16 October 2020: The Indian Express Editorial Analysis
1) Children in distress-
- The coronavirus pandemic has sharpened the edge of all inequalities.
- No one has felt the weight of its blow more than India’s children, the majority of whom have been pushed out of digital-only classrooms.
- The most fragile(weak) of them are at the risk of falling through the cracks.
- An investigation has revealed that children are being yanked out(removed) of the safety of homes, and being forced into child labour, early marriages, or being trafficked to sweatshops and brothels.
- The national helpline for children in distress, Childline, saw 1.92 lakh interventions between March and August, and 27 lakh distress calls — even during a period when large parts of the country were locked down.
- Over 10,000 cases of child marriage were recorded between April and August, with the perceived economic liability of girls leaving them more defenceless.
- The children are likely to be at greater peril(risk), not less, in the coming months.
- As the economy unlocks, labour contractors will be stalking desperately impoverished(poor) villages for cheap labour.
- In the face of such an enormous challenge, the state remains slow-footed.
- Despite advisories from the Ministry of Home Affairs to create a network of anti-human trafficking units to tackle the lockdown surge, several states have not set up even one.
- In the void left by the state, child rights organisations, teachers and communities have stepped in.
- In West Bengal’s South 24 Parganas, for example, a headmaster has put together an informal network of girl students who warn him about children being married off.
- Not every warning leads to a rescue. For every child saved, activists say, many more fall prey to trafficking cartels.
- Before the pandemic struck, equality in the classroom or the anganwadi was a work in progress.
- Social institutions remain harshest towards the poor, the lower-caste child and the first-generation learner — even if there is slow, incremental progress in many of these areas, from literacy to malnutrition to the education of the girl child.
- The pandemic’s shock has only deepened each of those fault lines.
- The state’s already questionable capacity for delivering public goods has been enfeebled, leaving vast sections of the Indian population, from workers left stranded in cities to small businesses keeling over(collapsing) as the economy contracts, at the mercy of chance.
- Each child lost to this cycle of distress adds up to an inter-generational deficit of learning, opportunity and well-being that will set back communities by decades.
- It is a battle on many fronts, but not one which this country can afford to lose.
- State governments must press the alarm button, and activate the bureaucracy at district, block and village levels to monitor dropout rates.
- This must be done to ensure relief to families and involve the police and civil society to stop this silent exodus(ouster) of children.
- With pandemic sharpening inequalities, more are being forced into child labour, being trafficked. Government must act.
2) Best way out-
- The International Monetary Fund’s (IMF) latest World Economic Outlook underlines the extent of the dislocation in economic activities across the world due to the COVID-19 pandemic.
- At the aggregate level, the Fund expects the global economy to contract by 4.4 per cent in 2020, with sharp differences across countries.
- For the Indian economy, the Fund’s prognosis(prediction) is grim(serious).
- The IMF now expects the Indian economy to contract by 10.3 per cent this fiscal year, worse than its earlier forecast, and that of the RBI’s.
- Of the major economies, only two others, Italy and Spain, are expected to contract in double digits.
REVERSAL OF TREND:
- The Fund’s latest assessment comes at a time when the signals from the BJP-ruled Centre suggest a reversal of decades of trade liberalisation and a return to the failed policies of self-sufficiency or atmanirbharta.
- A comparison with Bangladesh in this regard is instructive.
- According to the IMF’s medium-term forecasts, Bangladesh’s per capita GDP is expected to overtake India’s this year, though as the Indian economy rebounds next year, the situation is likely to reverse.
- However, over the five-year period ending in 2025, Bangladesh’s per capita GDP is expected to grow at a slightly higher pace, implying that in 2025, its per capita income would be $2,756, marginally higher than that of India’s at $2,729.
- In part, Bangladesh’s recent economic performance, and differences between the two countries can be traced to the former’s stellar(great) export performance, especially in garments and apparel.
- In comparison, India’s exports have remained sluggish, as export pessimism has taken hold.
DRIVERS OF GROWTH:
- In the current context, with three of the four drivers of growth struggling, exports could provide the much-needed fillip(push) to India’s economy.
- However, this would require India to reverse its recent stance on trade — lower rather than raise tariffs, embrace free trade agreements, and seek greater integration with global supply chains.
- Former chief economic advisor wrote that with wages in China rising, it has vacated about $140 billion in exports of unskilled labour intensive sectors, including apparel, clothing, leather and footwear.
- While countries like Bangladesh are better placed to take advantage of this opportunity, post-COVID, as companies try to hedge their supply chain risks, and shifts away from China intensify, this will provide India yet another opportunity.
- However, this will require the government to pivot away from protectionism.
Like Bangladesh, India should focus on world market, shun(avoid) protectionism, seek greater integration with global supply chains.
