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Indian Economic Slowdown: Path to Recovery May go Through Dusty Rural India

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Shimla-After the release of economic growth figures for the April-June quarter of FY20 by Central Statistics Office last week, at least we have a consensus on one sobering fact: Indian economy is in the doldrums, and we no longer are the fastest growing economy in the world.

A sizable slowdown has been reported across most segments-manufacturing, farm, mining, construction, real estate, financial, professional services IT, auto, etc. The data on display is alarming considering the huge bearing these sectors have on employment. The slowdown of such enormous scale is likely to increase India’s unemployment rate in the coming months that stood at 6.1% in FY18- the highest in the last 45 years. For some time now, there has been a manifest lack of demand and investment sentiments in the market.  

In the thick of all this, disconcerting is the lowest consumption growth in the last 18 quarters – remember the consumption growth was the major driver behind the rapid growth story of the Indian economy and it accounts for significant  55-58% of the GDP.  

One of the major reasons for the decline in consumption growth is the shrinking rural wages, which is the result of the unacknowledged farm crisis going across the country for a few years now. As per the World Bank collection of development indicators report, the rural population in India was 66.46% of the total population in 2017. The constant decline in rural wages resulted in a substantial decline in disposable income, hence, the demand too weakened. The constant decline in food prices bedevilled agriculture income and subsequently lowering the spending and hurting the rural demand. In economic, high inflation hurts the end consumers, similarly, low inflation impacts the producers. The lower inflation rate impacted the farm producers tormenting rural India badly.  

The favorable demographic profile (65% of the population in India is below the age of 35) of India, initially, acted as a stimulus for attracting investments. As the younger population of a nation aspire their own house, car, yearly holiday, white goods, electronic gadgets, etc. But, as India’s much-touted growth story has failed to generate enough jobs, sagging the aspirational spirits of the youth. Thus, resulting in the slackening of demand, in return, this affected the confidence and sentiments of the investors in the Indian market.

 It has a cascading impact in an economy, as an investor invests in anticipation of demand and keeping in view the market sentiments; at present both these factors are lacking in the India economy. 

Another reason for the economic slowdown is the decline in the saving rate from 34.6% to 30% over five years in India; the worst dip is in the household savings-the biggest source of Investment and accounts for 61% of the total savings- dropping to 16.3% from 23.6% over the same period.  The 18% & 28% GST slabs, that covers 43 % and 19% of the good and services respectively also took a toll on the disposable income, weakened the demand and eating up the savings among the great Indian middle-class.

The credit household debt has also increased manifold in last decade. This has reduced the purchasing power and reduced saving of the household in India.

The credit growth over the years has remained weak- in spite of successive rate cuts by the RBI- owing to the problem of NPA plaguing the banks. The recent liquidity woes in the Non-Banking Financial Companies (NBFC) – shadow banking – have also fuelled speculation, instability, and stress in the financial market. This mess in the financial sector has impacted the investments as reflected by the subdued CAPEX cycle also.  

The gig economy (responsible for 96% of the employment in the country) is yet to recover from the double whammy of demonization and GST. A testimony to this is the high unemployment rate prevailing in India. Gig in India is too big to be ignored.  

Besides this, weakening currency and decline in export only piled up the concerns in the economy, in spite of favorable crude oil prices and low inflation. The aftermaths of the trade war and global slowdown have also started to reflect on the Indian economy.

In India, the richest 10% owes 77.4% of the national wealth; the poorest 60% have 4.7% only. This represents the widening cleavage between the rich and the poor, the growing plutocracy is a concern for developing nations like India. As more and more wealth is concentrated in few hands, instability in the economy increases, making the macroeconomic parameters vulnerable. For such economies with rising plutocracy, a gloomy economic prognosis beacons.

The next few months will be critical for the Indian economy, as demand and investment sentiments need to be spiked up. The disposable income must be increased immediately by revamping at the multiple tax slabs under the present GST regime and replacing them with a simpler lower single tax slab. The technical issues with the input tax credit software should be addressed immediately. This will sort out the delay input credit and reduce its proceeding time too. We need a simpler GST rather than the labyrinth one.

