Editorials/Opinions Analysis For UPSC 13 October 2022

Editorials/Opinions Analysis For UPSC 13 October 2022

Contents

1. The government has approved bill to amend multi-state cooperative law
2. Retail inflation is at a five-month high

The Approval Of Bill To Amend Multi-State Cooperative Law

Context

The Multi-State Cooperative Societies (Amendment) Bill, 2022, has been approved by the Union Cabinet. Among other things, the bill aims to improve transparency and accountability, as well as the ease of doing business.

Relevance

GS Paper 2: Government and its policies, federalism

Mains Question

So far, the enormous transformative power of the cooperative sector has not been fully realised. In light of the statement, propose actions to fully utilise the sector’s potential. (250 Words)

Cooperative Societies with Multiple States

• There are many societies whose members and areas of operation span multiple states.
  • For example, most sugar mills along the Karnataka-Maharashtra border buy cane from both states.
• These are referred to as multi-state cooperative societies.
• To regulate such cooperatives, the Multi State Cooperative Societies (MSCS) Act of 2002 was enacted.

Multistate cooperative regulation

• Because these societies have members from various states, they are registered under the MSCS Act.

• Their board of directors includes members from all of the states in which they do business.

• The Central Registrar has administrative and financial control over these societies.

o No state government official has authority over them.

Statistics on Multistate Cooperatives

• As of December 2021, 1,479 such societies had been registered since the law was passed in 2002.

• Credit societies account for the majority of registered societies (610), followed by agro-based ones (including sugar mills, spinning mills, and so on) at 244.

• There are 96 multistate cooperative dairies and 66 multistate cooperative banks in the United States.

The Act of 2002 must be amended.

• The lack of checks and balances at multiple levels
  • The system for state-registered societies includes multiple layers of checks and balances to ensure process transparency.
  • State registrars exercise financial and administrative control over state-registered societies through district and tehshil-level officers.
• If a sugar mill wishes to purchase new machinery or expand, the sugar commissioner must grant permission for both.
• Following this, the proposal would be sent to a state-level committee, which would issue tenders and carry out the process.
  • These layers do not exist in multistate societies. The 2022 act gives the Central Registrar, who is also the Central Cooperative Commissioner, exclusive control over multi-state cooperatives.
• The annual report of these societies must be submitted to the Central Registrar, either online or offline, by September of each year.
• An apparent lack of government oversight on a daily basis
  • Unlike state cooperatives, which are required to submit multiple reports to the state registrar, multistate cooperatives are not required to do so.
  • The central registrar can only inspect societies under special circumstances.
• Inadequate infrastructure for the Central Registrar
  • There are no officers or offices at the state level, with most work done online or via correspondence.
  • The only office where members of the societies can seek justice is in Delhi.
• Act loopholes are being exploited
  • Credit societies have launched ponzi schemes across the country, taking advantage of these loopholes.
• With the promise of high returns, such schemes primarily target small and medium-sized investors.
• Fly-by-night operators entice people to invest and then shut down their operations after a few instalments.

Summary of Recent Events

• The Multi-State Cooperative Societies (Amendment) Bill, 2022, which seeks to amend the Multi-State Cooperative Societies Act, 2002, has been approved by the Union Cabinet.
• These changes have been made to improve the ease of doing business.