3) Nudge Towards Formalisation-
- A new process of classification and registration for small businesses took off on July 1.
- The enterprise or the “Udyam” as it is termed under the new Udyam registration process will register itself online based on self-declaration.
- As of October 1, the MSME ministry has confirmed that over 7 lakh registrations have taken place using the new system.
- While the number of registrations could rise in the coming months, at present this accounts for 1.1% of the total estimated 6.3 Cr MSMEs that exist as per the National Sample Survey 73rd Round (2015-2016).
- The endeavour(journey) to digitally register MSMEs is not new.
- In 2015, the government notified the Udyog Aadhaar Memorandum (UAM), an online filing system for MSMEs.
- The registration process was free, paperless and awarded instant registration.
- It was based on the self-declaration and self-certification of basic information regarding the enterprise’s existence and functioning.
- As of January, 86 lakh MSMEs had registered on the UAM portal — 13.5 per cent of the MSME universe.
- In 2016, the government notified rules under which MSMEs had to furnish information relating to their enterprises, online, in an MSME databank.
- As of January, only 1.6 lakh units registered on it. Reliable and updated information regarding small businesses in India is absent.
- A dedicated census for this salient sector was last conducted 13 years ago in 2006-2007.
- Basic information regarding MSME units is scattered across various databases such as the UAM, MSME Databank, and GSTN.
- The first two datasets contain self-certified, voluntary information provided by a fraction of MSMEs.
- The GSTN has a statutory requirement that only businesses with a turnover of more than Rs 40 lakh need be registered on it.
- Comparing the requirements of the UAM and Udyam registration, it is clear that the importance of generating a verified database of MSME units has been acknowledged.
- Under the Udyam registration process, Aadhaar is made mandatory for proprietors whereas companies/LLPs must provide their GSTIN and PAN along with the Aadhaar number.
- Moreover, every enterprise can have only one Udyam Registration Number, irrespective of the number of manufacturing and service activities provided.
- The self-declared information regarding investment and turnover is verified using the integration of the Udyam system with the Income Tax department database and the GSTN.
- For classification and information updation purposes, therefore, the registering entity’s ITR, GST returns and PAN will serve as reliable information.
- Entities that have previously registered (as of June 30) on other portals/systems will continue to be valid until March 31, 2021.
- By this cut-off date, however, it is expected that they will re-register themselves under the Udyam registration process.
- In an attempt to nudge more enterprises to become lifetime Udyam, the government has integrated the system with the Trade Receivables Electronic Discounting System (TReDS) and the Government e-Marketplace (GeM).
- Such linkages significantly benefit MSMEs by offering a free and automatic route to onboard bill discounting mechanisms and the government’s online procurement system.
- In its updated Priority Sector Lending (PSL) guidelines, the RBI has established that for the purposes of PSL, MSMEs will be identified as per the gazette notification laying down the new process of classification and registration.
- It has also clarified that all lenders may now obtain the Udyam Registration Certificate from entrepreneurs.
- It is clear that going forward financial institutions can make the Udyam registration a prerequisite for lending purposes.
- It is important to understand how this will bode for a vastly informal MSME sector.
- These unincorporated small business units comprise self-employed/owner-managed firms with characteristic features of household enterprises and those that operate with less than five workers.
- Most of these firms are not formally registered anywhere for various reasons.
- They are so small that they bypass minimum thresholds that require them to pay income tax or be registered under the GST.
- Being invisible benefits these firms since it enables them to stay out of a rather complex and expensive regulatory apparatus.
- The costs of formalisation and compliance are high and onerous(difficult) in many states in India.
- In such an ecosystem, there are perverse incentives to remaining small and informal.
- From April 1, 2021, it seems that the Udyam registration may be the only valid proof for an entity to be recognised as an MSME as per the revised definition.
- While the Udyam initiative holds more promise in terms of capturing reliable and verified information about MSMEs, it is important to assess if this will be detrimental(risk) to some of them in terms of accessing formal finance.
- The slightest chance of the Udyam registration turning into an entry barrier must be rectified before April 2021.
- To this end, the government and RBI should consider whether the registration requirement can be exempted for units with investment and turnover that falls in the lower end of the criteria that presently defines micro-enterprises, for the purpose of accessing formal credit.
- In 2018, the International Finance Corporation estimated that the overall supply of finance from formal sources met only one-third of the credit demand of the MSME sector.
- These businesses prefer relying on informal sources for financing due to their inability to meet documentation protocols, inadequate collateral, disorganised book-keeping, among others.
- Enabling strategies such as PSL could provide a fillip to priority sectors including MSMEs which require increased formal financing.
- It is imperative(need) that such institutional lending initiatives continue to remain accessible for all businesses, formal and informal, and deliver on the promise of financing for inclusive development.