A major part of Rs 1.76 lakh crores given by the RBI to the government can be used on the public expenditure, this will revive the infrastructure projects and boost disposable income and revive demand. This will also bolster the credit demand which has been facing a massive downturn.  

For decades now, the Indian growth story was riding on factors like a demographic dividend, a huge market for consumption and a strong base of saving to stimulate investment. But, the time has proved that such a model can’t work for long only on these factors. All these factors are favorable for economic development but, it has to be buttressed with policies that produce high enough economic growth with sufficient jobs; cultivate a conducive investment climate and boost confidence in the system. At present, there is a perceptible lack of these elements.

 In developing nations, an economic model driven by consumption growth can’t work for long, rather economic model should be driven by continuous investment. 

In India, unfortunately, all the limelight is hogged by urban India, whereas rural India remains unnoticed. Few quarters of stress in the auto industry becomes front-page news; on the contrary years of farm stress does not get any mention. Although, the path to the economic recovery may go through dusty rural India and foster on the sweat, toil and hard work of the prosaic gig economy. Albeit, it may not make a beaming headline. Rural India, for one more time, will not mind; as it never did earlier. 

A former banker, interested in matters on economics, globalization, emerging markets, financial sector and public policy; Economic and Management graduate. He lives in Shimla.

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Himachal: Warnings of Delta Plus Virulence Fall on Deaf Ears, No Restriction on Visitors from Affected States  

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Shimla-Yesterday, the Centre government directed the state governments to take immediate measure in wake of the spread of more infectious Delta Plus variant.  As the Delta Plus variant is posing a threat of the third wave, the states were told to take steps like preventing crowds, increase testing, more focus on surveillance, contact tracing and put boosting vaccine coverage on a priority basis. Following it, Himachal Pradesh Government might have announced an alert over Delta plus variant, but there wasn’t any follow up on instructions passed by scientists and health experts to take strict restrictive measures ahead of the impending third wave. 

To make it worse, high rank officials and political leaders were seen flouting Covid-19 SOPs on several occasion, which sent wrong messages to the masses. The pictures and videos showing flouting of Covid appropriate behavior by Chief Minister Jairam Thakur and Directorial General of Police, Sanjay Kundu, alongwith other staff for Anupam Kher is the most recent to mention. A group photograph and video of the same were widely circulated on social media and invited huge criticism from the people.  

So far, the state has not reported any case of the Delta Plus variant. But the neighboring states – Punjab, Haryana, and Jammu & Kashmir – reported their first cases yesterday. This puts the boarding areas, like in Una district, at a higher risk. Chief Secretary to HP Government, Anil Khachi, yesterday said samples have been sent for genome sequencing. 

Despite repeated warnings of Delta plus variant (B.1.617.2.1.), Himachal Pradesh has thrown its borders open to all and lifted all restrictions for inter-state travel in just one go. From June 23 onwards, the state government removed the condition for registering on the e-pass portal for visitors intending to enter the state. In the Cabinet meeting held on June 22, 201, the government first decided that e-pass restrictions would be removed from July 1, but later it changed the decision and instead implemented it immediately.

This haphazard decision is said to have come under huge pressure from the hospitality industry – the worst-hit sector, leading to financial crisis and mass unemployment among its stakeholders. Related associations had been approaching Chief Minister Jairam Thakur with their pleas to provide relief, but mostly faced disappointment. The stakeholders say the state government didn’t provide any significant relief, which is making the survival of the industry difficult.

Also Read: Read Eight Reliefs That Himachal’s Devastated Tourism Industry Seeks from HP Govt  

Also, stakeholder of the industry, especially hoteliers, had been demanding the removal of restrictions and conditions on the entry of tourists to Himachal so that they could fetch the remaining peak tourist season.

With its inability to offer relief, the HP Government took the chance to waive off restrictions in a haste.

At the same time, the state government has decided to conduct offline examinations for the undergraduate classes starting from July. A section of the students had been condemning the HP government for scheduling exams without vaccinating students. Some student bodies had been asking the government as to why online classes were possible but not online exams. 

The state government also waived off restrictions on timings for the opening of markets/shops.

