The Peninsula Foundation

Category: Democracy & Governance

  • India’s Agriculture: The Failure of the Success

    India’s Agriculture: The Failure of the Success

    It was around the mid-1960s when the Paddock brothers, Paul and William, the ‘prophets of doom’, predicted that in another decade, recurring famines and an acute shortage of food grains would push India towards disaster. Stanford University Professor Paul R. Ehrlich in his 1968 best selling book The Population Bomb warned of the mass starvation of humans in the 1970s and 1980s in countries like India due to over population.

    Their prophecies were based on a rising shortage of food because of droughts, which forced India to import 10 million tonnes of grain in 1965-66 and a similar amount a year before. Little did they know that thanks to quick adoption of a new technology by Indian farmers, the country would more than double its annual wheat production from 11.28 million tonnes in 1962-63 to more than twice that within ten years to 24.99 million tonnes. It was 71.26 million tonnes in 2007. Similarly rice production also grew spectacularly from 34.48 million tonnes to almost 90 million tonnes in 2007.

    Total food grains production in India reached an all-time high of 251.12 million tonnes (MT) in FY15. Rice and wheat production in the country stood at 102.54 MT and 90.78 MT, respectively. India is among the 15 leading exporters of agricultural products in the world. The value of which was Rs.1.31 lakh crores in FY15.

    India is among the 15 leading exporters of agricultural products in the world. The value of which was Rs.1.31 lakh crores in FY15.

    Despite its falling share of GDP, agriculture plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood. Census 2011 says there are 118.9 million cultivators across the country or 24.6 per cent of the total workforce of over 481 million. In addition there are 144 million persons employed as agricultural laborers. If we add the number of cultivators and agricultural laborers, it would be around 263 million or 22 percent of the population. As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) was 16.1 per cent of the Gross Value Added (GVA) during 2014–15 at 2011–12 prices. This about sums up what ails our Agriculture- its contribution to the GDP is fast dwindling, now about 13.7 per cent, and it still sustains almost 60 per cent of the population.

    If we add the number of cultivators and agricultural laborers, it would be around 263 million or 22 percent of the population. As per estimates by the Central Statistics Office (CSO), the share of agriculture and allied sectors (including agriculture, livestock, forestry and fishery) was 16.1 per cent of the Gross Value Added (GVA) during 2014–15 at 2011–12 prices.

    With 157.35 million hectares, India holds the world’s second largest agricultural land area. India has about 20 agro-climatic regions, and all 15 major climates in the world exist here. Consequently it is a large producer of a wide variety of foods. India is the world’s largest producer of spices, pulses, milk, tea, cashew and jute; and the second largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton and oilseeds. Further, India is 2nd in global production of fruits and vegetables, and is the largest producer of mango and banana. It also has the highest productivity of grapes in the world. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity.
    According to the Agriculture Census, only 58.1 million hectares of land was actually irrigated in India. Of this 38 percent was from surface water and 62 per cent was from groundwater. India has the world’s largest groundwater well equipped irrigation system.

    There is a flipside to this great Indian agriculture story.The Indian subcontinent boasts nearly half the world’s hungry people. Half of all children under five years of age in South Asia are malnourished, which is more than even sub-Saharan Africa.

    More than 65 per cent of the farmland consists of marginal and small farms less than one hectare in size. Moreover, because of population growth, the average farm size has been decreasing. The average size of operational holdings has almost halved since 1970 to 1.05 ha. Approximately 92 million households or 490 million people are dependent on marginal or small farm holdings as per the 2001 census. This translates into 60 per cent of rural population or 42 per cent of total population.

    Approximately 92 million households or 490 million people are dependent on marginal or small farm holdings as per the 2001 census.

    About 70 per cent of India lives in rural areas and all-weather roads do not connect about 40 per cent of rural habitations. Lack of proper transport facility and inadequate post harvesting methods, food processing and transportation of foodstuffs has meant an annual wastage of Rs. 50,000 crores, out of an out of about Rs.370, 000 crores.

    There is a pronounced bias in the government’s procurement policy, with Punjab, Haryana, coastal AP and western UP accounting for the bulk (83.51 per cent) of the procurement. The food subsidy bill has increased from Rs. 24500 crores in 1990-91 to Rs. 1.75 lakh crores in 2001-02 to Rs. 2.31 lakh crores in 2016. Instead of being the buyer of last resort FCI has become the preferred buyer for the farmers. The government policy has resulted in mountains of food-grains coinciding with starvation deaths. A few regions of concentrated rural prosperity.

    The total subsidy provided to agricultural consumers by way of fertilizers and free power has quadrupled from Rs. 73000 crores in 1992-93, to Rs. 3.04 lakh crores now. While the subsidy was launched to reach the lower rung farmers, it has mostly benefited the well-off farmers. Free power has also meant a huge pressure on depleting groundwater resources.
    These huge subsidies come at a cost. Thus, public investment in agriculture, in real terms, had witnessed a steady decline from the Sixth Five-Year Plan onwards. With the exception of the Tenth Plan, public investment has consistently declined in real terms (at 1999-2000 prices) from Rs.64, 012 crores during the Sixth Plan (1980-85) to Rs 52,107 crores during the Seventh Plan (1985-90), Rs 45,565 crores during the Eighth Plan (1992-97) and about Rs 42,226 crores during Ninth Plan (1997-2002).

    With the exception of the Tenth Plan, public investment has consistently declined in real terms (at 1999-2000 prices) from Rs.64, 012 crores during the Sixth Plan (1980-85) to Rs 52,107 crores during the Seventh Plan (1985-90), Rs 45,565 crores during the Eighth Plan (1992-97) and about Rs 42,226 crores during Ninth Plan (1997-2002).

    Share of agriculture in total Gross Capital Formation (GCF) at 93-94 prices has halved from 15.44 per cent to 7.0 per cent in 2000-01. In 2001-02 almost half of the amount allocated to irrigation was actually spent on power generation. While it makes more economic sense to focus on minor irrigation schemes, major and medium irrigation projects have accounted for more than three fourth of the planned funds
    By 2050, India’s population is expected to reach 1.7 billion, which will then be equivalent to nearly that of China and the US combined. A fundamental question then is can India feed 1.7 billion people properly? In the four decades starting 1965-66, wheat production in Punjab and Haryana has risen nine-fold, while rice production increased by more than 30 times. These two states and parts of Andhra Pradesh and Uttar Pradesh now not only produce enough to feed the country but to leave a significant surplus for export.

    Since food production is no longer the issue, putting economic power into the hands of the vast rural poor becomes the issue. The first focus should be on separating them from their smallholdings by offering more gainful vocations.

    Farm outputs in India in recent years have been setting new records. It has gone up from 208 MT in 2005-06 to an estimated 251 MT in 2014-15. Even accounting for population growth during this period, the country would need probably around 225 to 230 MT to feed its people. There is one huge paradox implicit in this. Record food production is depressing prices. No wonder farmers with marketable surpluses are restive.

    India is producing enough food to feed its people, now and in the foreseeable future. Since food production is no longer the issue, putting economic power into the hands of the vast rural poor becomes the issue. The first focus should be on separating them from their smallholdings by offering more gainful vocations. With the level of skills prevailing, only the construction sector can immediately absorb the tens of millions that will be released. Government must step up its expenditures for infrastructure and habitations to create a demand for labor. The land released can be consolidated into larger holdings by easy credit to facilitate accumulation of smaller holdings to create more productive farms.

    Finally the entire government machinery geared to controlling food prices to satisfy the urban population should be dismantled. If a farmer has to buy a motorcycle or even a tractor he pays globally comparative prices, why should he make food available to the modern and industrial sector at the worlds lowest prices?
    Why should Bharat have to feed India at its cost?

    Image: Kanyakumari farm lands during onset of monsoon. 

     

  • CDS: A Welcome Reform and the Challenges Ahead

    CDS: A Welcome Reform and the Challenges Ahead

    The Year 2020 ushered in a momentous reform for higher defence management (HDM) in India with the government implementing PM Narendra Modi’s announcement made earlier from the ramparts of the Red Fort on 15th Aug 2019, on establishing the institution of the Chief of Defence Staff (CDS). Retiring Army Chief General Bipin Rawat, not surprisingly, was appointed as the first CDS of the Indian Armed Forces. The unique honour brings with it myriad challenges lying ahead for the new appointee.

