Read The Hindu Notes of 21st February 2019 for UPSC Civil Service Examination, State Civil Service Examination and other competitive Examination

The Hindu Notes for 21st February 2019
  • Topic Discussed: The Hindu Notes of 21st February 2019

    • The employment test

    The labour force may have actually shrunk while the Modi government has been in office

  • Attuned as we have become to political grandstanding on the purpose of democracy, we may not have imagined that something so prosaic as statistics can alter our perception of how it is actually working for us. The emergence over the past few months of data on employment, speaking precisely the lack of it, cannot but have an influence on our assessment. They paint a picture of an economy that is widely out of line with the government’s pronouncements on its performance. These have generally avoided any reference to employment, except to say that there is a lack of reliable data on it, for the rectification of which the government itself has done very little.
  • Arun Jaitley, Finance Minister for the greater part of this government’s tenure, has claimed that it has coincided with a degree of macroeconomic stability that has not been surpassed. Perhaps he had in mind the combination of falling inflation and declining Budget deficits since 2014. However, while this has indeed transpired, it is important to note that these trends had commenced even before. Moreover, after repeatedly expressing a commitment to fiscal consolidation, the government did not hesitate to swerve from the path of rectitude to finance an income support programme for farmers in an election year.

    • Silence on jobs

    But of greater significance is the fact that neither he nor the Prime Minister has had anything to say about employment. In this the BJP is not unique. Employment does not usually figure in the public discourse orchestrated by political parties, either at the Centre or in the States. This must change, for steady employment is the citizen’s aspiration, to realise which she elects representatives. Governments in India must therefore be routinely subjected to an employment test which gauges their success in generating and sustaining high employment. In his election campaign in 2014 Narendra Modi had announced that he would generate jobs.

  • Employment data from government sources (Labour Bureau) for about half a decade up to 2015 and from the independent agency Centre for Monitoring Indian Economy (CMIE) for the period since give us a reasonably good idea of the progress made with respect to employment. When supplemented with other information, these sources also suggest to us the proximate factors responsible for that history. The evidence they provide tell two stories. First, the Modi government has had next to no success in generating employment, notwithstanding its promises at election time. A development that may require some effort to understand fully, but which nevertheless it is important for the citizen to do, is that the labour force may actually have shrunk while it has been in office. The labour force is the sum of the employed and those unemployed who are seeking employment. A shrinking of the labour force is most unusual in an economy with a growing population, and thus a growing working age cohort.

    • The demonetisation effect

  • While this decline had already emerged in 2015, it became pronounced after demonetisation in 2016. We owe to CMIE, a private Indian body, both this finding and the articulation of the precise mechanism at work. A section of those hitherto willing to work may have simply dropped out of an already challenged labour market. This possibility is recognised in macroeconomics as the ‘discouraged-worker effect’ and has been observed in Western economies. The loss of skill that can accompany being unemployed even temporarily, and the consequent loss of long-run output for the economy, is the basis of the argument that public policy must respond with alacrity to growing unemployment. No such sensibility has infused the government, which appears not to have noticed the decline in the labour force itself, a development that occurred very early in its tenure. It has instead congratulated itself on having delivered macroeconomic stability. We are now able to see that whatever may have been the acclaimed beneficial impact of demonetisation in terms of raising direct tax compliance, it has caused demoralisation among a section of the already unemployed who may have given up all hope of finding employment.
  • The second of the two histories referred to, seen in the reports of one of the government’s agencies, is that of a rising unemployment rate from 2011 onwards. This point has political significance as we stay poised for the general election. This is that while the Modi government may have run amok with the demonetisation, India’s unemployment challenge predates this episode and evidently runs deeper. Labour Bureau data show that the unemployment rate almost doubled between 2011 and 2015. It is surprising that the government’s own reports did not flag this. The economic, as opposed to the political, message is that the recent history of unemployment has been impervious to the political formation governing India.
  • If we are to more than just wring our hands at the existant unemployment, an understanding of what underlies it is necessary. Actually, no more than standard macroeconomic analysis is needed in this regard. Both output growth and employment are under normal circumstances associated with capital formation. Capital formation as a share of output has been declining since 2011-12. Unlike consumption expenditure, capital expenditure is unique in expanding both the supply and demand sides of the economy. Despite the declining capital formation, neither United Progressive Alliance (UPA) II nor National Democratic Alliance II considered it necessary to respond to it by stepping up public investment, the obvious thing to do in the prevailing circumstances.
  • The clue to this inertia may be found in the political economy. For UPA II the success of its first term in office must have looked like the perfect opportunity to expand its political base by legislating rights and reciting the mantra “inclusive growth”. Then came Narendra Modi, who somewhat incongruously for an avowedly nationalist politician, embraced the dogma of the Washington Consensus. Popular in the 1990s after the collapse of the Soviet Union, it extolled small government and asserted the capacity of the market mechanism to deliver an optimal outcome. There was in this scheme of things no place for any involuntary unemployment. So, whatever may have been the calculation of the two political formations, employment generation just took a back seat in their respective programmes.

