Category: Uncategorized

Break The Cycle

Data released by the government regarding India’s GDP numbers during April-June quarter of financial year 2019-20 on August 30 confirms once again that India is experiencing economic slowdown. The first confirmation came to welcome the second NDA government in office on May 31 this year when GDP numbers for last quarter and full year of 2018-19 were announced.

Full year growth for 2018-19 was 6.8%, while that during January-March quarter was 5.8%. According to the data released on August 30, GDP grew by 5% during April-June quarter, which is the first quarter of financial year 2019-20. This rate of growth is lowest in last five years. That is why people are calling the current situation a slowdown.

Gross Domestic Product (GDP) is the total money value of all final goods and services produced in the country in a given year. Consumption by households, investment by private industries, government’s expenditure, and exports minus imports are added up to find out GDP. When GDP grows at lower rate than earlier, then it is called slowdown. It is different from recession. When GDP stops growing for six months, then it is called recession. In India’s case, it is growing, but at a lower rate than it grew earlier. People take slowdown seriously because, if not paid attention, it may lead to recession. So what are the causes of the current slowdown in India?

As said earlier, consumption by private households is one of the important areas of an economy. This consumption or demand has been decreasing in India. That is the driver of the slowdown. Domestic demand has been the backbone of Indian economy. Slump in the demand is evident in the decrease of sales across the sectors from automobile to biscuits to Fast Moving Consumer Goods (FMCG). FMCG are those goods which are purchased frequently, such as soap, talcum powder, toothpaste, etc. Automobile sector is the hardest hit with decline in sales of all major companies. Maruti Suzuki’s sales declined by 35. 52% in July 2019 compared to July 2018. Hyundai Motor’s sales were down by 10. 28%, Mahindra’s by 14. 91% and Tata Motor’s sales dropped by 46% for the same period. (Source: autocarindia.com) The sales have been dropping like this for nine months. Automobile industry employs 37 million people and contributes 7% to India’s GDP. (Source: economictimes.com) Big FMCG companies like Hindustan Unilever, ITC and Godrej have also reported fall in their quarterly growth. (Source: economictimes.com)

Weak demand is a result of farm crisis, and rising unemployment. Agriculture sector grew by just over 2% in 2018-19. (thehindu.com) Lack of basic facilities like water, electricity, good roads, transportation, low price for produce are some of the factors holding the sector behind. More than 50% of workforce is engaged in agriculture and related occupations, and the sector contributed 17-18% to India’s GDP in 2018. (financialexpress.com) Farm crisis results in low income in rural India. Rising unemployment is another cause for concern. According to data released by the government on May 31 this year, unemployment rate was 6. 1% in 2017-18, highest in “45 years.” Many economists are saying that demonetisation could have resulted in job losses in the informal sector. Also, large number of youth in India are unemployable as they lack the skills which market forces demand. All this results in low incomes of households, which in turn results in less consumption by them.

Private investment has been dropping over the years. In this context, when a businessman puts part of his profit back in the economy in order to expand his business expecting good returns in the future, that is called private investment. According to Centre for Monitoring Indian Economy, the value of new investment proposals was Rs 20 lakh crore in 2015-16. It came to Rs 10 lakh crore in 2018-19. New projects announced by private players during April-June this year were of Rs 74,000 crore. They stood at Rs 3.45 lakh crore during same period last year. (indianexpress.com) This happens when businessmen are not confident about the future. Investment did pick up in the first two years of NDA government because the BJP had promised before 2014 election that it will take major decisions in order to carry out economic reforms. It started declining in 2016.

Investment creates jobs and income, part of which people spend on consumption, which in turn generates more profit for firms, which further facilitates more investment. The cycle goes on. In India’s case that cycle has started moving reverse.

Experts say that global slowdown, caused by tensions between U. S and China over trade is also partly responsible for slowdown in India. However, India’s exports have risen by 3. 13% during April-July period as compared to same period in 2018. That said, there is a possibility that global conditions may have impact in India in future as no sign of easing tensions between the two big economies is visible.

The government has responded with steps to strengthen banking system. In budget, it announced that it will pump in Rs 70,000 crore to banks to help them solve Non Performing Assets (NPA) crisis. Some people or firms which had taken loans years back, failed to repay it, leaving the banks in a situation where they can’t give fresh loans. However, good news on that front is that, according to Economic Survey of India 2019, gross NPA of public sector banks has come down to 10. 2% in December 2018 from 11. 5% in March 2018. Government further announced merger of 10 PSBs. The government’s idea behind these measures, it appears, is that if banks are in the position to lend, then demand and investment will rise. RBI has reduced repo rate- the rate at which banks borrow from RBI in case of a shortage of funds- by 1. 10% so far. It is expected that banks will give benefit of lower rate while lending to their customers. After facing criticism, government has withdrawn surcharge levied on foreign investors who invest in Indian stock markets. It has also eased Foreign Direct Investment norms in mining, media and retail sectors.

