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14 Nov 2019: The Hindu Editorial Analysis

1) On shrinking industrial output: Gloom deepens

  • Another set of economic data from the National Statistical Office has reaffirmed both the depth and all-pervasive width of the ongoing economic slowdown.    
  • The latest index of industrial production (IIP) estimates from the NSO show that output shrank by 4.3% in September, with all three component sectors in the index - manufacturing, mining and electricity, posting contractions.
  • This was the sharpest contraction in output since at least April 2012, before which the data was referenced to a different base year. Also, five of the six categories on the IIP’s use-based classification of goods registered declines, with only intermediate goods bucking the trend.
  • Disconcertingly, the prolonged slump in the output of capital goods, a proxy for investment activity by businesses, extended into a ninth straight month as production contracted by about 21% for the second month in a row.
  • Consumer durables also posted a fourth straight contraction, with the 9.9% decline appearing in stark contrast to September 2018’s 5.4% growth.
  • Clearly, manufacturers of white goods are struggling to find demand for their wares and the sliding production points to an absence of the traditional festival-eve restocking bump.
  • The second successive shrinkage in infrastructure and construction goods of 6.4% - reflects the challenges besetting the two eponymous primary sectors.
  • Here, the Centre’s announcement of a funding initiative to help stalled housing projects ought to provide some fillip in the coming months. But a stretched fiscal situation is likely to keep government spending on other big-ticket infrastructure projects muted for the foreseeable future.

  • From an industry perspective, 17 of the 23 industry groups that comprise the manufacturing sector contracted. And leading the slump, predictably, was the motor vehicles industry, which posted a 25% contraction.
  • If the wholesale data from the Society of Indian Automobile Manufacturers (SIAM) is any indicator of trends for this industry, there is certainly more pain ahead as overall shipments fell almost 13% from a year earlier in October.
  • Demand for newly introduced utility vehicles was the saving grace, as it propelled a marginal uptick in passenger vehicle deliveries.
  • SIAM’s figures on commercial vehicles, which show a 23% year-on-year decline, particularly underscore the demand vacuum in the rural hinterland and the wariness on the part of fleet operators to invest in new haulage capacity. With manufacturing having a weight of almost 78% in the IIP, the latest report from IHS Markit gives little room for optimism.
  • The survey-based Purchasing Managers’ Index revealed continuing manufacturing sector weakness in October as weakening demand hurt new orders and business sentiment.
  • In fact, business confidence had slipped last month to its lowest level in more than two-and-a-half years, according to the private economic research group.
  • All signs now point to the central bank cutting interest rates again at its next meeting, in order to help spur a revival.


2) On Karnataka rebel MLAs: Disqualified, yet qualified

  • It is not often that an adverse order brings relief along with it. Even while upholding the Karnataka Speaker’s orders disqualifying 17 defectors this year, the Supreme Court has allowed the former legislators to contest the December 5 by-elections to 15 Assembly seats.
  • The former Janata Dal (S) and Congress MLAs are now free not only to contest the polls, but may reap the benefits of their amoral crossover by getting a ticket from the ruling BJP.
  • Most of them had tried to resign from their respective parties in July, but the move was seen as a transparent ploy to bring down the JD(S)-Congress regime of H.D. Kumaraswamy.
  • The suspicion, not unfounded, was that they would get ministerial positions as soon as BJP leader B.S. Yediyurappa formed a BJP government.
  • The then Speaker, K.R. Ramesh Kumar, kept them at bay for days by refusing to act on their resignations. Ultimately, he disqualified all of them in orders passed on July 25 and 28 and said the disqualification would go on till 2023 - the end of the current Assembly’s term.
  • The Speaker’s stance was quite controversial as it appeared to create a conflict between resignation and disqualification. He now stands partially vindicated as his argument that resignation could not be a ruse to evade an impending disqualification has been accepted.
  • The Speaker was also hoping to keep the defectors out of any alternative regime as members disqualified for defection are barred from becoming ministers until they get re-elected.
  • The court’s exposition of the law relating to the interplay between resignation and defection is quite welcome. On the one hand, resignation does not take away the effect of a prior act that amounts to disqualification.

  • On the other, Speakers are not given a free pass to sit on resignation letters indefinitely. Under Article 190(3), a provision under which the Speaker has to ascertain the “voluntary” and “genuine” nature of a resignation before accepting it, the court is clear that it is a limited inquiry, only to see if the letter is authentic and if the intent to quit is based on free will.
  • “Once it is demonstrated that a member is willing to resign out of his free will, the Speaker has no option but to accept the resignation,” the court has said.
  • This effectively ends the argument that the Speaker is empowered to consider the motives and circumstances whenever a resignation is submitted.
  • The verdict bemoans the fact that Speakers sometimes tend not to be neutral, and that change of loyalty for the lure of office continues despite the anti-defection law. Identifying its weak aspects and strengthening the law may be the answer.