    • Cost of failure?

  • We have adopted representative democracy as our form of government because we cannot in isolation achieve the outcomes we desire even when they are exclusive to us. Employment is one example of this. Though it manifests itself as jobs for individuals, it is determined by macroeconomic factors which individuals cannot influence on their own. The Great Depression in the 20th century and the Great Recession in the 21st, both which have originated in the U.S. but quickly spread across the world, testify to this helplessness of individuals in the face of market forces. In a democracy, it is left to elected representatives whether to pursue macroeconomic policies conducive to the generation of employment. India’s political parties have for close to a decade now failed to so, either wilfully or out of neglect. However, when elected to govern, they are given a chance to create the conditions that enable Indians to lead flourishing lives, which includes being meaningfully employed during their working age. India’s political parties must pass ‘the employment test’. When they fail they must vacate the stage.

    • More symbolic than punitive

    India’s trade-related action will encourage informal trade and propel Pakistan to look for markets beyond South Asia

  • India’s decision to withdraw the Most Favoured Nation (MFN) status to Pakistan means that India will not treat Pakistan on an equal footing in trade as is expected of fellow members of the World Trade Organisation. The move comes after the attack on a Central Reserve Police Force convoy in Pulwama, Jammu and Kashmir.

    • Just a dent

  • It does not strictly fall under the ‘beggar-thy-policy’, often used in international trade through which one country tries to resolve its economic problems by means that worsen the economic problems of its neighbours or trade partners. The moot point therefore is the sensitivity of the impact of the MFN status on Pakistan in terms of its trade with India. It can only be a pressure tactic and do little unless stringent actions are taken to stop informal trade that has been going on between the two countries for long.
  • Besides China, India and Pakistan are the two largest economies in the South Asian region. Being dominant constituents of the South Asian Association for Regional Cooperation, both countries have immense potential for intra-regional trade. Trade now takes place using three channels: the official route; the illegal (informal) route, through smuggling along porous India-Pakistan land borders and also Afghanistan, which may not be accounted for in the national income; and lastly, through mainly Dubai and Singapore, which have free ports and accommodate legal agents of traders from India and Pakistan.
  • Informal trade generally takes place due to restrictions on import of specific items on grounds of health and religious beliefs; ‘high tariff barriers or transportation costs, making it cost effective to smuggle goods in the country; imposition of non-tariff measures (NTMs)’; weaknesses in the ‘rules of origin’ resulting in ‘trade routed through a third country; leakages in transit trade; and distortions in domestic policies such as the absence of or relatively low indirect taxes, creating an incentive to transport items illegally to neighbouring countries. Traders carry out informal trade between Pakistan and India through the exchange of goods at the border as well as through the personal baggage scheme’ through “green channel” facilities at international airports or railway stations. ‘Informal trade has also taken place through Afghanistan where goods are exported officially from India and later smuggled into Pakistan. Indian-made goods smuggled into Pakistan include cosmetics, liquor, stainless steel utensils, ayurvedic medicines, videotapes/CDs, confectionery/cashew nuts, tea, coffee, live animals and spices’.

