Economic Highlights

New Delhi, 1 April, 2024

Market Fails Jobs: ILO

CHANGE NEP, STRATEGIES

By Shivaji Sarkar 

As the country gears up for one of its most interesting elections, the economy requires significant improvement to address the challenges, as highlighted by the International Labour Organisation (ILO) and official indicators, which reveal a deteriorating situation concerning jobs and official stats of a 31 percent decline in foreign direct investments (FDI). 

Ambitious government projections of $3 to 5 trillion economy and other figures apparently are not in sync. A rise in the stock market is not supported by strong indicators else FDI cannot fall so drastically at a critical political juncture. 

The country is receiving short-term fly-by-night foreign portfolio investments at stock markets. The FDI indicates the investor confidence in the system. It is promised but is not actually flowing in. There are UNCTAD studies that show interest in India, but the actual flow has usually been weak. India’s inequality is attracting attention of world powers. 

The Inequality Report 2022 brought out by Institute of Competitiveness on the basis of Periodic Labour Force Survey (PLFS) 2019-20 finds that monthly salary of Rs 25,000 puts a person among the top wages earned. It is interpreted as a challenge to securing development with dignity to all and actual growth. 

The ILO report is vocal about the employment challenge that cannot be left to the markets alone. Production in manufacturing is becoming capital intensive. Without high manufacturing growth, employment generation might continue to disappoint. Is it for that reason the government investing in the construction and real estate? It is internationally accepted that about two-thirds of infra investments are frittered away in various kinds of cuts. Be it Southeast Asia or any other region, infra investments have resulted in severe meltdowns. 

India’s youth employment profile suggests country passing through a difficult phase. Share of youth who are not in employment, education or training has averaged 29.2 percent between 2010 and 2019, the highest in the subcontinent. There is high proportion of unemployed educated youth even as industry complains of a shortage of skilled jobs. 

The report emphasises on the broken link between education and employment. “A large proportion of highly educated young men and women, including the technically educated, are overqualified for the job they have”. It is a reflection on the education system and the New Education Policy (NEP) that stress on an extended four-year-undergraduate degree course and high qualifications of PhD. This is a common phenomenon across the country as youth with such unusually high qualifications pine for blue-collar public sector jobs in the hope of job security. About 3700 PhDs applied for the post of a peon in Uttar Pradesh police where class 5 was the eligibility criterion. 

It's an unsavoury comment on the education system and the private sector, which have thrown even the basic labour laws to the wind. The ILO report stresses on 1) promoting job creation; 2) improving employment quality; 3) addressing labour market inequalities; 4) strengthening skills and active labour market policies; and 5) bridging the knowledge deficits on labour market patterns and youth employment. The NEP does not answer these questions.

It flags the challenges of addressing inequalities, improving quality of jobs and fixing asymmetries in the labour market. A State Bank of India study on women’s collectives brings out the gains through aspiring lakhpatididis. However, on income, employment and human capital there is still a distance to cover. 

The ILO report calls for giving primacy to labour intensive manufacturing employment to absorb the unskilled labour. A comparison with China’s shortfall in infrastructure funding promises to SE Asia on Belt and Road Initiative (BRI) may be a lesson for India, as per study of Syndey’s Lowy Institute. It is a pointer to the huge gap in funding and long gestation period. Only 35 percent of infra projects seen through completion. The funding is falling through by $50 billion. The Lowy report is a caution for India for desisting from investing in infra projects. Poor quality of constructions of bridges and other infra, including too many roads in Maharashtra, Gujarat of Bihar are testimonies for the failures. 

Women are often not preferred for jobs as these entail maternity and child care benefits. About 53.3 percent of the female workforce was self employed in 2019. It rose to 62 percent in 2022. Many of them are employed but paid low or no wages.

The weak consumption data in the GDP numbers indicate that over the past decade inflation-adjusted earnings of regular salaried and self-employed persons declined. Perhaps, it is the post-demonetisation syndrome that devastated the small and medium entrepreneurs. 

An issue that the reports have not discussed is the marginalisation of the public sector companies and gradual disinvestment. A fall out is testified by the electoral bond donations. The Rs 12000 plus crore donations are grim pointers that the private sector functions on the principles of giving donations and in return getting back expensive projects. 