As mentioned earlier, investors will only invest if they are confident about getting good returns in the future. Banking reforms or easing of norms alone will not be able to build that confidence. Consumers will not buy homes and vehicles just because the loans are cheaper. To break this vicious cycle, government must loosen the strings of its wallet and invest, as it is not in the business of doing business. It can do it through public sector companies. Investment by government will surely boost the confidence of private investors.

In the long run, government must look for some major reforms. One of them is freeing agriculture from government control. Instead of giving farmers minimum support price, let them sell their produce in open market. It is not possible for the government to purchase all agriculture produce. So the farmers don’t get their dues. Secondly, ease of doing business must be ensured all over India and not only in Mumbai and Delhi. It will create opportunities for people living in villages, towns and small cities and avoid concentration of businesses in metros. Lastly, more focus is needed towards education. Government must ensure not just that every child goes to school, but he/she gets education which provokes him/her to think, encourages him/her to express ideas freely. At school level, students should be given exposure to skills which are in demand in market. Some of these reforms are politically risky, and that is why they are expected from the current government. It has more than required numbers in parliament. These measures are inevitable to ensure inclusive growth, and a healthy economy and society in the future. For now, the government must break the cycle of slowdown by putting money in the economy.

Cost Of Development

Article 370 of the Constitution had lately become more of an emotional
matter than anything else for both people living in Jammu & Kashmir
and rest of Indians. This article had provided that no provision of
the Indian constitution and no law passed by Indian parliament shall
be extended to the state of J&K without the concurrence of the state
government. Defence, communication and external affairs were
exceptions. Before the provisions of this article were scrapped two
weeks ago, 260 out of 395 articles of Indian constitution were already
extended to the state by previous governments through the concurrence
of the state government. Similarly, out of 97 subjects on which
parliament has exclusive powers to make laws, 94 are extended to J&K.
Which means no need to take concurrence from state government before
extending laws of these 94 subjects to the state. For some sections of
J&K, this was an article of faith while for rest of Indians, It was a
“discriminatory” provision which needed to be struck down. Both the
sides ignore the above facts. The government could have extended the
remaining provisions just like the previous governments did it. But
the government for which, people’s emotions are like oxygen, it was
necessary to show that it is doing something which has never happened
before.

On August 5, Home minister Amit Shah informed the Rajya Sabha that the
President of India has struck down provisions of article 370 using his
special powers, and introduced a bill to bifurcate and downgrade the
state of Jammu & Kashmir into two union territories of Jammu & Kashmir
and Ladakh. J&K will have legislature while Ladakh will not. The
parliament passed the bills with some opposition parties too
supporting the government.

Agreed that article 370 was a temporary provision and it had to go one
day, but with the concurrence of J&K Constituent Assembly. Since the
constituent assembly was dissolved in 1956, the central government
interpreted it as Legislative Assembly of J&K. The Legislative
assembly is also not there because the governor dissolved it in last
November. The state is under President’s rule since then. In such a
scenario, according to the constitution, parliament performs the
function of that state’s legislative assembly. So on paper the
government did nothing wrong. But such important decisions regarding
the status of a state were taken with parts of that state under
lockdown. No connection of mobile and landline, Internet shut down,
curfew imposed and elected representatives of the state under house
arrest. In other words, the decisions regarding the status of J&K were
taken without consulting with even a single person of that state.
Lockdown continues in parts of the state as of August 21 evening.

No matter what you think about article 370 and Kashmir problem, the
manner in which the decisions of scrapping the provisions and
bifurcating and downgrading the state were taken raises some serious
questions. Government justifies the decisions and the manner saying
that it has done so to ensure well being and security of the people of
J&K. How is it that only people sitting in Delhi know what is good for
people living in J&K? What about the principles of democracy and
federalism? Is it okay to undermine democratic process for
development, given that the term is subjective? I fear that this
manner of taking decisions in the name of development and security
will become a new normal. In such a scenario the question really is,
should development come at the cost of civil rights?

Reference: Article 370, Federalism and the Basic Structure of Indian Constitution by Faizan Mustafa on theindiaforum.in

BJP’s Trust Vote

It is surprising that the Congress-JD[S] coalition managed to run their government in Karnataka for almost two month after their massive defeat in the Lok Sabha election. I was hoping that the government will collapse in a week or two after the May 23 election result. For there was infighting within the coalition, and BJP was attempting to lure the coalition’s Members of Legislative Assembly[MLAs]. Finally, starting from July 6, 15 coalition MLAs resigned in phases, bringing down its strength in the Assembly. What followed was dragging and misuse of constitutional offices by all political players for their selfish motives.

The speaker is deliberately delaying decision on the resignations. He has not accepted the resignations yet. In such a scenario, those 15 MLAs will get disqualified if they don’t vote in favor of the coalition or remain absent during the trust vote. In that case, they won’t be able to become ministers in an alternative government. Secondly, the speaker is using his extraordinary powers to run the house in favor of the Congress-JD[S] coalition by allowing a three day long debate on the trust vote.

