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Admin 2020-08-03

3 August 2020: The Hindu Editorial Analysis

1) Contraction slows: On signs of economic recovery-

GS 3- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

 


CONTEXT:

  1. The latest data on output at the eight core industries point to tentative signs that the pandemic caused economic contraction may have begun to bottom out(get worse).
  2. The sector-wise performance also affirms that the gradual reopening since June appears to have helped tease back(rearrange) some smattering(small amount) of demand in the economy.

 

 

DATA:

  1. Of the seven industries that extended their contractions, only coal shrank at a faster pace (-15.5%) than in May, when production had declined 14%.
  2. Refinery products, the largest weight on the index contributing 28%, shrank 8.9% marking an improvement from the 21.3% contraction seen the previous month.
  3. The lifting of restrictions on inter and intra-State movement of persons and goods revived both vehicular movement and, consequently, demand for auto fuels.
  4. With personal modes of mobility preferred given the fear of infection, petroproduct consumption grew 11% month-on-month in June.
  5. Electricity output too fell at a slower 11% pace than the preceding(earlier) month’s 14.8% slump, again signalling an uptick in demand from some manufacturing clusters including in western and northern India.

 

 

INCREASING FISCAL DEFICIT:

  1. Among the other sectors, steel production continued to tumble(fall) — output shrank by more than a third (-33.8%) from June 2019.
  2. Cement appeared to have put the worst behind as urban construction and projects under the rural job guarantee scheme spurred(pushed) demand.
  3. Cement output fell 6.9%, a sharp deceleration in the pace of decline from May’s 21.4% contraction.
  4. Fertilizers, the only industry to post growth for a second straight month, however, saw the expansion ease to 4.2%, from 7.5% in May.
  5. Still, with monsoon activity above normal so far this year, kharif sowing was almost 14% higher as on July 31 than at the same time in 2019.
  6. With the IMD forecasting above average rainfall in August and September as well, the outlook for the agriculture-reliant rural economy is far more promising than for most other sectors.
  7. To be sure, the economy is still a fair distance from a sustained turnaround with other data flagging the risks to a recovery.
  8. For one, the significant shortfalls in GST collection point to the difficulties the central and State governments are facing in garnering crucially needed revenue.
  9. This has already swelled(increased) the fiscal deficit at the end of the first quarter to 83% of the full year’s target.

 

CONCLUSION:

  1. With the new infections curve showing no signs of plateauing(decreasing) as yet, policymakers have the tough task of cutting the COVID-19 surge without dampening(hurting) economic momentum.
  2. As lockdown restrictions ease, the economy sees the first signs of recovery.

 

 

 

2) Rebuild India’s confidence, revive the economy-

GS 3- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

 

 


CONTEXT:

  1. These are extraordinarily difficult times for our nation and the world. People are gripped with the fear of disease and death from COVID-19.
  2. This fear is ubiquitous (present everywhere) and transcends(surpasses) geography, religion and class.
  3. The inability of nations to control the spread of the novel coronavirus and the lack of a confirmed cure for the disease have exacerbated(worsened) people’s concerns.
  4. Such a heightened sense of anxiety among people can cause tremendous upheavals(disturbance) in the functioning of societies.
  5. Consequently, disruption of the normal social order will inevitably impact livelihoods and the larger economy.
  6. The economic impact of COVID-19 has been much discussed.
  7. There is unanimity among economists that the global economy will experience one of its worst years in history.
  8. India is no exception and cannot buck the trend. While estimates vary, it is clear that, for the first time in many decades, India’s economy will contract significantly.

 

 

AN EVENT WITH DEEP IMPACT:

  1. Economic contraction is not merely a GDP number for economists to analyse and debate. It means a reversal of many years of progress.
  2. A significant number among the weaker sections of our society may slip back into poverty, a rare occurrence for a developing nation.
  3. Many enterprises may shut down. An entire generation may be lost due to severe unemployment.
  4. A contracting economy can adversely impact our ability to feed and educate our children owing to a shortage of financial resources.
  5. The deleterious(harming) impact of an economic contraction is long and deep, especially on the poor.
  6. It is thus imperative(needful) to act with utmost urgency to nurse the economy back to good health.
  7. The slowdown in economic activity is both a function of external factors such as the lockdown and behavioural changes of people and enterprises, driven by fear.
  8. The foundation for reviving our economy is to inject confidence back in the entire ecosystem. People must feel confident about their lives and livelihoods.
  9. Entrepreneurs must feel confident of reopening and making investments. Bankers must feel confident about providing capital.
  10. Multilateral organisations must feel confident enough to provide funding to India.
  11. Sovereign ratings agencies must feel confident about India’s ability to fulfil its financial obligations and restore economic growth.

