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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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First Open for Tourism, Then Train Staff, HP Govt Goes Topsy Turvy

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Himachal pradesh CM jairam thakur on hotel staff training

Shimla- In the last week, the Himachal state government has taken decisions that could have a long-lasting impact on citizens without consulting or even informing all stakeholders.

First, it came out with guidelines for tourism that did not have any inputs from the tourism industry. Second, it decided to open the state for tourism without consulting hotel and travel industry or keeping village pradhans in the loop.Six days after the decision to allow tourist activity and opening State borders for tourists, the state government of HP has decided to train people employed with the industry.

“Online training for the Hospitality sector would also be held in wake of COVID-19. About 10,000 candidates would be provided one-day training on hygiene and sanitation procedures. Three weeks training on basic essential of a tourist guide communication skill etc. would be provided to about four hundred candidates,”

said Chief Minister Jairam Thakur in a review meeting with Tourism Industry officials on 8th July. It’s surprising that the Government did not find the time to either have this ‘1 day training’ program ready or train the staff of hotels and restaurants before throwing open state borders for tourists. The government gave no time to the hotel industry to understand, prepare and implement directions given in the issued SOPs.

Major Hotel Associations have already decided to keep hotels closed at least till September and  Village Pradhans have also refused to allow tourists into their jurisdiction. The Chief Minister said that the State Government is following the lead of states such as Uttarakhand, Rajasthan, Goa, Kerala etc. where the Governments have decided to open the State for tourists.

To enter Himachal Pradesh, tourists have to meet three conditions, a valid booking for at least five days, a COVID-19 test report from an Indian Council of Medical Research (ICMR) certified laboratory not older than 72 hours and their vehicle should have a sanitisation certificate.

About 600 tourists have already entered Kangra district. Police arrested a couple in Kangra district who managed to enter the State by furnishing a fake COVID-19 negative report.

“A case was registered at Damtal police station against a couple who entered HP from Bhadroya barrier based on fake COVID Negative test report. Legal action is being initiated against them for cheating, fraud & forgery. They are currently lodged in an institutional quarantine facility at Parour,”

SP, Kangra, Vimukt Ranjan, said confirming the report. In another case in Kullu, five tourists, who managed to enter the State and reach Bajaura barrier in Kullu, were detained for not carrying required documents. A total of 12 tourists have been allowed in to Kullu district after they met the three conditions needed for tourists.

According to Kullu district police, about 70 tourists from Punjab, Haryana, Chandigarh, Rajasthan, Telangana, Uttar Pradesh etc. were sent back for not fulfilling conditions prescribed by the State Government. Tourists who should be sent back for a lack of required documents and fulfilling conditions given in the SOPs issued by the State Government are able to cross barriers at borders, like Parwanoo and Swarghat.

Police manning barricades are also frontline staff who are at risk.

We have provided police who are manning the barricades with N95 masks, raincoats that will serve a double purpose for rain and COVID protection and long gloves, policemen over the age of 50 years and those with existing conditions are not deployed at barricades,

said DSP, Kullu, Priyank Gupta.

While the majority of the hospitality industry players, (which is worst hit by the loss of business), is against opening the State for tourism, there are some, especially those who have leased hotels and taken loans who want to open for tourism. However, until the state government takes steps to add healthcare facilities and make more dedicated COVID hospital wards especially in rural areas, large scale tourism could endanger locals.

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Govt Legitimizing and Legalizing Environmental Violations for Business by Amending EIA Rules: Activists  

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Himachal pradesh EIA Notification 2020 Amendments news

Shimla-While in statements, the politicians in power at the Centre and State Governments have been expressing concerns over environmental issues and ensuring the people that they are committed to protect and preserve the environment, the reality is contrary to it. The most recent evidence is the proposed 2020 draft amendments to the Environment Impact Assessment (EIA) Notification. With these amendments, the process of environmental assessment before granting permission to execute commercial projects, like hydropower projects in Himachal Pradesh, would be reduced to merely a formality.

Environmental activists and people’s organisations from across Himachal have written to the Union Ministry of Environment, Forests and Climate Change (MoEF&CC) to scrap the 2020 draft amendments to the Environment Impact Assessment (EIA) Notification proposed by it.

These activists and environmental protection groups are of the opinion that the EIA Notification, first issued in 1994 under the Environment Protection Act 1986, is a critical mechanism that regulates clearances granted to all kinds of development projects and economic activities in the country. It is one of the environmental decision-making processes that makes it mandatory for project developers to not just study the socio-economic, ecological and other impacts of a proposed project but also place them in front of the affected communities for their opinions and objections, thus, ensuring the process of a free, fair and informed consent. However, this notification has been amended and read down several times in the last two decades, in favour of ‘easing the norms’ for business. The latest draft continues to move in the direction of rendering the EIA process a mere formality. 

