Gist of EPW September Week 1, 2019

The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.

1. Foreign Investment in Coal Mining

Context
The Government of India has initiated a policy reform which now allows 100% Foreign Direct
Investment (FDI) under the automatic route for the sale of coal and for coal mining activities,
including associated processing infrastructure.
Background

 The 100% foreign direct investment (FDI) under the automatic route are subject to
provisions of the Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals
(Development and Regulation) Act, 1957, amended over time.
 Under the earlier policy, 100% FDI was allowed only for captive consumption.
 Captive Consumption means the consumption of goods manufactured by one
division or unit and consumer by another division or unit of the same organization
 Specifically, 100% FDI via the automatic route was allowed in coal and lignite mining
for captive consumption by power, steel and cement units.
The changed policy regime, thus, allows foreign companies to extract coal for commercial
purposes for sale in the open market and in “associated infrastructure” that include washeries,
crushing, coal handling and separation.
FDI and Routes of FDI
What is Foreign Direct Investment (FDI)?

 Foreign direct investment (FDI) is an investment made by a firm or individual in one

country into business interests located in another country.
 Generally, FDI takes place when an investor establishes foreign business operations or
acquires foreign business assets, including establishing ownership or controlling interest
in a foreign company.
 Two routes of FDI in India: Automatic Route and Government Route.
Automatic Route

1. Under the Automatic Route, the non-resident investor or the Indian company does not
require any approval from Government of India for the investment.

Government Route
 2. Under the Government Route, prior to investment, approval from the Government of
India is required. Proposals for foreign investment under Government route, are
considered by respective Administrative Ministry/ Department.

Significance of new FDI policy

1. The Coal industry plays a key role in the growth of the economy.
 India has one of the largest reserves of coal, amounting to 286 billion tonnes.
 Coal mining in India, the third largest in the world, is an important industry that
supplies the largest commercial source of primary energy.
 Coal, being a vital raw material, is mainly used by the power plants, and
metallurgical and cement industries.
2. India has been importing coal to meet its growing energy requirements
 The domestic production by Coal India Ltd (CIL) has been unable to keep up with
the demand for coal and also meet its production targets.
 The imports of coal have been made at a cost higher than the prices of domestic
coal.
 With the implementation of the liberalised policy enabling the entry of foreign
coal mining companies, it is expected that domestic production would be
augmented.
 It is also presumed to bring into India newer and efficient exploration
technologies and methods for mining coal, especially high-end technology for
underground mining used by global miners, which would also help in lowering
costs.
3. The policy would also enable the opening up of the industry to competition, which until
now had been the monopoly of CIL, a public sector company.
 Only CIL could mine and sell coal in the country. Later, along with CIL, private
and public sector companies with captive mines were allowed to mine and sell
25% of the coal in the open market.
 To remain competitive, CIL, which is beset with the problems of low
productivity, would therefore need to bring down its escalating operating costs.
4. The new coal mining policy would also push forward the implementation of related
policies such as those for auction and allocation of coal blocks, environment and forest
clearances, land allocation, and so on.
 This is because the changed FDI norms alone may not meet the desired objectives
of the policy.
 The entry of new companies would necessitate fast-tracking of approval processes
in a time-bound manner to reduce uncertainties regarding regulations and
clearances in order to avoid risks to production.
Other Challenges
  Private investments in captive coal mines have been minimal due to risks to production.
These include risks involved in land acquisitions and other permits, which may prevent
the entry of foreign firms.
 This is because foreign firms usually avoid sectors in which the regulatory risks tend to
be high, especially with regard to natural resources.
 Entrants to the industry would have to acquire and develop new coal mines.
 This would lead to the need for a certain gestation period before the commencement of
commercial operations that would also require large financial outlays.
 Additionally, bidding and environmental clearances, inadequate infrastructure, and issues
regarding land availability would take time before 100% FDI in mining by new firms
commences.
 Constraints on profitability could also discourage new entrants and investments.
Conclusion

 However, from the perspective of sustainable development of natural resources there is a

risk of creating imbalance in the environment and ecology that would be caused due to
indiscriminate mining.
 To moderate such apprehensions and to further the larger objective of sustainable
development, regulations and safeguards need to be strictly imposed on the mining firms,
so that the firms abide by environmental laws and regulations as well as health and safety
norms for workers in mines.

Gist of EPW August Week 5, 2019

The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.

1. Access and Equity Aspects of Higher Education

Context

 The Draft National Education Policy 2019 (DNEP 2019) has been prepared by the
committee constituted by the Ministry of Human Resource Development, Government of
India, under the chairmanship of K Kasturirangan.
  An assessment of the draft National Education Policy 2019 is undertaken in this article in
reference to the Gross Enrolment Ratio.
What is Gross Enrolment Ratio (GER)

 The Gross Enrolment Ratio (GER) is the total enrolment in higher education (both degree
and diploma programmes in regular and distance modes), as a percentage of the
population in the age-group 18–23 years.
Growth of Higher Education
11th Five Year Plan (2007–12)

 It had its focal point on objectives of equity, access and quality at the same time
expressing concern at the poor standards of majority of institutions and extremely low
11% enrolment ratio in higher education, compared to the then world average of 23.2%,
with region-, gender- and social class-based disparities.
 This was sought to be achieved by
 Establishing new colleges and universities
 Including model colleges in educationally backward districts
 Strengthening and expanding existing institutions
 Upgrading few select universities with “potential for excellence”
 Strengthening distance education
 It was proposed that apart from increasing budgetary allocation, the additional resources
required can be generated by increasing fees and also by developing loan and scholarship
programmes.
Twelfth Five Year Plan (2012-17)

 The 12th Five Year Plan was a shift from the Eleventh Plan, proposed to achieve
objectives of access, equity and quality in higher education through a set of structural
reforms.
 The operationalisation of the principle of “strategic central funding based on state higher
education plans” and structural reforms was set in motion by the Rashtriya Uchchatar
Shiksha Abhiyan (RUSA)
Rashtriya Uchchatar Shiksha Abhiyan (RUSA)

 RUSA is a Centrally Sponsored Scheme (CSS), launched in 2013 which aims at

providing strategic funding to eligible state higher educational institutions.
 The central funding (in the ratio of 60:40 for general category States, 90:10 for special
category states and 100% for union territories) would be norm based and outcome
dependent.
 The funding would flow from the central ministry through the state governments/union
territories to the State Higher Education Councils before reaching the identified
institutions.
Objectives of RUSA
  Improve the overall quality of state institutions by ensuring conformity to prescribed
norms and standards and adopt accreditation as a mandatory quality assurance
framework.
 Usher transformative reforms in the state higher education system by creating a
facilitating institutional structure for planning and monitoring at the state level,
promoting autonomy in State Universities and improving governance in institutions.
 Ensure reforms in the affiliation, academic and examination systems.
 Ensure adequate availability of quality faculty in all higher educational institutions and
ensure capacity building at all levels of employment.
 Create an enabling atmosphere in the higher educational institutions to devote themselves
to research and innovations.
 Expand the institutional base by creating additional capacity in existing institutions and
establishing new institutions, in order to achieve enrolment targets.
 Correct regional imbalances in access to higher education by setting up institutions in
unserved & underserved areas.
 Improve equity in higher education by providing adequate opportunities of higher
education to SC/STs and socially and educationally backward classes; promote inclusion
of women, minorities, and differently abled persons.
RUSA and Higher Education

