- Laying the foundation for faster growth
- Stopping the slide of health care in India
- The right call
Editorial: Laying the foundation for faster growth
- The decline in 2020-21 caused by the pandemic can be addressed only if the Indian economy grows at 8% in 2021-22.
- GS Paper 3: Indian Economy (issues re: planning, mobilisation of resources, growth, development, employment); Inclusive growth and issues therein.
- Among several factors for India’s potential growth, savings rate is the most effective one. Do you agree? What are the other factors available for growth potential? 15 Marks
- Recent controversies over reforms have shown that timing, sequencing and consensus building are equally important. In this context, discuss the Agri Reform Acts. 15 Marks
- Growth must not only be consumption driven but also investment driven. Discuss the statement, in the context of reviving the GDP in 2021-22. 15 Marks
Dimensions of the Article:
- How bad was the performance of the Indian economy in 2020-21?
- Causes of poor performance of GDP:
- What are the prospects for 2021-22?
- What should the stance of monetary policy be in the coming months?
- What should the Budget to be presented by the central government in February 2021 focus on?
- Will the global environment for trade and investment improve and help India?
- Way Forward
Performance in 2020-21
GDP is the final value of the goods and services produced within the geographic boundaries of a country during a specified period of time, normally a year. GDP growth rate is an important indicator of the economic performance of a country. In India, the performance of the GDP growth in 2020-21 is very poor.
- Reductions in the first half of GDP at 2011-12 prices in 2020-21 as compared to the first half of 2019-20 is ₹11,15,879 crore which is 7.66% of the 2019-20 GDP.
- If the Indian economy at least maintains the second half GDP in 2020-21 at the level of the previous year, the full year contraction can be limited to about 7.7%.
Causes of poor performance of GDP:
- Low demand in Economy: Weak income growth, especially rural, has been affecting private consumption.
- Problems in financial sector: Following ILFS crisis last year, abrupt reduction in NBFC’s credit expansion took place, leading to the associated broad-based tightening of credit conditions.
- Corporate and Environmental regulatory uncertainty: Private investment has been hindered by the financial sector difficulties (including in the public sector banks (PSBs)) and insufficient business confidence.
- Implementation issues with some structural reforms like goods and services tax (GST)
What to expect in 2021-22?
It is important to remember that if only if the Indian economy grows at 8% in 2021-22 will we be compensating for the decline in 2020-21. This should be possible if by that time restrictions imposed because of COVID-19 are withdrawn and the nation goes back to a normal state.
- Government Expenditure: The sectors, which are labour intensive and has huge potential to increase the growth, can work as engine of growth. The government should focus in these sectors.
- Private sector: The government should not expect much from private sector because it seems to be revising its future prospects.
- Trade: The global environment for trade and growth is an uncertain factor. Many developed countries are still struggling to find answers to COVID-19.
Monetary policy is the macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side economic policy used by the government of a country to achieve macroeconomic objectives like inflation, consumption, growth and liquidity. Three major elements in the policy are:
- A reduction in interest rate through changes in policy rate;
- Providing liquidity through various measures,
- Regulatory changes such as moratorium.
According to the recent monetary policy statement, reserve money increased by 15.3% as of end November 2020.
- Money supply however grew by 12.5% because some of the injection of liquidity ended up in excess reserve.
- With a large injection of liquidity, one should expect inflation to remain high.
- In the final analysis, inflation is determined by overall liquidity or money supply in the system in conjunction with the availability of goods and services.
Through the fiscal policy, the government of a country controls the flow of tax revenues and public expenditure to navigate the economy. Government expenditures play a key role in a situation such as the one we are facing. Therefore, through following ways fiscal policy is important:
- To improve investment: Pile-up of past domestic debt severely restricts the ability to finance new investment. If debt becomes unsustainable, there is an increased risk of default & hence, downgrading of sovereign credit ratings.
