Mitras Analysis of News : 06-03-2017

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1.No time for Complacency (THE HINDU)

2.India’s manufacturing opportunity (LiveMint)

3.Saving the Ghats   (The Hindu)

 

1.No time for Complacency (THE HINDU)

Synoptic line: It throws light on present economic conditions and provide for a future course of action.(GS paper III)

Overview

  • India Economy seems to be on sweet spot as suggested by third quarter report and even by various international reports.
  • Although there is room for slight dip in growth numbers once fourth quarter results are out. Moreover, informal sector is also not properly accounted.
  • However, Indian Economic story outperform its critics. However, still certain bumps have to be addressed if Growth has to be robust and consistent.
  • Systemic and sectorial reforms are the need of the hour.

State of the Economy

  • Prospects of grim and downward economy are supposed to be unfounded on account of recent CSO survey.
  • Growth rhetoric and GDP estimates are supported by two other crucial independent international assessments as well, which are – IMF and OECD (Organisation for Economic Cooperation and Development)

Robust growth due to :

  • Consistent and impressive fiscal consolidation,
  • Humble current account deficit
  • Gentle inflation level
  • improved public and private consumption
  • Moreover, risk pertaining to international factors such as: shocks from sharp increases in commodity prices, a sudden global slowdown impacting remittances and exports and volatility relating to the Chinese economy now look modest.

Areas to look for:

  1. India’s huge interest payment on account of developmental loans is an area of great concern. OECD’s survey also raises concerns about it.
  • Even Fiscal Responsibility and Budget Management (FRBM) Review Committee also stressed on higher interest payments.
  • High fiscal deficits can also be areas to great worry. Government should focus on improving the quality of public expenditure than just enhancing budgetary outlays. Budget outlays should be prudent to cover the areas such as health and education.
  1. On one hand Banking sector is ailing from high NPA(s) while on other hand Corporate balance sheets are stressed (twin balance sheet problem). Thus, immediate work is needed to be done to improve the health of both.
  • The concept of Bad Bank is mooted in this regard but it is also plagued with certain systemic problems as it does not address the ill of pasts. There is no surety if the problem will not recur in future ( just considers the stock rather than checking the flows.
  • More encompassing banking reforms on the lines of Mission Indradhanush and bank autonomy are required.
  1. Rule based Management of economy has been stressed by OECD. it implies creation an institutional framework or mechanism for management of economy, for e.g. Monetary Policy Committee, GST Council, Banks Board Bureau etc.
  • Banking Council to facilitate a dialogue with political parties and stake holders on a new banking road map can also be considered. It can consider the reforms suggested by various commitees such as Narasimham Committee, P.J. Nayak Committee, Gopalakrishna Committee etc.
  • Currently, all such reforms are considered under the aegis of RBI acting as the principal banking ombudsman with inherent conflict of interest. In the long run, we need an alternative mechanism for the banking sector.
  1. Balanced regional development is the need of the hour where local government entities need greater empowerment. These go beyond the enhanced devolution of resources based on the recommendation of Fourteenth Finance Commission.
  • In the 15th Finance Commission report should consider incentivising States on empowerment and delegation of powers to local bodies.
  • Even grants provided to states should be divided in two parts such as, a basic grant and performance grant.

Way ahead

  • Government should not be carried away by instant gratification and should work on long term reforms to handle the more organic problems such as:
  1. Working on Ease of doing business,
  2. Infrastructure development via involving the private investment as public investment may not catch up hugely due to FRBM targets.
  3. Bankruptcy and Insolvency code should be implemented effectively to facilitate the sick enterprises
  4. Asset reconstruction Companies (ARC) should be infused with reforms and should be made more robust to realign the huge NPA(s)

2.India’s manufacturing opportunity  (LiveMint)

 Synoptic line:   It throws light on the prospects for India in manufacturing sector and low hanging fruits it can achieve. (GS paper III)

Overview

  • China has recorded double digit growth for nearly two decades.
  • Immense growth in manufacturing sector guided by cheap labour has been the driver of growth for China.
  • India can also learn from Chinese experience and should explore the possibilities associated with huge youn population of India.

Prospects for India

  • Accoding to World Bank, India’s Demographic dividend can be a great asset for growth. Majority of population in India is young and dependency ratio of India is declining. Hence, India enjoys all the prerequisites to be a manufacturing hub.
  • Moreover developing manufacturing sector can provide meaningful employment to population and can trigger out the vicious poverty.
  • Low-cost production jobs, especially in the apparel, toys and cheap electronics sectors, are now moving out to other countries, mostly in South and South-East Asia, which have a steady supply of cheap labour. India can fit easily in this situation.

Mighty five (MITI V)

  • Mighty Five is a group of five countries – Malaysia, India, Thailand, Indonesia and Vietnam. According to the reports , this group will emerge as the “New China” by 2020 given its abundant supply of cheap labour, favourable demographic profiles, and market and economic growth.

