05 Nov 2020: UPSC Exam Comprehensive News Analysis

B. GS 2 Related

Category: POLITY AND GOVERNANCE

1. SC lays down guidelines for matrimonial cases

Context:

The Supreme Court has held that deserted wives and children are entitled to alimony/maintenance from their husbands from the date they apply for it in a court of law.

Details:

• The judgement laid down uniform and comprehensive guidelines for family courts, magistrates and lower courts to follow while hearing applications filed by women seeking maintenance from their estranged husbands.
  • The plea of the husband that he does not possess any source of income by the very fact does not spare him of his moral duty to maintain his wife, if he is able-bodied and has educational qualifications.
  • Both the applicant wife and the respondent husband have to disclose their assets and liabilities in a maintenance case.
  • Factors such as “spiralling inflation rates and high costs of living” should be considered while calculating the alimony.
• Any violation would lead to punishment, such as civil detention and even attachment of the property of the latter.

What was the need for the guidelines?

• Women deserted by husbands are often left in difficult situations or are reduced to destitution for lack of means to sustain themselves and their children.
• One of the judges reasoned that if maintenance was not paid from the date of application, the party seeking maintenance would be deprived of sustenance, owing to the time taken for disposal of the application, which often runs into several years.
• That the maintenance must be granted from the date when the application was made is based on the rationale that the primary object of maintenance laws is to protect a deserted wife and dependent children from destitution.

E. Editorials

Category: ECONOMY

1. Fixing the rules of the economy

Context:

• The article evaluates the current economic policies in India and argues for a change keeping in view both the short and long term needs of the Indian economy.

Background:

Income inequality:

• Income inequality is a critical issue plaguing the Indian economy. The prevalent trend indicates that income inequality in India is rising independent of absolute incomes.
  • Income inequality is how unevenly income is distributed throughout a population. The less equal the distribution, the higher the income inequality is.
• Incomes of people in the lower half of the income pyramid are too low. India’s richest 1 per cent hold more than four-times the wealth held by 953 million people who make up for the bottom 70 per cent of the country’s population.

Gini Coefficient:

• The Gini coefficient is indicative of income inequality in India. It is a statistical measure to gauge the rich-poor income or wealth divide.
• The Gini Coefficient for India is estimated to be close to 0.50, which would be an all-time high.
  • Its value varies between zero to 1, zero indicating perfect equality and one indicating the perfect inequality.
  • A Gini figure below 0.40 is generally considered to be within tolerable limits by economic experts.
• A general rise in the Gini Coefficient indicates that government policies are not inclusive and may be benefiting the rich as much as (or even more than) the poor.

Consequences of income inequality:

Concentration of power:

• The power to influence policymaking has become concentrated with wealthy investors and large multinational corporations. The rules do not favour workers and tiny enterprises because they have too little power. This does not augur well for the development process of the large population which make up the labour class and the tiny enterprises.

Economic inefficiency:

• The growing inequality is not good for the economic growth of the country.
• The lower disposable income among the large population does not augur well for demand in the economy which in turn has a vicious impact on investment decisions and economic growth.
• The inequitable economic growth is not sustainable.

Economic policies being propounded in India:

• There has been a growing emphasis on freeing up markets, improving productivity, and applying technology.

Details:

• The article calls for a re-examination of the fundamental economic policies being propounded.

Freeing up markets:

• There has been a growing emphasis on liberalizing the economy through measures such as freeing up the markets for agricultural products to ensure higher price realization for the farmers or deregulation of labour laws to attract investments.

Concerns:

• The freeing up markets for labour is expected to reduce the burden of wage costs on investors.
• This would have a degrading effect on the income of the labour class just when wages and the size of markets must be increased to counter the economic downturn. Without adequate incomes, people cannot be a good market for businesses. In fact, it is the inadequate growth of incomes that has caused a slump in investments due to poor expectations of demand.

Improving productivity:

• Improvement of ‘productivity’ is considered a key aspect of economic progress.
  • Productivity measures the efficiency of production. Productivity is expressed as the ratio of the aggregate output to the aggregate input i.e. output per unit of input, typically over a specific period of time. The larger the output that is produced with a unit of input, the higher the productivity of the system.
• Economists generally use labour productivity as a universal measure of the productivity of an economy.
  • The number of people in the system (the country/the economy) is the denominator, and the gross domestic product the people produce is the numerator. Companies also measure their labour productivity similarly, by dividing the total output of the enterprise by the number of workers employed.

Strategies for increasing productivity:

• Labour productivity can be increased by either increasing the total output of the factory while maintaining the number of workers or by decreasing the number of workers involved in the production.
• The total output can be increased by adding more machines and technology to supplement the capacity of workers to increase total output. This is a good strategy for capital-rich enterprises and countries.
• The total output can also be increased by enhancing the workers’ skills and create a culture of continuous improvement in the factory, whereby workers and managers cooperate to improve the capability of their system to produce more from limited resources. This is the strategy of ‘total quality management’, famously employed in Japanese companies to reduce their costs of production and to improve the quality of their products. This contributed to the improvement of the total productivity of their enterprises.

Concerns:

• The companies seem to be taking the easy way out to improve productivity in the economy.
• There seems to be the growing reliance on reducing the workforce and squeezing out the maximum work possible from this limited workforce to increase productivity.
• This has given rise to a ‘hire and fire’ strategy in companies. This goes against the labour welfare principle and could prove detrimental to the labour class.