                To those at home and abroad who are accustomed to the working of governments of all political hues in India it should not be a surprise that this  critically vital appointment  took over 18 years to materialise. To recall, as part of the many HDM reforms this appointment was also approved by the NDA led Vajpayee government way back in 2001, after the 1999 Kargil War, based on the recommendations of the Subramanyam led Kargil Review Committee (KRC). Bureaucratic sluggishness, lack of will among different political dispensations as also the fact that there could be indifference on matters of even national security broadly explain the long delay. Thus, the Modi government deserves full credit for institutionalizing the long overdue appointment of the CDS. However, the designated role of CDS, the status and the government charter laying down all the details are still being worked out.

    Chief of the Defence Staff (CDS)

    As promulgated by the government, the CDS will be a ‘four star’ officer and will be considered as the ‘first among equals’ in relation to the chiefs of the Army, Navy and the Air Force. He will be the permanent Chairman of the Chiefs of Staff Committee (COSC) and can serve till 65 years of age. KRC recommended that CDS appropriately should  be a ‘five star officer’ considering his onerous responsibilities and role.

    Now that the government has given the green signal for the CDS to commence functioning to provide the desired levels of integration in all tri-service matters including policy, operational, training, communications, logistical aspects and so on, the CDS will be confronted with myriad challenges in achieving his onerous missions. Apart from an unwavering encouragement support from the Prime Minister’s Office (PMO) and the Ministry of Defence (MOD), the CDS will require more than a willing assistance from the three services to truly get-off the ground. As is natural and customary, no service likes to shed its resources and time honoured responsibilities to newer organizations. Having raised the Defence Intelligence Agency (DIA) way back in 2002, as a result of the same KRC recommendations, I am more than aware of the reluctance of the three Services to shed some of their assets and roles which will now be managed by the CDS. Thus, General Rawat will have to orchestrate extracting resources from the three Services for the new organizations, formations and units directly under his command being raised, with tact and sensitivity.

    Re-organisation of MOD: an analysis

                The MOD, till recently,functioned with four departments namely the Departments of Defence (DOD), Defence Production, Defence Research and Development as well as Ex Servicemen Welfare – each headed by a Secretary – ranked officer. On 30th Dec 2019, the government promulgated a gazette notification establishing the fifth department to be called the Department of Military Affairs (DMA) to be headed by the newly appointed CDS. The Rules of Business existing since 1961 and reallocation of certain responsibilities with the Defence Secretary have been modified though this has also invited adverse comments from defence analysts in India on the ground that the desired level of responsibilities had not been given to the CDS.

                In the last many years, right from the acceptance of the KRC and its approval by  LK Advani led Group of Ministers and subsequently by the Vajpayee government in 2001, it had been accepted by all that the CDS was urgently required as a major reform of  India’s higher defence management. The CDS was required to provide single-point professional military advice to the political leadership. However, what apparently has happened now is that the CDS will be providing his advice to the Defence Minister only and not to both the Prime Minister and Defence Minister. Many see in this, a case of bureaucratic play to reduce the importance of the CDS.

                 In the orders recently issued by the government, four key responsibilities have been taken away from the DOD under the Defence Secretary and now put under the DMA which includes the three services and their headquarters, the Territorial Army and works relating to the army, navy and the air force. Non-capital purchases and promoting jointness in procurement, operations, training, communications, logistics (including repairs and maintenance) and encouraging use of indigenous equipment and platforms will be in the CDS charter.

                Entry 1 of the amended charter for the DOD states that “Defence of India and every part thereof including defence policy and preparation for defence and all such acts as may be conducive in times of war to its prosecution and after its termination to effective demobilization” will be with the Defence Secretary.  This has apparently been done to ensure the primacy of the civil bureaucracy. Why can’t the responsibility of defence policy and the mandate for defence of India not rest with the Defence Minister if this charter, was to be kept away from the CDS?

    Why can’t the responsibility of defence policy and the mandate for defence of India not rest with the Defence Minister if this charter, was to be kept away from the CDS?

                The other amendment is in the field of defence purchases where the earlier formulation of “procurement exclusive to the defence services” has been altered to “capital acquisition exclusive to the defence services.” This means that big-ticket acquisitions will be in the Defence Secretary’s ambit creating an impression of paucity of faith in the CDS in this matter.

    The existing HQ Integrated Defence Staff could have been the backbone for this new integrated structure within the MOD brining about cost-effectiveness as well. 

                The Department of Military Affairs will have a structure that rightly includes civilian bureaucracy as well. The CDS will be assisted by two joint secretaries and a dozen deputy secretary level officers. Ideally not only the CDS but the entire MOD should have seen complete integration of the civil bureaucracy with the military. The existing HQ Integrated Defence Staff could have been the backbone for this new integrated structure within the MOD brining about cost-effectiveness as well.  Military and civil officers should be working in various departments of the MOD in unison. The Defence Secretary could have been retained, as the coordinator of all the departments. The DMA could have been headed by a Secretary level Vice Chief of the Defence Staff (VCDS) to enable the CDS, in the MOD, to concentrate primarily on critical strategic issues for advising the Prime Minister and Defence Minister on macro-management of defence strategy.

                The Defence Secretary’s charter also includes  military cantonments, veterinary and military farms, land acquisition for defence, Border Roads Organisation, purchasing food items for defence and even the Canteen Stores Department – virtually covering all issues and portfolios related to financial expenditure and management! Surprisingly, even the management of the National Defence College (NDC) and the Institute of Defence Studies has been kept with the Defence Secretary!

    The DMA could have been headed by a Secretary level Vice Chief of the Defence Staff (VCDS) to enable the CDS, in the MOD, to concentrate primarily on critical strategic issues for advising the Prime Minister and Defence Minister on macro-management of defence strategy.  

    Theatre commands

                One of the critical issues, after the establishment of the CDS system, would be the widely discussed recommendation that integrated inter-service theatre commands should be established to exercise control over all operations in each theatre as practiced in many nations of the world including US and China. Currently the three services have their own operational commands that make for a total of 17 command HQs.  In addition, the Indian Armed Forces through HQ IDS have under their control only one tri-service command headquarters, namely the Andaman and Nicobar Command (ANC). The Strategic Forces Command (SFC), though led, manned and operated primarily  by personnel from the three services have their ultimate command authority  vested in the Nuclear Command Authority directly under the PM/National Security Council.

                The CDS has been tasked with the responsibility of restructuring military commands for optimal utilization of resources by bringing in jointness in operations through the establishment of joint theatre commands. However, many Indian analysts opine that the armed forces should commence this integration after coursing out exhaustive trials initially for one command headquarters. The significant change must be analysed in its entirety and not rushed through. It may be prudent to adopt ‘best practices’ of some other formidable armed forces in the world and suitably adapt them for our own challenges and genius. Theatre commands, once finally agreed to, can be implemented in a graduated manner employing the incremental concept. In the services even with the current structures, far greater jointness in operational doctrines and plans, training, communications and logistics should be ensured first to establish synergy.

    Theatre commands, once finally agreed to, can be implemented in a graduated manner employing the incremental concept.

                The newly appointed CDS at a recently conducted press conference outlined the likely contours of the envisaged theatre commands. He stated that two integrated commands, namely the Air Defence Command and the Peninsular Command respectively will be raised in the coming year while they will endeavour to raise the first theatre command by 2022. Preliminary studies on the geographical and operational spans for five theatre commands along the northern and western borders are underway. In addition, the services are also carrying out an in-depth study to examine if Jammu and Kashmir should have a separate theatre command.

                The Air Defence Command will be integrating all air defence assets including air defence missiles with the three services, coastal guns, air defence radars and air surveillance systems presently held with the three services.  In view of potent air and ballistic missile threats from India’s adversaries, the Air Defence Command, to be headed by an air force officer, will assume critical significance in terms of its efficacy.

                The Peninsular Command which, some naval officers want to call the Indian Ocean Command will look to merging the western and eastern naval commands. This command to be headed by a naval officer would be given dedicated air force assets and army troops. It would work to ensure India’s maritime security interests in the Indian Ocean region, both on the western and eastern sea-boards, and would also acquire the capably of conducting amphibious operations.

    National Security Doctrine

     As one of his top priorities, the CDS must have the Government Issue a National Security Doctrine which lays down a well-conceived and comprehensive strategic policy for the nation in the short, mid and long term perspective. It will be primarily an articulation of the nation’s overall vision and strategic intent. This document should naturally have both the non-classified and classified objectives which can be disseminated on a ‘need to know’ basis among concerned institutions and personalities in the country. The existing HQ IDS have endeavoured in the past to produce perspective plans for the Indian Armed Forces and have the requisite expertise to produce such policy documents for approval by the government.