These are dependent on the government doles at the cost of PSUs. A real private sector has not yet emerged in this country. This has been the pattern in the licence-permit raj as well and continues in era of liberalisation. Why should a country foster such unethical business model? Much of the failings underlined by the ILO or PLFS are grim reminders of poor consumption and a failing business system. 

The nation needs to ponder why it should dip into high debts which has annual repayment of over Rs 10 lakh crore exponentially squeezing the actual budgetary allocation to around Rs 37 lakh crore, far away of from $3 trillion target. A policy review is called for the entire financial system, manufacturing, employment and New Education Policy. 

The country is on experimentation spree and has yet to stabilise its policies.  The high prices are obstructions. Parliament is unnecessarily busy in making laws or redrafting the old ones. No wonder the chief economic advisor, the highest think tank, says the government can’t solve the problem of unemployment.  Post poll all national and regional parties and institutions must come together to redraft the sustainable growth path and manufacturing policies, including revival of PSUs for proper quality job creation, a strong ILO suggestion. ---INFA 

(Copyright, India News & Feature Alliance)

REWIND

New Delhi, 28 March 2024

SUPREME COURT GOES WRONG

By Inder Jit

(Released on 13 March 1984) 

The Supreme Court’s judgment on electronic voting has been dismissed widely as of little consequence. Most people feel it matters little whether they vote by ballot or through an electronic machine. Yet the verdict deserves greater attention of the nation than it has received so far. It goes way beyond the Court’s decision to set aside the election of a Kerala MLA. The judgment has raised a basic issue of vital importance to the provision of free and fair elections in India. Since free and fair elections are the bedrock of any democracy worth its name, several questions arise. Who is to ensure free and fair elections under the Constitution? The Election Commission or Parliament? Which of the two is the apex body in matters relating to election? Can the Election Commission ignore Parliament? Or vice versa, can Parliament ride roughshod over the Election Commission? Whose view should prevail in the event of a clash of opinion? What was the basic scheme and approach of the founding fathers of the Constitution? 

First the judgment. A division bench of the Court has held that the Election Commission’s order directing the casting of ballot by machines was without jurisdiction according to the law. More important, the court disagreed with the contention of Mr Ram Jethmalani and Mr Asoke Sen, who appeared for the respondent and the Election Commission respectively, that the Constitution gave complete powers to the Commission for the conduct of elections under Article 324. The judges observed that the provisions of the Constitution could never have intended to make the Commission an apex body in respect of matters relating to the elections and conferring on it legislative powers ignoring Parliament altogether. If the Commission was armed with such unlimited and arbitrary powers, the judges observed, if it ever happens that the person manning the Commission shares or is wedded to a political havoc or to bring about a Constitutional crisis, it could set at naught the integrity and independence of the electoral process, so important to and indispensable in the democratic system. 

The bench said that such an absolute and uncanalised power given to the Commission without providing any guidelines would itself destroy the basic structure of the rule of law, adding “it is manifest such a disastrous consequence could never have been contemplated by the Constitution makers.” Hence the judges said: “We construe Article 324 to 329 would reveal that the legislative powers in respect to matters relating to Parliament or State legislature vest in Parliament and no other body, and the Commission would come into the picture only if no provision has been made by Parliament in regard to the elections to Parliament or the State legislature.” The judges said furthermore: “The power under Article 324 relating to superintendence, direction and control was actually vesting of merely all the executive powers and not the legislative powers.” It was pertinent to indicate that the Kerala High Court, which had upheld the election of Mr Pillai, “fell into an obvious fallacy by acceptance of the position that the direction of the Commission was intended to operate in an uncovered field.” 

The founding fathers were anxious to ensure free and fair elections and therefore, created an independent Election Commission which would function without fear or favour. Accordingly, Article 324(1) of the Constitution provides “The superintendence, direction and control of the preparation of the electoral rolls for, and the conduct of, elections to Parliament and to the legislature of every state and of elections to the offices of President and Vice President held under this Constitution shall be vested in a Commission (referred to in this Constitution as the Election Commission)”. However, all this would have been meaningless without protecting the independence of the Chief Election Commissioner, therefore, the founding fathers also provided under Section 5 of the same Article that “the Chief Election Commissioner shall not be removed from his office except in like manner and on like grounds as a judge of the Supreme Court”. Further, “the conditions of service of the Chief Election Commissioner shall not be varied to his disadvantage after his appointment.” 