 RUSA replaced the principle of “need-based” funding with that of “norm-based” funding
 As per the RUSA document (GoI 2013), “low GER very aptly indicates, increase in the
number of institutions has still remained inadequate to meet the increased demand for
higher education.”
 Among various objectives enumerated in RUSA, one that is most pertinent here is, to
“expand the institutional base by creating additional capacity in existing institutions and
establishing new institutions, in order to achieve enrolment targets.”
 The targets set under RUSA were to increase the enrolment ratio in higher educational
institutions to 25% by the end of Twelfth Plan (2012–17) and to 32% by the end of
Thirteenth Plan (2017–22).
 Notwithstanding that the entire planning process is now abandoned, it is clear that the last
two plans emphasised on expanding existing capacity and opening new institutions for
increasing GERs. The DNEP completely ignores this.
Stats on variation and distribution of higher education
(As per UGC 2018; AISHE 2018)

 5% colleges are in rural areas (this ratio was 58% in 2014–15 and 54% in 2010–11).
 48% of the enrolment comprises women students.
 Category-wise enrolment: General– 46%, Scheduled Castes (SC)–14%, Scheduled Tribes
(ST)–5% and Other Backward Classes–35%.
 Distance enrolment constitutes 11% of total enrolment.
  Level-wise enrolment (regular mode): undergraduate–81.1%, postgraduate–9%,
research–0.6%, diploma/certificate–8.7% and Integrated courses–0.6%.
 65% of the students are enrolled in the general stream.
 3% of undergraduate and 75.3% of postgraduate enrolment is in colleges and the rest is in
university departments (UGC 2018).
Characteristics of Distribution

 Evidently, the undergraduate colleges, especially in the general stream, are the backbone
of higher education in the country.
 Moreover, a majority of the undergraduate colleges are in rural areas and this proportion
has grown steadily since 2010.
 This expansion has played a role in the rise in GER through expanded opportunities for
access to higher education to rural masses.
Comparative study between Maharashtra and other states

 As per reports of AISHE on Maharashtra, we find that at the commencement of Twelfth

Plan, in 2011–12, the states of Himachal Pradesh and Kerala had GERs as 24.8% and
21.8% respectively, which were below the 26.3% of Maharashtra.
 However, these two states have registered GERs higher than Maharashtra, during the
Twelfth Plan as well as by the end of it.
 Further, Tamil Nadu has the highest GER in the country and very close to the overall
target of 50% set by the DNEP.
 As per the reports of AISHE sluggish enrolment growth and contraction of institutional
base in Maharashtra is in stark contrast with the consistent and impressive rise in
enrolment in Himachal Pradesh, Kerala and Tamil Nadu.
 Creation of additional capacity in existing institutions and/or establishing new institutions
in these three states is highly evident.
 Even with a near stagnant average enrolment per college, the significant jump in the GER
in both Himachal Pradesh and Kerala is accompanied by a rise in the number of colleges.
 In the case of Tamil Nadu, it is the increase in, both, number of institutions as well as the
size of the institutions.
New Institutional Architecture

 In DNEP the road map to move towards the declared policy thrust “Institutional
Restructuring and Consolidation,” will actually cause a shrinkage of the expanding base
of higher education.
 This framework comprises of developing three types of institutions:
 Type 1: research universities,
 Type 2: teaching universities and
 Type 3: colleges.
 It is proposed that this “institutional architecture” be executed through comprehensive
10-year plans prepared by all state governments.
  The plan will envisage judicious distribution of the types of institutions across the state,
with a special emphasis on access in disadvantaged regions.
 It is expected to have one each of types 1, 2, and 3 institutions per 50 lakh, 5 lakh, and 2
lakh of population respectively, with scope of some variation allowed across regions.
 The stated objective is to have bigger and fewer institutions, with the target to have about
150–300 of Type 1, 1,000–2,000 of Type 2 and 5,000–10,000 of Type 3 institutions.
 This is sought to be done by restructuring the institutions which cannot develop into Type
1, 2 or 3 due to lower enrolment levels and utilising their infrastructure for other purposes
like schools, library, vocational centres, etc.
 Clearly from the AISHE stats, a greater number of Type 2 HEIs (teaching universities)
would be required, much fewer Type 3 HEIs (colleges) will be needed.
 Even if we presume that several Type 3 HEIs will evolve into Type 2 and some of the
Type 2 would be upgraded to Type 1, the total number of HEIs will be less than 10,000.
 Thus, the veil of high-sounding jargon is to conceal the “framework” to close down
colleges.
Conclusion

 Based on the United Nations projections, India’s population in the 18–23 age-group is
estimated to be about 139 million in 2035 (8.8% of total population), lower than the
present 141.8 million (AISHE 2018), which is 11.7% of total population.
 The policy aims to reach the target of 50% GER by then. This would necessitate the all-
India gross enrolment to reach a target of about 70 million from the current 37 million.
 Apparently, this would require more sustained efforts for expansion of existing capacity,
which cannot be achieved by severe curtailment of existing base.
 Further, it is incomprehensible how “smaller number of institutions” with much larger
average size, will lead to increase in GER and is nowhere explained in the DNEP.
 On the contrary, curtailment of a number of institutions can have severe repercussion on
the district- and taluka (tehsil)-wise distribution of HEIs.
 Thus the consistent rise in GER has also accompanied expansion of higher education
base in rural India.
 In Maharashtra, the policy to have at least one government-aided college per taluka, led
to expansion of higher education in the remote hilly and tribal areas.
 In view of this the DNEP in its present form constitutes a threat to the “access” and
“equity” aspects of higher education.

Gist of EPW August Week 4, 2019

The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.
1. Code on Wages and the Gig Economy
Context

 The Code on Wages, 2019 subsumes four different laws governing the payment of wages
and minimum wages in India, and “simplify and rationalise” the law.
 However, the definition of “employee” in the context of the rise of the “gig economy,” is
not updated hence they do not enjoy formal protection under the labour laws.
About Code on Wages

 The Code on Wages, based on the recommendations of the report of the Second National
Commission on Labour in 2002, seeks to repeal and replace four separate legislation
dealing with wages, namely:
 The Payment of Wages Act, 1936
 The Minimum Wages Act, 1948
 The Payment of Bonus Act, 1965
 The Equal Remuneration Act, 1976
Recent developments in labour laws

 The Supreme Court, in a judgement, ruled that women who worked from home doing
piece work would be considered “employees” of the company which had engaged them
to do so, even if there was no direct contract of employment between the two.
 Second important development was the passage of the Code on Wages, 2019 by the Lok
Sabha and the Rajya Sabha after having first been introduced in 2017.
Significance of the Developments

 These two developments gain significance at a time when job creation is not just slowing
down, but the new reality is the widespread job losses resulting from structural changes
in the Indian economy
 At the same time, the very nature of work and employment is changing thanks to
technological changes. The so-called “gig economy” wants us to believe that we can all
be “entrepreneurs,” whether we are driving cars, delivering biryani, or writing code.
 Workers in the gig economy, unlike permanent employees, supposedly enjoy the freedom
and flexibility of choosing their hours and employers.
 However, the reality is that they are largely doing poorly paid work with none of the legal
protections and rights enjoyed by permanent employees.
 The recent judgment by the Supreme Court is the most emphatic rejection of the idea that
an employee-employer relationship requires the employee to work at the employer’s
premises in any way.
 This reaffirms that the test to determine the relationship of employment is control and not
necessarily location, this has large implications for workers in the gig economy.
What is a Gig Economy?