    HQrs Andaman and Nicobar Command and newer agencies

                As mentioned earlier, the Indian Armed Forces have under their direct ambit only one tri-service command, namely HQ ANC. This Command HQ is of critical significance for its role in dominating the sea-lanes of the Indian Ocean and preventing the ever-assertive PLA Navy from indulging in mischief in these waters.  The CDS would no doubt accord adequate attention to a further strengthening of the strategic combat capabilities of HQ ANC for handling maritime challenges that will only multiply on India’s eastern seaboard and in the entire Indo-Pacific region.

                For CDS challenges emanating from the entire spectrum of warfare encompassing all domains are a priority. The CDS will also be overseeing the establishment of the recently sanctioned Cyber and Special Forces agencies besides the Defence Space Agency. These entities in the years ahead could qualify for being upgraded to the levels of Command HQs. As widely known, the domains of cyber and space are the battlegrounds of the future – and there the foresighted Chinese have stolen a march even over hi-tech western agencies including those of the US. India, despite being an IT super power, has still a long way to go to bridge the gap between itself and China in this aspect.

    CDS: Nuclear Military Adviser   

                The CDS will now be overseeing the functioning of the SFC far more intimately than was done earlier by the COSC as he has also been designated as the Nuclear Military Adviser to the government. The presence of a senior military officer in the Nuclear Command Authority is a step in the right direction for he would be able to provide the necessary expertise and fillip to the nation’s nuclear preparedness. The CDS may wish to advise the government to review its entire Nuclear Doctrine and revisit the policies of “No-First Use” and “Massive Retaliation”. Also, it may be necessary to re-examine whether India should go in for the development of tactical nuclear weapons for limiting a nuclear exchange. India’s two adversaries, China and Pakistan, are both reckonable nuclear powers and India’s nuclear preparedness has, therefore, to match up to them.

    Defence budgets and inter service prioritization

    It is a strategic truism that the Indian Armed Forces have to be prepared to confront a “two-front war”. Mandated to provide integrated “single-point military advice” to the government, the CDS will have to rise above service loyalties and professionally prioritize conflicting inter-service requirements in the larger interests of the nation. This assumes greater significance in the current scenario where the combat capabilities of the Indian Armed Forces have to be accorded substantial accretions in an environment of great financial strain facing the nation. The volatile situation in West Asia will be greatly impacting the energy security of India and this will further tax India’s currently faltering economy. Thus, the first test for the newly appointed CDS will have to be to convince the financially stressed government to make larger allocations in the capital budget for speedy acquisition of much needed modern weapon systems. As is known, India’s depleting fighter aircraft and submarine fleets, other deficiencies in other platforms, various types of ammunition and spares, force-multipliers etc need concerted attention. Last year’s defence budget had been allocated merely 1.49 per cent of the GDP whereas successive parliamentary committees have recommended at least 3 per cent of the GDP to be assigned for defence. Unfortunately, even this year’s recently announced defence budget has been dismal – considering the big-ticket acquisitions required by the armed forces.

    In the current charter issued by the government, any big-ticket acquisitions will remain in the Defence Secretary’s purview and thus final negotiations with foreign collaborators, Indian Defence Public Sector Undertakings or Indian private industry would rest with the DOD and the Defence Secretary. Delays as earlier are likely to occur. With “Make in India” and “Start-up India” initiatives not yet taking off, the government needs to revisit these areas involving the CDS institution.

    Coordination with civil agencies

                One of the tasks that can do with better handling is improving the coordination between the armed forces and other civilian governmental agencies who are, also handling various other aspects of national security. The CDS structure now will be an important institution to improve coordination between the MHA, MOD, NSAB and NSC Real-time information or intelligence sharing between the Defence Intelligence Agency (DIA) and the other national intelligence agencies like the Intelligence Bureau, Research and Analysis Wing, National Technical Research Organisation and other newer intelligence that had come up in the last few years will hopefully improve. However, to start with, the CDS must put the Service Intelligence Directorates of the three services directly under command of the DIA for better effectiveness in the exacting intelligence domain.

    Recommendations: overall mandate for CDS

                The CDS has been formally appointed and his role enunciated and as the appointment matures in the immediate future, a further refinement of his responsibilities should be undertaken. These should include the following: –

    • The CDS should be designated as the Principal Defence Advisor to the Prime Minister (through the Defence Minister) on all matters pertaining to India’s national security.
    • The CDS should provide an overarching ‘strategic vision’ to the government and be responsible for all strategic planning for the armed forces, including all war plans and contingency planning. During peacetime, preparedness for future operations, in the strategic domain, should be one of the prime responsibilities of the CDS. He will have to synergize the mission and assets of the three services in various theatres to achieve the nation’s strategic objectives.
    • The CDS must be made responsible for overall financial planning, budgetary allocations and force structuring for the three services.
    • The CDS should oversee the preparation of the annual Defence Intelligence Estimate which obtains requisite strategic intelligence inputs for overall defence planning.
    • The establishment of theatre commands, the functioning of other tri-service commands like the Strategic Forces Command, Andaman and Nicobar Command and others which may come up in the future like the Air Defence, Cyber, Space and Special Forces Commands must get the utmost attention of the CDS.

    Conclusion

    The coming years in an increasingly troubled world and especially in our volatile neighbourhood portend diverse and formidable challenges to India’s security and economic resurgence. Consequently, an earnest effort must be made to meet them. A major HDM reform like the recent establishment of the CDS edifice goes a long way in the optimal utilization of India’s resources for defence and enhancing its operational preparedness across the entire spectrum of warfare.  All new institutions at their start do face various problems and the office of the CDS will be no exception. But it must get whole-hearted support from the PMO, MOD and the three services themselves in successfully fulfilling the onerous responsibilities and roles assigned to it.

    Views expressed are the author’s own.

    This article was published earlier in Chanakya.

  • Need to Redefine MGNREGS: Response for a post pandemic Economy

    Need to Redefine MGNREGS: Response for a post pandemic Economy

    The Union budget 2020 was heavily criticized for allocating only INR 60,000 crore on the UPA flagship program, Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA). Discontent continues even after the relief package mentioned INR 200 per person will be paid for the next three months. With 7.6 crore workers registered under MGNREGA program – around one trillion (INR) would be required to fulfill the promise. The pandemic has disrupted almost every physical activity, thereby disrupting the physical labour economy. The unfolding crisis across the country and  the poor health infrastructure especially in rural areas poses a major challenge to combat the spread of the virus .  According to the National Health Report, India’s government hospitals average a low figure of one bed per 1844 patients.  The magnitude of the health crisis becomes apparent with the inadequacy in health infrastructure in rural India. The ongoing COVID-19 crisis is reshaping the entire global economy and is expected to be a stress test for government institutions. Even after the crisis, policy making and social programs will remain the key areas in which continuous revision must happen – to build a resilient economy in the long run. As the pandemic influenced financial crisis looms large, it is opportune to discuss public employment programs in bridging infrastructure gaps and financial losses. 

     Demand driven workfare programs intend to provide 100 days of employment for rural households. This scheme was launched with an objective to alleviate poverty and create public assets.   Recognising the vagaries of the agriculture sector to provide stable employment, the program sought to guarantee minimum income for subsistence level labourers and also internalized short term shocks in the rural economy. In principle, the ‘right to work’ element offered a legitimate progress in public-policy discourse by empowering women and marginalized communities to work. The laudable results of the employment program have more or less achieved its social objectives by increasing individual asset creation and enhancing savings rate. Almost 50 percent of the population dependent on agriculture fall back to government employment schemes in times of labour market failure. Low productivity, inadequate modern technology, high dependence on rainfall and bottlenecks to reach the market are primary sources of such failures. Execution of public employment in India is  plagued by rampant corruption and efforts to effectively implement the scheme faces hurdles and results in marginal progress. In the wake of economic slump with falling consumption in rural India and high unemployment rates, infusing cash in the hands of people is always the priority. However, marginal increase in budget allocation for public work programs has invited criticism from the economists – expecting the rural economy to struggle with slow recovery. With acute shortage of skilled labourers and an education system failing to impart quality skill education, a public employment program can be more dynamic in resolving the socio-economic and food security problems. The primary objective is to offset short term economic disturbance and smoothen consumption expenditure, but the development of the program in responding to the needs of the community is also important.  Successful implementation of an employment program must factor-in convergence with other departments, quality of assets created and skill levels imparted under the program. .The three-week lockdown due to covid-19, further extended by two weeks, has exposed the inadequacy of public health infrastructure, more so in rural areas and for informal labour groups, to address their health and the resulting financial hardship. Converging the needs of villages to enhance better response during a crisis with the employment program would result in bringing accountability and creating assets.