- Increasing credit availability to private sector: As more money is lent to government rather than invested in the market, corporate sector is crowded out leading to slower industrial and capital asset growth and potential loss of employment.
- Control inflation: Too much of government debt can lead to inflation and reduction in real interest rates. It might prompt people to invest more in gold and real estate, thereby accentuating the problem of poor economic liquidity and black money.
- Intergenerational parity will be hurt as future generations will have to pay increased taxes to settle the government debt.
- Constitutional Requirement: Article 292 of the Constitution envisages fiscal responsibility in the form of legislation that obliges the government to have a ceiling on debt.
Growth and Investment
Investment influences the rate of economic growth because it is a component of aggregate demand (AD) and more importantly influences the productive capacity of the economy.
- An increase in investment should be a boost to economic growth.
- Investment means expenditure on capital spending, e.g. buying new machines, building bigger factories, buying robots to enable automation. (in economics investment does not mean saving money in a bank)
- Investment is a component of aggregate demand (AD). Therefore, if there is an increase in investment, it will help to boost AD and short-run economic growth.
- If there is spare capacity, then increased investment and a rise in AD will increase the rate of economic growth.
- Financial sector: these reforms are needed in the short term as per IMF, such as:
- Resolution of balance sheet issues including in the commercial banks, the corporate sector, and the NBFCs including housing finance companies.
- More information on smaller NBFCs is needed to better understand the impact of reduced credit on private demand, especially micro, small, and medium-sized enterprises and in rural areas.
- Fiscal policy suggestions:
- In the short term, focus on the composition of expenditures and rationalizing GST.
- Over the medium-term, focus on domestic revenue mobilization like increasing personal income tax collections by ending exemptions, reducing the minimum threshold for taxpayers and by raising contributions by top earners, decreasing expenditures on subsidies, and enhancing fiscal transparency and thus reducing uncertainty.
Many have cherished the idea of India reaching the status of a $5 trillion economy by 2025. But increasingly the idea is becoming a more distant goal. The Indian economy in 2019 was at around $2.7 trillion. To achieve the level of $5 trillion, we need to grow continuously at 9% for six years from now.
Editorial: Stopping the slide of health care in India
- The novel coronavirus pandemic has revealed the mismatch between the overwhelming presence of the not so well-to-do and private health care with its revenue modelling that borders more on greed and rent gouging.
- GS Paper 2: Social Sector & Social Services (health, education, human resources – issues in development, management);
- While India has made rapid strides in raising economic growth and lifted millions out of poverty, progress in improving healthcare has been slow. Critically Discuss
- Appropriate local community-level healthcare intervention is a prerequisite to achieve ‘Health for All ‘ in India. Explain. 15 Marks
Dimensions of the Article:
- Status of health sector in India.
- Causes of poor health care in India.
- Measures taken by the government
- Way Forward
Status of health sector in India
- India’s health care is 70% private and 30% public in a country where 80% people do not have any protection for health and the out-of-pocket expense is as high as 62%.
- With public spending at 1.13% of GDP and a huge shortage of health-care workers particularly nurses and midwives, policy moves and plans appear like a sound in emptiness.
- Population with health insurance coverage: About 14% of the rural population and 19% of the urban population had health expenditure coverage.
- Child Health: As per estimates developed by the UN Inter-agency Group for Child Mortality Estimation:
- Under-five mortality rate (U5MR) (deaths of children less than 5 years per 1,000 live births) has declined from 126 in 1990 to 34 in 2019, with an Annual rate of reduction (ARR) of 4.5 per cent in the time period 1990-2019.
- Infant mortality rate (deaths of children less than 1 year per 1,000 live births) has declined from 89 in 1990 to 28 in 2019.
- Neonatal mortality rate (deaths of children within a month per 1,000 live births) has declined from 57 in 1990 to 22 in 2019.
Causes of poor health care in India:
- One big reason driving India’s health crisis is the unavailability of doctors and nurses. In India per 1000 people only 1.1 doctors are available which are very less as compared to advanced countries.