As scientists and health experts warn of the virulence of the new variant and with neighboring states already on alert after reporting cases of the new variant, the HP government hasn’t even mentioned any intention to at least put a check on the visitor from the states where cases of Delta Plus are being reported. Carrying an RT-PCR negative report for visitors from such states/cities would have been a wiser step. 

Officially, the state is on alert, but no measures have been announced to check the entry and spread of the variant into the state. The state government does speak of preparing for the anticipated third wave, but there is hardly any long-term preventive strategy. The Covid appropriate behavior is hard to adopt when markets and tourist places are crowded with visitors.

Why Delta Plus is a Big Concern

The World Health Organization (WHO) has labelled the Delta variant as ‘Variant of Concern’.

The Centre and scientific/medical institutes in India also agree with that Delta Plus as a variant of concern and could be the cause of impending third wave. Last Tuesday, based on the findings of INSACOG, the Union Health Ministry had alerted and advised Maharashtra, Kerala and Madhya Pradesh regarding the Delta Plus variant of COVID19.

INSACOG had warned that the Delta Plus variant has increased transmissibility, stronger binding to receptors of lung cells, potential reduction in monoclonal antibody response.

“Delta variant is more resistant to medication, treatment and vaccination. Therefore, people who have been vaccinated can still be affected by this variant and can go on to get a clinical illness, Archana Dhawan Bajaj, director, Nurture IVF, told a national English Daily.

“Neutralising antibodies against this variant post-vaccination seem to be nearly five times lower in people who have already been vaccinated than the other variants,” she said.

Further,  Dr Raman Gangakhedkar, ex-Head Scientist of Epidemiology and communicable diseases, ICMR, has also expressed concern over the reports that Delta Plus has reported pathophysiologic change and affecting different organs.  Dr Raman says that it could transfer from cell to cell and would more likely produce neurological symptoms as a common manifestation.

So far India has reported 51 cases of the Delta Plus variant.

Delta Plus variant is a variant of Delta with an additional mutation -B.1.617.2.1.

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Kullu Brawl: New Video Shows Farmers Expressing Discontent with CM Jairam Thakur-led Govt in Front of Union Minister

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Kullu-The Superintendent of Police, Gaurav Singh, 2013 batch IPS, and Chief Minister Jairam Thakur’s Security Personal, ASP Brijesh Sood, got into an ugly scuffle on June 23 and created an unruly situation. A verbal spat between the two officials of the HP Police led to slapping and kicking each other.

What’s humiliating for the state police department was the fact that this unwanted incident occurred on an occasion where the Chief Minister had come to the Airport to welcome a Union Minister – Nitin Gadkari.

Also Read: IPS Gaurav Singh and CM’s Security Personnel Exchange Slaps & Kicks, Video Goes Viral, Inquiry Ordered

The video has appeared on national news channels and the incident made headlines, raising question over the professionalism of the state police. This part of the entire episode, is getting more attention from the media. But a new video has emerged adding another layer to the controversy, as when Union Minister Nitin Gadkari stopped the car and got out to speak to people who were holding a banner of “Four-Lane Sangharsh Samiti” and BJP flags. It turned out, that these people were farmers, who have been affected by the four-lane project as their lands were acquired for it. These farmers allege that before coming into power, the Bharatiya Janata Party, in its election manifesto, had promised compensation four times the circle rate if elected to power. These farmers also allege that after coming to power, the government didn’t fulfil this promise that also included employment to affected youth. These aggrieved farmers say they have been raising their grievance for the last four years, but the government didn’t lend an ear. With these grievances, the farmers had come to see the Union Minister.

Gadkari’s visit has come right before the by-elections in the state. He is supposed to inaugurate and dedicate some projects during this visit. This visit was supposed to leave a positive impact. The video also shows that the farmers’ group did not create any obstruction to the convoy of the Union Minister, neither they create any ruckus. They just stood outside the Airport with banners and posters in their hands. This halt was not scheduled for Gadkari and the Chief Minister was caught off-guard.