    India has experimented with a plethora of universal public programs such as Public Distribution System and Integrated Child Development Scheme (ICDS). In a similar vein, MGNREGS has been an important public work programme with the aim of reducing poverty and enhancing income levels. At this juncture, revising and reviewing MGNREGA scheme with the objective to reduce leakage in the system is a priority. A clear balance between the twin objective of providing employment and creating infrastructure has been missing in the literature. The gap between theoretical policy and reality has raised  concern and the need to review the current approach . The obvious gap in infrastructure requirements identified during the time of crisis must converge with public programs. Such carefully designed schemes with tangible objectives will provide economic security in the short run and improve rural infrastructure in the long run. 

    Work completion rate can be used as a proxy for productivity because individual labour productivity is hard to ascertain with heterogeneous work projects. Although the official MGNREGA website suggests an average of 90 percent of work completion, open government data shows a decline in work completion rate from 43.8 percent in 2008-09 to 28.4  percent in 2015-16. Financial support through employment should account for both quality of assets created and the process of such creation. This would internally check and balance the operation of the scheme and intuitively bring in accountability. At present, the scheme contains the above mentioned elements but has not been used to evaluate the execution of the program. Convergence between departments to create assets and the work completion rate might explain the effectiveness of a program in physical terms. 

    An efficient model should enhance the skill levels of rural youth and is more than necessary to counter the loss of jobs already happening due to coronavirus lockdown. Unskilled and semi-skilled labourers will face lay-offs as industries with the recent norm on social distancing adjust to capital intensive businesses. The percentage of rural population in the age group of 15-59 receiving vocational training has reduced from 1.6 percent in 2011 to 1.5 percent in 2015-16. Unemployment rate among rural youth (15 to 29) has increased from 5 percent in 2011 to 17.4 percent in 2017-18. Although the highest unemployment rate is observed among rural females, the employability of rural youth reduces as education increases. The paradox of educated unemployment is not complex to decode, but a significant skill gap is the fundamental problem from the labour supply side. The Expanded Public Works Program (EPWP) introduced in South Africa to address the skill gap among the youth has succeeded in reducing poverty and unemployment rates. The program has been designed to create labour intensive projects not limited to infrastructure but extends to social, cultural and economic activities. The percentage of young workers under this scheme witnessed a rise from 7.73 % in 2017-18 to 10.06 % in 2019-20 in reference to the low levels of employment. This would mean the nature of the guarantee program has shifted from giving opportunities for seasonal unemployed to educated unemployed. The change is indicative of the deeper crisis faced in the rural economy and calls for a sustainable plan to use public programs as a tool to also impart skill training for the rural youth. State’s increasing dependence on work programmes to create employment needs to be revised based on community requirements. While enhancing rural employment is the immediate concern, the process of achieving it suffers from various executive problems such as corruption among government staff and individual’s lack of willingness to work. Amidst the lockdown situation due to COVID-19, unemployment will increase sharply. A well-devised strategy to address economic losses on priority and emphasis on health infrastructure through public employment must resonate in policy-making after the impact of the coronavirus crisis subsides. 

     

  • An unmitigated disaster

    An unmitigated disaster

    Category : Democracy & Governance/Governance, Law & Order

    Title : An Unmitigated Disaster

    Author : Deepak Sinha 04.03.2020

    The ill-conceived CAA act and the fears induced by it and the issues of National Population Register have led to nation-wide protests. The resultant police actions at various places culminated in the Delhi violence and police inaction that has given rise to world-wide condemnation. That it coincided with US President Trump’s visit should be even more worrisome for the government. Deepak Sinha analyses the issue in his Op-Ed.

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  • Budget 2020: Rhetoric vs Reality

    Budget 2020: Rhetoric vs Reality

    Sharing structural similarities with the 1991 economic conditions, , the current decline in Indian economy is in desperate need  for radical reforms to energize the growth. Faced with severe fiscal constraints, the optimistic projection of revenue by the government   seems more of a challenge than realistic prospects for economic growth. Tax revenue is expected to fall short by INR 2.5 lakh crores in FY20 as the GDP records an 11- year low of 4.5 %.  As against the target of INR 24.6 lakh crores, there is likely to be a shortfall of INR 2 lakh crores for the current fiscal year. Expenditure cannot only depend on the expected revenue and fall in revenue collection will become a grave concern to achieve the fiscal deficit target set at 3.5 percent .  The budget is expected to balance deficit and growth by laying down a plan for fiscal consolidation and pushing the growth fundamentals. The Finance Minister in her speech mentioned three pillars under which the budgetary allocation has been rationalized. There is a need for deeper examination of budget proposals  beyond the slogans of the budget speech in order to comprehend the government’s long-term economic strategy.

    Aspirational India

    The agriculture sector with poor growth rate yet employing 50 percent of the workforce required significant capital infusion. 2.6 lakh crore has been allocated to agriculture & allied activities out of which 75,000 crores are dedicated to double farmers’ income. In reality, implementing a cash transfer scheme with a huge quantum of finance is a strenuous task facing  challenges on the ground. Schemes such as setting up solar panels and village storage run by Self Help Groups will act as a non monetary support measure. However, infusion of cash in rural credit structure and ease in acquiring credit facilities is largely ignored. The absence of  adequate investment for R & D in agriculture is a major shortfall in the budget. A target to increase the milk production capacity to 108 million tonnes is ambitious, yet no road map has been laid down to enhance the capacity in the current structure.  Weak consumption and high unemployment has contracted rural economic growth but the budget has failed to directly inject finance to increase effective demand. Sharp cuts in MGNREGA budget is giving rise to concerns as the total money in circulation in the economy continues to be low.

    Income insecurity will weaken the consumption demand for a few more quarters, arresting the medium-term growth. Healthcare Sector has been allocated  a total of 67,000 crores which is a significant increase of 10 percent compared to the last budget. The government’s flagship healthcare program, Pradhan Mantri Jan Arogya Yojana or  Ayushman Bharat, is allocated 6,400 crores which is the same as the previous year along with the National Rural Health Mission being allotted 28,000 crores. The Finance Minister has approved a Private-Public Partnership (PPP) between private medical colleges and hospitals in the country. The initiative is aimed to improve the skill levels of enrolled students to export their services abroad. Effectiveness of the PPP model in healthcare will depend on the amount of scrutiny and quality checks placed at the execution stage. Highest decline in funds was for Rashtriya Swasthya Bima Yojana from Rs 156 crores to Rs 29 crores, and Food Safety & Standards Authority of India was reduced to Rs 283.71.

    The draft of National Education Policy in 2019 invited multiple debates but achieving quality education has been the common goal across all levels of education. Human capital investment and skill development has been crucial to the 2020 budget with an allocation of almost 1 lakh crore for education and training. Breakup of funds for education under primary, secondary and higher education was not spelt out.  Finance minister citing the increase in gross enrolment ratio of girls in education has clearly missed the data on falling rates of women in labour force. The narrow lens of viewing enrolment number as a measure  women empowerment has to be revisited to achieve gender equality status. Encouraging apprenticeship and internships in rural areas for engineering and technical graduates is an important mention as the students lack experiential learning. Higher education population stands at around 36.6 million, surging the demand for  institutions offering graduate courses. The Government due to its limited fiscal capacity has allowed private institutions to address the demand for higher education. Despite this opening up tertiary education remains at only 25.8 percent of Gross Enrolment Rate. Quality in higher education is still a distant dream in India and it is important to dedicate funds to improve the quality of higher education in particular.

    Economic Development 

    Under Economic Development, promoting MSME sector and developing infrastructure have been the focus areas. Setting up NIRVIK scheme for higher export credit disbursement and facilitating investment clearance cells is a favourable move for medium and small scale business. Primarily, encouraging potential start-ups to equip their operations  with technology and managerial skills for creating export market demand must take precedence.