 

 

ON NREGA AND CASH SUPPORT:

  1. There is extreme duress among India’s poor.
  2. At a time when agriculture activity has been robust, data show that just in the month of June, 62 million people demanded work under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).
  3. This is thrice the usual number and 10 times more than the total number employed by the entire listed corporate sector.
  4. It is evident(obvious) that most of them are displaced non-agricultural workers, struggling to make ends meet.
  5. Such is the scale and enormity of despair in our labour force.
  6. Fortuitously, the MGNREGA programme has proved to be a bedrock(support) of support in such times but it is not enough.
  7. A meaningful cash transfer can restore confidence in these families.
  8. Money in the hands of people can provide an immediate sense of security and confidence, which is the cornerstone to restoring economic normalcy.
  9. India is perhaps the only large democracy that has not provided direct cash assistance of a significant amount during the COVID-19 crisis.
  10. There seems to be a misplaced sense of apprehension that providing large cash assistance may deter(prevent) people from returning to the workforce when needed and starve industry of labour.
  11. While it is inordinately late, it is still prudent to provide a significant sum as direct cash assistance to the poor which can inject confidence in them to weather this COVID-19 storm.

 

LOOK AT THE FINANCIAL SYSTEM:

  1. There is also a dire(urgent) need to restore confidence in the financial system which acts as the vital lubricant for the economy.
  2. COVID-19 assistance measures undertaken by the RBI and the government such as interest rate reductions, credit guarantee and liquidity enhancement schemes are welcome steps.
  3. But such steps have largely failed since banks are not confident of lending.
  4. Reviving the health of the banking sector is not merely about capital infusion or disinvestment of public sector banks.
  5. Allowing institutions such as the RBI, public sector banks, bankruptcy boards, securities and insurance regulators to function freely and professionally is the foundational step to restoring confidence in the financial system.
  6. It is critical to allow processes such as the insolvency process to function smoothly without intervention.
  7. If there is confidence among people to spend and among bankers to lend, then the private sector will spontaneously derive the confidence to reopen and invest.
  8. When firms feel confident of availability of capital and consumers, they do not need much else to kick-start production and investment.
  9. Corporate tax cuts, such as the one announced last year, are misguided luxuries that will neither boost private investment nor are fiscally affordable.
  10. Knee-jerk reaction such as protection of Indian industry through trade restrictions cannot catalyse economic activity immediately but instead, is a dangerous reversal of established industrial policy that has generated enormous economic gains over the last three decades.
  11. A large direct cash assistance to people, improving capital adequacy of banks and providing credit guarantee schemes for corporates require significant financial resources.
  12. Government finances are already stretched with a major shortfall in revenues.
  13. New avenues for tax revenues are not feasible in the short term. Higher borrowing by the government is inevitable.
  14. India cannot afford to be too fiscally restrained in these distressing times.

 

GOVERNMENT NEEDS TO BORROW:

  1. India must make full use of loan programmes of international institutions such as the International Monetary Fund and the World Bank.
  2. Our long track record as an impeccable(honest) borrower with no default, timely repayments and full transparency make us an ideal borrower for these institutions.
  3. However, these will not suffice(sufficient), and the government needs to borrow more.
  4. Some have opined that India should hark back to the old ways of deficit monetisation by the RBI, also known as printing money.
  5. This is understandable given the current unforeseen circumstances.
  6. But we must be cognisant of the unhealthy impulses that seemingly free money creates for governments.
  7. Deficit monetisation imposes high intangible and institutional costs, as we have experienced in the past.
  8. It is perhaps prudent(practical) to adopt deficit monetisation as the last resort when all other options are exhausted.
  9. India is confronted with a dangerous trinity of military, health and economic threats.
  10. Diverting people’s attention from these threats through choreographed events and headlines will not make them disappear.
  11. India entered the COVID-19 crisis in a precarious(tough) position, with slowing growth, rising unemployment and a choked financial system.
  12. The epidemic has manifestly made it more painful.