    • Trade data

  • From 2011-12 to 2017-18, India’s formal trade with Pakistan increased from $1.94 billion to $2.41 billion. Of this, the share of exports stands at almost 80% and has been fairly stable over the years (Ministry of Commerce and Industry, India). In 2012-13, informal trade between India and Pakistan — estimated in a study (ICRIER, N. Taneja and S. Bimal, 2016) — was $4.71 billion, which was double when compared to formal trade. India’s informal export share to Pakistan was again much higher at $4 billion while its import share was low at $0.71 billion.
  • After the Pulwama attack, the follow-up measure to raise tariff duty on imports to 200% can again be trivial. So would be the NTMs, if increased, as India’s imports from Pakistan are reasonably low at $0.488 billion. Besides, imports from Pakistan grew at a lower rate (1.04%) compared to exports (1.32%) per annum from 2011-12 to 2017-18. Major exports from India that would hard hit would be cotton (not carded or combed) valued at $0.273 billion, p-Xylene ($0.082 billion), polypropylene ($0.063 billion) and single yarn ($0.088 billion). Pakistan’s loss from major exports to India would be much less — from dates ($0.113 billion), portland cement ($0.078 billion), other petroleum oil ($0.055 billion) and light oils and preparations ($0.028 billion).
  • Thus Pakistan is an important export destination for India but not vice-a-versa. This is despite the fact that Pakistan imposes a large number of NTMs (143) on Indian exports, the major ones being export related measures (25.2%); technical barriers to trade (24.5%); and sanitary and phytosanitary measures (22.4%). These are ‘concentrated on agriculture, plants, and food-related products and operate as bans that shut competitors out of its market. Pakistan’s NTMs are blunt instruments; it is difficult to use them to provide targeted protection to the strategic industries. In contrast, India’s NTMs are soft barriers which operate as delays or bureaucratic hurdles rather than bans. Pakistan’s NTMs focus on general categories of goods whereas India’s NTMs are on particular industries and trading partners. The widely used NTMs India uses include defence procurement procedure, preference to domestically manufactured electronic goods in government procurement’ and a ban on goods largely manufactured within the country.
  • The sense is that Pakistan may not face an exacerbating situation with India withdrawing the MFN status and raising the import duty. Informal trade may proliferate, which might not be in India’s interest and an appropriate strategy is required to bring it to a halt. Also, under the South Asia Free Trade Area Agreement (SAFTA) 2004, Pakistan’s share in external trade is less than 10%, while India’s share is more than 70%. Such steps may propel Pakistan to look for new markets beyond SAFTA, corroborated by the recent meeting held with Saudi Arabia and growing prospects of trade through a third country, mainly via Dubai.

    • With reservations

    It’s not clear if the 103rd Amendment will protect the new quota for Gujjars in Rajasthan

  • With leaders of the Gujjar agitation for reservations calling off their stir, the Rajasthan government has averted what could have been a prolonged crisis. There is a sense of déjà vu amid all this. Gujjar leaders have held various rounds of protests over the last decade and a half, demanding reservations in educational institutions and employment in a separate backward category that is apart from the existing 21% set aside for Other Backward Classes in the State. Despite governments bringing in legislation towards this end, they have been struck down on the grounds that the additional quota would take the quantum of reservation above the 50% limit set by the Supreme Court in the Indra Sawhney judgment. On Wednesday, the Rajasthan State Assembly passed legislation providing 5% reservation to Gujjars and four other nomadic communities, classifying them as “extremely backward classes”. But this time, the circumstances have arguably changed with the passing of the 103rd Amendment to the Constitution that allows for a 10% quota for the economically backward among communities that do not enjoy any form of reservation. The State government has also added a line to the Bill explicitly referring to the amendment, which effectively breaches the 50% limit set for reservations by the Supreme Court. It remains to be seen how the judiciary will tackle this question in light of the 103rd amendment, the constitutionality of which is under challenge.
  • The demand by Gujjars has a specific context. In Rajasthan, the community is currently eligible for reservations as an OBC community. They had in the mid- and late-2000s agitated for inclusion in the Scheduled Tribe category, in keeping with the way they are classified in Jammu and Kashmir and Himachal Pradesh. This demand was denied because tribal status, as defined in the Constitution’s Fifth Schedule, involves identifiable characteristics such as lifestyle, culture, inaccessibility and backwardness, and not just economic underdevelopment. Since then, the largely pastoral community has pressed for reservations under a separate backward class category, arguing that inclusion of Jats in the OBC list has crowded Gujjars out of the benefits of reservations. Clearly, the decision to accommodate a demand from one politically dominant community (Jats) has come to haunt administrators in the State as this has fanned Gujjar agitations on and off. Multiple commissions appointed by State governments have recommended the implementation of the 5% quota on the basis of the community’s “extreme” or “most” backward nature. But the lack of adequate data in the absence of a proper socio-economic caste census to prove this has led to the policy’s undoing in judicial orders. More important, the repeated agitations are an indication of the shortfall in adequate, gainful and secure job opportunities in States such as Rajasthan.