On the other hand, the 15 MLAs reached Supreme Court against the speaker’s inaction on their resignations. The Supreme Court, in its July 17 order, said that the MLAs need not be present in the assembly during the trust vote. Which means, they will not get disqualified even if they remain absent for the vote. The Congress-JD[S] combine hopes that the court will reverse this order, and that is why they are delaying the vote through speaker. They have approached the Supreme Court.

Karnataka Governor is echoing BJP’s stand of having the trust vote at the earliest. The BJP wants it early so that it can form the alternative government. The question is: how can the Governor direct the speaker about house proceedings? The house has taken up the trust vote and they are debating on it. The voting happens after the debate. It is the speaker’s right to decide the duration of a debate in the house.

There is clear disrespect of people’s mandate in all this.

This is an opportunity for the BJP to prove that it adheres to democracy. that it stands for a change, that it is different from the Congress, that it wants to start a new kind of politics in India, and that it respects people’s mandate. The Congress-JD[S] coalition government in all likelihood will collapse on Monday. Instead of immediately forming the alternative government, the BJP should wait. Let the by-elections on those 15 seats whose representatives have resigned, happen. Let the people in these constituencies decide which party members they want as their representatives. After the by-elections, if the numbers go in BJP’s favor then it should form the government. But if the numbers don’t go in its favor, it should play the role of a responsible opposition and wait for its turn. Isn’t that the change the people of India want?

Formula Of Nothing

Central government may have defused the controversy over “imposition” of Hindi in non-Hindi speaking regions in response to the protests in southern states, especially in Tamil Nadu, but that doesn’t mean it won’t come up again. Since independence the government has been flirting with the idea of promoting Hindi among non-Hindi speaking people. A clause in the Draft National Education Policy was the latest attempt. It had made teaching Hindi mandatory in the schools of non-Hindi speaking states as a third language. Students in Hindi speaking states had to choose one modern Indian language as a third language, besides Hindi and English. This was in the initial draft.

The re-uploaded draft does away with the clause of mandatory teaching of Hindi in non-Hindi speaking states, and gives option to choose a third language to both the regions. But everybody has to learn three languages in school. In U.S, it is mandatory for students to learn English and one other language. In Japan, it’s Japanese and English. The policy is same in European countries. What on earth, then, makes Indian government think that it is necessary to teach Indian children three languages? A child has to learn four languages if her mother tongue does not have official language status. It is always good to learn more languages, but making it mandatory does not make sense. I think making a child proficient in her mother tongue and one other language is enough. Today there are lot of options available to her if she wants to learn more languages.

As far as the issue of link language is concerned, bollywood is taking Hindi across the country. Most people know basic Hindi. Internet has made things much more easy. Do we really need to study a link language for five years? The government must do away with the Three Language Formula, and make two languages- English and mother tongue- mandatory in schools all over the country. It should focus on the development of those languages which do not enjoy official language status. Promoting a common language to keep India united is the old trick of 1940s and 50s. India has moved ahead, the government must catch up fast.

Beyond Faces

“What is Rahul Gandhi’s religion?” “Narendra Modi really used to sell tea?” These and other such questions largely dominate both social media and television news channels. People debate such questions for hours. How will the answers of these questions help India progress? If it turns out that Narendra Modi really used to sell tea before he began his political career, will it help in India’s current GDP growth?

Giving unnecessary importance to these non-issues, however, could prove to be harmful in the long run. This tendency does two things. One, debating non-issues results in us ignoring real issues of importance which deserve debate. If we debate the latter, we can hold our politicians accountable. Two, by responding to non-issues, we might be furthering, unknowingly, somebody’s agenda of diverting public attention and taking its political benefits.

Let us take a recent example of how India’s public debate gives issues a miss. Last week, violence erupted in Kolkata during BJP president Amit Shah’s roadshow. In that, 19th century social reformer Ishwar Chandra Vidyasagar’s statue was vandalised. While all of us were busy in finding out who vandalised the statue, Iran’s foreign minister Javed Zarif visited India on an official tour amid growing U.S-Iran tensions and U.S asking all the countries, including India, to stop buying oil from Iran. While vandalising of Vidyasagar’s statue is unfortunate, the larger question is how to get rid of this culture of violence during elections. We neither talked about that, nor did we pay much attention to Iran foreign minister’s visit. India buys 10% of its total oil from Iran. How to deal with Iran amid growing U.S pressure, keeping India’s interests on the top priority, is going to be a big question the next government will have to deal with. This is just one example. There are many more.

Starting May 26th, on every alternate Sunday, I will be calling attention to an issue which I think is important, and must be talked about. I am not here to bash up anybody or to support anybody. I feel that issues should be in focus rather than personalities. We are not supposed to love or hate any leader blindly in a democracy. That kills its spirit. What is expected in a democracy is expressing yourself fearlessly and listening to others with an open mind. I will share my view on a given issue, you are welcome to share yours. I am okay even if you disagree with me. The aim is to shift the debate from personalities to issues.