The submission made by HP groups states,

“In the context of the already vulnerable and sensitive Himalayan region, flouting of various provisions of even the present EIA notification has heavily impacted the local ecology and livelihoods of the people. The new amendments will only legitimize and legalize these violations and this will mean irreparable damage to the Himalayan ecosystem”. 

The key objections raised are around exemptions of a variety of projects from the mandatory  Public Consultation’ process as well as the dismantling of this process itself.

“The reduction of the time prior to public hearing from 30 to 20 days is also highly objectionable. In the given 30 day period itself, the information about Public hearings does not reach all the affected areas which are often spread out widely in case of mountains with some project-affected communities residing in remote and inaccessible terrains. Here accessing information takes a long time and reducing this time to 20 days will completely exclude such people from raising their grievances and suggestions in the public consultation. This is a clear attempt to block their participation in the environmental decision-making process”

said R.S Negi of Him Lok Jagriti Manch, Kinnaur. 

 

“It is shocking that the amendments include allowing post-facto clearance, which means that the project proponent can start work and before they have obtained environmental clearance. If the basic precautionary principle on which the EIA notifications is grounded is itself not followed it can lead to a disastrous situation for the ecology and local people. In this situation who is going to be responsible for the losses? If the project proponent is not in a position to pay for losses, will the MoEF&CC take the responsibility of losses? This provision will encourage project developers to bypass the process of environmental decision making. We absolutely oppose this amendment”,

said Prakash Bhandari of Himdhara Collective.  

The 2020 draft also dilutes the guidelines for monitoring and compliance of Environment conditions.

“Already the system of monitoring is weak, the conditions lose, the pollution control board and companies non-accountable, thus, leading to widespread destruction of local ecology and impacting health, lives, and livelihoods of project-affected communities. In the case of hydropower projects, for instance, the illegal and unmonitored dumping of muck along river beds, in forests and on common lands, has damaged pastures, disrupted the flow of the rivers, and caused massive disasters when floods occur. The proposed changes will give a free reign to those profiting from extractive and polluting projects,” 

according to Kulbhushan Upmanyu of Himalaya Bachao Samiti. 

It is ironic that on one hand, the global COVID crisis has thrown up several studies showing that pandemics like COVID emerge from ecological degradation and forest loss, and on the government is pushing for policy changes which will accentuate the environmental crisis that the country is already reeling under.  

“If the MoEF&CC wants to change the environmental laws, it should carry out countrywide regional consultations”,

added Uma Mahajan of Himachal Van Adhikar Manch.

The country, especially ecologically diverse yet climate-vulnerable regions like the Himalayas need a robust and strong environmental regulatory and governance regime that makes project proponents accountable and keeps the affected communities and ecological concerns at the centre of the EIA and environmental decision-making process. 

Notably, MoEF&CC had called for citizen’s comments before May 11 but this deadline was extended upto  June 30 and now August 11 as environmentalists and concerned groups expressed outrage that calling for public inputs on this critical law amidst the COVID led lockdown was unjustified. The MoEF&CC has in this period received thousands of objections highlighting the new draft as anti-people and environment.

The demand is to scrap these proposed amendments for the sake of the environment. 

Submission Made to Ministry of Environment, Forest and Climate Change by Activists and Organizations

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Himachal: Tourist Activity Allowed, Read New Rules for Entering State, Quarantine, Plying of Public Transport

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Himachal Pradesh New Rules quarantine on entering state

Shimla: What appears to be a blunder amid continuous surge in COVID-19 cases in India as well as in Himachal Pradesh, the State Government has decided to open the borders and allow movement of all people including tourists without permission or E-Pass. Restrictions on re-opening would be limited to only containment zones.

As a matter of concern, tourists with an advance booking of a minimum of five days and COVID-19 test report obtained not earlier than 72 hours from an ICMR accredited laboratory, would not be quarantined anymore and they would not need any pass to roam around.

The visitors entering the State would have to register on COVID-19 portal (https://covid19epass.hp.gov.in/) in advance. It’s the same portal which was earlier used to issue e-passes. Anyone who wants to visit Himachal from other states or abroad will have to fill their details during registration but would not require a pass/permission from the State or district administration.

Only those arriving from high-load cities would have to follow the mandatory institutional quarantine. Relaxation can be given only in the case of death, pregnancy, medical urgency, elderly people, and children below 10 years or infants. Daily and weekend commuters entering and exiting the State have been exempted from quarantine requirements. It includes industrialists, traders, raw material suppliers, factory workers, project proponents, service providers, inspecting authorities etc. Also, persons falling in these categories are exempted from home-quarantine on arrival from other states.