    • The big fight

    For the AIADMK, the Assembly bypolls are more important than the Lok Sabha election

  • In Tamil Nadu, political alliances for the Lok Sabha election are falling into place as in a jigsaw. The real fight, as it has been over the last four decades, is between the two major regional parties, the AIADMK and the DMK; but the BJP and the Congress have ensured that they have skin in the game, giving the contest a national flavour. While the BJP virtually forced its way into the AIADMK camp, the Congress drove a hard bargain for seats in the DMK-led alliance. Through four elections from 1996 to 2004, the AIADMK had switched between the Congress and the BJP, before contesting 2009 and 2014 without either of them for company. In 2014, the go-it-alone strategy yielded rich dividends: the party won 37 of the 39 seats. For the party to now give away five seats to the BJP and another seven to the Pattali Makkal Katchi is therefore a climbdown. But the AIADMK is more interested in retaining power in the State. The party is running the government on a wafer-thin majority after a revolt by the faction led by T.T.V. Dhinakaran. Alongside the Lok Sabha election, by-elections to 21 Assembly constituencies are likely to be held. For Chief Minister Edappadi K. Palaniswami, winning these seats is more important than a few more Lok Sabha constituencies in Tamil Nadu. With the BJP on board, the AIADMK can hope to have a stake in a government at the Centre, but even more important for the party is the tie-up with the PMK. With its concentrated support base in the northern districts of the State, the PMK could be of immense help in at least eight seats where by-elections are due.
  • The alliance with the BJP and the PMK also helped the AIADMK win the battle of perceptions with Mr. Dhinakaran’s Amma Makkal Munnetra Kazhagam. In the public eye, the AIADMK, as a sought-after ally, is now the bigger of the two parties. For the DMK, the tie-up with the Congress is part of its visualisation of a larger national canvas. In India’s coalition era, the DMK has had an important role to play: the party was part of governments led by different combinations of parties. If indeed the AIADMK government lasts its full term until 2021, the DMK would very much like to have some levers of power at the Centre. The party was in power either at the Centre or in the State for most of the 15 years from 1996 till 2011, and it would like to avoid a second consecutive loss in the Lok Sabha election after two successive defeats in the Assembly elections. Moreover DMK president M.K. Stalin knows this is his first big test after the passing of his father and party patriarch M. Karunanidhi. For him, the stakes are just as high in the Lok Sabha election.

    • A modern story of Ekalavya

    The education system continues to exclude many people’s histories, world views and cultures

  • It is difficult being a teacher these days. The dismantling of institutions, which seems to be the prime concern of this government, began with education. The attack on premier public universities through motivated hiring, questioning reservation, and creating a climate of fear and intimidation has continued. This is a time when many teachers are forced to rethink the meaning of teaching.

    • The place of the teacher

  • This has also led to a climate of suspicion about teachers in general, in schools, colleges and universities. Teachers are constantly under attack by systems which want to protect students (especially because students are nowadays seen as paying ‘consumers’), by parents who decide what and how a teacher should teach, by a government which humiliates and uses teachers, and by private managements which see teachers as a necessary ‘evil’ to put up with. Our colleges and schools even today are places of feudal authority and oppressive labour conditions. In such a climate, for the first time in my life, I am beginning to ask whether it is worth teaching at all.
  • It was not easy being a teacher earlier too. The pay was quite abysmal and the work that it entailed, particularly the grading of hundreds of exam papers, was not necessarily enjoyable. But there was something different; there was a sense of service and commitment to the act of teaching, somewhat similar to the medical profession then. There was an underlying notion of respect for teachers, even from students.
  • In India, there are many stories of teachers who sacrificed much in order to teach. Teaching meant inspiring students, making them better human beings, and enabling them to go up in life. A good mathematics teacher always taught more than mathematics. What students learnt with every good teacher was not just subject matter but ways of being in the world.
  • The first disintegration of this world of teaching came when teaching became equivalent to ‘giving tuition’. And then came other major problems that have contributed to this suspicion of teaching. In a digital world, the role of a teacher is more and more unclear. There is a lack of clarity on what exactly a teacher is supposed to teach: the content, or diverse ways of thinking, or learning together with others?
  • Related to this issue is the continued lack of equal access to education. We have spent more money and effort keeping people out of the education system than trying to bring them in — much of this is done through dubious concepts called intelligence and merit, operationalised by examinations. It is not a surprise then that our gross enrolment ratios for all levels of education are quite low, because the aim of the system right from the beginning was to find ways to control who would enter the portals of education. This is a continuation of the Ekalavya complex, and it is possible because we have created a system in which the excluded find little representation of their lives, their world views and their articulations in what is taught.