 An economy where workers are not necessarily working out of a fixed place of
employment, whether at home or elsewhere.
 In a gig economy, temporary, flexible jobs are commonplace and companies tend toward
hiring independent contractors and freelancers instead of full-time employees.
The Factors of a Gig Economy

 In the modern digital world, it’s becoming increasingly common for people to work
remotely or from home.
 This facilitates independent contracting work as many of those jobs don’t require the
freelancer to come into the office to work.
 Employers also have a wider range of applicants to choose from as they don’t have to
hire someone based on their proximity.
 Most times, employers cannot afford to hire full-time employees to do all the work they
need to be done, so they hire part-time or temporary employees to take care of busier
times or specific projects.
 On the side of the employee, people often find they need to move around or take multiple
positions to afford the lifestyle they want.
 People also tend to change careers many times throughout their lives, so the gig economy
can be viewed as a reflection of this occurring on a large scale.
 In effect, workers in a gig economy are more like entrepreneurs than traditional workers.
Criticisms of the Gig Economy

 Despite its benefits, there are some downsides to the gig economy. While not all
employers lean toward hiring contracted employees.
 The gig economy trend can make it harder for full-time employees to develop fully in
their careers since temporary employees are often cheaper to hire and more flexible in
their availability.
 For some workers, the flexibility of working gigs can actually disrupt the work-life
balance, sleep patterns, and activities of daily life.
 Flexibility in a gig economy often means that workers have to make themselves available
any time gigs come up, regardless of their other needs, and must always be on the hunt
for the next gig.
 The gig economy can give greater freedom of choice for the individual worker, it also
means that the security of a steady job with regular pay, benefits, and a daily routine that
has characterized work for generations are rapidly becoming a thing of the past.
 The lifestyle and exposure to risk that come with being an entrepreneur or freelancer may
simply not be for everyone.
 Lastly, because of the fluid nature of gig economy transactions and relationships, long-
term relationships between workers, employers, clients, and vendors can tend to erode.
  This can eliminate the benefits that flow from building long-term trust, customary
practice, and familiarity with clients and employers.
Challenges in Defining employees

 On the face of it, the Code on Wages, in Section 2(k) contains a definition of “employee”
far wider than any of the laws it repeals.
 Also, the definition includes those declared by the “appropriate government” (state or
union) as employees.
 One common feature of platform workers in the gig economy is that they are not tied to
any one particular platform by law. There are usually contractual terms to this effect, but
the level of enforcement is unknown.
 This leaves open the question: Who is the employer?
 If a delivery person switches between two non-competing delivery apps, or even
competing taxi apps, would they be considered an employee of both entities?
 Another issue specific to minimum wages is that the Code on Wages refers to those who
are doing time work or piece work, what about those who are paid on the basis of tasks
fulfilled?
 Even if interpretation gives a wide definition, how will their minimum wages be fixed in
the absence of any guidance from the law?
 An expansive definition, even widely interpreted, may not, therefore, meet the needs of
workers of the gig economy.
 At the very least, state governments will struggle to make sense of how to set minimum
wages for workers in the gig economy.
Conclusion

 The fact that the Code on Wages remains somewhat backward-looking means that it risks
becoming obsolete almost as soon as it becomes law.
 With the structural changes taking place in the Indian economy, where manifestations of
the gig economy are prominent it might have been a worthwhile effort to go deeper into
the definitions of “employee” and “employer” in the law itself.
 Far better, perhaps, would have been for the Code on Wages to acknowledge the workers
of the gig economy and create separate provisions for them,
 These separate provisions must be made keeping in mind the peculiar nature of work and
the trend of economic and technological change in the country.
 Needless to say, it looks like the task will now lie before the judiciary and possibly state
governments to take the lead on the matter.
 As gig economy workers potentially organise and place their demands overpayment to
their employers and governments, it is possible that the remedy will come in the form of
judicial or state government intervention.
 While this might provide some succour to workers in the gig economy, it risks the
fragmentation of gains as different courts take different approaches or state governments
come up with entirely different regulatory mechanisms.
  Needless to say, both situations will create precisely the kinds of problems that the Code
on Wages is supposed to solve, the uncertainty and confusion in the law.

2. Interest Rate and India’s Economic Revival

Context

 Apart from the trade war, media in the United States is actively discussing this in the
context of a relative fall in the returns of long-term government bonds vis-à-vis bonds of
shorter maturity; the so-called “inverted yield curve.”
Background

 The experience of government responses since the global recession of 2008, which
preferred monetary easing over a genuine fiscal stimulus across the globe, does not
inspire much confidence.
 Indian policymakers too do not seem to have learnt much from the global failure of
monetary policy as a way out of a slowdown.
 There seems to be a general consensus among the policymakers, despite concrete
evidence to the contrary, that economic activity can be manoeuvred through changes in
the interest rates.
Latest Development

 The Reserve Bank of India has accepted the government’s view and decreased the repo
rates by 35 bps (100 bps = 1 per cent) in its last monetary policy review meeting.
 The expectation is that credit-financed private investment and consumption would pick
up as a result of a fall in the cost of credit and bring the Indian economy back on its feet.
Why consumption cannot revive the economy

 A relationship between consumption and current income, that acts like a principle in is
that consumption and current income is a cyclic process. So, when the expectations of
future incomes is less, consumption will be unsuitable for revival
 It is for this reason that Keynes called consumption a passive factor when it came to the
question of how to revive a flailing economy.
Role of Investors (Borrower)

 Two factors that is considered for investing is the profitability and the interest rate.
 When a company is running below capacity, it makes no sense to the invester, creating
more capacity by investing only because the cost of loans have come down.
 Credit and its cost may be a necessary condition, but not a sufficient one to influence
investment.
 This means that investment too is indirectly a function of demand, past and current, and
therefore cannot expect investments to happen when the credit costs are reduced.
Roles of Banks and NBFCs (Lenders)

 For the fall in repo rate to percolate down to the borrower (like the investors), the banks
and the NBFCs has to reduce their rate of interest charged: There can be 2 types of cases

1. The lenders have to bring down their rates, which may not necessarily happen for various
reasons.
 Lenders may want a higher margin of security during difficult times because of
piling non-performing assets and failing non-bank lending institutions.
2. Even if they bring it down, like it is happening now, at least with some public sector
banks, the banks may go slow on the volume of the credit.
 So, the banks may bring their lending rates down, but still be wary of lending
except to very creditworthy borrowers.

 What matters for the expansion is not just the incremental cost, but the volume of loans
too.
 Therefore, even the necessary condition, that is reducing the credit cost may not get
created.
Way Forward

 Keynes had argued that fiscal policy is far more effective since it directly influences the
level of activity.
 Indeed, fiscal expenditure has the potential to revive the economy, but, unfortunately,
because of the Fiscal Responsibility and Budget Management Act, that has been given
up.
 The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in 2003
which set targets for the government to reduce fiscal deficits.
 A fixation of the deficit target to 3.3% of the gross domestic product in the last budget
means that the government expenditure itself becomes a function of the current income.
 Unless these self-imposed constraints are broken, there is hardly any scope for revival
and the recession would have to run its full course before revival begins.
 The Indian economy is not just in a trough of a usual business cycle, it is also going
through a structural crisis, that is, it is a crisis of both the trend and the cyclical
component of economic activity.
 While the cyclical component can be tackled through tinkering fiscal policy, the trend in
the economy requires deeper intervention.
 It would require identifying sources which can deliver equitable and sustainable growth.
Perhaps, this is an opportune time for a new green deal.
 The government could, among other initiatives, aggressively invest in green
infrastructure as a specific form of fiscal intervention.
 Such expenditure has the usual benefit of generating a multiplier, but it has several
additional benefits. Green growth is usually more inclusive both because of its higher
employment elasticities as well as its environment-conserving potentialities.
  In short, without a comprehensive plan about the future of the Indian economy, quick-
fixes alone will not serve us well in the long run, but then we have a government in
power which does not believe in plans anymore!
Difference between monetary and fiscal policy

