Mitras Analysis of News : 12-6-2017

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1.Entrepreneurship or Job for India? (What can be a relevant mix) (Live Mint)

2.Neighbourhood First’ in Nepal (The Hindu and The Indian Express)

 

1.Entrepreneurship or Job for India? (What can be a relevant mix) (Live Mint)

 Synoptic line: It throws light on (GS paper II)

Overview

  • India is witnessing a major growth in entrepreneurship — not because of its X factor but out of the need for its citizens to create their own job. With more than 65 percent of the population under 35 years of age and a record-breaking growth in smartphone adoption and data services across the country, there has been a rising demand for next-generation services with simplified solutions.
  • While India has been seeing this increasing trajectory of entrepreneurs and new start-ups over the last five years, 2016 has been a major milestone year for all of the key stakeholders in the Indian ecosystem including government, educational institutions, entrepreneurship support organizations, investors and entrepreneurs to seek and provide support in sustaining the biggest hurricane of entrepreneurship to date.
  • However, it remains to be seen whether this kind of absolute affection toward entrepreneurhip is worth admiring or not.

Right mix for India

  • Nearly one million new workers will join the labour force every month in India for the next two decades. This is equivalent to the entire population of Sweden joining the labour force in India every year.
  • The pace at which India creates new jobs will determine whether its demographic trend turns into a dividend or a disaster.
  • Our understanding of what can be done to accelerate the pace of job creation is still evolving. The experience of the US and other developed economies has shown that there is a strong link between entrepreneurship and jobs.
  • Entrepreneurship helps allocate resources efficiently, strengthens competition among firms, supports innovation and new product designs, and promotes trade growth through product variety.
  • Multiple studies have examined the role of entrepreneurship in job creation in advanced economies, but there is very little empirical evidence for India. This lack of research hampers the effectiveness of policy efforts to promote job growth through entrepreneurship.

Case for India

  • India’s economic geography in entrepreneurship is still evolving, unlike in the US where it has matured. At such an early point, and with industrial structures not entrenched, local policies and traits have profound and lasting impacts by shaping where industries plant their roots.
  • Just like in the US, jobs in India are created by small firms. The two most consistent factors that predict the entry of new firms in any district in India are human infrastructure and physical infrastructure.
  • These patterns are true for both manufacturing and services. This relationship is much stronger in India than that found for the US.
  • Unfortunately, entrepreneurship rates in India continue to remain low for its stage of development. Many policy observers have observed that India’s manufacturing sector is underdeveloped relative to economies of similar size, and stronger entrepreneurship will help close these gaps. This will also help move people out of subsistence entrepreneurship and into entrepreneurship in the formal sector. This reallocation will help close India’s productivity gap.

What can be done?

  • There are several policy levers that can be used to promote start-ups and entrepreneurial growth. Instead of being preoccupied with firm chasing attracting large firms from other locations policymakers should shift their focus to improving physical and human infrastructure and encouraging entrepreneurship in their communities.
  • There are well-understood limits to the pace at which countries can accumulate physical capital, but the limitations on the speed with which the gap in knowledge can be closed are less clear. Because of the strong link between education and entrepreneurship, policymakers should remove any constraints that restrict the growth in the quality and quantity of local colleges and educational institutions.
  • Along with education, physical infrastructure is also essential to supporting a modern economy. Goods and services cannot be produced and delivered without roads, electricity, and telecommunication. And moving people is as important, if not more important, as moving goods. Investing more in roads, railways, bridges and schools should be an integral part of any jobs agenda.
  • If this is important in the current US context, the role of both infrastructure and education in job creation is even more fundamental in developing countries, where there’s much more to be done than in the US and other advanced economies.

Way ahead

  • There is no magic formula or one-size-fits-all solution for making cities more enterprising. While there is widespread agreement that entrepreneurship is critical for structural transformation and growth, there is less agreement about what drives entrepreneurship or what government policies encourage and incubate new economic enterprises.
  • Most of the policy research on entrepreneurship has been in the developed world, but even that is just beginning to focus on the causes of entrepreneurial differences across space. Policymakers in the developing world want to better understand the connections between entrepreneurship and growth and how this has an impact on jobs and growth.

Question:  What will be the optimum mix of employment for India to achieve growth along with equity?