    • A story of caste and learning

  • In the midst of this existential crisis, I watched a new Tamil movie called Sarvam Thaala Mayam. It is a movie which has been criticised for its avoidance of caste issues even though it is primarily about Carnatic music’s relation with caste. While that may be true, here I am more interested in what it says about the nature of teaching and learning. It is a modern Ekalavya story in a Tamil mainstream idiom and, like Ekalavya’s story, which is about caste and privilege, at its core it is about the processes of teaching and learning.
  • The story of Ekalavya is well known and has been used as a powerful metaphor to highlight problems of exclusion in education — about how the privileged monopolise learning even though others may be far better. This movie makes us ask: What would Ekalavya do today if Drona refuses to teach him?
  • The modern Ekalavya, Peter Johnson, is the son of a mridangam maker. He is very talented. When he accidentally listens to a mridangam vidwan, Vembu Iyer, he is mesmerised. But this Chennai Ekalavya cannot easily become a student of this vidwan and much of the obstacle is related to their caste differences. These differences are most tellingly articulated by the boy’s father who creates these instruments but also seems resigned to the fact that he will not be allowed to play them.
  • However, the modern Ekalavya does not give up when Vembu Iyer refuses to take him as his student. He persists and is finally taken as Iyer’s student because Iyer sees Peter’s passion and genuine commitment. Peter is like Ekalavya in his complete devotion to his guru, but due to a misunderstanding, the teacher banishes Peter for no fault of his. Their reconciliation is really the heart of the story, for it is not just a negotiation between people of different caste hierarchies but also between the hierarchy of teacher and student.
  • If Arjuna was the counterpart to Ekalavya in the original story, there is an equally powerful counterpart in this modern version. This is in the form of a fair-skinned, Tamil Brahmin NRI, who has been admitted to a PhD programme at Harvard University. He comes with more privilege than Arjuna! But Peter is unfazed. He takes on the traditionalists in their own game. In the climax of the movie, his strength is shown to lie in his own historical and cultural consciousness. Peter changes due to his encounter with his guru but he also changes the instrument and the classical music tradition which uses it.
  • Vembu Iyer epitomises all the struggles of a teacher, one who belongs to an exclusive tradition but with an ideal of learning that transcends that exclusion. A teacher is one who is able to go beyond his or her tradition and comfort zone for the sake of a true seeker. The film reminds us that a teacher is incomplete without good students, but good is not intellectual competence alone; it is something more. The last scene of the film, when the teacher accepts the student as someone who can not only carry on the tradition but also bring his own modifications to it, captures one of the central ethical principles of teaching.

    • Need for an inclusive system

  • What this movie reminds us is that the present-day education system is based on the qualities, attributes and desires of a dominant community. It is not inclusive, since it does not have space for truth, knowledge and the qualities of learning based on the diverse strengths of different cultures and histories like those of Peter. But Peter’s struggle should remind teachers that teaching is a service, not a transaction. Our society is filled with countless such committed teachers, but they are all silenced by the powers that run education as a handmaiden for their personal and political ambitions.

    • Splurging in the time of debt

    Andhra Pradesh’s government continues to launch populist schemes despite its poor financial situation

  • It is puzzling that Andhra Pradesh Chief Minister N. Chandrababu Naidu is busy announcing a spree of sops, given the State’s poor financial situation. A recently released White Paper on State finances and economic growth details how the unscientific and unjust bifurcation of undivided Andhra Pradesh, as well as the unwillingness of the Central government to implement several provisions of the Andhra Pradesh Reorganisation Act, left Andhra Pradesh with a revenue deficit of ₹16,078 crore in 2014-15.

