[UPSC Newspaper Clips] June 04, 2020

UPSC Newspaper Clips



In times of wide and deep economic distress, a rethink on its design might be called for, without compromising its purpose.


A record 4.89 crore persons belonging to 3.44 crore households sought work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in May. This is against 3.18 crore persons from 2.26 crore households for the same month last year, when large parts of India were experiencing drought-like conditions. The current surge in MGNREGA work demand reflects a drought, not of water, but of jobs and incomes. And it seems to be coming mainly from migrant workers returning to their villages from cities and industrial centres post the COVID lockdown. Proof of it is the states where the number of households registering demand has shown the highest increase: Uttar Pradesh (299.3 per cent in May 2020 over May 2019), West Bengal (214.5 per cent), Odisha (113.5 per cent), Chhattisgarh (68.9 per cent), Madhya Pradesh (65.1 per cent) and Bihar (62.1 per cent). These are all labour exporting states. What’s now being seen is an extraordinary phenomenon of distress reverse migration from city to village. The lockdown hasn’t hit the rural economy, more so agriculture, that badly.

The MGNREGA has been generally viewed as a scheme that provides employment during the lean period for agriculture, thereby reducing seasonal labour migration from rural to urban areas. The demand for work, too, typically peaks in May-June before falling in the subsequent months coinciding with the main kharif cropping season. But this conventional pattern may not hold in the present scenario, where the primary demand driver will not be the landless agricultural labourer who would have little work after the kharif or rabi crop has been harvested. If the laid-off auto worker from Gurgaon-Manesar or erstwhile hotel employee in Mumbai is the one seeking employment under MGNREGA — and there is no way to gainfully engage them in agriculture — the scheme’s scope will have to be widened. To start with, the number of days of guaranteed employment to adult members of any rural household needs to be expanded beyond the existing 100 days. The returning migrant workers may, at some point, want to go back to jobs that paid better. But those jobs aren’t going to come back soon either.

This is where a rethink on the MGNREGA’s basic design might be called for without compromising its objective. If the idea is to provide work to anybody demanding it, there should, in principle, be no restrictions on the kind of activities allowed under the scheme. The stipulation of a 60:40 wage-to-material cost ratio can also be relaxed. If higher material component helps in building more assets with durable quality, why cannot these projects qualify under the MGNREGA? Why tie it down to particular “permitted works”? What stops MGNREGA labour from being used even to undertake railway or national highway work? Any public work ultimately requires labour and so long as it is given on demand, the MGNREGA has fulfilled its purpose.


A Backward Turn

Quest for ‘self-reliance’ must not lead to failed policy of import substitution. It did not work in the past, won’t work even now.


Ever since the prime minister’s speech exhorting the country to march towards an Atmanirbhar Bharat, there has been an unease: That lurking behind the rhetoric of “self-reliance” was an attempt to reorient the economic structure towards ensuring “self-sufficiency” by falling back on the decades-old failed policy of import substitution. Subsequent calls by the government to citizens to buy Indian, and the setting up of “targets” towards building self-reliance in certain sectors so that “unnecessary” imports can be reduced, indicate that the shift towards protectionism, that began over the past few years with the NDA government raising tariffs — threatening to undo decades of trade liberalisation — may be underway.

Protectionism ends up creating an inefficient and high-cost domestic manufacturing sector, while leading to poor allocation of resources. The Indian experience of the second half of the last century should have provided enough proof to drive this point home. Such a policy stance helps neither consumers nor producers. Yet, it is almost as if policy-makers are choosing to forget the lessons learnt, and are determined to ignore the immense economic benefits to the country and citizens post 1991. In all likelihood, tariff hikes will be the first line of defence against “unnecessary” imports. Once this door is opened, it creates space for lobbying by domestic players to keep in place the protections, which, once imposed, will not be removed easily.

A more appropriate policy response is to focus on boosting competitiveness — building infrastructure, ensuring cheap power, reforming land and labour markets, and creating conditions for companies to compete in global markets. India should be striving to embed itself in global value chains, not becoming more inward-looking. Companies, especially in the post COVID world, looking to shift away from China, will look for policy stability. They are unlikely to relocate to countries that are susceptible to sudden tariff impositions. Further, as research has shown, India’s trade balance has widened in part due to imports of raw materials, intermediate products, and capital goods, implying that the imposition of tariffs will also hurt export competitiveness. India needs to raise its share in world trade beyond 2 per cent. Doing so requires greater trade liberalisation. The country needs to reduce tariffs, be part of trade agreements, not head down a slippery slope in the opposite direction.


Seven to eleven

India deserves its place on the global stage, but on G-11, it must be clear about its aims


Dismissing the current configuration of the “Group of Seven” or G-7 of the world’s most developed nations as “outdated”, U.S. President Donald Trump announced over the weekend that he would like to expand it to a G-11, by adding India, Russia, South Korea and Australia. He followed that up with invitations to their leaders, including Prime Minister Modi, to attend the G-7 summit in the U.S. later this year. The news was welcomed by Mr. Modi, who commended Mr. Trump for his “creative and far-sighted” decision to expand the format of the grouping to keep up with the new realities of the “post-COVID world”. Australia and South Korea have also welcomed the invitation, while Russia, that lost its membership of the grouping in 2014 over its annexation of Crimea, said President Putin would attend “if treated as an equal”. Notable by its absence in the proposed grouping is China, which had earlier, along with India, Brazil, Mexico and South Africa, been invited regularly to G-8 summits as an outreach by the developed world to the five emerging economies (called the G-8+5). U.S.-China tensions, particularly over coronavirus issues, clearly played a part in Mr. Trump’s decision to leave Chinese President Xi Jinping off his summit guest list. A White House spokesperson even explained that the G-11 would be a way for the U.S. to bring together its “traditional allies to talk about how to deal with the future of China”. Predictably, Beijing has lashed out at the G-11 idea, as one that would be “doomed to fail”.