    National Logistic Policy is underway to revamp the transport infrastructure and new trains are to be operated under PPP. 100 new airports to be developed under UDAAN scheme is expected to create substantial employment in infrastructure sector. Linking basic Bharatnet services to 1 lakh gram panchayats is a notable initiative to improve the internet connection at local unit level. An exclusive direct investment in disruptive technology and artificial intelligence continues to be absent indicating India’s lag in becoming more competitive. Failure of the ‘Make in India’ initiative to materialize as expected is a relevant evaluation to reframe the fund allocation to accelerate indeginious production. Foreign trade of India presents a grim picture with exports slipping by 1.8 % in the last few months.  Although the political aspect of ditching Regional Comprehensive Economic Cooperation (RCEP) played well, quitting a multilateral trade deal has reduced the scope to upgrade domestic technologies. Frailty of the economy has clearly reduced the incentive for small businesses to invest in production and service despite schemes dedicated for this domain. Entrepreneurship culture in a favourable environment to undertake small businesses with insurance cover should aim at utilizing the existing human and capital resources through upgraded technology. A National Pipeline project has been proposed to ensure public spending on road, irrigation, power (conventional and renewable), railways and housing. Under this project, substantial funds are allocated for roads and least is for rural infrastructure. A prepaid  ‘smart metering’ system is to be substituted for conventional energy meters. On the financial front, tax concessions for corporate companies and foreign investment have been proposed. Reducing income tax slabs cheered the middle class but it has been a necessary and not sufficient condition to push the economy in a growth trajectory. Extension of tax holiday for real estate corporations would not qualify as fiscal stimulus with poor housing demand. As Dr Rathin Roy, economist suggests, either productivity should improve for pushing the demand at existing wage or minimum wage should increase. Decoding his post-Keynesian idea, structural crisis present in India offers much more complexity in practice. Land, labour and capital market reforms are inevitable to catch the growth momentum in the long run. Revising tax structure under Goods & Service Tax (GST) does not count for a structural reform to revive growth and scant attention has been paid for resolving systemic issues using budget as a tool. 

    Caring India

    The last pillar of the budget, emphasizing the importance of national and social security,  allocated funds for marginal groups, senior citizens and women, adopting a populist measure.  Over 6 lakh anganwadi workers are to be given smartphones and the budget estimate for nutritional related programs stands at 35,600 crores. Proposals were made to establish Indian Institute of Heritage and Conservation along with the development of 5 archaeological sites.  Major schemes like PM KISAN, Direct Benefit Transfer, Pradhan Mantri Awas Yojna and ICDS (Integrated Child Development Service) witnessed a jump from revised budget estimates of 2019-20. The Finance Minister in her budget had mentioned a number of schemes aimed at the Environment, Pollution and Climate Change. It includes 4,400 crores for the Clean Air Policy, 460 crores for Pollution Control and 3,100 crores for the Ministry of Environment, Forest and Climate Change. The last budget witnessed reduction in GST rates on Electric Vehicles (EV) and an annual tax reduction of up to 1.5 lakhs on interest paid to purchase EVs. However, the current budget has increased the custom duties to curb the import of cheap materials from China making the vehicles more expensive. National Adaptation Fund for Climate Change (NAFCC) is a central sector scheme set up to support concrete adaptation activities that mitigate the adverse effects of climate change. The Budget missed out on the replenishment of the much-needed NAFCC and has ignored it for two consecutive years. The overall fund allocation for Climate Change and Environment has increased by 5 per cent in the budget. Promoting sustainable business practices at micro levels is a key in tackling climate change. Accommodating the green budget would demand more involvement beyond mere budget allocation, effective plans need to be developed that can constantly track the progress of India’s climate change dialogue and advocacy.

    The defence budget for 2020-21 stands at 3.37 lakh crores, constituting 1.5% of the GDP, excluding pensions. Capital and revenue expenditure is valued at 1.18 and 2.18  lakh crores and pension at 1.33 lakh crores. This will affect several big projects taken up by the armed forces to build capabilities against Pakistan and China as there has been only a marginal increase in capital expenditure compared to previous year (1.08 lakh crores). Armed forces will be forced to cut down on arms and equipment purchases, thereby diluting the state’s priority on national security. However, with adequate government support there is scope for the private sector to bridge  the gap in areas of maintenance and logistics of the armed forces. Corporate tax cuts in the manufacturing sector, strategic disinvestment in Central Public Sector Enterprises (CPSE) and abolition of ‘angel tax’ for start-ups is appreciable. However, more involvement and sincere efforts should be undertaken by the Government to enhance private sector involvement in creating additional funding for developing a robust defence industry and meeting the needs of the armed forces at the same time.

     A recent study by Oxfam reported that 73% of the total wealth is owned by 1% of India’s population, as a result the number of billionaires has increased to 120 in 2019 from nine in 2000. A funding strategy that does not  attend to the growth of income among masses would lead to furthering the inequality and handicap the long term growth of an economy. Budget continues to be a powerful instrument to reallocate resources through fiscal policies and reduce economic inequality in a country. Facing a high risk of missing the demographic dividend, the budget was expected to make radical and structural reforms. Immediate measures to revitalise economic wealth among middle-class and rural residents is the need of the hour. The ostensible budget might garner popularity but the foundation to achieve India’s growth potential remains insufficient. Choice between managing fiscal deficit at the cost of reduced demand and initiating growth at the cost of huge fiscal deficit summarizes budget decisions. Biting the fiscal bullet, the finance ministry has assumed more accountability in explaining every component of expenditure but has failed to provide confidence for a resurgent Indian economy. Micro level assessment reveals a rosy picture but the exercise has undoubtedly choked the Indian economy in the short run.

    Contributions by

    Manjari Balu and Swaminathan S are Research Analysts with TPF.

    Aditya Balakrishna is an Intern with TPF.

    Views expressed are their own.

    Image Courtesy: Sanjay Rawat // www.fortuneindia.com

  • Falling Consumption Expenditure: Need for Labour Market Reforms

    Falling Consumption Expenditure: Need for Labour Market Reforms

    Government withholding consumption expenditure data on the grounds of data quality has stirred many criticisms from economists and other interest groups. Growing concern over falling rural consumption especially amidst economic slowdown has crystallized a categorical debate on the nature of slowdown. Irrespective of the validity of methodology employed, low consumption expenditure can sequel falling growth rates. Slowdown of the automobile industry as a case, sluggish growth and rising unemployment corroborate the unofficial claims on falling consumption expenditure. According to Business Standard report, the average amount spent per month by an individual declined from INR 1501 in 2011-12 to INR 1,446 2017-18. Although falling rural consumption expenditure evinces an economic malaise, issue of inefficient labour market has received less attention. Consumption is considered an important way to assess the health of an economy according to neoclassical economists. Multiple theories on income and consumption relationship are advanced in the field of economics. According to permanent income hypothesis, consumption expenditure varies in relation to the expected future income. In simple terms, an individual’s consumption will be distributed across their lifetime based on the permanent income they are expected to receive. Every theory has reiterated the central role of income in determining the consumption levels of the individuals. 

    Income insecurity in Informal sector

    A study conducted  on consumption spending in Ghana concluded that income and inflation had a long-run relationship on consumption expenditure. The Monthly Per capita Consumption Expenditure (MPCE) in 2011-12 revealed that urban MPCE was higher by 84 percent than rural MPCE. India, operating as a dual economy, considers casual wages and regular salaries as a proxies to study informal and formal sector. The wage differential among salary earning individuals operating in informal and formal sector was higher than casual labourers’ wages. Increasing number of regular employees working in informal sector shifted the concern to penetration of ‘informality’ across the labour market.  Post globalization labour market has theoretically encouraged organized sector but the wage employment in the organized sector has employed more casual labourers with no social security. A new layer of casual labours was created post reforms to cushion the weight from competitive prices. Fragmentation within the organized sector with growing contractual labourers has weakened the expected income levels which could directly affect consumption behaviour. Working-poor in India are highly concentrated in the organized sector as casual labourers and self-employed with a combined share of 51 percent of the total workforce as of 2012.

     A recent report on consumption expenditure points out that rural monthly consumption has fallen by 10 per cent from INR 643 to INR 580 indicating a need to accumulate more income in rural India. The main industries functioning under informal structure were construction, manufacturing and wholesale-trade employing majority of unskilled and semi-skilled labourers. In 2011-12, rural employment contributed 76 percent of total informal sector labourers in the three main sectors. Almost 80 per cent of rural workers are engaged in casual employment and despite a moderate growth in casual wages over the years; it amounted to only 36 percent of a regular worker’s earnings. Increasing share of informal employment within the organized sector coupled with poor social security has reduced expected financial flow of labourers. State induced social spending would propel consumption levels to a limited extent but the underlying crisis in the rural labour market would continue to contract long term consumption expenditure. Total social sector spending as a percentage of GDP has reduced from 2.7 per cent in 2000 to 2 percent in 2014. Reduced government spending and lack of labour market reforms are responsible for poor disposable income in the rural economy. 

    Rural labour market instability

    Casual labourers have constituted consistently 28 percent in Indian rural labour force since 1983. The periodic labour force survey report (2017-18) observed a decline in the share of self-employment in both rural and urban sectors. The unemployment rate in urban sector is 7.3 percent, comparatively higher than rural unemployment rates of 5.8 percent. A major portion of rural labourers are associated with the casual sector in rural areas with unstable income and weak social security. For instance, average earning per day in public workfare programme such as MGNREGA has fluctuating wage rates in rural areas, recording as low as INR 136 in 2018. Such a precarious structure in the labour market has diluted the spending capacity of rural residents in the recent times. According to the usual status in employment, there is a moderate increase in casual labourers and salary earners but the self-employment rates have been on the downtrend. In 1983, 60 percent were self-employed, which has gone down to 57 percent in 2018 despite the attractive loan schemes introduced by the government. 