Challenges for India

There are three key challenges in India’s path to manufacturing :

  1. First set of problems relate to internal problems. These are well-known and include numerous regulatory roadblocks, unfavourable land and labour laws, inadequate transport, communication and energy infrastructure, among others.
  • A combination of these internal problems has also caused a structural imbalance: Small and medium enterprises, not large factories, dominate the Indian economic scenario.
  • Some of these enterprises are “babies” that can be scaled up but many may be “dwarfs” that will not grow. If India has more dwarfs than babies, this will prove to be a serious drag on its manufacturing potential.
  1. India faces stiff competition from South east Asian Countries such as South-East Asian and other South Asian countries which may be smaller in size but are better integrated into global supply chains.
  • The space vacated by China is fast being taken over by Bangladesh and Vietnam in the case of apparels; Vietnam and Indonesia in the case of leather and footwear. Indian apparel and leather firms are relocating to Bangladesh, Vietnam, Myanmar, and even Ethiopia.
  1. India is prone to the challenges posed by geo technical changes such as advent of fourth Industrial revolution where greater automation and robotics will drive out the manual labour. Even labour intensive jobs are to be taken up by machines.

Way forward

  • Initiatives such as Make in India and National Manufacturing Policy should be taken up rigorously to develop the manufacturing base
  • Manufacturing development should be coupled with skill development in Educational and vocational facilities. Government initiatives such as National skill development centres and skill India programme are good steps in this direction.
  • Infrastructure and Industrial corridors should be developed be focussed more as to facilitate better and cheaper evacuation of finished goods.
  • SEZ policy should be refined and pursued meticulously to complete the proposed SEZ(s) as the can drive the export oriented growth for our manufacturing sector.

 

3.Saving the Ghats   (The Hindu)

 Synoptic line:   It throws light on the ecological and geographical importance of western ghats and the need for government to proactively work for the conservation of Ghats. (GS paper III)

Overview

  • Western Ghats are crucial for the vivid diversity it holds and the ecological services being provided by it.
  • They compose the natural heritage of India but government’s response is afflicted with inactivity and lax implementation of conservation recommendations.

What are Western Ghats ?

  • Western Ghats are a mountain range that runs parallel to the western coast of the Indian peninsula, located entirely in India.
  • The Western Ghats extend from the Satpura Range in the north, stretching from Gujarat to Tamil Nadu. It traverses south past the states of Maharashtra, Goa, Karnataka and Kerala.
  • Major gaps in the range are the Goa Gap, between the Maharashtra and Karnataka sections, and the Palghat Gap on the Tamil Nadu and Kerala border between the Nilgiri Hills and the Anaimalai Hills.
  • It is a UNESCO World Heritage Site and is one of the eight “hottest hot-spots” of biological diversity in the world. It is sometimes called the Great Escarpment of India.
  • The Western Ghats are home to four tropical and subtropical moist broadleaf forest eco-regions – the North Western Ghats moist deciduous forests, North Western Ghats montane rain forests, South Western Ghats moist deciduous forests, and South Western Ghats montane rain forests.

Need to Conserve Ghats

  • The Western Ghats was declared as an ecological hotspot in 1988. A large number of plants, amphibians, birds, reptiles, mammals are endemic to this region. This area has a number of protected areas including 2 biosphere reserves, 14 national parks and several wild life sanctuaries.
  • Fragile mountainous forests should be protected from unsustainable exploitation in the interests of present and future generations.
  • Ghats plays unique role in facilitating the monsoon over the country and the forests in the ghats harbour a rich biodiversity that has not even been fully studied. New species continue to emerge each year.
  • A framework is needed under which scientific evidence and public concerns are debated democratically and the baseline for declaring Ecological Sensitive Ares (ESAs) within Western Ghats is arrived at.

Reports on Western Ghats

  • Regarding the Western Ghats conservation the Government of India has appointed committees to prepare a comprehensive plan for the protection of fragile eco-systems in the Western Ghats

Madhav Gadgil Committee

  • The Western Ghats Ecology Expert Panel (WGEEP), also known as the Gadgil Commission.
  • The Western Ghats Ecology Expert Panel (WGEEP) designated the entire hill range as an Ecologically Sensitive Area (ESA).
  • ESZ-1 being of high priority, almost all developmental activities (mining, thermal power plants etc) were restricted in it.
  • The panel recommended a National-level authority, Western Ghats Ecology Authority (WGEA).
  • The Gadgil Committee report was criticized for being too environment-friendly.

Kasturirangan Committee

  • The Kasturirangan committee was constituted to examine the WGEEP report.The report by the Kasturirangan committee had said that 37% of the total area of the Western Ghats is ecologically sensitive spread across Gujarat, Maharashtra, Goa, Karnataka, Kerala and Tamil Nadu.
  • The report distinguishes between cultural and natural landscape. It said that cultural landscapes, which include human settlements, agricultural fields and plantations, covered 58.44% of the Western Ghats. It identified 90% of the remaining natural landscape area marked as an ESA. The panel called for a complete ban on mining, quarrying and sand mining in this area.
  • The panel had recommended that no thermal power projects should be allowed in the ESA and hydropower projects should be allowed only after “a cumulative study which assesses the impact of each project on the flow pattern of the rivers and forest and biodiversity loss” is conducted.

Ministry of Environment didn’t take any action on Gadgil and Kasturirangan committee recommendations

Way ahead-

  • There is need to determine how much of the Western Ghats is ecologically sensitive.
  • National Action Plan for Climate Change should recognize the importance of western ghats as a possible shield against rising pollution levels.
  • Debate of Environment versus Development should be settled to recognize the long term benefits of environmental hotspots.
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