The bill’s main points

• Includes provisions from the 97th Constitutional Amendment
  • The provision of the 97th Constitutional Amendment is incorporated into the bill.
• Parliament approved the 97th constitutional amendment in December 2011.
• In July 2021, the Supreme Court struck down a section of this act dealing with state cooperatives.
• It addressed issues concerning the effective management of co-operative societies in the country.
• It amended Article 19(1)(c) to protect cooperatives and added Article 43 B and Part IX B relating to them.
• Concentrate on strengthening the governance of multi-state cooperative societies.
  • The bill provides for the establishment of a Cooperative Election Authority, a Cooperative Information Officer, and a Cooperative Ombudsman.
• The Election Authority will ensure that elections are fair, free, and timely.
• The provision to bar electoral offenders from voting for three years will increase electoral discipline.
• A mechanism for resolving member grievances will be provided by the Cooperative Ombudsman.
• The appointment of a Cooperative Information Officer will improve transparency by allowing members to access information more quickly.
  • This will make multi-state cooperative societies’ governance more democratic, transparent, and accountable.
• Encourages equity and inclusion
  • Provisions for the representation of women and SC/ST members on multi-State co-operative societies’ boards have been included.
• Encourages professional management
  • Provisions have been made for the appointment of co-opted directors with experience in banking, management, cooperative management, and so on.
• Makes doing business easier.
  • The bill includes provisions to shorten the registration period, as well as a provision for applicants to request an extension of two months to correct errors.
• Additional provisions
  • A provision for the issuance of non-voting shares would provide a tool for multi-State co-operative societies to raise required capital.
  • In addition, the recently proposed Rehabilitation, Reconstruction, and Development Fund will aid in the revitalization of sick multi-State cooperative societies.
• The bill seeks to improve the auditing mechanism of multi-state cooperatives in order to increase accountability.

Retail Inflation Is At A Five-Month High

Context

Retail inflation rose to a five-month high in September, driven by stubborn food prices, while industrial output fell in August.

Relevance

Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Mains Question

Examine the factors for the high rate of inflation in the Indian economy in the recent months. Suggest measures to keep the inflation within the Reserve Bank of India (RBI)’s tolerance band. (250 words)

Consumer Price Index (CPI) 

• The CPI is a metric that measures retail inflation by collecting data on the prices of goods and services purchased by the country’s retail population.
• The CPI is published by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
  • CPI is published for all of India and for each state/UT separately for rural, urban, and combined (national).
• CPI is currently calculated with 2012 as the base year.
• Items classified across categories for the CPI basket of goods and services.
  • Some of the categories are as follows: food and beverages, clothing, housing, fuel and light, recreation, and so on (as shown in the diagram).
  • At the moment, the CPI is calculated by taking 299 items into account.

Index of Industrial Production (IIP) 

• The IIP number compares the industrial production for the month under review to the reference period.
• After the end of the reference month, the IIP index data is published six weeks later.
• It is currently calculated with 2011-2012 as the base year. • The IIP data is released by the National Statistical Office (NSO) under the Ministry of Statistics and Programme Implementation (MoSPI).

Components of IIP

• IIP is a composite indicator that measures the growth rate of industry groups classified as o Broad sectors, namely Mining (14.4%), Manufacturing (77.6%), and Electricity (8%) o Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods, and so on.
• The Eight Core Industries account for 40.27% of the total weight of items in the IIP.
• Retail inflation reached 7.41 percent in September, a five-month high.
  • This is the ninth consecutive month (or three-quarters) that headline inflation has remained above the RBI’s target of 4 +/- 2%.
• In addition, factory output based on the IIP fell into negative territory after a 17-month hiatus, falling to (-) 0.8% in August.
  • Manufacturing output, which accounts for 77.6 percent of the IIP’s weight, fell 0.7% in August.
  • Consumer durables and consumer non-durables fell by 2.5 percent and 9.9 percent, respectively, indicating weak consumer demand.

The Analysis

• The industrial recovery remains precarious.
  • The negative growth in consumer durables is puzzling, as consumer durable manufacturers typically ramp up production around this time to ensure adequate inventory for the upcoming festival season demand.
  • This demonstrates that the ongoing industrial recovery is not only fragile, but also limited in scope.
• The possibility of another rate hike by the RBI in December o Despite a high favourable base effect next month, inflation may rise above 6% due to the recent excessive rainfall in early October.
• Food inflation increased to 8.60% in September, up from 7.62% in August and 0.680% a year ago.
• In September, rural inflation was 7.56 percent, higher than urban inflation of 7.27 percent.
• As a result, analysts expect another rate hike in the December 2022 MPC (monetary policy committee) review.
• The RBI has already increased policy rates by 190 basis points in the last five months, to 5.90 percent.
  • The current situation complicates the RBI’s task of containing inflation while not impeding growth.
  • Several agencies, including the World Bank and the IMF, have already reduced India’s growth forecast for the current fiscal year to less than 7%.