PM IAS EDITORIAL ANALYSIS AUG 07

Editorial 1: Powering up to get to the $30-trillion economy point

Introduction

With rising hopes of a 7%-plus GDP growth rate and India being the fastest-growing large economy in the world today, it is often discussed that the 21st century will be ‘India’s century’  For India to fulfil such a dream and become a $30-trillion economy by 2047, we must pursue rapid economic growth built on liberal economic policies that harness the private sector. However, Inequality remains a question of debate in India’s journey towards growth.

Potential of India’s working-age population

• Standard of living: Economic growth is the most effective tool for poverty alleviation and improving living standards.
• Poverty alleviation: From Independence till 1991, India’s poverty rate stayed at approximately 50% despite socialist policies emphasising poverty reduction. Between 1991, the year of liberalisation, and 2011, the poverty rate fell to approximately 20%, pulling 35 crore people out of abject poverty.
• Inequality: More Indians and specially at the bottom of the pyramid are better off than ever before. I
• Wealth creation: In any fast-growing economy, there are bound to be a few people who generate a lot of wealth — wealth creation is inherent to economic growth and the most crucial incentive for entrepreneurship.

Key data points on Indian economic growth

• IT Growth: India’s high-growth years of 2000-10 were led by an IT services boom that spawned an affluent middle-class during the Economic reforms of the 1990s.
• Agricultural Labour: 46% of our labour force remains in agriculture, characterised by low productivity and under-employment, contributing just 18% of our GDP.
• Female labour force participation rate (FLFPR) — at 37%, post COVID-19 it was 26% when several women have gone back to work as agricultural labour. Compare this with the FLFPR in China, Vietnam, and Japan, all between 60%-70%

Unlocking the potential of Indian economy to boost growth

• Export oriented Industrialisation: Low-skilled, employment-intensive manufacturing with a strong focus on exports is important. For instance, South Korea, Taiwan, Japan, and Vietnam came to be called the ‘Asian Tigers’, regularly achieving double-digit growth between 1960-90 through  focused approach on rapid export-oriented industrialisation.
• Openness of economy:  is needed for growth, For instance, in India between 1990 and 2013, exports grew as a percentage of India’s GDP grew from 7% in 1990 to 25% in 2013.
• Augmenting Supply Chains: India is trying to capitalise on the China+1 moment to attract global manufacturers and their supply chains, and further augment its exports, alongside we must be cautious of putting up huge tariff walls for imports.
• Controlled import tariffs: The lure of import tariffs must be resisted  as coddled and inefficient manufacturers enter in the market. For instance,  a mobile phone maker who has to import components from China. Tariffs will artificially inflate the prices of the many parts needed for their finished phones, ultimately raising the prices of downstream Indian exports. Thus creating a vicious cycle.
•  The middle Income trap: India must graduate from lower-middle-income economy to middle-income status by the early part of the next decade.
• Sector oriented approach:  Economies losing their edge in lower-end sectors and not being competitive enough with more prosperous countries in high-tech sectors hinders growth.

Necessary Steps to boost India’s economic growth

• Low-tech manufacturing: To leverage our surplus labour in order to grow in low-end sectors. The IT boom gave us an alternative pathway to growth.
• Ecosystem boost:  Value chain in manufacturing is built on a foundation of low-tech manufacturing — ecosystems of managers and workers who get things done while ensuring scale and quality, form the backbone of any industrial sector.
• Improving work conditions: India’s social sector and civil society should deal firmly with campaigns that paint factories (hubs of low-tech manufacturing) as sweatshops, decrying their work conditions and low wages.
• Balancing employer-employee interest: Should be a priority as forcing employers operating on wafer-thin margins to spend more on employee welfare would not improve the quality of manufacturing jobs as much as it would result in the erasure of such jobs altogether for those with very few options for employment outside of farm work.
• Minimum Government, Maximum Governance: Avoiding the middle-income trap requires a market-led economy that lets private enterprise thrive, without the government, or perceptions of factory jobs, getting in the way.
• Ease of doing business: The Indian state must continue delivering on this decade-long promise in earnest.
• A cluster-led industrial model: Revamping creaky infrastructure by building industrial clusters that are on a par with those in China and Vietnam, with plug-and-play infrastructure and ancillary ecosystems, for education, health care and entertainment, thereby attracting both employers and workers.
• Labour productivity and logistics growth: is needed to reduce cost disabilities when compared to countries such as Bangladesh, China and Vietnam
• Compliance burden: Deters new players from entering and the existing ones from expanding. Stringent regulations should be relaxed in designated areas, helps create a favourable environment for manufacturing.