- Another key reason for poor health of Indians is the high proportion of out-of-pocket expenditure on health because of low insurance coverage and weak public health systems, which forces even poor people to visit private medical practitioners, and drives up average health costs. High healthcare costs often lead people to delay treatment, aggravating health problems.
- India’s public health expenditure is not just low, it is also regressive. The poorest income classes benefit less from the public health system than the better-off sections of society.
- Lack of affordability: India’s public health expenditure is not just low, it is also regressive. The poorest income classes benefit less from the public health system than the better-off sections of society.
- Vicious cycle of poverty: Nearly 70 million of the non-poor slide into poverty on a year-to-year basis. Because of the problem of access, affordability, absence of quality manpower and the rent-seeking behaviour of staff, more than 80% of people routinely reach Registered Medical Practitioners who are not trained to treat patients.
- Universal coverage: Rural-urban differences in health resources are also glaring, with 80 per cent of doctors, 75 per cent of dispensaries and 60 per cent of hospitals being situated in urban areas.
Measures to improve the health care in India:
- Roll out PM-JAY: Establish the Ayushman Bharat-National Health Agency at the central level and counterpart institutions at the state and district levels for management of the PM-JAY.
- Galvanize health facilities in the public sector and engage the private sector: Provide greater autonomy to public hospitals to use claims money generated under PM-JAY to improve facilities, purchase the necessary drugs/tests and provide performance-based incentives to staff.
- Ensure access to affordable drugs and medical devices: Finalize the national pharmaceutical policy to enable access to affordable medicines, promote the use of generic drugs, clamp down on unfair marketing practices and give a boost to local manufacturing to reduce dependence on imports.
- Strengthen health research capacity: Set up research consortia for diseases of high priority including neglected tropical diseases and emerging infections along the lines of the India TB Research and Development Corporation.
- First, Ramp up the number of doctors with counterpart obligation to serve in rural areas. The result is uncertain with far greater career options in the private sector (with its better infrastructure which is required for job satisfaction).
- Second is to revive the Licentiate Medical Practitioner as we had before Independence in the rural areas. This requires starting it de novo with the attendant resistance.
- The third one is to empower graduates of BSc (Nursing) to be nursing practitioners — as prevalent in many countries.
- Fourth: Primary health care should receive three times more allocation in the budget and doctor and paramedic strength should be doubled merely on the basis of population increase. If necessary, doctors can be given incentives in terms of extra salary and post graduate seat preference, but in parallel, given penalties for absenteeism for rural posting.
Editorial: The right call
- The Supreme Court on Friday quite rightly stayed an Andhra Pradesh High Court order that sought to convene a judicial inquiry into whether there is a “constitutional breakdown” in the Y.S. Jagan Mohan Reddy-led government in the State.
- GS Paper 2: Separation of Powers (between different organs, dispute redressal mechanisms, institutions); Judiciary (structure, organisation functioning).
- Do you think that constitution of India does not accept principle of strict separation of powers rather it is based on the principle of ‘checks and balance’? Explain.
- The question of a “constitutional breakdown” or the failure of constitutional machinery is dealt with under Article 356 of the Constitution, whose invoking comes under the prerogative of the executive and not the judiciary. In this context discuss the S.R. Bommai case. 15 Marks
Dimensions of the Article:
- What is Separation of Power?
- Significance of Separation of Power
- Constitutional status of separation of power.
- Issues with Separation of Power
- Way forward
What is Separation of Power?
The term “separation of powers” was coined by Montesquieu, an 18th century French social and political philosopher. His publication, Spirit of the Laws, is considered one of the great works in the history of political theory and jurisprudence, and it inspired the Declaration of the Rights of Man and the Constitution of the United States.
Separation of powers, therefore, refers to the division of government responsibilities into distinct branches to limit any one branch from exercising the core functions of another. The intent is to prevent the concentration of power and provide for checks and balances.