 Monetary policy involves changing the interest rate and influencing the money supply.
 Fiscal policy involves the government changing tax rates and levels of government
spending to influence aggregate demand in the economy.
Monetary policy

 Monetary policy is usually carried out by the Central Bank/Monetary authorities and
involves:
 Setting base interest rates
 Influencing the supply of money.
 The Central Bank may have an inflation target of 2%. If they feel inflation is going to go
above the inflation target, due to economic growth being too quick, then they will
increase interest rates.
 Higher interest rates increase borrowing costs and reduce consumer spending and
investment, leading to lower aggregate demand and lower inflation.
 If the economy went into recession, the Central Bank would cut interest rates.
Fiscal policy

 Fiscal policy is carried out by the government and involves changing:

 Level of government spending
 Levels of taxation
 To increase demand and economic growth, the government will cut tax and increase
spending (leading to a higher budget deficit)
 To reduce demand and reduce inflation, the government can increase tax rates and cut
spending (leading to a smaller budget deficit)
Gist of EPW August Week 3, 2019
The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.
1. Crisis in the Automobile Industry
Context
The slump in automotive sales points to a deepening structural crisis facing the industry.
Significance of Automobile Industry to Indian economy

 The automotive industry was one of the fastest growing industries as well as an important
driver of the manufacturing sector.
 The industry’s turnover is close to half of the manufacturing GDP.
 They contributed 7% to India’s gross domestic product (GDP) in 2018,
 Also a major provider of direct and indirect employment due to its forward and backward
linkages with other sectors.
 Industry accounts for about 11% of the entire GST revenues of the country.
Rate of slowdown

 The current sales of vehicles have been the lowest in the last 19 years, due to a drop in
the domestic demand.
 There was a 26% dip in car sales in May 2019 versus last year
 In 2017–18, the sales of four-wheelers, which were growing at 14% are now down to 5%,
while for two-wheelers, the decline has been from 15% to 5% over the same period.
Reasons for slump in automotive sales

 The automotive industry has been facing a slowdown worldwide.

 The crisis in the shadow banking sector has also been adversely affecting credit flows to
dealers and consumers.
 With over three-fifths of the vehicles sold in the country being financed through loans, a
squeeze in the supply of finance in the country since the last one and half years is bound
to keep the growth rate of sales at lower levels.
 The industry also faces other challenges like the changes in regulatory and technological
norms, and that of higher input prices.
 The environment of uncertainty has been aggravated by the implementation of various
regulations that potentially affect the pricing structure.
 The forthcoming shift to the new emission standards under the Bharat Stage (BS) VI in
April 2020 from the current BS IV standard. The new emission standards would require
technological overhauling, particularly for the diesel cars.
  With the expected rise in the price of diesel cars, the overall share of diesel cars in total
domestic sales is estimated to drop to 28% from the current 40%.
 But, the decline in diesel car sales has been underway since 2012–13, when this category
was a market leader by constituting almost 60% of the sales.
 Growing competition from the pre-owned cars market is also pulling down sales of new
vehicles.
 There is also a possibility that some customers are waiting to buy the latest Bharat Stage
(BS)-VI emission standard compliant vehicles or
 They are waiting for more incentives from vehicle makers who will be looking to sell off
their BS-IV compliant stocks before the April 1, 2020 deadline.
 Over FY19-21, vehicle prices are estimated to jump 13-30% due to safety, insurance and
emission-related compliance costs.
 Too much focus on electric vehicles (EVs) by the government may also be encouraging
buyers to postpone the purchase of petrol and diesel vehicles.
Consequesnces

 A slump in automotive sales—due to the cascading effect—thus, also affects sectors such
as tyre, steel and steering manufacturers.
 The effect of low demand has hit the domestic component manufacturers the worst.
 Many small manufacturers have reported operating at around 70% of their potential
efficiency level, either by adopting a staggered system of work when they want to retain
their workforce, or by simply laying off workers.
 The cumulative impact of these factors has been taking a toll on jobs lately, especially
contract and casual jobs.
 It is estimated that automakers, auto part manufacturers, and dealers taken together have
laid off about 3,50,000 workers in the last three months.
 For labour, the long-term effects of the slowdown in automobile manufacturing, in which
the share of jobs had doubled from 3% to 7% between 2000 and 2015, would be
deleterious.
 Automation in the industry has been underway, with average robot density at 79 per
10,000 workers, which is higher than that in manufacturing.
 Thus, apart from the current downturn affecting mainly the temporary and casual
workforce, technological changes had also necessitated restructuring, reskilling, and
manpower adjustments.
Way Forward

 It is imperative that, given the adverse circumstances, the industry transforms with
minimal disruptions by streamlining the automotive businesses.
 The industry’s demands include a reduction in GST to 18% from the current rate of 28%,
which will help in an immediate price reduction.
 This demands innovative processes, especially when there is a policy push towards a
transition to electric vehicles.
  A related problem is of acquiring and developing new skill sets for those manning the
novel methods along with redeployment or creation of new earning opportunities for the
replaced workforce.

2. In Deep Waters
Context

 The havoc that the floods wrecked this year with the lives and property of people of
Maharashtra, Karnataka, and Kerala is much larger in scale than in the previous years.
Causes

 Heavy and relentless rains over a shorter window are becoming a regular phenomenon.
 Dam mismanagement and land degradation are the other two factors that have aggravated
flood situations repeatedly in different parts of India.
Dam mismanagement

 All the rivers and their tributaries have dams built across them in the states of
Maharashtra, Karnataka, Tamil Nadu and Kerala.
 Disputes and lack of coordination between different dam authorities as well as delayed
discharges have proved fatal for these regions. Later the disaster gets transferred down
the rivers.
 Heavy discharges from dams could cause inundation downstream. But the failure of
timely release for the dams can result in submergence of the upstream areas.
 Some dams in the south had failed to regulate their storage, despite it being the monsoon
season and having prior predictions of heavy rainfall.
 “Dam-made” floods strike in a sudden manner on the people in the downstream areas,
catching them unawares, and they do not have the “rhythm” of natural floods with which
people are more familiar.
 There has been an increase in flood damage, even as more and more areas are brought
under “flood control” infrastructure projects such as dams and embankments.
 According to the Internal Displacement Monitoring Centre, India is a country with the
highest level of disaster displacement.
Land degradation

 Structural changes in land use, diversion of forestlands, razing of mountain slopes, and
blocked streams have led to a loss of seepage spaces and natural channels for drainage,
resulting in the landslides and flash floods in the Western Ghats and in the Himalayan
states.
 Human tampering with geomorphic integrity of land has led to increased instances of
urban flooding, producing devastating consequences for urban dwellers.
  While rivers have been curtailed from sculpting the land due to structural interventions,
real estate muscles in and encroaches upon any elbow room available to the rivers.
 The construction of even crucial public infrastructure such as airports (in Kochi, Chennai,
Mumbai and even the upcoming one in Navi Mumbai) remains devoid of any such
consideration for the rivers.
 Sealed floodplains, flattened ponds, mangroves, wetlands, and riverbeds prevent the
natural mechanisms of land to absorb, contain in, and thus mitigate the impacts of heavy
rainfall.
 It paves the way for flooding, further land degradation, and subsequent drought
conditions.
Way Forward

 There is a compelling need for

 Basin-level plans for efficient water management,
 Eco-restoration of catchment areas
 Maintenance of the natural drainage system
 These steps are acknowledged by concerned government authorities, but only to be
ignored in favour of more “practical and convenient” arrangements.
 Unless steps are taken for “re-naturalising” river basins, the crisis of created, man-made
floods is here to stay.
 There should be strong legislations and also steps taken by the government authorities.
One of the best methods would be to act on Gadgil commission recommendations and
also enact the River Basin Management Bill, 2018.
River Basin Management Bill, 2018