Conclusion

Time is of the essence; the government must leverage the strengths of the private sector and its own penchant for reforms to focus on low-skilled manufacturing that can employ multitudes of people in sectors such as electronics assembly and apparel, as the opportunity that needs to be made more lucrative for scores of Indians. Inter-State migration and urbanisation would be important here, as would FLFPR and a decline in agriculture’s share of total employment, to assess whether we are on the right path to becoming a $30-trillion economy by 2047. The reward for breaking down these barriers to growth would be an unfettered path to prosperity.

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Editorial 2: Set for a stand-off with Governor

Introduction

Karnataka has been witnessing political theatrics for over a week with the government in power(Congress) accusing the Raj Bhavan of ‘taking instruction’ from the BJP to destabilise the democratically elected government. The government has locked horns with Governor Thaawar Chand Gehlot after he issued a show cause notice to Chief Minister Siddaramaiah questioning why sanction to prosecute Mr. Siddaramaiah should not be given to probe the alleged irregularities in the distribution of sites to his wife by the Mysuru Urban Development Authority (MUDA) in lieu of land acquired from her.

What is the stance of the Government in Power in Karnataka?

• CM away from Cabinet: during the meeting of the Council of Ministers, chaired by Deputy Chief Minister D.K. Shivakumar. It advised the Governor to withdraw the notice and reject the request seeking sanction for prosecution.
• The Congress High Command:  has asked his Cabinet colleagues to stay united
• Constitutional question: Congress call it ‘anti-democratic and anti-constitution move of the Governor’  and decided to mount a legal battle.

The irregularities in MUDA(Mysore Urban Development Authority)

• Compensatory allotment of residential sites: Under a 50:50 scheme, where the land loser receives 50% of the developed land.
• Allegations on CM’s wife: who have been allotted 14 sites under a 50:50 scheme in lieu of three acres and 16 guntas acquired by MUDA to develop a layout benefitting from the scheme during the BJP’s rule in 2023 when Mr. Siddaramaiah was the Leader of the Opposition.
• Misuse of authority: It was revealed that a family member of the Chief Minister from Mysuru district and political leaders across the spectrum are also alleged to be the beneficiaries.
• Reputation tarnished: Facing intense pressure for the first time in this tenure, Mr. Siddaramaiah and his supporters have steadfastly denied the irregularities, citing legal and procedural provisions.

Action taken by the Governor

• Before issuing the show cause notice, the Governor sought clarifications from the government on two occasions.
• Clarifications were provided by the Chief Secretary on one occasion and by the Chief Minister during a personal meeting on another occasion.
• Eventually, on July 26, the Governor issued a show cause notice, giving the Chief Minister a week’s time to respond.
• On the last day of the deadline, the Council of Ministers advised the Governor to withdraw the notice and reject the request for prosecution sanction.

Why was the Governor’s action challenged?

• Article 163: Terming the Governor’s action as “done in haste and without application of mind”. Article 163 of the Constitution, the Governor lacks the discretion to serve a show cause notice to the Chief Minister without a report from an inquiry or investigating agency.
• Historical cases: In 2011 when the then Governor H.R. Bhardwaj gave prosecution sanction against then Chief Minister B.S. Yediyurappa, the Governor had the Lokayukta report, they contended, adding that the provisions in the Prevention of Corruption Act, 1988, has also been modified since then. They also pointed out that the Governor’s action was premature since a complaint had been made with the Lokayukta.

Conclusion

The BJP and JD(S) have been unrelenting in their demand for the Chief Minister’s resignation and are on a 140-kilometres padayatra to Mysuru from Bengaluru. While in response, the Congress has been holding the Janandolana programme in big towns en route the padayatra to fight “misinformation”, highlighting that the scheme was there during BJP’s tenure. Mr. Siddaramaiah, “corruption-free four-decade political career” braces to fight the allegations. Now, all eyes are now on the Governor’s next move. Nevertheless, constitutional provisions and a legal recourse should be the guiding light during proceedings. Both Governor and CM should take a macro view, and ensure transparency along with maintaining the dignity of their respective offices.