 

SETTING THINGS RIGHT:

  1. It is important to enlarge one’s diagnosis of India’s economic woes from mere GDP numbers to the underlying sentiments of fear, uncertainty and insecurity prevalent in people, firms and institutions.
  2. Restoring confidence in people through direct cash assistance and other welfare programmes can help them live their lives and spend.
  3. Restoring confidence among bankers through autonomy of institutions and processes will help them lend.
  4. Restoring confidence among businesses with greater access to capital will help them invest and create jobs.
  5. Restoring confidence among international organisations by re-establishing the credibility of our institutions will help get funding assistance and objective sovereign ratings.

 

CONCLUSION:

The path to India’s sustained economic revival is through the philosophical pursuits(following) of improving confidence and sentiments of all in our society, using the economic tools of fiscal and monetary policies.

 

 

 

3) Parents, the first and natural tutors-

GS 2- Issues relating to development and management of Social Sector/Services relating to Education

 


CONTEXT:

  1. The National Education Policy (NEP) emphatically makes the case for early childhood care and education (ECCE).
  2. It says, “Schools providing quality ECCE reap(gain) the greatest dividends for children who come from families that are economically disadvantaged.”
  3. Over 85% of a child’s cumulative brain development occurs before the age of six.
  4. Yet, over 5 crore children are estimated to not have attained foundational literacy and numeracy in India.
  5. At present, says the policy, children from socio-economically disadvantaged backgrounds do not have access to ECCE.

 

ROLE OF PARENTS:

  1. The NEP lays out a detailed paradigm for educators to provide high-quality ECCE through preschools and anganwadis.
  2. It also talks of how parents can be active stakeholders in their children’s education.
  3. Indeed, it is crucial that we dig deeper into how parents can help, as any learning in school can be reinforced or undone at home.
  4. Parents are their children’s first and natural tutors at that age.
  5. Involving them is necessary to ensure that children learn the foundational skills they need to succeed in school.
  6. But how can low-income parents, with constraints on their time and energy, start getting more involved in ECCE?
  7. Through our work with low-income communities and youth, we believe the answer is through AIM (aspiration, information, and motivation and measurement).

 

 

BUILDING ASPIRATION:

  1. At present, 30% of low-income parents don’t send their children to any ECCE institutions.
  2. Instead, many opt to send their children to primary school too early, when they are still cognitively and emotionally unprepared for Class 1 studies.
  3. These are often the children who get left behind in primary school and beyond, with limited scope for recovery.
  4. Evidence suggests that low-income parents do value education from primary school onwards, spending a disproportionate amount of their monthly income on it.
  5. However, awareness of the importance of education at the preschool age is missing.
  6. Indeed, while high-income parents face a huge amount of social pressure to help their children achieve developmental milestones before the age of six, low-income parents lack such social incentives.
  7. Building aspiration through role modeling, mass media and social media involving examples of celebrities and influencers is the crucial first step.

 

PROVIDING INFORMATION:

  1. Once awareness and aspiration have been built, we must provide low-income parents with educational tools to support their children that they can themselves confidently administer.
  2. Preschool-aged children usually have an attention span of 5-15 minutes, which is not enough to focus on learning materials themselves, so parental involvement is necessary.
  3. Fortunately, all parents are usually equipped to understand the foundational skills that their children are learning at this age as 70% of mothers and even more fathers are educated up to Class 5 themselves.
  4. We need to assist them in combing through the vast wealth of print and online content.
  5. Information must be simplified and contextualised — creation, curation, and dissemination of content that is in their local language, relevant to their context, and relatively convenient to administer is essential.

 

TRIVIA:

Nudge is a concept in behavioral economics, political theory, and behavioral sciences which proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals.

 

MEASURING PROGRESS:

  1. The last essential piece of the puzzle for sustained engagement from parents is to motivate them on a regular basis and give them measurable indicators of progress and change.
  2. Behavioural research on nudges, social incentives, and the power of creating habits demonstrates some possible ways to provide continuous feedback and encouragement.
  3. Measurement also acts as a powerful motivation mechanism.
  4. The child’s progress and growth can be measured through rigorous(strict) assessments and through visual learning journeys.
  5. Sharing results with parents, and developing plans in partnership with them, can ensure that truly no child is left behind.