Not many remember that the founding fathers deliberately and advisedly picked the three words superintendence, direction and control from Article 14 of the Government of India Act of 1935. This key article, it needs to be pointed out, was specially designed to give the Secretary of State absolute power to supervise, direct and control the functioning of the Governor General of India, who was authorised even to act “in his discretion” and “exercise his individual judgment”. In fact, a Constitution Bench of the Supreme Court held in 1978 that the power of the Commission in the superintendence, direction and control is unfettered and over-riding. Parliament, is no doubt, empowered under Article 327 to legislate or certain aspects of the elections, such as making provision with respect to elections to legislatures. But the crucial point to remember here is this: all such legislation is subject to the absolute power accorded to the Election Commission to conduct a free and fair poll (italics mine). 

In practice, the three words superintendence, direction and control - also give the Election Commission two vital far-reaching rights; to virtually legislate and to be informed. The Chief Election Commissioner is empowered to legislate through “direction”, implement the legislation through “superintendence” and interpret the legislation through “control”. Every little detail in regard to the conduct of elections comes under his overall control, direction and superintendence through Section (6) of Article 324 of the Constitution which provides: “The President, or the Governor of a State, shall, when so requested by the Election Commission, make available to the Election Commission or to a Regional Commissioner such staff as may be necessary for the discharge of the functions conferred on the Election Commission by clause (1)". Experts tell me that the word staff does not mean merely officials or clerks of the State. The word embraces everyone under the umbrella of either the Centre or the State Government, including the police and the army. 

The Constitution Bench of the Supreme Court held in the Mohinder Singh Gill case in 1978 that “the Constitution contemplates a free and fair election and vests comprehensive responsibilities of superintendence, direction and control of the conduct of elections in the Election Commission. This responsibility may cover powers, duties, and functions of many sorts, administrative or other, depending on the circumstances.” It conceded that “when appropriate laws are made under Article 327 by Parliament as well as under Article 328 by the State legislatures, the Commission has to act in conformity with those laws and the other legal provisions made thereunder.” Nevertheless, it made it clear that both these articles “are ‘subject to the provisions’ of the Constitution which include Article 324 and 329.” It added: “since the conduct of all elections...is vested under Article 324(1) in the Election Commission, the framers of the Constitution took care leaving scope for exercise of residuary powers by the Commission in its own right, as a creature of the Constitution, in the infinite variety of situations that may emerge from time to time in such a large democracy as ours.” 

Not only that. The Court further explained: “Every contingency could not be foreseen or anticipated with precision. That is why there in no hedging in Article 324. The Commission may be required to cope with some situation which may not be provided for in the enacted law and the rules. That seems to be the raison d’etre for the opening clause in Article 327 and 328 which leaves the exercise of power under Article 324 operative and effective when it is reasonably called for in a vacuous area.” The Court further held: “Once the appointment is made by the President, the Election Commission remains insulated from extraneous influences, and that cannot be achieved unless it has an amplitude of powers in the conduct of elections of course in accordance with the existing laws. But where these are absent… he must lawfully exercise his powers independently, in all matters relating to the conduct of elections, and see that the election process is completed properly, in a free and fair manner”. 

The basic issue boils down to this: which is the apex body for the superintendence, direction and control of the elections: Parliament or the Election Commission? In the case of the Kerala MLA, the Election Commission took the view that it had the necessary constitutional and statutory powers to go ahead with electronic voting under Article 324. But the Supreme Court has held that it was not open to the Commission to do so “at its own sweet will.” In support of its contention, the Court has argued that the powers of the Commission were “meant to supplement rather than supplant the law.” It has also stated that the Commission could not be given “unlimited and arbitrary powers” as this could have “disastrous consequences” which could “never have been contemplated by the Constitution makers.” But in taking this stand, the Supreme Court appears to have overlooked the ultimate check provided by the founding fathers against the Commission going berserk. Article 324 also provides that the Chief Election Commissioner can be removed by Parliament in a like manner and on like grounds as a judge of the Supreme Court. 

