Polity & Governance
- Breaking out of election mode
- India cannot become the third largest economy by bypassing women workers
- Special governance zones as reform labs
- RBI shouldn’t overlook the savings slide
Polity & Governance
GS (M) Paper-2: “Important aspects of governance”
GS (M) Paper-2: “Issues and challenges pertaining to the federal structure”
Breaking out of election mode
To ensure that development on all fronts is not hampered by frequent elections, India needs to vigorously pursue and implement the idea of ‘one nation, one election’.
The cycle of continuous elections not only affects the developmental process and good governance, but also forces the political class to typically think in terms of immediate electoral gains rather than focusing on long-term programmes and policies for the overall progress of the nation and its people.
Will it harm the federal structure?
- The Chief Election Commissioner, Nasim Zaidi, recently observed that holding elections simultaneously would certainly save money, time and energy, and ensure effective governance, amidst arguing that such a move would affect the federal polity and democracy of the country.
- The holding of simultaneous elections between 1952 and 1967, did not make the country a unitary state.
- India’s parliamentary democracy, based on strong constitutional principles, is mature enough not to slip into a unitary model just because of simultaneous elections; rather it would ensure more co-operations between the centre and states.
Indian voters are politically savvy:
- Although some data might show that there has been a tendency among voters to choose the same party at the Centre and in the States during simultaneously held elections in the past, it is politically naïve to simply infer that this would be the general trend whenever polls are held.
- Besides, there is also talk that national issues would dominate the agenda of the political parties, particularly pan-India parties, during simultaneous elections. This again might be a far-fetched conclusion.
- Indian voters are politically quite savvy to decide what lies in their best interests, irrespective of the various methods adopted by both national and regional parties to woo them.
Views of Parliamentary Standing Committee:
A Parliamentary Standing Committee, which also backed the holding of simultaneous elections, had cited several reasons for exploring the feasibility.
- Apart from reducing the massive expenditure involved in conducting separate elections every year, it was pointed out that “the imposition of the Model Code of Conduct puts on hold the entire range of development activities of the Union and State governments.
- Frequent elections lead to imposition of MCC over prolonged periods of time leading to policy paralysis and government deficit.”
Advantages vs. disadvantages:
- The advantages of holding simultaneous elections far outweigh the disadvantages as the process would not only vastly reduce the burden on the exchequer, but put an end to the practice of frequent deployment of police and other government staff on election duty in different States.
- No doubt, conducting concurrent elections is a humongous logistical task in terms of deployment of personnel, EVMs and other material- so we must enhance the capacity of the EC.
- Once a political consensus is built on the issue, constitutional amendments could be put in place for fixed tenure of the legislative bodies and the process kick-started.
GS (M) Paper-2: “Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.”
GS (M) Paper-1 Topic: “Role of women”
India cannot become the third largest economy by bypassing women workers
A survey by ProEves, a gender diversity consulting firm, reveals that woman participation in India Inc is fixed at less than 20% for the past three years. Compared to the US, India is at half the women participation across all employee groups.
India ranks 127th on the gender inequality index and 108th on the global gender gap index.
- Discrepancy in policies and implementation (the survey shows that 61% of the companies have a stated goal on diversity but only a third have a number target and have no target association on inclusion for leaders)
- Lack of flexible policies and the larger issues of child care support system, commuting, infrastructure, safety concerns, education and training.
- Women in India are largely employed in the informal, semi- or unskilled sector such as domestic work, where incomes are low and there are limited benefits or job security.
- According to the ILO, in 2011-12, while 62.8% of women were employed in the agriculture sector, only 20% were employed in industry and 17% in the services sectors.
Women participation in workforce: Benefits
- A recent Mckinsey report shows that India stands to gain as much as $2.9 trillion of additional annual GDP in 2050, if we increase Women participation in workforce.
- It will address the problems of patriarchy, gender discrimination and violence.
- More effective measures such as greater investments in secondary and tertiary education, vocational and skills training, and developing and strengthening laws and policies to support working women can ensure bridging this gender divide.
GS (M) Paper-2: “Important aspects of governance”
Special governance zones as reform labs
The case for creating ‘special governance zones’ to perform reform experiments.