 The draft River Basin Management Bill proposes optimum development of inter-State
rivers.
 This is done by facilitating inter-State coordination ensuring scientific planning of land
and water resources taking basin/sub-basin as unit with unified perspectives of water in
all its forms (including soil moisture, ground and surface water).
 It will ensure comprehensive and balanced development of both catchment and command
areas.
 It is expected that enactment of the proposed legislation would result in optimum
integrated development and management of inter-State River waters with basin approach
and will result in change of environment from the one of conflicts to that of cooperation.
Gadgil Commission

 An environmental research commission is named after its chairman Madhav Gadgil. The
commission is formally known as Western Ghats Ecology Expert Panel (WGEEP).
 The commission submitted the report to the Government of India in August 2011.
Western Ghats Ecology Expert Panel (WGEEP) Report
  Recommended that the entire stretch of the Western Ghats should be declared as
Ecologically Sensitive Area (ESA).
 It recommended the division of region into three zones – ESZ1, ESZ2, ESZ3 and gave a
broad outline of certain restrictions for each zone.
 The committee recommended the division of region into zones at the block/taluk level.
 It recommended that no new polluting industries (red and orange) were to be permitted in
ESZ1 and ESZ2 and gradual phasing out of such existing industries by 2016. Complete
ban on mining in ESZ1 and regulation of mining in ESZ-2.
 It was recommended that bottom to top approach be followed for conservation of
Western Ghats.
 Western Ghats Ecological Authority was proposed to be set up as a statutory body and
given powers under the Environment Protection Act 1986.
Criticisms of the report

 The report was not prepared keeping in mind the ground realities. If the report is
implemented, the development and the energy requirements in the states coming within
the boundary of Western Ghats would be adversely affected.
 There is no need to set up a new body while there are many such bodies for the protection
of the environment.
 Following severe resistance to the implementation of the Gadgil Committee report,
Kasturirangan Panel was set up in 2012 to advise the government on the Gadgil
Committee Report.
Results of neglecting the report

 All landslide and flood-affected areas in the state of Kerala are in Ecologically Sensitive
Zones (ESZ-1), as categorised by the Madhav Gadgil report.
 Illegal mining. The Shah Commission inquiring into illegal mining in Goa observes that
mining beyond permissible limits has caused serious damage to water resources,
agriculture and biodiversity.
 Scientific knowledge and advice has been continually disregarded. For instance, the
project document of proposed Athirappilly hydroelectric project had seriously
overestimated the availability of water.
Conclusion

 The wrong approach towards rivers and land— where it is assumed they exist to be
tamed and consumed mindlessly in the interest of “development” has been a primary
cause for the floods.
 The above approach also has a skewed focus on dealing with the impacts of disasters,
rather than addressing the causal factors.
 Even while dealing with relief activities, there remains the want of a more humane and
communitarian approach, especially in view of “sticker wars” on the food packets meant
for reaching the affected people and “flood tourism” by the politicians.
  India’s Union Minister for Environment, Forest and Climate Change denied “climate
change” as being a cause of deluge, other political leaders have resorted to making it an
excuse for their business as usual approach.
 The climate risks and crises are manifesting with an unsettling speed, enormity, and
ferocity, even as concerned public institutions appear to be caught in a time warp.

Gist of EPW August Week 2, 2019

The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.

1. Food Subsidy in Cash or Kind?

Context

 Food subsidies, currently availed in the form of subsidised cereals, be given out in the
form of cash instead.
 Arguments have been advanced on both sides of this debate, which remains largely
unresolved so far.
About the debate

 Either the PDS should be entirely replaced by cash transfers, or it should remain entirely
in-kind.
 Hardly any family gets its food entirely from the PDS or entirely for cash. Most make use
of both systems.
 Some analysts and official agencies have come out in favour of the cash alternative.
 Other scholars have argued that the food security of the country’s poorer citizens is better
ensured by retaining the existing mode of in-kind subsidies given out through the public
distribution system (PDS)
Significance of Public Distribution System in India

 The need for the public distribution system varies widely across states and districts. In
some districts, the poor draw more than 80% of their grain from thePDS, but in other
districts this share is less than 10%.
 A wide diversity of relationships with the PDS exist, suggesting a need for alternative
modes of provisioning.
  On an average, across the country, less than 30% of BPL (below poverty line)
households’ total grain consumption derives from the PDS, while more than 70% is
sourced from the market.
 The relative shares of the PDS and the market in the grain supply of the poor vary
considerably from district to district and from state to state.
 People in some districts get more than 80% of their grain supply from the PDS, whereas
people in other districts source less than 10% of their grain from the PDS.
Diversity of relationships with the PDS in states

 On an average, across India, 12.2% of households get more than 70% of their grain
supply from the PDS.
 But, there are six states—Jammu and Kashmir, Himachal Pradesh, Chhattisgarh,
Maharashtra, Goa, and Tamil Nadu—in which more than 20% of households are highly
PDS dependent.
 On the other hand, less than 10% of households are highly PDS dependent in 10 other
states.
 Differences across states are larger when only BPL households are considered.
 The PDS is meant to provide fair-priced foodgrains to APL households and subsidised
grains to BPL households.
 The percentage share of heavily PDS-dependent BPL households is greatest (50.5%) in
Maharashtra.
 In seven other states—Jammu and Kashmir, Himachal Pradesh, Jharkhand, Rajasthan,
Chhattisgarh, Kerala and Tamil Nadu—this share is greater than 30%.
 At the other end of the spectrum, the share of BPL households who are heavily dependent
on PDS is only 3.3% in West Bengal and 7.6% in Andhra Pradesh.
 Therefore, implementing a cash alternative will have different implications in different
states. Replacing the PDS pipeline for 6% of grain consumption is a qualitatively
different matter compared to replacing half or more of the grain supply line.
Benefits of the cash alternative

 The freedom to buy the grains one prefers—including grains like bajra and maize that are
not supplied by the PDS—and to buy them at a place and time of one’s selection
 The enhanced bargaining power that the ability to exit any particular shop provides to the
consumer
 The reduced need for the authorities to closely safeguard against leakages in the PDS
pipeline of subsidised commodities.
 The considerable savings that should accrue to the taxpayer from having a system that is
less administratively heavy.
Disadvantages of cash alternative

 The distant location of banks and post offices from many villages
 Shortages of public transport facilities in some areas.
  Single-member households, elderly and disabled persons, who worry that cash means
going to two places (bank and ration shop) instead of one
 The lack of familiarity, in situations of low literacy, with banking procedures
 The inability of the existing bank network to cope with a suddenly enlarged demand for
services, as witnessed in the chaotic scenes seen at the time of demonetisation
 Reports of corrupt practices in handling MGNREGA payments
 The fear that, without the anchor of the PDS, the balance of power will shift towards
traders and away from consumers
Design principles for implementing Cash alternatives

 States should have the right to opt into (or stay out of) the testing of alternatives.
 Families within these states. should also have the right to opt between food and cash.
They should also have the right to reverse their choices. The choice for a family must not
be made by someone else.
 Retain and strengthen the existing network of PDS outlets—making them partners, and
not adversaries, of the new system
 Food subsidies to BPL households should be given out, in the first instance, in the form
of vouchers, distributed through the existing network of PDS outlets
 Food vouchers should be inflation-indexed cash entitlements, equal in value to x kg of
wheat or rice at the prevailing market price.
 A far-reaching public information campaign must be run in the selected districts during
the three to six months prior to the launch of the test in any district. People should know
clearly the ramifications of both options.
Implementing cash alternative