The residents of Himachal Pradesh exiting the State to visit other states for a short duration for medical, business or official purposes and coming back to the State within 48 hours have also been exempted from home-quarantine provided they are asymptomatic.

Further, persons visiting the State for bonafide purpose of trade, business, job, project, service purpose, marriage ceremonies, commission agents, and ‘artiyas’ can enter the state with supporting documents provided they are not arriving from high-load cities.  

The orchardist, agriculturist, contractors, project proponents etc. would have to get all hired labourers registered on the same portal. They will have to arrange for quarantine facility for all labour brought from other states. The Government has also allowed sending such labour directly to the site of work (orchards, industries, farmlands etc.) provided they follow the guidelines regarding quarantine and social distancing.

Personals of the Armed forces and Central paramilitary Forces would not need registering on the portal and will be allowed to enter by showing their official identity card.

The decision is quite surprising considering the fact that the total of COVID-19 positive cases has crossed the 1000 mark and the rate of appearance of new cases is also on the rise in the State. The State government claimed that it had requested the Centre to allow the State to regulate the entry of people in wake of the rising cases in the State. However, the State Government claimed that the Centre declined this request. Moreover, the economy of the State has been hit adversely due to the lockdown, thus, zero tourist influx.

Therefore, under pressure to resume economic activities, at the same time, the State Government has given a huge relaxation in the lockdown and social distancing measures. The Government has removed the conditions of maintaining 60 percent occupancy in the state carriage buses. Now, the buses could run with 100 percent capacity, informed a  Spokesperson of the HP Transport Department on Friday.

“This will be subject to maintaining social distancing and that no standing passenger would be allowed in the buses during the journey,”

the Spokerspoers said.

Other conditions not related to maintaining 60 percent occupancy mentioned in the Department’s notification issued on May 30, 2020, will remain the same, the Spokesperson said. However, the inter-state movement of public transport would remain prohibited. Inter-state movement of taxis is allowed after obtaining permission from the concerned Deputy Commissioner.

On the situation in the State, Chief Minister Jairam Thakur yesterday said that all is well, and the cause of surge in cases is due to people returning from other States.

“The situation in the State was quite under control. There is a sharp increase in corona patients in the State as over two lakh people from different parts of the country have been brought back to Himachal Pradesh. The people of the State need not worry as the Government is fully aware of the situation,”

Again, he compared the number of cases and fatalities in India with the rest of the world to claim that the spread is contained effectively.

“Number of death due to COVID-19 in the fifteen most developed countries with a population of 142 crore was about five lakh, whereas in India having a population of 135 crore, about 17,000 had lost life due to Corona till date,”

he said.

The State Government said that hotels and restaurants/dhabas would have to follow guidelines issued by the Department of Tourism from time to time. The restaurants and dhabas are allowed to serve food by operating only at 60 percent of their seating capacity. The HPTDC lifts in Shimla city have also been allowed to operate.

On the other hand, the hoteliers are not in favour of opening hotels due to the fear of COVID-19 spread. The Hoteliers & Restaurant Association, Shimla, had written to the State Government a couple of days ago suggesting that tourism activities in the State should not be allowed for the coming few months.

The Association in a written submission had given the following reasons to not open tourism activities (unedited):

  1. Corona cases are increasing at an alarming speed in India and a world at large. As per expert opinion, Corona pandemic will be at peak in the month of July/ Aug. 20
  2. In the summer season, we get bulk of our visitors from Punjab, Delhi, Gujrat, Maharashtra, Tamil Nadu. As most of the areas in the above States are gravely infected and are in the red zone, we should not invite them to visit Himachal and put our public at risk of Corona.
  3. The railway which is the popular mode of transportation for the tourist is not operating till August 12, 2020, and airlines have also suspended their operations till July 15.
  4. As most of the Corona patients are asymptomatic, despite taking all precautions and social distancing, we will be putting the life and health of our hotel staff at grave risk, if they come in contact with them.
  5. At present, there is no vaccine available for the cure of Corona, so there is a fear psychosis amongst the population and they are concerned about their health and safety and would not like to venture out from their homes and stay in hotels.
  6. For the above reasons, we don’t expect many tourists to visit Himachal in July and August 20, It will be financially unviable to open hotels.

The Association had suggested that touristic activities in hotels may be permitted after the rainy season is over, sometime in September or October.

Himachal Pradesh is witnessing a rapid rise in COVID-19 case since the day the Government opened borders for its residents who were stranded in other States. So far they required e-pass and had to go through mandatory institutional and home-quarantine. However, now, with borders opened for all including tourists without obtaining any permission, the people of the State need to be prepared in case the outbreak gets out of control.

In such a scenario, people can’t solely rely on the Government and will have to follow social distancing rules strictly to protect themselves.

Click to Read Full Notification 

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