Indian Express Editorial Analysis
11 May 2020

1) What’s in a NAM?


CONTEXT:

Prime Minister Narendra Modi’s video address to a summit of the non-aligned nations last week has generated criticism as well as commendation(praise). Both sides, however, miss the recent evolution of the Indian thinking on the NAM.

RENEWED INTEREST:

 

External Affairs Minister Subrahmanyam Jaishankar has spoken frequently about India’s stakes in the so-called “Global South”. He was invoking a term that refers to the entire developing world and not just members of the NAM.

The minister has talked about consolidating(strengthen) long-standing political equities that Delhi had created in the NAM and the Global South over the last many decades.

The new interest is not a throwback to seeing the NAM as an anti-Western ideological crusade. Nor is it a pretence(act) of valuing the movement but treating it as a ritual to be performed every three years.

It is based on the bet that the NAM remains a critical diplomatic forum for the pursuit(objectives) of India’s international interests.

ATTENTION:

But why has a routine speech by the PM on promoting global cooperation in combating the coronavirus gotten so much attention?

One reason is its billing as Modi’s first address ever to the NAM. After all, he had skipped the last two NAM summits, at Venezuela in 2016 and Azerbaijan in 2019. Critics of the NDA’s foreign policy convinced themselves that Modi had no real attachment for the non-aligned legacy of Jawaharlal Nehru.

For the traditionalists, Modi’s engagement with the NAM was a welcome return to roots. For those who see the NAM as a political dinosaur, Delhi’s renewed enthusiasm for it seems like a regression(return to a former or less developed state). But a closer look at the Modi government’s foreign policy actions reveals a three-fold rationale for intensifying engagement with the NAM.

NEW COLD WAR:

One, those who say the NAM is a relic(remains) of the Cold War must also acknowledge that a new Cold War is beginning to unfold, this time between the US and China.

As the conflict between the world’s two most important powers envelops all dimensions of international society, India has every reason to try and preserve some political space in between the two.

Second, in the last few years, Delhi paid lip-service(agree with something but do nothing to support it) to the NAM but devoted a lot of diplomatic energy to forums like BRICS. Given the Russian and Chinese leadership of BRICS, Delhi inevitably began to tamely(timidly) echo(support) the international positions of Moscow and Beijing rather than represent voices of the Global South.

CONCLUSION:

Finally, as a nation seeking to become an independent pole in global affairs, India could do more with forums like the NAM in mobilising support on issues of interest to Delhi.

An independent Indian line backed by strong support within the NAM can make a big difference to the outcomes of the impending contentions at the World Health Assembly later this month on reviewing the WHO’s performance during the COVID crisis.


2) Reform for labour-


CONTEXT:

That the archaic(old-dated) labour laws in India need to be amended(changed) is beyond debate. They have protected only a tiny section of the labour force, facilitated rent-seeking, and have laid the ground for the casualisation of the labour force, the phenomenon of the missing middle in manufacturing, and the substitution of capital(money) for labour in a capital deficient(less) and labour abundant(plenty) economy.

 

RATIONALISING LABOUR LAWS:

Rationalising(reorganize a process so as to make it more logical and consistent) labour laws has been on the policy agenda for decades. Yet, labour reform hasn’t taken off because the debate has been framed in terms of empowering the management while curbing(restricting) the rights of labour, as is evident(obvious) from industry’s often-demanded concession of the power to fire workers without seeking government permission.

But now, a number of states have embarked(started) on this politically contentious course again. While efforts to reform labour laws should be encouraged, coming at a time of acute(severe) economic distress and labour insecurity, in a crisis that has exposed the lack of safety nets and the limited access of workers to healthcare, they must keep the concerns of labour at the centre.

INITIATIVES:

Initiatives taken by states such as Madhya Pradesh — which aim to reduce the frequency of inspections, ease the registration and licensing process, and enhance the thresholds of when the regulatory architecture kicks in — are steps in the right direction. As is the introduction of fixed-term employment to help companies sidestep the contractor system.

But, removing firms’ obligation(duty) to comply with provisions of the Industrial Disputes Act constitutes blatant(severe) disregard for workers’ rights. To be sure, certain parts of the Act which deal with the hiring and firing of workers have rightly been seen as impediments(hindrance) to flexible labour markets.

DEGREE OF PROTECTION OR REDRESSAL MECHANISMS:

Yet, instead of rationalising or doing away with some chapters, giving firms a free pass over complying with the Act strips(takes away) workers of any degree of protection or redressal(remedy or compensation for a wrong or grievance) mechanisms. It further reduces the bargaining power of labour, their right to negotiate.