    Female workers’ earnings play a vital role in determining the consumption health of an economy, a drastic fall in female work participation deserves an in-depth investigation. Falling participation rate could mean either women drop out due to social conditions or due to unavailability of jobs matching their skills. While sufficient literature studying these two areas are available, the first issue can be viewed with scepticism as earnings of men have increased significantly while women’s wages have stagnated. Although overall women in the workforce have reduced, 73 percent of women are engaged in agriculture as primary activity compared to 50 percent of men. A deceleration in agriculture and low investment on public infrastructure in the past few quarters have  decimated the consumption capacity of rural India. Women being the bigger component of agricultural labour force, and with factors of social discrimination, tend to have lower wage rates, thereby contributing significantly to reduced capacity for consumption and expenditure.

    Labour market reforms needed to revive long term consumption

    It would be erroneous to isolate the core economic problem to be categorical- the structural issue or cyclical slowdown can be both demand-side and supply-side driven. The whole economic apparatus is strongly integrated and a supply-side constraint can indirectly choke the demand which would, in turn, weaken the growth. Many economists have recommended the need for structural reforms; labour and capital relations have to be redefined as a measure to redistribute the resources. Further, the labour code on wages, 2019 has invited criticisms on grounds of poor protection for informal labourers and favouring corporate profit. Financial ecosystem requires corporates to make profits but a stagnant reinvestment convulses the cycle. Deepening crisis in the economy is conspicuous and falling consumption reiterates the need for better land and labour reforms. 

    Closer examination of the rural labour structure provides a bleak picture of low-income concomitant with minimum social and economic security, thus seriously impacting rural economic consumption. According to the PLFS report, the percentage of rural regular salaried employees with no job contracts increased from 58 percent in 2004 to 69 percent in 2018. Around 88 percent of rural female casual labourers against 84 percent of rural male casual labourers had no union or association. Absence of union is a proxy for weak bargaining power which eventually distorts the real market wages for the labour. Systematic labour market reform is critical especially for fixing the minimum wages and restructuring the labour market. Failure of manufacturing and service sectors to absorb the excess unskilled labourers from the agricultural sector has posed a major challenge. A short term cash transfer or providing welfare schemes should not be mistaken for structural reform. Enhancing the skill levels of rural labourers so as to enable their displacement to the manufacturing sector would augment employment and income. 

    Effect of demonetisation on the informal rural economy cannot be underestimated; removing 80 percent of currency from the economy damaged small and medium scale businesses operating on cash. ‘Make in India’ has not succeeded in accelerating business entrepreneurship in the country. Only 5 % of the adult population manages to establish a business that survives for longer than 42 months according to Global Entrepreneurship Monitor, a rate that is the lowest in the world. Financial investment in medium scale and small scale industries has been poor due to bureaucratic hurdles and unfavourable business environment leading to world’s highest business discontinuation rate of 26.4 %.

    From the supply side, low reinvestment despite a reduction in interest rate has exacerbated the falling consumption situation. Slowing automobile industry and consistent downtrend in manufacturing have contracted the capacity for employment generation in the industrial sector. CMIE has observed corporate profits to be more volatile than wages in the last two decades. The standard deviation of increased profit was recorded to be 32 percent as compared to 6.3 percent in the wage share. The erratic change in profit component implies entrepreneurs are more likely to be discouraged to invest in a business and play it safe. This invariably allows only the big corporate companies to survive. Low share of labour income in the economy is undoubtedly a structural phenomenon; the state’s apathy to induce private capital investment is detrimental to the labour market as well. 

    Reforms should have distinct rural and urban labour market strategies

    Departing from viewing economy in a political lens, a state must prioritize market reforms especially labour reforms. It is the state’s responsibility to ensure efficient allocation of resources and guarantee economic development and welfare of people. The slogan of ‘minimum government and maximum governance’ can be realised only through radical reforms and policy changes.

    The problem of shrinking consumption in rural areas is an outcome of constraints in the supply-side and unorganized labour market. Mere infusion of money as a solution is neither practical nor sustainable; a long term strategy to improve the structure of the rural economy is necessary to address the current economic crisis. Policies should be directed towards energising the informal sector, provide social security and economic dynamism that accelerates capital formation and induces private investment to support business growth. Consumption levels can be revived by making demand side and supply side changes simultaneously; increasing public gross capital formation and encouraging private investment by improving the investment climate would revive private consumption. A clear distinction has to be drawn between rural and urban labour markets, reforms to monitor the movement and prices will emerge as a structural reform to support both growth and development. 

    Manjari Balu is a Research Analyst with TPF. Views expressed are her own. 

    Image credit: www.newskarnataka.com

  • Rural Development and Gender Equality: A reality check in Tamilnadu

    Rural Development and Gender Equality: A reality check in Tamilnadu

    Category : Agriculture/Rural Development/Gender Equality

    Title : Rural development and gender equality: A reality check in Tamilnadu

    Author : Manjari Balu 06.01.2020

    Tamilnadu continues to be one of the fastest growing states in India, despite some major declines due to political instability, rampant corruption, and populist measures at the cost of development. Despite significant progress in literacy, women’s education, and some aspects of social security, there are still major shortfalls with respect to rural employment, skill development, and gender wage inequality. Tamilnadu has to develop a policy framework to achieve employability through quality secondary education for women, shifting focus from only enrolment of girls in primary education. Manjari Balu analyses this issue in Tamilnadu.


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  • Local Protests: A New Status-Quo in Political Lifestyle?

    Local Protests: A New Status-Quo in Political Lifestyle?

    Hong Kong and Chile convulse, Lebanon possibly spiralling into a civil strife, and sanctions induced discontent paralysing Iran, a pattern of global protests is increasingly evident. The global political landscape is currently marked by frequent mass protests, and this wave is geographically much broader and unfolding in countries at different stages of development. Unlike earlier protest movements that aimed at radical political change and revolutionising the existing order, the modern demands abandon this narrative of overthrowing the system instead aiming for democratisation of the established institutions. In other words, the anti-government protests cropping up in various parts are not trying to dismantle the democratic structures but to redefine its scope and depth.

    New Wave of Protests – questioning inept governance

    In contrast to the previous waves of uprising like the Pink Tide in Latin America or the Arab Spring, that was spreading in a particular region with similar agenda, the recent protests are occurring in different zones and is marked by the uniqueness of initial triggers and demands put forth by the protestors. In Lebanon, the discontent was sparked by regressive taxes proposed (mainly Whatsapp tax) but turned into massive demonstrations, transcending sects and classes, calling for a technocratic government in the backdrop of sectarian political regime, widespread corruption and mishandling of the economy. The Yellow Vest movement in France originally against the fuel tax snowballed into nationwide protests to address the socio economic inequalities, stemming from high unemployment and stagnating economy. Protests in Chile against hiked transport fares escalated to countrywide riots revealing the dissatisfaction with the pro rich growth, heavily privatised welfare system and pro market regime. On observation, these isolated protests by themselves can be a defining feature of the current wave of protests, different from the previous waves that were characterised by common contestations.

    Despite being unrelated events with independent agendas, the countries undergoing mass protests share similar trends of inequality and economic downturns. Further scrutiny beyond the seemingly small initial triggers reveal an evident pattern of economic anger and insecurity in these nations. Experts have suggested that Hong Kong’s pro democracy movement is also fuelled by wide income inequality (highest among developed nations), especially in the last 45 years since its handover to the Chinese. The Latin American region, witnessing the most number of countries breaking into sustained protests, is the world’s most unequal zone. In addition to inequality, sustained unrest in states like Colombia, Catalonia to Iraq and Egypt, the protests are driven by slowing economic growth, mounting public debt and austerity measures. Even in populist and authoritarian regimes, citizens are demanding an end to corruption and restoration of democratic rule of law. For instance, long serving, extremely popular, leftist leader Evo Morales was forced to resign in Bolivia after protests erupted accusing him of undermining democracy to extent his rule. There are increasing clashes against repressive democracy in Russia, and revolts against autocrats in Slovenia and Czech Republic.

    Leaderless or smart mobilization?