 A prior test of the cash alternative, rolled out in three cities in 2015, violated several of
these design principles and had to be hastily rolled back.
 Individuals were not given the right to choose whether they wanted to opt into or out of
the cash alternative.
 Rather, the alternative was thrust upon them without any mass education campaign and
without clear and well-known processes. The worst failures were observed on the part of
the banks.
 In many cases, there were errors in the amounts deposited in individuals’ accounts: too
much money was deposited in some accounts and too little in others.
Challenges in implementation

 Educating, motivating and policing two mammoth bureaucracies (the PDS and banks)
and arranging for coordination between them hugely increases the workload and
magnifies the risks.
 Poorly informed citizens are likely to panic.
  A widespread public information campaign preceding the introduction of the cash
alternative helps bring clarity and purpose to the undertaking, enabling people to make
considered decisions.
 No such information campaigns preceded the 2015 experiments.
Conclusion

 The potential benefits of cash are considerable, but the risks involved in replacing the
PDS with cash are also large.
 Systems need to be developed and put in place that protect food security, especially of
vulnerable households.
 These and other systems are not yet in place at the present, also it is uncertain about
moving from the PDS to cash will be smooth or even that it will result in producing net
benefits.
 However, since the cash alternative holds the promise of greater freedom of choice to the
consumer while lowering the burden to the exchequer, it needs to be tried out with
seriousness and care.
 The achievement of this promise is tricky in practice, which is why a sequenced plan of
implementation, starting with a few pilot districts, is recommended.
 Change will occur incrementally. Even in the first set of districts, people will not switch
to cash all at once.
 It can reasonably be expected that thePDS will continue for a long time even in districts
where the cash alternative is implemented.
 There might well be some districts where the cash alternative is preferred by the vast
majority of eligible households, and other districts where the majority prefer to
obtainPDS grains.
 Trying to find a single solution is the wrong idea in a situation where levels of PDS
dependence vary a great deal across households and districts. Those who want it should
have the cash alternative; there should be no imposition of cash upon the rest.

Gist of EPW August Week 1, 2019

The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.

1. Declining Fertility and Demographic Dividend

Context
  A concerted policy to harness the demographic dividend is the need of the hour.
What is Demographic Dividend

 Demographic dividend refers to the growth in an economy that is the result of a change in
the age structure of a country’s population.
 Demographic transition has two components, that of fertility and mortality transition.
 However, it is fertility transition that plays a decisive role in determining the
demographic dividend of any population.
 The change in age structure is typically brought on by a decline in fertility and
mortality rates.
 The demographic dividend comes as there’s an increase in the working population’s
productivity, which boosts per capita income.
 The first period for a demographic dividend can last 50 or more years and then the second
period can last indefinitely as an aging population invests in various investment vehicles.
Total Fertility Rate

 The steady decline in the total fertility rate (TFR), an indicator of the average number of
children expected to be born to a woman during her reproductive span, has been the main
driver of the slowing down of population growth in India in the recent decades.
 Consequently, this has several implications for policy, as population growth is set for a
slowdown in the coming decades, along with an increase in the share of the working age
population.
 While the high fertility states have also recorded a sharp decline in the TFR over time, it
has declined to 2.2 per woman in the 22 major states in 2017.
 However, due to the skewed sex ratio, the required replacement-level fertility, or the
effective replacement-level fertility is higher than the benchmark of 2.1.
Reasons for fall in TRF

 Increasing mobility
 Delayed marriage
 Access to higher education and
 Greater financial independence of women.
Trends of TRF

 The data from the Sample Registration System (SRS) 2017 reveal that several contrasting
phenomena are in operation in the rural and urban areas with regard to the decline in
fertility rates.
 Even though fertility rates fell across all age groups, fertility in the older age groups has
risen over time in urban India. While in the rural areas the fertility rates in the higher age
groups, that is, among mothers aged above 35 has fallen.
 However, the overall trend is that of falling female fertility rates.
  In the urban areas fertility has been falling faster than expected. As of 2017, the TFR of
urban India has fallen to 1.7, which is lower than the replacement level.
Education plays role in TRF

 It was found that education too had a role to play with regard to fertility rates among
women.
 Although in general, fertility is lower among educated women, in urban areas, fertility
rates among women in their 30s are higher among the better educated than the less
educated women.
 This is because better educated women have been able to delay marriage and childbirth,
while access to better healthcare facilities enables women to have children at a later age.
Significance of Demographic Dividend

 Savings—During the demographic period, personal savings grow and can be used to
stimulate the economy.
 Labor supply—More workers are added to the labor force, including more women.
 Human capital—With fewer births, parents are able to allocate more resources per child,
leading to better educational and health outcomes.
 Economic growth—GDP per capita is increased due to a decrease in the dependency
ratio.
Population and Demographic Dividend in India

 The population parameters also indicate that the demographic transition in India has not
been uniform.
 Although the population growth is set for a slowdown, an increase in the share of the
working age population points to the advantage of the demographic dividend in India.
 This means that the growth rate of the working population is higher than the general
population.
 Normally, the demographic dividend can last for 40 to 50 years and countries can benefit
only if they can use it effectively. Otherwise, the demographic dividend can also turn into
a demographic burden.
 In India, as there is a clear divergence in demographic patterns across regions and states,
the demographic dividend window is available at different times as the age structures
differ across the states.
 According to the United Nations Population Fund, in the southern and western parts, the
demographic dividend is set to close in five years with an ageing population, whereas in
some states it would remain open for 10 to 15 years.
 In the high fertility states of the north, the window is yet to open. Thus, India has the
advantage of a longer span of the demographic dividend due to the differences in the
patterns in demographic transition across states.
Conclusion
  An improvement in the dependency ratio due to the demographic dividend leads to the
hypothesis that the increase in the working age population would lead to acceleration in
growth.
 The benefits of the demographic dividend can be reaped only if sufficient investments are
made for basic infrastructure, health, educational attainment, and skill upgradation of the
workforce,
 Also creation of sufficient numbers of suitable jobs to provide employment to the
growing workforce is important. Otherwise the available workers would not be absorbed
spontaneously to deliver high growth.
 To harness the demographic dividend, therefore, it is necessary that people in the
working age are gainfully employed and that those working have proper education and
skills so that they are productive in the workplace.
 On the contrary, with unemployment rate at a 45-year high of 6.1%, it is clear that
enough jobs are not available.
 The poor employability of the workforce points to the deficiencies in their health,
educational attainments and vocational training, thereby validating that enough is not
being done to take advantage of the demographic dividend.