What next? We have now before us the judgment of a three-member Division bench of the Supreme Court comprising Mr Justice Murtaza Fazl Ali, Mr Justice Varadarajan and Mr Justice R. Misra. We also have the judgment of the five-member Constitution Bench comprising Mr. Justice M. H. Beg, Mr Justice P.N. Bhagwati, Mr Justice Krishna Iyer, Mr Justice P.K. Goswami and Mr Justice P.N. Singhal in the Mohinder Singh Gill case. Obviously, the latest verdict holds the field. The Union Law Minister, Mr J.N. Kaushal, told the Rajya Sabha on Friday that the law as now laid down by the Supreme Court's judgment “is unexceptionable.” But the Opposition and some constitutional experts hold a different view. Some even describe the judgment as “retrograde and preposterous”. (Criticism of a judgment is permitted so long as motives are not attributed.) Mr L.K. Advani suggested that either the Government or the Election Commission should approach the Supreme Court for a review. This, he said, was necessary to restore independence of the Election Commission and to ensure free and fair elections. The suggestion deserves to be accepted since the Supreme Court has gone wrong in virtually reducing the power of the Election Commission from superintendence, direction and control of elections to mere superintendence. An issue of fundamental importance is involved --- INFA.

(Copyright, India News & Feature Alliance)

Round The World

New Delhi, 29 March 2024

PM Modi in Bhutan

SOLIDIFYING HISTORICAL TIES

By Prof. (Dr.) D.K. Giri

(Secretary General, Assn for Democratic Socialism) 

Prime Minister Narendra Modi’s visit to Bhutan on 21-22 March was significant for more than one reason. It was to counter China which is aggressively penetrating to India’s neighbourhood. Recently, through the border talks, Beijing sent overtures to Bhutan in order to dilute New Delhi’s historic ties with Thimphu. Second, despite the pressure of electioneering, Modi dashed to Bhutan underscoring the importance New Delhi attaches to its neighbourhood first policy. Third, conferring the Order of the Druk Gyalpo on Prime Minister Modi is an evidence of reciprocal importance Thimphu places on its ties with India. This honour is the highest award Bhutan gives to anyone including all orders, decorations and medals. The honour is testimony of India’s commitment to Bhutan’s growth, prosperity and security. 

Political observers have wondered how a small country like Bhutan could be friendly for so many years with a much bigger country like India. Bhutan has a geographically area of 38,394 sq kms and a population of about 7.7 lakh whereas India’s territory consists of 3.28 million sq kms and population of 140 crore plus. The asymmetry in size and population is huge. Yet both the countries have remained the closest partners in the region for over last 50 years and more. This is because India treats other countries with respect and as equals as it should be between two sovereign countries irrespective of their size and resources. Bhutan has been having the trust and confidence in India to help it grow. India in return, has lived up to that expectation. 

The latest in the bilateral relations between Bhutan and India is the development of Gelephu project which is being built as a special economic zone to attract foreign investment and advance prosperity for the Bhutanese kingdom. At the same time, this is being developed as a Mindfulness city with environmental security and spiritual well-being as the foremost concerns. The project will focus on all-round human well-being with practices of yoga, relaxation, recreation and spa therapies etc. 

The visit of King of Bhutan Jigme Khesar Namgyel Wangchuck in November 2023 was to highlight the need and significance of such a project. The King spent quite a bit of time both with Prime Minister Modi and President of India Draupadi Murmu. Also, Bhutan’s Prime Minister Tshering Tobgay was in New Delhi just a week before Modi’s visit. They had a lengthy discussion in Delhi. The back-to-back visits by the Heads of governments of both countries signify the attention placed on the relationship which manifests in their evolving closeness. 

Hydropower cooperation is the main pillar of India’s relations with Bhutan. Several hydropower joint projects have been commissioned and completed by both the countries that supply clean electricity to India and Bhutan with a regular flow of revenue. The delayed Punatsangchhu-II hydropower project is expected to be completed in 2024. However, some rethinking is called for as several other joint ventures on hydropower generation have not taken off. 

The Government of India has declared to double its development assistance from Rs 5,000 crore in the 12^th Five-Year Plan of Bhutan to Rs 10,000 crore. This is quite a significant development. Prime Minister Modi inaugurated a women and child hospital built with India’s support. Bilateralism with Bhutan in multiple sectors has grown under the basic framework of India-Bhutan bilateral relations in the form of Treaty of Friendship and Cooperation signed in 1949 and revised in 2007. 