    Interestingly, a majority of the modern protests are leaderless, led by students and youth. In Hong Kong, the protests are gaining momentum through the active involvement of the students while in Chile the unrest for systematic change was ignited after school students launched a campaign to end the 4 percent subway fare increase. Niall Ferguson noted that this demographic trend of the young leading the demonstrations is a repeat of the 1960s, which like the present had an excess of educated youth over the number of available jobs. Another similarity amongst the protests is the urban-centric mass unrest. According to migration theorists, uncontrolled urbanisation resulting in rural to urban movements is a major cause for the ongoing demonstrations. Pushed into informal settlements in cities, often ignored by authorities and without basic social coverage, the urban area becomes a ground for discontent. For instance, in Haiti the protests began due to gasoline and food scarcity. Therefore, the socio-economic marginalisation of the urban poor is a significant yet overlooked factor that drives people to the streets. This is also compounded by a lack of faith in the government. More than the poor state policies adopted and prevalent corruption, in some protesting nations, there is deep distrust among the citizens. Hong Kongers believe that their government does not have legitimate powers over Beijing, and in countries like Lebanon, Chile or Ecuador, reversal of the initial triggers did not stop the dissenters from demanding a new government.

    The youth bulge and the shrinking economic opportunities only partly explains the global protests. The reach and accessibility of social media and free messaging apps have exploded in the past decade. In addition to acting as a medium to organise and sustain mass protests, these channels are also used to express political frustrations. Unlike before when media had a monopoly over mass reach, individuals and groups have the capacity to mobilise and garner support over specific issues. While the protests seem unconnected, it is possible to see a copycat element in the way protests are carried out. The coverage of news and faster reach makes it possible for protestors to adopt methods of action that were successful elsewhere. It is also harder for states to contain and repress dissenting voices. Thus, the spread of communicative technology and social platforms offer a conducive environment for protests. 

    Social Media enables activism

    The ability of electronic media to break down physical barriers and bring more events to global audiences might be increasing the visibility of protests, which would have otherwise remained local. Data from GEDLT Project, which has been tracking protests around the world from the past 40 years, reveals that the frequency of protests has not significantly increased. However, the intensity and the length of protests have improved. Despite a spike in these political activities wherein citizens are actively mobilising to pursue their demands, there has been a decline in the success rate of protests. A recent study highlights the staggering decline in success rate of protests from 70 percent in 1990s to 30 percent in 2010. Some highlight the “smart” methods adopted by regimes to prevent and suppress clashes like reinforcing loyalty of the elite, infiltrating and dividing the opposition, etc. For instance, in Lebanon, the initially united protests has created anti protest groups that supports the Hezbollah. Governments are also adopting a strategy of blaming foreigners and outsiders to reinforce support from the public. For instance, China is building a narrative of US backed forces disrupting Hong Kong to get an advantage in the ongoing trade war, which has strengthened after US signed a Hong Kong Human Rights and Democracy law. Iran’s authorities are also blaming outsiders, especially the US, for the violence that ensued after state raising gasoline prices by 50 percent.

    Overall, there is an influx in political activism. Global unrests are now spreading and have significant implications for countries everywhere. With electronic media and its potential for mobilisation, it is now easier to bring issues to national discourse. However, while the willingness and ability of mass political activism to recur and cause disruptions have increased manyfold, its success rates have decreased. It may be said that the political frustrations and the current protests will not bring a major transformation in the political structures but rather it is a new status quo in the nature of political lifestyles.  

    Renuka Paul is a Research Analyst with TPF. She holds a masters in Public Policy.

    Image: Aerial night shot of Beirut Downtown, Lebanon during protest against Government, Lebanese revolution – Phot by Ramzi – Licensed from www.stock.adobe.com

  • ‘Pawar Play’ in Maharashtra

    ‘Pawar Play’ in Maharashtra

    Henry Luis Mencken (1880-1956), well known American journalist and essayist, once wrote “As democracy is perfected, the office of president represents, more and more closely, the inner soul of the people. On some great and glorious day the plain folks of the land will reach their heart’s desire at last and the White House will be adorned by a downright moron.” As we sit back and watch as the Impeachment drama plays out in the United States, one cannot help but marvel at Mr. Mencken prescience. The election of Donald Trump does seem to suggest that the American public has indeed found its inner soul, but as to whether it has really perfected democracy in the process remains questionable.

                Especially, more so, if it was to compare itself to what passes for democracy here. In short order they would then realize the vast distance they have yet to cover to reach true perfection. As a matter of fact, they would do well to follow the ongoing “Pawar Play” in Maharashtra, which incidentally is only the latest manifestation of what perfection in a democracy looks like, and has all the ingredients of a true Bollywood potboiler in the making. That is the only way in which realization would dawn on them that Mencken’s deductions were slightly awry. Invariably in perfect democracies it is not the political leaders who are morons, but the people who voted them to power. That is the fundamental reality we have been confronting ever since Independence, regardless of the political ideologies of the people and parties we vote into power.

                Whatever the host of legal eagles fighting the case in our Supreme Court may say to justify their arguments, and regardless of the conclusions the Hon’ble Court may arrive at, the simple truth of the matter is that for all sides concerned, Maharashtra is too important to lose. To start with the inability to form the government in Maharashtra would not just be a simple loss of face, but utter humiliation for the BJP, and more importantly, for its mentors from Nagpur, located in the heart of the State. If they cannot control their own fiefdom, what control will they exercise tomorrow over the rest of the country, more so given that elections are due in states like Bihar and Jharkhand in the coming months?

                Similarly for the Shiv Sena after having openly cast aside the cloak of morality and gambled everything, including the kitchen sink, in its blatant attempt to go one up and grab the Chief Ministership for Balasaheb’s scion, a loss would spell utter disaster and lead to questions of survivability of the dynasty. For the NCP, and especially the Pawars, being on the winning side is the only hope for redemption for past transgressions. As events have played out, it is now obvious that Pawar the younger was carried away by the brashness of youth and the fact that leadership of the Party would remain just a mirage due to circumstances of birth as long as Pawar the elder had any say in the matter. Finally, for the Congress that continues to be on the ventilator this was an unexpected bonus, a fleeting opportunity to start again.

         While each of these stakeholders has its own particular motivations for their actions, however, the most important aspect  incentive for all in this battle royal for the stewardship of the State is the simple fact that not only is Maharashtra a large state, governing which is undoubtedly prestigious, but also an extremely rich one. It doesn’t exactly require a leap of faith to suggest that whosoever controls the money controls the votes. After all, is that not the very reason that controversy dogs the issue of electoral bonds that were introduced not too long back?

                Leave aside mundane issues of malfeasance, personal greed, overarching ambition and rank opportunism, what is indeed truly astounding to see is the utter lack of constitutional propriety and ethical conduct on the part of those charged with its very protection. For them to let petty loyalties and servility take precedence over self- respect and principled conduct is not just a reflection on how unworthy they are to hold such positions of eminence, but also a shameful blot on our social mores that encourages such people to claw their way up despite lacking an iota of integrity or moral fibre. One cannot but feel embarrassment for the President, a former advocate, who unquestioningly accepts the recommendations of a Prime Minister without the requisite cabinet approval, justified by the use of a most inappropriate rule to cover the lapse. That such a rule can be invoked at the dead of night to swear- in a government at dawn, in the futile hope that it would provide stability, after weeks of confusion, is indeed laughable, if it were not so tragic.

                The Supreme Court’s directions to the newly sworn-in Chief Minister, Devendra Fadnavis, to prove his majority on the floor of the House within two days, set the cat among the pigeons as it left only limited scope for horse trading. It forced him to resign prior to the House being called into session as by that time it was abundantly clear that Mr. Ajit Pawar was in no position to provide the necessary support of the NCP legislators required to gain a majority, as he had promised. It is only now becoming increasingly clear that the ‘Ajit Pawar move’ was in all likelihood, a move conceived by his uncle and leader of the NCP, Mr. Sharad Pawar, to kill two birds with one stone; firstly lure the BJP into withdrawing President’s Rule in the State, which it may otherwise not have done in a hurry, and to force the Congress to reduce its demands in exchange for joining the anti BJP Coalition, Maharashtra Vikas Agadi, under the leadership of Mr. Uddhav Thackeray as Chief Minister.

                Events in Maharashtra only accentuate the utter lack of morality on display on the part of all concerned. If we were to look at the winners and losers that have emerged after this power play, clearly the BJP finds itself stranded by the wayside and has much to introspect, but it is not the only loser, The Shiv Sena may have won itself a reprieve and fulfilled Thackeray’s ambition of being Chief Minister, it has come at a cost, as it appears to have caused grevious damage to its ideological foundations. There is always the possibility that Uddhav may have realized that with the Ayodhya Temple issue having been resolved to a large extent, hard Hindutva is unlikely to be a crowd puller in the coming days and an ideological shift was necessary if the Shiv Sena is to flourish. The Congress continues to be seen as disorganized, lacking leadership, confused and opportunistic, a perception that is unlikely to change until the Gandhi’s are leached out of its organizational structure. Only the NCP appears to have emerged as clear winners, especially Mr. Sharad Pawar, as he will undoubtedly wield the remote control on this coalition government. Off course, all of these shenanigans only reinforce the fact that it has been the people of Maharashtra, who have lost out the most, and were, in Mencken’s words, “moronic” enough to vote these ingrates into power.