The proposed G-11 grouping would recognise India’s place amongst the world’s richest nations, and acknowledge its global voice. However, the government must weigh the benefits proposed along with some of the factors that are still unclear. As host, Mr. Trump can invite any country as a G-7 special invitee, but changing its composition will require the approval of the other members. Already, there are some concerns over Russia, which could derail the entire G-11 plan, making any concrete decision by New Delhi on the issue premature. It is unclear when the summit will actually be held, given the November polls in the U.S., although Mr. Trump has indicated that he could hold it close to the UN General Assembly session in September. Despite its border tensions with Beijing, India must also consider its objectives in attending a grouping that appears aimed at fuelling a new Cold War between the U.S. and China. Finally, an evaluation of the G-7’s effectiveness as a multilateral forum thus far is needed, given deep member differences on issues including climate change, security contributions, Iran, etc. In France, last year, the grouping was unable to issue a joint communiqué due to these differences — a first in its 45-year-old history.


Time to discontinue free power for farmers

It has led to widespread wastage of water and electricity

T. Ramakrishnan

Exactly 15 years after Manmohan Singh, as Congress Prime Minister, openly spoke against the free power supply scheme for farmers, the Bharatiya Janata Party (BJP)-led government at the Centre is attempting to do away with the much-abused scheme, which has been viewed by political parties as a major vote-catching policy measure. This time, the Centre has prescribed that the free power supply scheme should be replaced with the direct benefits transfer (DBT) as a condition to allow States to increase their borrowing limit. It is not the first time that the Union government has recommended DBT with regard to electricity. But what is new is setting the time frame for implementing it. By December this year, the DBT should be introduced at least in one district of a State and from the next financial year, a full roll-out should be made.

Predictably, Tamil Nadu, which was the first State to introduce free power in September 1984, is strongly resisting the Centre’s stipulation. Chief Minister Edappadi K. Palaniswami has taken a categorical stand against the proposal. Though Chief Ministers of Andhra Pradesh, Telangana and Punjab, where free power scheme is in vogue, are yet to express their views, it is not difficult to predict their response. After all, Punjab Chief Minister Amarinder Singh, who had abolished the scheme during his first innings, is now a strong votary of the scheme.

Power subsidy bills

In the last 15 years, Maharashtra has been the only State that scrapped the scheme within a year of introducing it. Karnataka, which has been implementing it since 2008, may become the first southern State to have DBT in power supply, if the hint dropped by Chief Minister B.S. Yediyurappa in early March is any indication. The power subsidy bills in the four southern States and Punjab are at least ₹33,000 crore, an amount the State governments will struggle to meet due to resource crunch in the light of the COVID-19 pandemic.

The financial stress apart, the universal application of the scheme has had deleterious consequences. Primarily, the scheme has led to widespread wastage of water and electricity. It is inherently against incentivising even a conscientious farmer to conserve the two precious resources. It may be pertinent to point out that India is the largest user of groundwater at 251 billion cubic meters, exceeding the combined withdrawal by China and the U.S., as pointed out by Bharat Ramaswami of the Indian Statistical Institute last year. Second, be it parts of the Cauvery delta in Tamil Nadu or Sangrur district of Punjab, the story about the groundwater table is the same — a worrying rate of depletion. There is one more attendant problem. To sustain their activity, farmers need to go for submersible or high-capacity pumpsets.

Third, the extension of the scheme to different States over the years has only encouraged installation of more pumpsets. Karnataka is a classic example, The number of irrigation pumpsets, which was around 17 lakh 12 years ago, is now around 30 lakh. Fourth, there is misuse of the scheme for which not just a section of farmers but also field officials have to be blamed. And, fifth, in the absence of meters for these connections or segregation of feeders or metering of distribution transformers, accurate measurement of consumption becomes tricky. Those in charge of power distribution companies find it convenient to reduce their aggregate technical and commercial losses by clubbing a portion of the losses with energy consumption by the farm sector.

Argument for free power

Proponents of the free power scheme have a couple of valid points in their support. Apart from ensuring food security, free power provides livelihood opportunities to landless workers. When farmers dependent on supplies through canals get water almost free of cost, it is but fair that those not covered by canal irrigation should be given free electricity. Though there is substance in the argument, it is not difficult to arrive at a fair pricing mechanism. Small and marginal farmers and those who are outside the canal supply deserve free power, albeit with restrictions, but there is no justification for continuing with the scheme perpetually to other farmers. However, those enjoying free power need to be told about the need for judicious use of groundwater and how to conserve it.

Making use of the situation created by the COVID-19 pandemic, the Centre is trying to make lasting changes in areas where such measures are long overdue. At least in the area of power sector, its attempt can yield meaningful results only if there is a change in the mindset of agriculturists and political parties towards the concept of free power.