2. Unmasking the Fiscal Deficit

Context

 The fiscal deficit numbers mentioned in the Union Budget for 2019–20 are doubtful,
given that the total liabilities of the government are understated as the off-budget finance
items are excluded from the fiscal deficit calculations.
Off-budget financing

 Off-budget financing is a tool being used to defer expenditure to subsequent years, and
the modality of repayment of borrowing is not spelt out.
 They are not accounted for in the current budget because they are future liabilities and
not current liabilities. They are, however, part of the overall debt of the government.
 Successive governments have used this route to defer some of their liabilities and exclude
them from the fiscal deficit calculations.
 Such off-budget financing creates future liability and increases the subsidy cost due to
interest payments. Of late, the central government has increased off-budget borrowings to
fund capital and revenue expenditure such as food and fertiliser subsidy arrears.
CAGs Report on Off-budget financing

 Comptroller and Auditor General’s (CAG) report mentioned that the off-budget financing
was being used to defer fertiliser arrears, food subsidy bills, and outstanding dues of the
Food Corporation of India (FCI) through borrowings.
  Off-budget financing was used for deferring the fertiliser bills through special banking
arrangements
 Food subsidy bills of the FCI was being deferred through bonds, unsecured short-term
loans, Borrowings of NABARD under the Long-Term Irrigation Fund for
implementation of irrigation schemes (Accelerated Irrigation Benefits Programme)
 In terms of capital expenditure, off-budget financing is used to fund railway projects
through borrowings from the Indian Railway Finance Corporation (IRFC) and power
projects through borrowings from the Power Finance Corporation (PFC).
Reality versus Projections

 It is extremely important to look at the total debt of the government with reference to the
gross domestic product (GDP).
 The total liability worked out to 50.5% of the GDP against the projection of 47.10% as
mentioned in the medium-term fiscal policy (MTFP) statement of 2016–17.
 Similarly, after incorporating the off-budget borrowings for revenue expenditure, the
revenue deficit stands at 3.48% of the GDP against 2.59% reported by the government for
2017–18.
 After adding the off-budget borrowings for capital expenditure, the fiscal deficit stands at
5.85% of the GDP against 3.46% reported by the government for 2017–18.
Challenges in addressing the issue

 Currently, there is no policy that governs such off-budget financial arrangements, and the
government is free to decide the mode and quantum of such financing.
 There has been an absence of transparent disclosures on such huge off-budget financing,
which can pose substantial fiscal risk in case the entity that raises the funds fails to
service the debt.
Way Forward

 Given that such off-budget financing has serious fiscal implications on the economy, the
CAG report recommended that the central government should frame a policy on off-
budget financing.
 The framework should specifically mention the objectives and quantum of off-budget
financing, the sources of such funding, and the means for servicing of such debt.
 The details of such off-budget borrowings should be disclosed through disclosure
statements in the budget as well as in the government accounts.
 It is recommended that the government include the off-budget financing items for
calculation of the revenue deficit, effective revenue deficit, and fiscal deficit.

3. HRIDAY in Amravathi
Context
  The Andhra Pradesh government’s effort to build a new capital city, Amaravati, is in
national focus, but a government scheme to preserve the heritage of a nearby village with
a rich history is floundering.
 Amravathi is part of the central government’s Heritage City Development and
Augmentation Yojana (HRIDAY), an ambitious scheme that aims to reimagine urban
heritage management in 12 cities across 10 states.
HRIDAY

 The Ministry of Housing and Urban Affairs, Government of India, launched the National
Heritage City Development and Augmentation Yojana (HRIDAY) scheme in 2015, with
a focus on holistic development of heritage cities.
 The scheme aims to preserve and revitalise soul of the heritage city to reflect the city’s
unique character by encouraging aesthetically appealing, accessible, informative &
secured environment.
 The Scheme is being implemented in 12 identified Cities namely, Ajmer, Amaravati,
Amritsar, Badami, Dwarka, Gaya, Kanchipuram, Mathura, Puri, Varanasi, Velankanni
and Warangal.
 The Scheme supports development of core heritage infrastructure projects which shall
include revitalization of urban infrastructure for areas around heritage assets identified /
approved by the Ministry of Culture, Government of India and State Governments.
 These initiatives shall include development of water supply, sanitation, drainage, waste
management, approach roads, footpaths, street lights, tourist conveniences, electricity
wiring, landscaping and such citizen services.
 National Advisory Committee (NAC): The National Advisory Committee is the apex
advisory body for the HRIDAY Scheme.
Objectives

 Planning, development and implementation of heritage sensitive infrastructure.

 Service delivery and infrastructure provisioning in historic city core areas.
 Preserve and revitalize heritage wherein tourists can connect directly with city’s unique
character.
 Develop and document a heritage asset inventory of cities – natural, cultural, living and
built heritage as a basis for urban planning, growth and service provision & delivery.
 Implementation and enhancement of basic services delivery with focus on sanitation
services like public conveniences, toilets, water taps, street lights with use of latest
technologies in improving tourist facilities/amenities.
 Local capacity enhancement for inclusive heritage-based industry.
 Create effective linkages between tourism and cultural facilities and also the conservation
of natural and built heritage.
 Urban heritage adaptive rehabilitation and maintenance, including appropriate
technologies for historic buildings retrofitting.
  Establish and manage effective public private partnership for adaptive urban
rehabilitation.
 Development and promotion of core tangible economic activities to enhance avenues of
livelihoods amongst stakeholders. This would also include necessary skill development
amongst them including making public spaces accessible and developing cultural spaces.
 Making cities informative with use of modern ICT tools and making cities secure with
modern surveillance and security apparatus like CCTV etc.
 Increase accessibility i.e. physical access (roads as well as universal design) and
intellectual access (i.e. digital heritage and GIS mapping of historical locations/ tourist
maps and routes).
Analysis of implementation of HRIDAY in Amravathi

 The Andhra Pradesh Tourism Development Corporation (APTDC) was nominated as the
implementing agency under the scheme. Subsequently, when HRIDAY was officially
inaugurated in Amravathi
 There were 9 projects that were proposed. All nine, however, pertain only to the physical
infrastructure of Amravathi.
 Two of these were approved in a modified form: the Detailed Project Report (DPR) for
the upgradation of approach roads and the creation of a heritage park was tabled.
 A ground survey of HRIDAY sites in Amravathi made these oversights painfully
apparent. The DPRs finally approved under HRIDAY were relevant only to the built
environment around the Mahachaitya Stupa, the ASI Museum, and the Dhyana Buddha.
 The minister of state for urban development had informed the Lok Sabha in August 2017
that 46% of the work sanctioned for Amravathi under HRIDAY had been completed by
July 2017 and that the remaining work was expected to be completed by December 2017
 However, as of January 2018, no work had been initiated on the ground for the creation
of a heritage park. Given that the heritage park exists only on paper, there is clearly much
more to be done.
 Similarly, the heritage walk from the Dhyana Buddha to the stupa consists of only a
partial stone pavement with ornamental street lamps in various states of disrepair.
 The addition of a metallic fence near the stupa has inadvertently turned sections of the
walk into a dumping spot for garbage.
 The DPRs were already excessively biased towards Amravathi’s physical infrastructure,
and the manner in which they have been executed gives HRIDAY the appearance of
being insular and boxed in its vision and implementation, despite the bold mission
objectives.
Way Forward

 The nature and quality of the work executed under HRIDAY in Amravathi leaves the
scheme open to interrogation.
 Public participation and consultation are crucial to incorporating local stakeholders’
imaginations and aspirations into the larger development trajectory
  With negligible capacity-building and community engagement, it is not really surprising
that most HRIDAY cities—including Amravathi—have opted to utilise money for doing
just this and nothing more.
 HRIDAY’s failure in achieving its mandate across the nation may well become the
subject of considered investigation, but in Amravathi it is downright ironic.
 With HRIDAY’s reduction to quick fixes like so-called heritage walks and parks, all that
Amravathi has actually received in the name of heritage-sensitive development are a few
streets, pavements, and storm water drains.
 Despite being a comparatively prosperous village with 91.1% census houses being
permanent and 72.2% houses availing banking facilities, Amravathi still has no drainage
and no sewage treatment system and suffers from a high rate of open defecation.
 The scope and implementation of HRIDAY and similar schemes should be rigorously
and publicly examined so that policymakers, conservationists, and scholars can work
with each other in evolving more decentralised and participatory models
Gist of EPW June Week 2, 2019
The Economic and Political Weekly (EPW) is an important source of study material for IAS,
especially for the current affairs segment. In this section, we give you the gist of the EPW
magazine every week. The important topics covered in the weekly are analysed and explained in
a simple language, all from a UPSC perspective.