    • Several problems

  • The paper argues that 46% of the estimated revenue was granted to Andhra Pradesh against a population of 58%; assets were allocated on location basis (most locations were in Hyderabad and hence left behind), while debts and liabilities were divided on the basis of population; the pension liability of the combined State was divided on the basis of population; power allocation was done on the basis of consumption; and refund of taxes, a liability, was allocated on the basis of population, whereas deferred tax collections, an asset, were given on the basis of location, causing a loss of ₹3,820 crore.
  • Further, the State lost Hyderabad, that in 2014 was estimated to generate about ₹60,000 crore of revenue, besides the manufacturing and service sector hubs. It inherited drought and cyclone-prone areas. Though the Central government had acknowledged that the fiscal, economic and social conditions of Andhra Pradesh would be adversely affected by bifurcation, the support lent to the State in the last four and half years has been abysmal, the State claims.
  • Andhra Pradesh’s economy continues to be predominantly agrarian. This is evident from the fact that the contribution of the agriculture sector, which was 23% in undivided Andhra Pradesh, shot up to 30.2% at the time of bifurcation in 2014, and to 34.4% in 2017-18. Consequently, the per capita income was ₹82,870 in 2014, compared to Telangana’s per capita income of ₹1,12,162. Telangana is powered by the industry and services sector. The per capita income of Andhra Pradesh is the lowest among the five southern States.
  • The Socio Economic Survey of 2017-18 says the State’s public debt has gone up to ₹2,25,234 crore. Market loans are a lion’s share in the debt, accounting for 60%. The outstanding debt includes the un-apportioned amount of ₹23,483 crore between Andhra Pradesh and Telangana.
  • The debt accounts for 28.79% of the State GDP and the government says it is forced to raise loans as no special funds are flowing from the Centre beyond the Centrally Sponsored Schemes.

    • Dealing with the financial crisis

  • Yet the government insists that it has “converted the crisis into an opportunity”. Despite structural challenges, the Budget boasts that the State is counted among the best economic performers with an average growth of 10.66% compared to the all-India growth rate of 7.3% (June 2014-December 2018).
  • How is the State overcoming the problems of a low tax base, deficit rainfall, an “uncooperative” Central government, and the hurdles mounted by bifurcation and a predominantly agriculture economy? Government officials say the State is not only controlling revenue expenditure by cutting administrative costs, plugging revenue leakages, minimising transaction costs and rationalising the tax structure, but also using more technology across the board.
  • Presenting the vote-on-budget in the Andhra Pradesh Assembly, Finance Minister Y. Ramakrishnudu said the government had successfully launched the the Comprehensive Financial Management System, which is in operation now. This, he said, not only improved “effectiveness of budget, expenditure and cash management”, but also brought about a sea change in government transactions. The government, he said, saved ₹2,585 crore through Aadhaar seeding in the Public Distribution System by using technology to plug leakages. And it has managed to increase tax revenue from ₹38,038 crore in 2014-15 to ₹75,438 crore in 2018-19.
  • Although it claims to have done well in managing the available resources, the government seems unable to resist the temptation to launch more populist schemes in total disregard for the State’s fragile financial condition. After spending over ₹22,000 crore on crop loan waivers, it announced ₹5,000 crore in the Interim Budget for Annadatha Sukhibhava, an economic support scheme for farmers; doubled social security pensions; and increased the unemployment allowance. It also increased the pay scales of employees, the wages of Anganwadi workers and village revenue assistants, and the allocation for various welfare schemes.
  • How can a government indulge in financial profligacy while alleging a virtual funds freeze by the Centre?