The farmers told Gadkari all about their grievance and also alleged that Chief Minister and the Deputy Commissioner, Kullu, weren’t even ready to listen to them. To discuss the matter, there and then Gadkari called for the Chief Minister, who rushed towards the spot from his vehicle.

Watch What Happened When Gadkari Spoke to Agitating Farmers

In the video, the farmers can be heard telling the Union Minister that they are BJP supporters and workers. Later, they were also seen chanting “Jai Shri Ram” for the Union Minister. They can also be heard saying that despite their party being in power at both Centre and the State, there is no hearing. This added to the humiliation for the Chief Minister as the party supporters were not at all satisfied with him.

The video also shows the Chief Minister losing temper when the farmers repeatedly kept saying that they had been agitating for the last four years over the same grievance. He was seen swiftly turning towards farmers with a hostile gesture of warning. The farmers were heard retaliating to this gesture and saying “ Gussa to hame bhi aa rha hai Thakur sahb (we are also angry Mr Thakur)”.

At the same time, farmers expressed their gratitude towards the Union Minister for stopping the vehicle himself and attending them. “This is his (Gadkari) greatness that he saw us and bothered to listened to us,” a farmer later said while speaking to the media.

The situation put both politicians in contrast while dealing with the same situation related to the people’s grievance.

This video aptly explains why the Chief Minister and his security were annoyed with the local police for allowing people to stand outside the Airport. Though the local police was not responsible for the halt of Gadkari’s convoy, the Chief Minister’s security triggered arguments over it. This argument eventually led to one of the most shameful moments for the HP Police. An IPS slapping another police officer is hard to justify or defend, but taking into account the history of an IPS officer like Gaurav Singh, the question as to what exactly caused him to lose his temper to such an extent that he dared to slap the Chief Minister’s security personal on an occasion where the Union Minister was also present.

Also Read: Who is IPS Gaurav Singh, the Officer in News for Slapping CM Jairam’s Security Personnel

Now, as it’s a well-established fact that the 2014 and 2019 Lok Sabha elections were fought with Narendra Modi as the BJP’s face, and so were the state assembly polls of Himachal Pradesh in 2017. Owing to the media and the IT cells, the very name and face of PM Narendra Modi won a majority for BJP not only in Himachal but in other states too. Therefore, the situation couldn’t get any worse for a Chief Minister who is serving his first term when the slogan “ Hamara PM Kaise Ho, Gadkari Jaisa Ho” was raised by the people.

What message this entire episode would send to the BJP High Command about Chief Minister’s capacity to contain the distress amongst its own party supporters and handle the officers? This doesn’t end here. The opposition has alleged that this incident clearly proves that the Chief Minister doesn’t have a hold on his officers, as well as, party sympathizers, especially from the farming community. The opposition is citing the current incident as an example of BJP’s anti-farmer attitude. Pertinent to mention that the current Centre government is at loggerheads with farmers who had been protesting for nearly one year against the contentious farm laws passed in 2020.

Himachal Kisan Sabha also released a statement in which it alleged that the Chief Minister was desperate to ensure that the farmers do not get to speak to the Union Minister. Further, the results of the recently held elections to the four Municipal Corporations of Himachal Pradesh – Solan, Mandi, Palampur, and Dharamshala-have already dented Jairam Thakur’s term.

Ahead of the by-polls in the state, the factionalism in the party is already a challenge for Thakur.

Last but not the least, the treatment given to bureaucrats and IPS officers by politicians which results in such ugly, unruly situations like these has also become a topic of debate.

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India’s Revised Vaccination Policy and Supreme Court’s Role Behind This Change in Approach

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Shimla-Free vaccine to all Indian citizens above 18 years of age would be available from 21st June onwards, the Government of India announced yesterday. The Centre has also announced that private hospitals would not be able to levy arbitrary charges for vaccination and the rate would be fixed. The government also rolled back its policy for procurement of vaccines, which was under heavy criticism not only from the opposition but also from the Supreme Court of India.

Though, the Centre claimed that the roll-back was a result of the demands raised by state governments, but some believe this decision came right after harsh judicial scrutiny of the government’s previous policy by the Supreme Court, whose initiation is being lauded by the citizens of India amid this pandemic.