1. The Bubble of ‘Benign’ Inflation

Inflation which is low and consistent is termed as Benign Inflation.
Background

 The 2019 general elections were perhaps the first of a kind in India that did not have
“inflation” amongst the electoral agenda.
 This is because over the past five years inflation, especially the headline inflation rate, in
this country has been restrained and checked.
Stats

 From 2014 till April 2018, the year-on-year inflation rate—estimated as the rate of
change of the consumer price index (CPI)—declined steeply from 6.65% to 2.42%.
 But what potentially has given legitimacy to the numerical value of these estimates is the
concept of the “permissible” range of 2%–6% of inflation, as provided by the inflation
targeting framework of the Reserve Bank of India (RBI).
Relationship between inflation and economic growth

 The macroeconomic (policy) discourse on the relationship between inflation and

economic growth recognizes the significance of a “threshold level” of inflation.
  Though there is a consensus that inflation above the threshold limit hurts economic
growth, empirical evidences of the effect of low inflation rate on growth are mixed
yet predominated by instances of either positive or insignificant consequences.
 Given such evidences alongside the RBI’s mandated inflation range, the current hike
in CPI-based inflation in India, even if to its five-month high of 2.92% in April
2019, can still be considered “benign” in the RBI’s parlance. So much so that the RBI
could slash down its policy rate to 5.75% from 6% in a quick succession within three
months.
 The objective is to stimulate private investment and consumption expenditure so
that the gross domestic product (GDP) growth can be revived from its current low of
5.8% to reach the 2019–20 target of 7%, notwithstanding the consequences of such
circumspect tactics of economic growth on wider socio-economic objectives.
Is CPI a better indicator of Inflation?

 Conceptually, the CPI is a better indicator of inflation for guiding monetary policy
decisions than the WPI, because it captures retail inflation.
 But technically, the RBI’s inflation targeting apparatus have little impact on the CPI
wherein food and beverages have a combined weightage of almost 46%.
 And much of the food price inflation/deflation in India is driven by supply-side issues—
such as the fluctuation in the brent crude oil prices in the global market and/or the
variability of domestic crop production—over which the RBI has little control.
RBI should introspect on these parameters
Given that the benignity of the consumer prices is a matter of chance, an inflation rate, even
within the RBI’s legislated mandate, may not be as innocuous for the consumers as it
appears to be.

 First, because it is driven by food inflation, which, measured in terms of the WPI, has hit
a 33-month high of 7.4%, primarily led by the sequential acceleration of the prices of key
food items. On a year-on-year basis the pulses inflation is hovering at 14%, while that of
cereals is at 8.5%.
 Second, the meteorological department is not very optimistic about the abundance of
the southwest monsoon, implying a looming risk of underproduction and further price
hike.
 And third, due to geopolitical uncertainties oil prices might exceed the current low of
$60 a barrel, thereby exerting upward pressure on the food prices.
Conclusion

 Alternatively, the farmers’ ability to benefit from such price surge will depend upon the
state’s ingenuity in managing the food economy.
 The Govt should adopt a holistic approach for development management in practice by
temporarily not chasing on its growth fetishism
2. New Reservation Policy
Context

 Is the reservation policy earmarking a 10% quota for the economically weaker sections of
the “general category” empirically founded and justifiable?’
 An analysis of 445 premier higher education institutions finds that this section of students
already had about 28% of representation—that is, close to three times the proposed 10%
quota.
Intent of the Policy

 The recent reservation policy brought about by introducing an amendment to the

Constitution intends to reserve 10% of the total seats in higher education institutions,
both private and public, and in government jobs exclusively for the EWS belonging to the
general category
 Considering the economic condition as the sole basis for reservation, this policy uses two
criteria to define eligibility:
 Annual household income: the limit is fixed at ₹ 8 lakh per annum
 Asset ownership: the limits are somewhat different in rural and urban areas.
 The rationale underlying the proposed reservation policy is that the EWS from the
general category remained “excluded from attending the higher education institutions” in
India “due to their financial incapacity.”
Issues on the intent of the policy

 The criteria, seemingly is wide in range and reach, may not help insulate the proposed
policy from the ills that blight the welfare schemes in India—the errors of wrong
inclusion and wrong exclusion
 Estimates suggest that as high as 80% to 95% of the general category households will be
eligible for this quota.
 Thus, the above EWS criteria are prone to the error of wrong inclusion rather than
addressing exclusion.
 Importantly, ₹ 8 lakh as cut-off is higher than the eligibility criteria adopted by many
states and education institutions in India.
 As many as 80% of households from the general category are economically weaker
despite their social advantage.
Sources for analysis

 To analyse the representation of economically backward students in the higher education

institutions in India, the data submitted by 445 higher education institutions to the MHRD
for the NIRF, 2018 has been used.
 Since 2016, the NIRF ranks higher education institutions in India based on their
performance on five parameters.
  Data is available, inter alia, on the total number of students studying in all years of all
programmes, and the number of students from “economically backward class” (EBC) for
both undergraduate and postgraduate programmes.
Analysis of the issues raised on intent

 The graph presents the share of EBC students who were enrolled at NIRF-ranked
institutions in 2016–17.
 Of the total students enrolled in all the 445 NIRF-ranked institutions in 2016–17, about
28% (4.55 lakh) belonged to the EBC.
 A disaggregated analysis of NIRF-ranked institutions into eight different categories
reveals that the share of EBC students varies from 13% in architecture institutions to 33%
in colleges.
 Except for architecture and medicine, the share of EBC students stands at almost double
in all other categories of institutions, from the proposed 10% quota.
 Thus, it is evident that the EBC students have already secured about three times the
number of seats under the proposed quota of 10%, without any reservation in higher
education institutions.
 This is despite the fact that the income criterion at ₹ 5.5 lakh per annum used by most of
these institutions is lesser than the proposed criterion of ₹ 8 lakh per annum.
 In each of these eight categories of institutions, it is further examined as to how many
have less than 10% and more than 20% of the share of EBC students.
 About two-thirds (66%) of all NIRF-ranked higher education institutions already have
more than 10% of EBC students from the general category
 As high as 50% of the institutions already have more than 20% of EBC students from the
general category.
 Note that the number of architecture, law, management and medical institutions present
in NIRF rankings was much smaller as compared to engineering institutions or
universities.
 One possible reason for the under-representation of EBC in these four types of
institutions that have emerged as highly competitive in recent years could be the high
costs involved.
 This includes coaching costs for preparation for the entrance tests as well as the high fees
charged by these institutions.
 When classified further on the basis of public and private higher education institutions,
the representation of EBC students remains broadly the same as the overall pattern
 What is interesting is that close to 70% of the private institutions ranked by the NIRF
have more than 10% of EBC students.
 Further, 56% of the privately owned NIRF-ranked institutions have more than 20% of
EBC students.
 These NIRF-ranked private institutions could be charging a relatively higher fee
compared to the non-ranked private institutions. Despite such a higher fee, the share of
EBC students of general category is not as less.
Conclusion

 The analysis reveals that the EBC students from the general category have about 28%
share in 445 NIRF-ranked higher education institutions in India. This is close to three
times the proposed 10% quota.
 This suggests that the EBC students from the general category already have a reasonable
share without any reservation in premier higher education institutions in India.
 If the share of EBC students in these premier institutions is as high as 28%, their share is
likely to be more in non-ranked institutions which might be charging a relatively lower
fee.
 Hence, the possible impact of the proposed reservation policy is likely to be lesser in the
higher