 2.Neighbourhood First’ in Nepal (The Hindu and The Indian Express)

 Synoptic line: It throws light on the issue of ongoing Nepal constitutional crisis and future developments.(GS paper III)

Overview

  • Nepali Congress Chairman Sher Bahadur Deuba has been elected Prime Minister of Nepal. Mr. Deuba will be heading a multi-party coalition, with the Communist Party of Nepal-Maoist Centre as the second largest constituent after Nepali Congress.
  • During the last quarter century Nepal has gone through a Maoist insurgency and transitioned from a monarchy to a republic, there is a long way to go in bringing political stability to Nepal.
  • Nepal is our only major buffer against China. Therefore, it is of utmost importance to keep Nepal in our bounds of confidence to maintain a healthy situation in Southeast Asia.

Immediate concerns

  • The most challenging job for Deuba will be addressing the demands of Madhes-based parties, a thorny issue in national politics since the promulgation of the new constitution in 2015. Madhesi have a significant presence in the two Terai-based provinces. They had demanded that unless the constitutional amendment addressing their concerns was passed, they would not participate in the local body elections.
  • Amendment of the constitution needed to address Madhesi demand that will require a two-third majority vote in Parliament, something the previous government failed to achieve. On a positive note, however Deuba secured nearly two-thirds of votes in the prime minister election and if he makes a little effort he may secure the necessary votes for a constitutional amendment.
  • The main opposition Communist Party of Nepal (Unified Marxist Leninist), which emerged as the top vote-getter in the first round of local elections, is against a constitutional amendment.
  • A failure to hold two important elections in the next eight months would cause a political and constitutional crisis in the Himalayan country. According to constitutional provisions, the tenure of the current Parliament will expire on January 2018 and replacement is mandatory.
  • Deuba as a prime minister has expressed his commitment to fulfill the demands of Madhesi-based parties, a position which has been backed by India. Though India is not vocal about the Madhesi, who live along the India-Nepal border, New Delhi has been pressing Kathmandu to address their demands.

Restoring goodwill with India

  • Nepal shares an open border with five Indian states (Uttarakhand, Uttar Pradesh, Bihar, West Bengal and Sikkim) and with Tibet. Under the 1950 Treaty of Peace and Friendship with India, Nepali citizens enjoy ‘national’ treatment and Nepali businesses unhindered rights of trade, transit and movement.
  • But the last year marked a low point in India-Nepal relations with increased ethnic polarization within Nepal and blame India for interfering in internal affairs, of imposing an economic blockade and supporting the Madhesi agitation, significantly, it eroded the goodwill that have been generated by India.
  • Miffed relation with India government gave opportunities to China; it has been stepped up its presence in Nepal. China and Nepal signed an Agreement on Transit Trade which is now being developed along with an examination of a possible rail link. For the first time in early 2017, joint military exercises were held with first ever visit by the Chinese Defence Minister to Nepal, promising a military grant of $32 million. Nepal has also signed on to the Belt and Road Initiative and a special economic zone has been promised.
  • Deuba another challenge will be implementing the agreements reached with China without affecting the relationship with India, In 2016, Deuba visited India and met Indian leaders and officials; India needs to support Mr. Deuba’s efforts to conclude the local body elections followed by the passage of the constitutional amendment, which will clear the way for the provincial and parliamentary elections under the new Constitution.
  • A series of recent developments have marked a new low in Nepal-India relations, a relationship the two sides in better times often referred to as a ‘historic and special one’.
  • Recently India and Nepal have signed an agreement to renew supply of petroleum to Nepal for a period of five years i.e. till 2022. The renewed agreement, which was overseen by the Petroleum Ministers of both countries, petroleum supply to Nepal, was severely hit during 2015-16 due to the blockade on the border. Thus, the new agreement also maintains the fuel supply exclusivity to India.

Way ahead

  • There is need to smoothen our recently strained relations with Nepal as well as strengthen our historically friendly ties. A climate of confidence and trust in the long-term trading relationship between India and Nepal can greatly help Nepal meet its ambitious target and provide an opportunity for Indian investors to invest in Nepal.
  • Importantly, India needs to ensure speedy delivery of the generous pledges of over a billion dollars committed during the last two years to make good on ‘neighbourhood first’ policy.

Question: What can be the possible implications of Nepal’s constitutional crisis over India? How India should assist to overcome the debacle in Nepal?

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