Prime Minister Modi’s visit had at least three dividends. First, it gave strong message that India is committed to Bhutan’s development particularly in terms of support to the upcoming Gelephu project that would facilitate India’s increase in financial support. Second, Bhutan is an integral part of India’s massive infrastructure initiative and also for energy exchanges. Both these sectors are pushing sub-regional trade and trade and travel between India, Bangladesh, Bhutan and Nepal. Third, the message through the visit should be loud and clear that India is wary of Bhutan’s increased engagement with China. New Delhi may reconcile to Bhutan signing a boundary agreement with Beijing but will not brook China’s incursion into trade and investment in Bhutan. Beijing has done so with India’s other close neighbours. 

Without doubt, New Delhi is concerned about the ongoing talks between Bhutan and China on boundary agreement. In fact, the possible swap of land at Doklam to Bhutan’s west is a threat to India’s Siliguri Corridor and it could threaten India’s border connectivity projects in Arunachal Pradesh. Note that, Bhutan-China boundary talks focus only on areas to Bhutan’s west and north, but China’s new claims to Bhutan’s East have raised fears that Beijing is using these claims to put pressure on Bhutan to fast-track the boundary talks or risk broadening the disputed areas. 

As Bhutan appeared to be lenient to Beijing, Modi’s visit underlined India’s perspective on the border talks. Accepting the award, Modi said, “India-Bhutan ties are unbreakable and urged that India and Bhutan should remain vigilant about their ties in the face of challenges within their countries as well as in the neighbourhood. 

Modi’s visit to Bhutan, after the elections were announced, has raised some eyebrows. Some people commented that he could go as a caretaker Prime Minister but cannot initiate or conclude any agreements. Such visits during the operation of Code of Conduct are perhaps unusual. But given the strategic importance of visit, new conventions could be created in the national interest. So, the gesture was meant to denote India’s commitment to Bhutan in particular and to the government’s “neighbourhood first” policy. 

In order to enhance the bilateral relations, in the immediate future, New Delhi could perhaps think of commencing direct flights from Mumbai/Delhi and Gelephu which will increase the tourist traffic to Bhutan. Indians are looking for alternative tourist sites after a bad spat in social media with Maldivians. New Delhi also could transfer the knowledge and technology in building the Mindful city; encourage business to set up retail shops in the city. The success of Gelephu project will have economic spill-over in West Bengal and Assam region. 

New Delhi will have to react swiftly whenever China seeks to open an entry point to inch nearer India threatening her security. Remember, China’s so-called ‘String of Pearls’ in the Indian Ocean region to encircle India. Also, India should always remember Mao Zedong’s Five Fingers of Tibet. China considers Tibet to be its right hand palm with five fingers in its periphery – Ladakh, Nepal, Sikkim, Bhutan and Arunachal Pradesh. Modi has done well to visit Bhutan at this juncture. New Delhi should keep up the momentum even after the elections.---INFA 

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 27 March 2024

Politics Of Poverty

ARE POOR BETTER OFF?

By Dhurjati Mukherjee 

Lok Sabha elections announced, all political parties are gearing up to woo the electoral vote bank, specially the poor and reeling out promises and policies if brought to power. Social security measures are being spelt out, but none specifically talk of poverty eradication, though poverty analysis is an ongoing subject with poverty lines being drawn based on different stipulations by varied agencies from time to time. However, the fact remains that most of these analyses, particularly of governments, are somewhat theoretical propositions and are quite different from the ground reality. This is because the lack of involvement of civil society groups during the process of collection of data as also the trend to show lesser people are below the poverty line.   

Recall the somewhat irrational assessment by the chief of Niti Aayog stating that poverty stands at just 5 per cent in the country. This observation drew flak from different international organisations, not just Oxfam, though none thought it worthwhile to comment. Such an observation may not be surprising, because in reality the true conditions of the masses in the rural areas, specially the backward districts of the country, are best hidden. Moreso, as every government would seek to claim having improved their lot.   

Judging independently, while the political leadership makes tall claims, the agents of political parties are found torturing the impoverished and backward sections and grabbing their land though all this has not been adequately focussed in the media, only scattered reports of the neglect that the poor face. The ground situation doesn’t get the national attention as the information from grass-root leaders is kept in wraps and the gap between the rich and the poor is startling. 