- The legislative branch is responsible for enacting the laws of the state and appropriating the money necessary to operate the government.
- The executive branch is responsible for implementing and administering the public policy enacted and funded by the legislative branch.
- The judicial branch is responsible for interpreting the constitution and laws and applying their interpretations to controversies brought before it.
Significance of the Separation of Power:
As it is a very well-known fact that whenever a large power is given in the hand of any administering authority there are higher chances of maladministration, corruption and misuse of power. This doctrine helps prevent the abuse of power. This doctrine protects the individual from the arbitrary rule. The government is the violator and also protects individual liberty. Summarily, the importance can be encapsulated in the following points:
- Ending the autocracy, it protects the liberty of the individual.
- It not only safeguards the liberty of the individual but also maintains the efficiency of the administration.
- Focus on the requirement of independence of the judiciary
- Prevent the legislature from enacting an arbitrary rule.
Constitutional status of separation of power:
- Article 50: This article puts an obligation over the State to separate the judiciary from the executive. But, since this falls under the Directive Principles of State Policy, it is not enforceable.
- Article 123: The President, being the executive head of the country, is empowered to exercise legislative powers (Promulgate ordinances) in certain conditions.
- Articles 121 and 211: These provide that the legislatures cannot discuss the conduct of a judge of the Supreme Court or High Court. They can do so only in case of impeachment.
- Article 361: The President and Governors enjoy immunity from court proceedings.
There is a system of checks and balances wherein the various organs impose checks on one another by certain provisions.
- The judiciary has the power of judicial review over the actions of the executive and the legislature.
- The judiciary has the power to strike down any law passed by the legislature if it is unconstitutional or arbitrary as per Article 13 (if it violates Fundamental Rights).
- It can also declare unconstitutional executive actions as void.
- The legislature also reviews the functioning of the executive.
- Although the judiciary is independent, the judges are appointed by the executive.
- The legislature can also alter the basis of the judgment while adhering to the constitutional limitation.
Checks and balances ensure that no one organ becomes all-too powerful. The Constitution guarantees that the discretionary power bestowed on any one organ is within the democratic principle.
Supreme Court Judgements regarding Separation of Power:
- Indira Gandhi vs Raj Narain: In the case the court held that In our Constitution the doctrine of separation of power has been accepted in a broader sense. Just like in American and Australia Constitution where a rigid sense of separation of power applies is not applicable in India.
- Kesavananda Bharati Case (1973): In this case, the SC held that the amending power of the Parliament is subject to the basic features of the Constitution. So, any amendment violating the basic features will be declared unconstitutional.
- Swaran Singh Case (1998): In this case, the SC held the UP Governor’s pardon of a convict unconstitutional.
Issues with Separation of Power: Judicial Overreach
Judicial overreach is when the judiciary starts interfering with the proper functioning of the legislative or executive organs of the government, i.e., the judiciary crosses its own function and enter the executive and legislative functions. Judicial overreach is considered undesirable in a democracy. And it is against the separation of power. Followings are the implications of judicial overreach:
- It destroys the spirit of the constitution as the democracy stands on the separation of powers between the organs.
- It creates a conflict between the legislative and the judicial system. As the message which is conveyed with these decisions among the people is of legislative inactivity.
- When Judicial activism helps in strengthening the people’s faith in the judiciary, the very act of overreach destroys it. As it appears an act of ‘tyranny of unelected’ in a democracy where elected representatives rule.
- It reduces the trust of the people in public institutions which can be dangerous for democracy.
- It is a waste of Judicial time, which can otherwise be utilized for hearing various important matters relating to public importance pending before the court.
The doctrine of separation of powers is not codified in the Indian constitution. Indeed, it may be difficult to draw a strict line demarcating the separation. However, it may be necessary for each pillar of the State to evolve a healthy convention that respects the domain of the others.