter-cyclical at the moment, it must be equally nimble in the other direction.
    • When the recovery gets more entrenched, policy support should be withdrawn with equal speed and alacrity.

    3) Role of monetary policy

    • With fiscal policy playing a primary role, monetary policy must slowly take a back seat.
    • The combination of a more relaxed fiscal path and domestic private sector savings normalising after the COVID surge could result in equilibrium bond market yields rising [fall in the price of bond] — but that is a cost worth incurring for a meaningful public investment push.
    • In the near term, the RBI may focus on ensuring this new equilibrium is reached in a non-disruptive manner.
    • Given the current slack in the economy, it’s understandable if fiscal and monetary are temporarily complementary.
    • But as confidence in the recovery grows, fiscal and monetary must quickly become substitutes — with the RBI progressively normalising liquidity to wardoff financial stability and fiscal dominance concerns — so as to safeguard macroeconomic stability.

    Consider the question “This year’s Budget marked many departures from the past Budgets. However, there are several challenges in realising these departures. What are such departures and identify the challenges in realising them?”

    Conclusion

    The budget must be commended for embarking on important paradigm shifts. But its success, and in turn the sustainability of India’s recovery, will now come down squarely to policy execution and coordination.

     

  • IBC as an enabler

    The article analyses whether or not the Insolvency and Bankruptcy Code is delivering on its objectives.

    Criticism of IBC

    • The Insolvency and Bankruptcy Code (IBC), 2016 was enacted to resolve the stress of companies.
    • However, the corporate insolvency resolution process (CIRP)  has been criticised as it rescues only about 25 per cent of companies and leads to liquidation for the rest.

    Is IBC delivering on its mandate

    Let’s analyse how Insolvency and Bankruptcy Code (IBC) 2016 is working towards value maximising outcomes.

    1) It enables the market to attempt to resolve

    • The CIRP enables the market to attempt to resolve stress through a resolution plan whereby the company survives.
    • When it concludes that there is no feasible resolution plan to rescue the company, the company proceeds for liquidation.
    • The market usually rescues a viable company and liquidates an unviable one.
    • There are quite a few companies which have negligible assets and/or are defunct when they enter CIRP.
    • Many of these are beyond rescue for a variety of reasons, including creative destruction, and their continuation is a cost to the economy.
    • In such cases, the code enables liquidation to release available resources to alternate uses.
    • It is welcome, as it releases the assets as well as the entrepreneur stuck up in an unviable company, which is a key objective of the code.

    2) Look at the total asset value not the number of companies

    • In terms of absolute numbers, 25 per cent of companies were rescued and 75 per cent proceeded for liquidation.
    • In value terms, however, 75 per cent of the assets were rescued and 25 per cent of assets proceeded for liquidation.
    • Of the companies sent for liquidation, 75 per cent were either sick or defunct, and of the companies rescued, 25 per cent were either sick or defunct.

    3) Look at the overall impact, not just final numbers

    • Third, the stress that a company suffers is like an illness which can be treated by a variety of options.
    • Normally, recovery is better if diagnosis and treatment start early.
    • Likewise, the health of the company deteriorates if the resolution process is delayed.
    • The percentage of rescue at this later stage may not be significant.
    • The credible threat of CIRP that a company may change hands has redefined the debtor-creditor relationship.
    • Faced with the possibility of the CIRP, a debtor makes all-out efforts to prevent the stress, or resolve it much before it translates into a default, or settles the default.
    • Even after an application is filed, a debtor continues efforts to resolve the financial stress midway through settlement, review, mediation, or withdrawal to avoid the consequences of CIRP.
    • The number of companies that recover before filing the application as a percentage of those that get starts the insolvency process would give the fair idea about the efficacy of the IBC.

    Consider the question “The IBC has often been criticised for liquidating the companies rather than rescuing them. Do you agree with this criticism? Give reasons in support of your argument.”

    Conclusion

    Liquidation or rescue is an outcome of the market forces; the law is only an enabler giving choices and nudging a company towards value maximising outcomes. The “invisible hands” of the market works towards the best outcome, which we should respect and accept.

  • Dairy Industry in India : An analysis

    The article highlights the issues facing the dairy sector and explains the utility of IVF technology for crossbreeding.

    Importance of dairy sector

    • The dairy sector assumes significance on account two reasons:
    • 1) It has to do with the socio-cultural affinity towards cows and dairy products in large parts of the country.
    • 2) As an industry, it employs more than 70 million farmers.
    • Need of the hour is for us to identify ways in which we can enhance the return on investment for our farmers.

    India’s journey from milk deficit country to one of surplus

    • Initiated in 1970, Operation Flood transformed India into one of the largest milk producers.
    • The per capita availability of milk in 2018-19 was 394 grams per day as against the world average of 302 grams.
    • Today with an annual production of 187.75 million tonnes India accounts for about 22% of the world’s milk production.
    • However, India is yet to join the ranks of major milk exporting nations, as much of what we produce is directed towards meeting domestic demands.

    Making India milk exporting nation

    • Indigenous cows produce 3.01kgs of milk per cow per day, while the yield of exotic crossbred cows is 7.95kgs.
    • Crossbreeding has taken off in a big way because of the advancements in reproductive technologies like In vitro fertilization (IVF), embryo transfer process, and artificial insemination.
    • Out of these processes, IVF and artificial insemination have proven to be the most popular and effective methods.
    • The NAIP (Nationwide Artificial Insemination Programme) Phase-I was launched in September 2019.
    • Every animal in the programme was assigned a 12-digit unique identification number under the Pashu Aadhar scheme.
    • NAIP Phase-II was initiated on 1 August 2020 with an allocation of ₹1,090 crore in 604 districts covering 50,000 animals per district and is on track to be completed by the 31 May 2021.
    • Under the programme, 9.06 crore artificial inseminations will be performed and is expected to lead to the birth of 1.5 crore high yielding female calves.
    • Consequently, 18 million tonnes of additional milk will be produced as average productivity will be enhanced from 1,861kg per animal per year to 3,000kg per animal per year.
    • Artificial insemination (AI) technology has been the most used method in India, but its success hinges upon accuracy in heat detection and timely insemination.
    • And this is where In Vitro Fertilization (IVF) technology will prove to be more effective.

