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

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