The very recent survey released by the National Sample Survey Office (NSSO) is an indictor as its Household Consumption Expenditure Survey (HCSE) showed that the richest 5 per cent of urban Indian households spend nearly 10 times more than the poorest 5 per cent on food and other necessities such as children’s education, medical treatment, clothing and transport during 2022-23. In rural areas, the rich 5 per cent spend nearly eight times more than the poorest 5 per cent, whose daily expenditure is as low as Rs 46. 

Nine states, including West Bengal, Odisha, Jharkhand, Bihar and Assam, lagged behind the national average. In 2011-12, the average nationwide Monthly Per Capita Consumption Expenditure (MPCE) figures were Rs 1459 and Rs 2630 respectively for rural and urban areas. This is obvious due to the fact that the northern and eastern states lag behind those in western and southern part of India. Judged from all angles, education, health and basic facilities are grossly lacking in these states. 

It has been shown that rural monthly per capita consumption spending rose 164 per cent from Rs 1430 in 2011-12 to Rs 3773 in 2022-23 whereas in urban centres, it shot up 148 per cent from Rs 2630 to Rs 6459 during the same period. But during this 11-year period, there has been a perceptible increase in prices of food items and this, on modest terms, almost doubled while, in some cases, to be more accurate increased by around 80 per cent.  

Any analysis or report reveals the average, but this is somewhat misleading as this does not quite reflect the spending power of the bottom 25 per cent of the rural population. The inflationary conditions that have been manifest, both during and after the pandemic severely affected the rural poor. While incomes of at least 50 to 60 per cent becoming stagnant during the period comparisons have been made, there can be no reason to feel that the poor or the economically weaker sections are well off by any standards. Moreover, the very fact that the government decided to give free rations to 80 crore people for 5 years proves that this section needs support. 

Even for the rich, the survey showed that the top 5 per cent in rural areas spend Rs 10,551 per month but this appears a gross understatement. Similarly, the 5 per cent richest in urban areas are found to spend Rs 20,821. This finding, according to several economists, is not quite correct as such people, who own multiple cars and live in palatial bungalows and even go on foreign jaunts for shopping, the figures are more than double of what has been revealed in the survey. While accepting that surveys often grossly underestimate the spending of the rich, in this instant case, the inaccuracy seems quite blatant. 

Another interesting finding related to the investigation of the poverty scenario is India’s prevalence of so-called ‘zero-food’ children who have not eaten anything whatsoever over a 24-hour period, assessed through snapshot surveys, is comparable to the prevalence rates in the West African nations of Guinea, Benin, Liberia and Mali. A study that used data from the Union Health Ministry’s national family health survey for 2019-2021 estimated India’s prevalence of zero-food children at 19.3 per cent, the third highest after Guinea’s 21.8 per cent and Mali’s 20.5 per cent. The comparable figures are much lower in Bangladesh (5.6 per cent), Pakistan (9.2 per cent), Nigeria (8.8 per cent) and Ethiopia (14.8 per cent). 

The main question that has arisen is whether the Niti Aayog has measured poverty based on the government’s flagship programmes, ignoring the standard parameters adopted the world over. The government’s recent growth figures suggested the consumption growth was 4.4 per cent. If people are getting more money, why are they not buying basic stuff such as soap, hair oil, toothpaste, biscuit and so on? The fast-moving consumer goods (FMCG) sector is not quite growing with the slow consumption demand in the rural areas.  

Finally, it needs to be reiterated that tackling poverty or upgrading incomes of the bottom layers of the population, specially in the rural and backward areas, calls for a different approach to development. First and foremost is the need for imposition of a ‘super tax’ of 2 per cent, or at least 1 per cent, on the net wealth of the 167 wealthiest families in 2022-23 which would yield 0.5 per cent or 0.25 per cent of national income in revenues and create valuable fiscal space to fight poverty related issues. 

Moreover, innumerable projects, most of which are geared for the metropolises and cities, must change, keeping in view not just the poverty and squalor of villagers but also the significant benefits in numbers if even 50 per cent of the projects are executed in rural areas. It is time that the political leadership adhere to the recommendations of economists and sociologists and give a new thrust to the rural sector. And while some good work has been done in recent years, much more needs to be desired. ---INFA 

(Copyright, India News & Feature Alliance)