    Conclusion

    In keeping with our ethos of ‘Jai Kisan, Jai Vigyan’ the marriage of rural farming with the latest innovations in technology will usher in unprecedented transformation in our dairy industry.

  • Laws that have distorted agriculture and labour markets need to go

    The article suggests the two steps to ensure growth while protecting the poor. The first is the creation of social safety net and next is factor market reforms.

    Issue of farmers’ income

    • An Indian engaged in industry or any aspect of the services sector (this includes a waiter in a restaurant) earns more than an average farmer.
    • This is an anomaly.
    • So, despite all the pro-farmer laws and protection, why do farmers in India earn less?
    • A recent study by RBI showed that across all crops, the farmgate price is 40-60 per cent less than the consumer price.
    • The real challenge is how to encourage growth while protecting the poor.

    Encouraging growth while protecting the poor: 2 steps

    • 1) A social safety net needs to be created to provide direct income transfers to the vulnerable.
    • 2) Factor markets involving labour and agricultural land need to be reformed to ensure productivity-enhancing growth.
    • Only way to ensure growth which benefits the poor is through employment creating in the manufacturing and services sector.

    1) Social safety nets in India

    • Despite a narrow tax base, India has created a comprehensive social safety net, which can cushion growth-enabling market reforms.
    • Accurate targeting under India’s Food Security Act to the bottom 67 per cent through Aadhaar identification and digital ration cards paired with E-POS machines has considerably reduced the leakage of subsidised grains.
    • The National Social Assistance programme intends to provide direct income support to over 40 million elderly landless agricultural workers, poor women-headed households and families with physically-challenged children.
    • India also provides income support annually to 145 million farmers, paying out Rs 75,000 crore.
    • This benefits all farmers while MSP benefits only 6 per cent of farm produce.

    2) Factor market reforms

    • If state support for social safety net has to become sustainable, wide-ranging growth, which will broaden the tax base, is essential.
    • India’s growth itself can be designed to reduce the number of people who need state support.
    • The agriculture and labour reforms recently passed create the conditions for productivity-enhancing growth, benefiting millions of small farmers and unorganised workers.

    Let us take a look at what the farm laws achieve and how they will change the status quo

    1) Amendment to Essential Commodities Act

    • The stock limits under the Essential Commodities Act do not enable large tur or moong and rice processors to procure in bulk for their entire season’s processing requirements.
    • This restricts large-scale processing units which can run throughout the non-harvest season.
    • This draconian anti-farmer rule has now been done away with.
    • This will enable the expansion of agro-processing and supply chains.
    • A larger share of the produce procured for agro-processing increases its shelf life, enabling the farmer to retain a greater value.
    •  30-40 per cent of the post-harvest value, particularly in vegetables and fruits, is lost due to inadequate storage, processing and transportation facilities.
    • Removal of stock limits and the accompanying contract farming act will bring in investments to tap the wasted resource.

    2) APMC regulation

    • The second law, removes another distortion: Only traders registered in APMCs can buy farmers produce.
    • Even though conditions for perfect markets exist, the APMC regulation creates this bottleneck.
    • Intermediaries extract a greater share of value as they are price makers while farmers are price takers.
    • This situation is further aggravated as farmers are restricted to selling within the taluka boundaries or limits of the APMC, and if they have to sell in other APMC, they have to pay the APMC tax.
    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 confines the authority of the APMC to levy fees and give trader licences within the boundary of the market yard.
    • Farmers will continue to have the option to sell in APMCs but any private market/non-APMCs registered trader can also set up an agricultural market and compete with APMCs to buy the same produce.
    • Karnataka implemented the Uniform Market portal in 2014, enabling trade across taluka APMC limits without APMC fees.
    • An analysis by researchers at the MIT Sloan School of Management has shown that prices of many agricultural goods increased by 3.5 to 5.1 per cent.
    • Significantly, profit margins of small farmers increased by more than 36 per cent.

    Labour reforms

    • Apart from agriculture, the abundance of labour is the second greatest comparative advantage of India.
    • However, multiple labour laws instead of encouraging employment, have created disincentives for job creation due to high costs of compliance.
    • While India’s employment elasticity with respect to GDP growth is only 0.2, China’s is at 0.44. Even for Bangladesh, the elasticity is 0.38.
    • India’s path-breaking labour reforms leverage the true comparative advantage of the country’s factor endowments to promote growth with higher employment elasticity.
    • The old labour laws protected existing jobs at the cost of preventing new job creation through creative destruction.
    • Bangladesh has shown the way to increase formal jobs by legalising fixed-term employment and banning union activity in FDI industries.
    • Raising the threshold for seeking prior permission for laying off workers will enable capital and land locked in sunset industries to move freely to new sunrise industries.

    Consider the question “An Indian engaged in industry or any aspect of the services sector earns more than an average farmer. What are the factors responsible for this anomaly? Suggest ways to achieve growth that could ensure sustainable safety net?”

    Conclusion

    The need of the hour is to continuously communicate with those unhappy with the reforms to explain how the current status quo is hurting farmers and informal workers.