Bold reform experiments require:
Bold reform experiments require two fundamental conditions to succeed: They need to be done at a unit of reasonable size and scale, and the experimental unit must have a manageable political economy. States are one sub-national option, cities the other.
Lessons from China:
- When need for radical economic reforms was felt in China, China initiated reforms in lesser known areas like Shenzhen, rather than the big cities. The idea was to minimize political and economic risks in case of failure.
- A new economic governance system was introduced here which allowed the market system to coordinate economic activity, protected private property and allowed foreign investment.
- The startling success of these regions then set the stage for radical reforms all across China. A fewer zones were set up, but at scale, close to port infrastructure.
A comparison with the Indian SEZ experiment:
India’s experiments with special economic zones (SEZs) were mostly a failure because they focused more on giveaways (taxes, real estate, etc.) than a fundamental reset of bad rules.
- For a start, Union territories and smart cities could be ideal vehicles for reform experiments, given their favourable political economy.
- The focus needs to be on fundamentals like empowered local officials, factor market reforms, law and order, education reforms, etc.—not concessions and giveaways.
- Two or three of each could be demarcated as demonstration projects where serious reforms are undertaken, and the successful ones can then be replicated across the country.
A two-part test for genuine reform:
Noted economist Paul Romer suggests a two-part test for genuine reform.
- Geographic tests:
Whether the suggested reform (liberal labour laws, for instance) needs to be contained in a geography or can grow to the rest of the country. If it can grow, it’s genuine reform. If not, it’s a concession.
- Temporal tests
If the reform needs to be time-limited. For instance, do tax incentives need to be limited to 10 years or can they be granted in perpetuity? If they need to be limited, it’s obviously a concession, not a reform.[Ref: LiveMint]
GS (M) Paper-3: “Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment”
RBI shouldn’t overlook the savings slide
As the Reserve Bank of India approaches its October policy review, more downside surprises in inflation will spur calls for more rate cuts.
However, this easing cycle needs to be balanced off with the need to preserve positive real rates and reverse the decline in savings.
India’s gross savings rate:
- According to the International Monetary Fund (IMF), India’s gross savings rate has fallen to 31 per cent of GDP from 37 per cent eight years ago.
- This compares unfavourably to China’s 49-50 per cent, which ironically faces criticism for not consuming enough.
What are the reasons for fall in savings?
- Slowdown in India’s savings rate is more cyclical than structural.
- Tough economic conditions, falling real returns and high inflation are other cyclical factors that have dented the piggy-bank.
- Further, financial inclusion is India is still not very high. A large chunk of its population is bereft of fruitful banking and financial services.
- In addition to falling household savings, its composition is also imbalanced. In recent years, two-thirds of household savings comprised physical assets (gold, land etc.). This was driven by a need to offset inflation, but led to a ballooning current account deficit and lower investment.
- The marginal increase in financial savings has also been concentrated in shares and debentures, insurance and retirement funds rather than bank deposits.
Is turnaround likely?
Corrective measures are under way to lift savings and investment, but a quick turnaround is unlikely.
- Public sector has largely been a drag to total savings, owing to higher fiscal deficits in recent years.
- However, with fiscal consolidation on agenda, it would now be a less of a drag on total savings.
- With rise in corporate savings largely owing to delayed spending plans and a push to mend balance sheets rather than strong profitability, any sound improvement in Total savings in the country seems unlikely
- The fall in savings needs to be arrested given India’s investment needs.
- Higher investment growth with decline or stagnating savings will put pressure on the current account of India.
- We cannot rely too much on foreign Investments to offset this, hence the push should be from inside.
- With this in mind RBI should not further cut the interest rates, as it would lead to more fall in savings.
- Currency in circulation should be reduced. Steps taken to curb the cash in circulation like Payments Bank, E-wallets, UPI should be leveraged to augment the cash reserves in Banks.
- Overall push to steer household savings away from physical assets into financial avenues should continue.
- This is important not only to meet investment spending needs, but also to ensure efficient savings for growth and limit external imbalances. On policy, further significant rate cuts are unlikely in the interest of maintaining positive real and nominal deposit rates.