3 August 2020: The Indian Express Editorial Analysis
1) One country, one system-
GS 2- Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora
- In the month since China imposed the controversial national security law in Hong Kong.
- China claimed the legislation was necessary to end the months of disruption caused by protests .
- The faultlines(differences) between the city and Beijing have only deepened.
- The elections to the city’s government due in September have been postponed, ostensibly due to the COVID pandemic.
- However, given that several pro-democracy candidates were not allowed from contesting and other activists have been arrested for online posts, the justification wears thin(less acceptable).
- International opprobrium(disliking) against the decision, too, has intensified.
- The US has imposed sanctions on China and the UK, Australia, Canada and Germany have suspended extradition treaties(deportation) with Hong Kong.
MORE TO LOSE:
- On the face of it, it may appear that China has more to lose by ending the “one country two systems”, under which Hong Kong was governed.
- It is this status that has made it a hub(main centre) for finance capital, international technology giants and the service industry.
- Tech giants like Facebook and Google, for example, can operate in Hong Kong, which has been outside the “Great Firewall”.
- Under the new law, authorities can arrest and extradite for trial and imprisonment to mainland China citizens of Hong Kong under vague(not clear) charges.
- However, the end of “one country two systems” is of a piece with Xi Jinping’s vision for China, and the ideological shift his tenure as head of the party-state has marked.
- China’s aggression in the Indo-Pacific vis a vis India as well as the ambitious strategic-economic expansionism of the Belt and Road Initiative, are part of the same pattern.
- Delhi has, as in the past, been reticent(reserved) about commenting on the special status of Hong Kong and its abrogation(end).
- Rajiv Kumar Chander, permanent representative to the UN, told the UNHRC that Delhi has been “keeping a close watch on developments”.
- India has historical role in Hong Kong’s modernisation and also has currently significant Indian-origin population and workers in the service sector there.
- It might be time to consider a carefully calibrated(measured) engagement with the city’s new and unfolding reality.
- With the heavy hand of the Chinese state looming, both finance capital and talent in the service sector are beginning to move out of Hong Kong.
- Delhi has largely failed to take advantage of the shift in global manufacturing out of China, losing out to countries like Vietnam.
- It could partially make up for that by trying to attract those from Hong Kong looking for a free society and economy.
Assault on Hong Kong's autonomy is of a piece with Xi's assertiveness at home and expansionism abroad.
2) Stress and strain-
- The first-quarter data on central government accounts has been released by the Controller General of Accounts.
- It underlines(focusses) the stress in government finances stemming(coming) from the curtailment of economic activities during this period.
FOUR TRENDS EMERGE:
- First, at the aggregate level, the Centre’s gross tax revenues have contracted by almost a third as compared to the same period last year, highlighting the extent of the economic shock.
A) However, as the lockdown restrictions were eased, and economic activity picked up, the pace of contraction in government revenues did ease.
- Second, with consumption picking up, the recovery in indirect taxes during the first quarter has been far swifter as compared to that in direct taxes.
- Third, despite this shortfall in tax revenues, central government expenditure has grown in line with what was projected in the Union budget 2020-21.
- Fourth, and more crucially, the government’s capital expenditure has grown at a much faster pace as compared to its revenue expenditure.
- At the aggregate level, the Centre’s gross tax revenues contracted by a staggering 32.6% in the April-June quarter of the current financial year.
- However, a closer look reveals that the pace of contraction eased with each passing month.
- Tax revenues contracted by 44. 3 per cent in April — the first full month of the lockdown — easing thereafter to 22.7 per cent in June.
- The disaggregated data shows that while direct and indirect taxes contracted by 30.6 per cent and 34.1 per cent respectively, the pace of contraction in indirect taxes has eased considerably.
- In fact, indirect taxes in June were almost at the same level as last year, driven in part by rising excise collections owing to the steep hike in duties on fuel products.
- On the direct tax side, the contraction in income taxes by more than a third in the April-June quarter underlines the extent to which the slowdown in activities has impacted individual incomes.
- Similarly, the 46% contraction in corporate tax revenues in June — the month of advance tax collections — highlights the grim situation for India Inc.
- On the other hand, despite the subdued revenues, the Centre has maintained its expenditure, especially capital expenditure, which was up 40% in the first quarter, over the same period last year.