    The writer is a military veteran and consultant with the Observer Research Foundation and a Senior Visiting Fellow with The Peninsula Foundation, Chennai. The views expressed are the author’s own.

  • Gender Wage Inequality: A Core Problem in Rural Indian Economy

    Gender Wage Inequality: A Core Problem in Rural Indian Economy

    Growing unemployment rates, inadequate demand and low productivity in rural India is currently drawing significant attention particularly in view of the current economic slowdown. Debates on falling agriculture productivity and consumption in rural areas have partially ignored the gender dimension. The sexual division of labour in a rural production framework arbitrarily sets the female wages lower than men. Declining participation of women in labour force could relate to various socio-economic conditions, a sector wise analysis mirrors an intelligible dynamics of the problem.   Informal rural market already operating below the minimum wage exploits women as they are presumed to have poor bargaining power and social constraints blocking their employment migration tracks. While the dire status of marginal farmers and casual labourers are talked about, economic and social inequality across gender misses the radar.

    Optimism on gender grounds rose after the wage gap between men and women started reducing in rural labour market across India. A closer examination of the wage data among rural labour reveals the complex nature of female labour wages. More importantly, the seeming reduction in  wage gap in actuality is more due to  decline in male wage rates. The overall percentage of women in rural casual labour market has seen a marginal reduction from 35 percent in 1983 to 31 percent in 2017-18. Analysis of informal casual labour market reveals a pattern of women being paid low wages and with no social security schemes resulting in decline in already poor quality of living. Significantly, economic contribution of women is grossly underestimated in the current System of National Accounts (SNA). Time Use Survey captures all unpaid activities of men and women which would be more accurate to calculate. However, the problem of valuation remains an issue, and calculation of woman’s opportunity cost in a rural household is an arduous task.

    Complex pattern of decline in female work participation rate

    Female Workers Participation Rate (FWPR) in rural sector declined from 32 percent in 1972-73 to 17 percent in 2017-18. Studies suggest various reasons could be responsible for a fall in proportion of women in rural work force.  According to Census India 2001 and NSSO 2010, increasing number of women migrate from one rural area to other and round 64 percent of women migrants move because of marriage. A research study in Institute of Asian Studies observed an income effect, U shaped probability curve of female participation with the log of male income in the family. This means more women were working during the times of economic distress to support the family and participation rate gradually reduced with higher income earned by the men. However, with increase in income, there is also a pattern of women working to meet the increased consumption expenditure. Education is also considered an important component contributing to reduced percentage of women in labour force. As literacy rates grow, graduate women are aspiring to get employed in skilled jobs and voluntarily withdraw from the work force. However, proportion of women in primary sector has only declined from 89.7 percent (Krishnaraj & Kanchi, 2008) in 1972 to 83.6 percent in 2004. Evidently, majority of women in rural areas are dependent on primary sector for employment, a drop to 67 percent of men dependent on primary sector for employment is due to their shift to secondary and tertiary sectors. Employment in unorganised sector is beset with low wages, an exploitation by the employers.  Moreover, absence of social security cripples the income earning capacity of women. This deliberately places women in the lower strata of rural economy leading to poor socio-economic living conditions and has a direct impact on their inability to invest in education, health and nutrition.

    Women in informal sector and Poverty in rural India

    India’s rural sector is characterized by a large segment of informal labour force where 90 percent of the population is either self-employed or work for casual wage. Rural areas in particular operate in an informal economy and wages are mostly determined by the labour market where women are inherently considered less productive and paid less than men.

    As of 2011-12, 68 percent of female casual labourers were receiving less than National Minimum Wage of INR 122. Around 47 percent of men in rural India received less than the minimum wage indicating the unreliable nature of rural informal job market. Men, naturally with higher migration possibility, shift to informal urban sector jobs but women are left with depressed wages even as the labour demand remains high. Although the rural urban migration among women is higher than men, 60.8 per cent of women migrating to urban areas are due to marriage. As far as employment is concerned only 2.6 percent of women migrate as opposed to 52.7 percent of men. The decline in women participation in labour force is visible among educated women. Unskilled women in poor households tend to work for daily wages and have not substantially reduced from workforce. In rural India, where casual farm and nonfarm jobs are exploited it makes limited sense to use only wage gap to measure the gender equality.

    Agriculture, evolved from a traditional household structure, supports if not advocates, defined gender roles and discriminates women overtly through economic means. According to the recent NSSO report unemployment rates among rural females has increased from 1.8 percent in 2004-05 to 3.8 percent in 2017-18. However, an average of 5.4 percent of women had reported to be available for additional work in PLFS survey 2017-18. Unemployment is rampant across the country in all sectors but women labour supply for casual jobs especially in poor household still remains high pushing the daily wages further down. Intense land fragmentation has increased the percentage of marginal landowners to 85 percent but the demand for labour has reduced, forcing men to migrate into other sectors. Deepening crisis in agriculture also contributes directly to low wages among residual unskilled women labourers. Effectively the ‘informal labour’ market conditions has become a trap that exploits unskilled women as they are willing to work even at a lower wage rate. In effect, an increase in participation would not guarantee a better standard of living if the market is unregulated and exploitation based on gender continues.

    Why Government measures are only partially effective?

    Government initiatives for the rural economy have led to various policies to increase the income levels of marginal farmers and unskilled labourers. Women participation has been prioritized in such schemes and has shown to reduce poverty among rural households. National workfare program MGNREGS provides employment on demand and has managed to attract many women to participate by claiming to offer equal wages. As the Public employment program also mandates 33 percent of labours to be women, unskilled women are largely entering into the MGNREGS program. For the financial year 2011-12, 48 percent of women are engaged in this program from all the rural districts. However, wage gap exists even in a state intervention program- calculating from Annual Report of PLFS 2017-18, men on an average are reported to earn 152 INR per day while women are paid 143 INR from the state employment guarantee program. Further, in few states like Gujarat, Tamil Nadu, Punjab, Madhya Pradesh, Maharashtra and Telengana casual worker’s (both male and female) wage is below the notified wage for financial year 2017-18. State programs are accused of various leakages and operational inefficiencies, yet the participation remains high indicating a much serious problem in rural labour market. An important long term issue pertaining to state run workfare program is the stagnation of skill levels in rural India.  Women participation in secondary and tertiary sector is low; a possible explanation for unskilled women labourers’ compromise for low wages is because of lack of any other alternative. Skill augmentation is prerequisite to transform from an agrarian to an industrial society. A significant effort needs to be directed in training unskilled work force in rural sector, and government employment program has to be a seasonal support system.

    Skill development and Vocational Training to combat rural poverty

    The national average wage difference between men and women for casual employment other than MGNREGS work is calculated to be 55.02 INR for the year 2017-18 and states like Tamil Nadu, Kerala, Tripura and Andhra Pradesh are observed to have the highest gender wage difference. Ironically, these are the states with female participation (in casual labour force) higher than the national average of 25.5 percent, implying that wages (equal wages) are not the only driving force for influencing labour participation. In rural India, while socially defined roles result in unequal wages in labour market, women’s labour does not seem to follow the traditional backward bending labour supply curve. The natural withdrawal of women from workforce is not as serious as unskilled women remaining in informal sector even with lower wages. Real problem of women in rural economy is their diminishing bargaining power and skill stagnation or non-development of any skills due to informal structure and counterproductive state measures.

     A complete free market approach would deepen the wage difference as rural women are assumed to have low skills and weak bargaining power. State intervention to engage more women in labour market should not be limited to just providing 100 days of employment. Skill enhancement, vocational training demanded by industrial and service sectors needs to be imparted in rural areas. Residual women in rural areas are reserve army of labour available and usually are exploited for reasons given above. The gender wage gap is a consequence of a faulty design by the government and dyed-in-the-wool beliefs of people; solutions lie in the state prioritising proactive measures to reform the unorganized sector and improve market accessibility for women. Unequal remuneration in informal sector is a symptom of a fragile labour market. Women labourers end up bearing weights of both market and state failure with poor skills and low wages.

    Manjari Balu is a Research Analyst with The Peninsula Foundation.

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