Technology-led growth:

• There is a growing emphasis on inducting high-end technology for economic growth. This is evident in the recent push for technologies like Artificial Intelligence, Internet of Things, etc.

Concerns:

• The very idea of defining the level of technology in terms of ‘equipment cost per work-place’ may be inappropriate.
• For capital-scarce and human resource-abundant countries, such as many developing countries, such a policy may be inappropriate.
• The current attempt of the ‘developing’ countries, supported by foreign aid, to infiltrate capital intensive technology into their economies inevitably kills off the low-cost indigenous technology at an alarming rate, destroying traditional workplaces at a much faster rate than modern workplaces can be created and producing the ‘dual economy’ with its attendant issues of mass unemployment and mass migration.

Way forward:

Following the social contract principle:

• A good job implies a contract between workers and society. Workers provide the economy with the products and services it needs. In return, society and the economy must create conditions whereby workers are treated with dignity and can earn adequate incomes. Good jobs require good contracts between workers and their employers.
• The government should, apart from ensuring ideal conditions for the investors, also ensure a protective cover for the workers. This would require it to regulate contracts between employers and employees.

Empowering the most vulnerable:

• Small enterprises and workers must combine into larger associations, in new forms, using technology, to tilt reforms towards their needs and their rights.

Employment promoting policies:

• The economic reforms should incentivize the firms to employ more numbers of less-skilled workers.

Category: POLITY AND GOVERNANCE

1. The financial capacity of States is being weakened

Context:

• The article discusses the decreasing financial capacity of the states; the causative factors and its consequences.

Causative factors:

Declining actual devolution:

• There has been a notable shortfall in actual and recommended devolutions given by the Finance Commission.
  • In the year 2014-15, the actual devolution was 14% less than the Finance Commission’s projection. Subsequent devolutions have been consistently less every year, with the period 2019-20 resulting in a 37% decrease.
• Finance Commissions recommend the share of States in the taxes raised by the Union government. Their recommendations are normally adhered to. But the current Union Government has discarded this constitutional obligation.

Shrinking divisible pool:

• The Union government has resorted to imposing or increasing cesses and surcharges instead of taxes wherever possible and, in some cases, even replaced taxes with cesses and surcharges.
• Various cesses and surcharges levied by the Union government are retained fully by it. They do not go into the divisible pool. This allows the Centre to raise revenues, yet not share them with the States.
• Between 2014-15 and 2019-20, cesses and surcharges soared from 9.3% to 15% of the gross tax revenue of the Union government.

GST shortfall:

• GST shortfalls have been persistent and growing from the inception of GST.
• Compensation to state revenues has been paid from the GST cess revenue. However, the COVID-19 pandemic induced lockdown has drastically reduced GST collections.
• Of the nearly ₹3 lakh crore GST shortfall to the States, the Centre will only compensate ₹1.8 lakh crore. The States will not get the remaining ₹1.2 lakh crore this year.

Central grants:

• Apart from the streams discussed above, Central grants are also likely to drop significantly this year due to lower than expected revenue collection for the government as well as the increased expenditure on health.

Consequences:

• Due to the combined effect of cutbacks in devolution, the shrinking divisible pool, failure to pay full GST compensation this year and fall in Central grants, the States may experience a fall of 20%-25% in their revenues for the current fiscal year.

Short term impact:

• State governments drive a majority of the country’s development programmes. A large number of people depend on these programmes for their livelihood, development, welfare and security. Any shortfall in the availability of resources may have a negative impact on the state’s ability to deliver on these development programmes.
• There has been increasing consensus on the need for a fiscal stimulus to induce economic recovery. Governments ought to spend money this year to stimulate demand. The reduced spending capability with the states will impede the recovery process as well.

Long term impact:

• Given the huge shortfalls, the States are now forced to resort to large borrowings. Repayment burden will overwhelm State budgets for several years. This would impair the state’s ability to spend on development and welfare activities.
• The decreased investment in development and welfare programmes will have an adverse impact on per capita income, human resource development and poverty thus impairing economic growth potential as well.

Conclusion:

• States are at the forefront of development and growth. Strong states lead to a stronger India.
• Given that the weakening of states serves neither federalism nor national interest, there is the need to guard against any such policies that weaken the states’ status or capabilities.

2. Star status

This issue has been covered previously in the following article:

CNA dated Nov 3, 2020: SC stays EC order revoking ‘star campaigner’ status of Nath

Q1. Consider the following statements with respect to the District Development Council:

Q2. “Nurturing Neighborhoods Challenge” is implemented by the-

Q3. The Vohra Committee report dealt with:

Q4. Which of the following states in India have a State Butterfly?

I. UPSC Mains Practice Questions

1. Given that the weakening of States serves neither federalism nor national interest, there is the need to guard against any such policies that weaken the state’s status or capabilities. Comment with respect to the issue of fiscal federalism in India. (10 marks, 150 words) (GS Paper 2/Polity and Governance)
2. The growing economic inequality poses serious challenges for India. Comment. Also evaluate the efficacy of the economic policies being propounded to counter this challenge. (15 marks, 250 words)(GS Paper 3/Economy)

Read the previous CNA here.