While fixed-term employment is a welcome half-step, states should ensure that these contract workers receive social security benefits similar to permanent workers, as is the case under the Centre’s model law. If regulations designed to support labour are suspended(removed), it can effectively remove the distinction between permanent and contractual workers.

Such moves could trigger a race to the bottom. They also raise questions over the architecture of the labour market of the future. Will this temporary reprieve to industry translate to long-term benefits? Why not increase the number of shifts as opposed to increasing the hours of work?

CONCLUSION:

Any shortsighted move now will only end up increasing workers’ vulnerabilities(weakness) at a time of acute distress, when unemployment is likely to be at all-time highs, and when the national consensus is veering(moving) towards providing labourers safety nets(such as pensions, savings).

Labour reform for long has framed labour as an adversary(enemy), now may be the moment to see it through their prism — this is the only way to make enduring(lasting over a period of time) progress.

Stringent labour laws need to be amended. But during COVID distress, reform will work if labour is seen as key stakeholder.

 

3) One Fund, Two Safety Nets-


CONTEXT:

A Singapore study has projected that if India maintains the present lockdown till May 16, it will be 97 per cent COVID-free by May 21. But while hoping for the best, the government needs to prepare for the worst.

There is a catastrophic(severe) decline in production and sales within the country; an even sharper fall in the government’s tax revenues, and a precipitous(sudden/steep) drop in foreign exchange inflows because of a simultaneous fall in export earnings and remittances(payments) from workers in the Gulf.

RUNNING OUT OF IDEAS:

Having put all its eggs(resources) in the lockdown basket, the Narendra Modi government has run out of ideas. The only one floating around today — to free the economy in a phased manner and maintain the lockdown only in “COVID hotspots” — is so impractical that only someone who has never worked in the industry could have dreamed it up.

Every manufactured product contains dozens of components that are supplied by ancillary(supporting) producers in the organised and unorganised sectors. The stocks of only one of these need to run out to bring the entire production line to a halt(stop).

With constantly shifting “hotspots”, can any enterprise ever be sure that it will be able to meet a committed delivery date?

 

SEASONAL VIRUS:

There is growing evidence, first from a study by the Sun Yatsen university in China and now from the National Environment and Engineering Research Institute in Nagpur that, like its predecessors SARS and MERS, COVID could also turn out to be a seasonal virus that dies out in summer only to return in winter. If that proves correct, will the nation have to go through this trauma(shock) every winter?

There is only one way to ensure that it does not: Admitting that this is not an “internal” crisis born out of the malfunctioning of the market economy. So it cannot be overcome by tightening or relaxing credit, raising or lowering interest rates, or by putting moratoria(temporary prohibition of an activity) on debt repayments.

Irrespective of its murky(dark) origins in China, COVID is a natural disaster. Its cost must, therefore, be met through emergency government spending and not, as is being attempted now, through soft loans that the recipients will have to repay.

SOLUTION:

 

The first step must be to create a separate emergency fund and budget for meeting the expenses that will be incurred in creating two “safety nets” — one to meet employers’ fixed costs while they are not producing anything, and the other to feed and shelter workers while they are earning nothing.

Since both the central and state governments are strapped(in need) for cash, the fund will have to be created by the Ministry of Finance through the issue of treasury bills, as a one-time exception to its 1994 agreement with the Reserve Bank of India to leave the management of money supply to it in the future.

(Treasury Bill- a short-dated UK or US government security, yielding no interest but issued at a discount on its redemption price)

VALUE OF T-BILLS-

The value of the T-Bills that will need to be issued will depend upon the loss of nominal GDP per month, how long the lockdown lasts, and the rate of saving in the economy.

For instance, if the present lockdown reduces the volume of transactions by two-thirds and lasts for two months, the imputed(assigned to something by inference from the value of the products or processes to which it contributes; estimated) decline of nominal GDP will be 11 per cent.

At the current savings rate of 31 per cent, any money released into the economy through the issue of T-bills will create just over 3.2 times as much income before it is fully absorbed into the economy — the Keynesian multiplier. Thus, the primary injection of funds will have to be 3.4 per cent of the annual GDP — Rs 6.8 lakh crore.

However, if the volume of transactions falls only by half, the corresponding figure for the issue of T- bills will be 5.3 lakh crore. These are double, and one-and-a-half times, respectively, the Rs 3.37 lakh crore that the RBI intends to inject into the economy as soft loans through commercial banks, but which the latter are having difficulty in finding borrowers for.

CONCLUSION:

This is not a daunting(challenging) sum. Much of it will be recovered if the economy makes a “V” shaped recovery. But far more valuable will be the confidence it will instill(inject) in the people that they do not need to live in fear for the rest of their lives.