    • Inflation pressure eases

    The Indian economy benefits from the fall in global oil prices

  • Why has inflation been falling?
  • Inflation at both the retail and wholesale levels has been falling for the last 4-5 consecutive months. Inflation as measured by the Consumer Price Index (CPI), which captures retail inflation, and the Wholesale Price Index (WPI) has been falling in general for the last year or so. The CPI, for example, was as high as 5.21% in December 2017, following which it fell quite steadily (except for a mid-year blip in 2018) till it reached 2.05% in January 2019, the lowest it has been in 19 months. The WPI has similarly seen an overall decline, but has been more volatile than the CPI.
  • The main reason why inflation has been falling is the drop in global oil prices. After rising in the middle of 2018 to average $80 a barrel in October, the Indian basket of crude oil prices fell to $57 a barrel in December 2018. It was $59 in January 2019. Prices in February have been slightly higher than that, but the increase is not much.
  • What does this mean for the economy?
  • The nature of the Indian economy is such that a change in oil prices has knock-on effects on almost every sector such as food, manufacturing, transport and infrastructure. Any sector that uses fuel or energy as an input is affected by global oil prices because India is still overwhelmingly dependent on imported oil to meet its needs.
  • When global oil prices fall, inflation falls across the board, most notably in energy-intensive sectors. And within this, falling prices in each of these sectors have an impact on the other sectors dependent on them. For example, falling inflation in the transport sector means that every sector that needs to transport goods will also benefit.
  • Another aspect of falling inflation is that the Reserve Bank of India has more leeway to go easy on interest rates, one of its key inflation targeting tools. In its last Monetary Policy Review, the central bank cut the benchmark interest rate by 25 basis points. Some experts feel there is scope for even more cuts. Politically, low and falling inflation is always to the benefit of the government. This is especially noteworthy in the run-up to the general election. In contrast, the CPI inflation averaged about 7.6% in the three months leading up to the 2014 elections.
  • Why do WPI and CPI inflation diverge?
  • Economists have pointed out the divergence for quite some time now. The main reason behind it is that the two indices measure different products and assign each of the categories different weights in the calculation of the overall index.
  • This divergence has intensified since the implementation of the Goods and Services Tax because the new tax system affects retail inflation far more than it does wholesale inflation, since it is included in the final price of the product.
  • What is the outlook ahead?
  • The outlook on oil prices is a stable one. The consensus is that crude oil prices will remain in the range of $55-65 a barrel for the next three to four quarters. Given how important this is for inflation in India, experts feel retail inflation will remain subdued at 2-3% and wholesale inflation at 3-4% in the near future.

    • The private sector in public health

    It can provide services and capital

  • The healthcare panel at the recent India Conference hosted by students of the Harvard Kennedy School and the Harvard Business School discussed the role of the private sector in augmenting public healthcare services. Goal 3 of the UN Sustainable Development Goals (SDG) is to “ensure healthy lives and promote well-being for all at all ages”. India has a mammoth role in helping the world attain SDG-3 as global health indicators cannot improve without India making giant strides. In providing healthcare, the Indian government has led the way, as it should, given that India is a welfare state.
  • Over the past decade, courtesy changing demographics and lifestyles, India has been witnessing shifting disease prevalence in terms of the largest causes of morbidity and mortality. This requires that we give our health delivery system a re-look. The Harvard panel dove in to how the private sector can be leveraged for this purpose. The precondition is to create an ecosystem where partnerships between the private and the public sector can thrive. This must start with trust and stated common objectives. Once the ecosystem is more conducive, complementarities need to be identified.
  • While one may not foresee a great presence of the private sector in providing primary healthcare services, areas such as ambulance services and value-based care delivery can be promoted through this sector. Ayushman Bharat seeks to improve the network of the government’s first-point-of-contact health centres. For higher levels of services, the private sector can be incorporated by creating linkages between public health infrastructure and private providers through a hub-and-spokes model.
  • Besides services, the private sector is also a source of capital. A legally mandated way to provide this is through Corporate Social Responsibility. Companies above a certain annual turnover (₹1,000 crore), net worth (₹500 crores) or annual net profits (₹5 crore) have to earmark 2% of their net profits of the past three years to CSR projects, which may include healthcare projects. CSR has not yet reached its full potential. However, it is encouraging to see the merging of initiatives. This is seen in the government directing companies, albeit public sector ones, to the focus districts of the Aspirational Districts programme, which was started in 2018 to improve governance and service delivery across six sectors including health and nutrition.
  • At the end of the day the lesson was clear: as India strives to ensure availability, affordability and accessibility to quality healthcare for its people, both private and public stakeholders need to come together.