“Many states came forward with a demand for reconsideration of the vaccination strategy and for bringing back the system that was there before 1st May,” the Centre said while defending the rollback.

Also, the Centre was even objecting to the court’s jurisdiction in matters related to policymaking and had termed it as an encroachment on the jurisdiction of the executive. However, very mindful of its jurisdiction, the court had mitigated this allegation of the Centre by explaining how policymaking is subject to judicial scrutiny. The court made the Centre aware of the ‘dialogic judicial review’, where the Court can question the executive and demand justifications from it over non-conformity of a policy to the constitutional rights.

Furthermore, the Supreme Court had grilled the Union government over its faulty and discriminatory policy as states were left on their own for the procurement of vaccines. In its orders passed on May 31, a bench comprising of Justice DY Chandrachud, L Nageswara Rao and S Ravindra Bhat came down heavily upon the central government. The bench had termed the policy approach as “arbitrary and irrational”  because it did not provide free vaccination for the 18-44 year age group.  The bench had sought clarification on policy and dual pricing in which states were being made to procure vaccines directly from the manufactures and were invariably paying more for vaccines while the Centre procured the same vaccines at lower rates.

“Due to the changing nature of the pandemic, we are now faced with a situation where the 18-44 age group also needs to be vaccinated, although priority may be retained between different age groups on a scientific basis. Hence, due to the importance of vaccinating individuals in the 18-44 age group, the policy of the Central Government for conducting free vaccination themselves for groups under the first 2 phases, and replacing it with paid vaccination by the State/UT Governments and private hospital for the persons between 18-44 years is prima facie arbitrary and irrational” a bench observed while passing an order on May 31, 2021 concerning a Suo moto case on “Re-Distribution of Essential Supplies and Services During Pandemic”.

Further, the court had also expressed concerns over the digital divide which would make accessing vaccine equally difficult for a large section through online registration.

Earlier, in its orders passed on April 30, the bend had observed that this policy approach would be “detrimental to the right to life and health”. The bench had also observed that this policy requires rethinking, as it needs to be formulated in conformity with the provisions of Articles 14 and 21 of the Indian Constitution.

The bench aggressively went on to order the government to share all details of the vaccine purchase and distribution, as well as provide information on how the budget allocated for the vaccination (₹35,000 Crores ) was used.

Provisions of the New Vaccination Policy

  • Procurement of 25 per cent vaccinations which was earlier with states will now be undertaken by the Government of India.
  • The government of India will buy 75 per cent of the total vaccines produced and will provide it to the states free of cost. No state government would be spending anything on vaccines.
  • The system of 25 per cent vaccines being procured directly by the private hospitals will continue. Private hospitals can’t charge more than 150 rupees service charge over the decided price of the vaccines.

The Centre said that this policy would be rolled out in two weeks.

“In two weeks, the Centre and states will make necessary preparations as per new guidelines,” the Centre announced yesterday.

Till today, more than 23 Crore vaccine doses have been administered in the country.

To ward off the embarrassment caused by such a contentious policy which was not conforming with the constitutional rights of the citizens, Prime Minister Narendra Modi, without referring to the judicial review, blamed it on the state governments.

“As the corona cases started declining, questions arose about the lack of choice for states and some people questioned why the Central government is deciding everything,” he said.

“India’s vaccination program was run mostly under the Central government. Free vaccination for all was moving forward and people were showing discipline in getting vaccinated when their turn came, amid all these demands for decentralization of vaccination were raised, the decision about priority to certain age groups was raised. Many types pressures were exerted and certain sections of media took it as a campaign,” the PM said.

But with that being said the role of the judiciary in making the government roll back its policy in the interest of the people is being lauded as the victory of judicial review. Also, it has attracted positive response for the apex court which was being alleged of evading several matters related to the public interest under the pressure from the current political regime.

Pradhan Mantri Garib Kalyan Anna Yojana Extended  Till Deepawali.

In another major announcement, the Central government announced the extension of the Pradhan Mantri Garib Kalyan Anna Yojana till Deepawali.

As per the announcement, till November, 80 crore people will continue to get a decided amount of free food grain every month.

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