- In large part, this spurt was driven by higher spending by the department of food and public distribution and road transport and highways.
- Government spending on rural development also saw a surge, much of which is likely to be on account of the relief measures to address the fallout of the crisis.
- The first-quarter data on government finances broadly affirms the trend of a gradual pick up in the economy from the lows observed in April.
- However, with economic activity now beginning to show some signs of plateauing, at lower levels, it underscores the difficulty of fiscal management.
- Reaching back to pre-COVID levels will depend in large part on the success in containing the virus, and on how economic activity shapes up, especially with the reimposition of the lockdown in several parts of the country.
3) Missing the Target-
- The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) is the first universal basic income-type of scheme targeted towards landed farmers.
- It was introduced in December 2018 to manage agricultural stress.
- Initially, the scheme was targeted at small and medium landed farmers, but with the declining growth in gross value added of the agricultural sector, it was extended to all farmers in May 2019.
- The Union budget had allocated Rs 75,000 crore to this scheme in 2020-21.
DELHI-NCR CORONAVIRUS TELEPHONE SURVEY:
- PM-KISAN is a useful vehicle to provide support to farmers during the lockdown and it was included in the Pradhan Mantri Garib Kalyan Package.
- On March 28 it was announced Rs 2,000 (out of Rs 6,000) would be front-loaded to 8.7 crore farmers between April-June.
- But, was this a useful way of relieving distress during the lockdown?
- Data from the Delhi-NCR Coronavirus Telephone Survey Round 3 (DCVTS-3) conducted by the NCAER National Data Innovation Centre in mid-June provides some useful insights.
- The target geographical area for DCVTS is the Delhi-NCR. The DCVTS-3 included 52 per cent rural and 48 per cent urban households from Haryana, Delhi, Rajasthan and Uttar Pradesh.
- The survey offers a holistic perspective to understand the extent of income loss of farm households, their experience of hardship and the role of PM-KISAN in alleviating(reducing) their suffering during April-June.
- Out of the 3,466 households in the sample, 18 per cent reported cultivation as the primary source of household income.
- The survey records a somewhat lower level of economic distress among farmers than among other groups.
- While farmers faced some logistical challenges in transporting and selling their produce, 97% of them continued to harvest rabi crops and prepared for the kharif season.
- Nearly 75% of the cultivators who usually hire labourers for agricultural activities continued to do so.
- As a result, farmers were relatively immune to the economic impact of the lockdown.
- About 32% of them experienced large income losses in the month of May, which is much lower compared to the proportion among casual wage workers (73%) and business households (70%).
- About 20% of farm households reported no reduction in their income in May.
- The proportion of households that had to borrow to meet their day-to-day consumption needs during the lockdown was relatively low for the farmers (34%) compared to casual wage workers and business households.
- While 7% of farm households suffered from occasional unavailability of food during the lockdown, this figure was much higher for casual workers (24%) and business households (14%).
- In the months of April and May, 21% of 632 farm households received cash transfers through PM-KISAN.
- Among the recipients, around two-thirds reported receiving Rs 2,000 and about a fourth received Rs 4,000 in April and May combined, possibly because family members engaged in agricultural activities may be co-residing within a household.
- On the whole, when compared to non-recipients of PM-KISAN (including both farm and non-farm households), these households exhibited lower signs of economic distress.
- About 35% of rural PM-KISAN recipients suffered income losses to a large extent in comparison to more than half of the non-recipients.
- A little more than a third of PM-KISAN recipients borrowed money during this period as against 48% of non-recipients.
- However, these households were somewhat better off than the general rural population even before receiving PM-KISAN benefits.
- Thus, their relative immunity(protection) to the income shock may not be solely due to PM-KISAN.
- Two aspects of this scheme present particular challenges.
- First, PM-KISAN is not reaching all farmer households as intended.
A) Most of the farmers in UP, Haryana and Rajasthan own land and should be receiving benefits. But only 21% of the cultivators interviewed reported receiving the benefit.
B) The exclusion is greater in UP than in Haryana and Rajasthan.
- Second, this scheme is not pro-poor since recipients of PM-KISAN seemed to be better off than the general rural population even before the lockdown.
Given this uncertainty over the reach of PM-KISAN and its targeting, the relevance of the scheme needs to be carefully evaluated during this period.