IASbaba’s Daily Current Affairs – 21st September, 2016

IASbaba's Daily Current Affairs Analysis, IASbaba's Daily Current Affairs Sep 2016, National, UPSC

IASbaba’s Daily Current Affairs – 21st September, 2016

ECONOMY

TOPIC:

General Studies 3

Issues related to direct and indirect farm subsidies and minimum support prices
Inclusive growth and issues arising from it.
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

General Studies 2

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Time to remove anti-farm bias

If India wants to forge a new path in achieving rural-urban and agriculture-industry balance, it has to follow models that sustain this balance. Discarding anti-farm policies is the prerequisite to initiate the balancing process.

Background

Rapid industrialisation through import substitution dominated India’s early development strategy.
For rapid growth of industry, it was important to ensure that wages were kept low, and hence the price of “wage goods”, i.e. food, had to be controlled.
A combination of public procurement and distribution through fair price shops kept the foodgrain prices low.
But low food prices were unfair to the farmer. Hence, input costs were highly subsidized to compensate it. Fertilizer, credit, electricity, water and seeds were sold much below cost.
In addition there were severe restrictions on the export of food and agriculture products.
The subsidy burden was borne by the general taxpayer in the hope that high industrial and economic growth would justify this subsidy system.

Was this strategy beneficial?

Though it might seem a necessary action in the hindsight but even after 69 years of independence, India’s more than half of population (58%) is still dependent on farming and related activities for their livelihood.
Large-scale absorption of workers into the industrial sector has been thwarted by stagnation in job growth.
The Arthur Lewis model of infinite supply of low-cost labour from the rural sector has not worked as anticipated for India, though it worked in China’s industrial push over three decades.
Lewis model represents dual sector model wherein it explains growth of a developing economy in terms of a labour transition between two sectors, the capitalist sector and the subsistence sector. The crux is: Surplus labour can be used instead of capital in the creation of new industrial investment projects, or it can be channelled into nascent industries, which are labour-intensive in their early stages.
Further, various farm subsidies were going mainly to large farmers. Free/subsidised electricity or cheap credit benefited larger farmers. Distribution of fertilizer subsidies across states and land holdings clearly show this pattern.
Subsidies also created distortions like overuse of urea leading to soil salinity and free power which was expensive for distribution companies.
Thus, high growth through rapid industrialisation did not became a reality as expected and agricultural development also got affected due to unhelpful policies.
Public procurement and distribution had three goals:
- Adequate prices to farmers
- Lower and stable food price
- Ensure food security to the nation
Farm incomes did not rise proportionate to gross domestic product or industry. There have been periodic episodes of high food inflation, especially in crops for which there was no procurement. This entire system of mostly indirect subsidies for the farm sector turned out to be a net negative for the sector. However, the Western nations had a net positive subsidy to their farm sector.
India continues this battle in WTO of defending its farm subsidies. From the early 1990s, the domestic terms of trade started shifting in favour of agriculture from industry. However, this movement till date is far from adequate.

Re-emphasising on farm sector

India has had two consecutive years of a serious drought.
Reason behind rural distress: Since 2011-12, farm income growth has dipped to 1% or below.
Job creation in the rest of the economy is woefully inadequate.
According to a national survey, 40% of those in farming would gladly leave, if only they can find a stable job outside.
Poor lobbying: The farm sector does not have a focused lobbying voice may be because the sector is too large and fragmented, and now exposed to globalization.

Thus, policies need to remove their inherent anti-farm bias as seen in:

Minimum Import Price (MIP)

The MIP is to help certain industrial sectors deal with the onslaught of low-cost imports being dumped in the country.
However, in contrast, the farm sector routinely suffers from minimum export price (MEP) to discourage exports. In fact, exports of agricultural products are often banned periodically.

Inflation targeting

RBI and government made inflation control an exclusive mandate of monetary policy.
The inflation measure to be used is the Consumer Price Index (CPI), which has 52% food-related components.
So monetary policy will implicitly be deflationary on the farm sector (reduction in food prices). Though it could be an unintended consequence but worth noting. In developed countries, since the CPI has only 10-15% food weightage, hence the focus on a CPI-based monetary policy is not as harmful.

Cotton sector

Prices have risen dramatically in the last few months.
This has caused alarm in the textile sector which is calling for restrictions like export ban or end-use restriction on cotton.
This is against the interest of cotton farmers.

Conclusion

The recent recommendations of the CEA panel on pulses gives the much required boost to farming sector. The panel advocates that pulse exports be allowed, public procurement go up by six to 10 times, and minimum support prices be hiked immediately by 15%.
The Union budget’s promise that farm incomes be doubled in the next six years is a worthy high-level goal. This goal should recognize that farm incomes now come from a variety of sources like cultivation, livestock, wage employment and other non-farm activities.
Other steps such as improving soil fertility on a sustainable basis through the soil health card scheme and supporting the organic farming scheme ‘Paramparagat Krishi Vikas Yojana’ are critical to improve agricultural production, thereby increasing farmers’ welfare. Introduction of fasal bima yojana, e-NAM is expected to give further impetus to agricultural growth.
Thus, agricultural development will remain a critical source for overall economic development for India to achieve inclusive and sustainable growth.

Additional read

http://www.prsindia.org/parliamenttrack/report-summaries/swaminathan-report-national-commission-on-farmers–662/

http://agricoop.nic.in/imagedefault1/NCF3.pdf

Connecting the dots:

The government policies have had not been encouraging towards agricultural sector. Do you agree? Discuss how to revive rural economy and overall economy through agricultural development
Imbalance between industrial and agricultural development has led to regional, social and economic disparities. Explain.
Agriculture sector is viewing new initiatives for its revival. Elucidate.
Rural development will lead to urban de-congestation. Analyse how agriculture will play a critical role in rural development.

Related articles:

The Big Picture – State of Indian Agriculture & Rural Economy

Need to Revive Agriculture

All India Radio- SUSTAINABLE AGRICULTURE

E-platform for trading farm produce to make agriculture remunerative

NATIONAL

TOPIC: General Studies 2

Indian Constitution – historical underpinnings, evolution, features, amendments, significant provisions and basic structure.

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Structure, organization and functioning of Executive and Judiciary

Anti-Defection law and controversies surrounding the law

52nd Amendment Act of 1985 provided for the disqualification of the members of Parliament and the state legislatures on the ground of defection from one political party to another. For this purpose, it made changes in four Articles of the Constitution and added a new Schedule (the Tenth Schedule) to the Constitution. This act is often referred to as the ‘anti defection law’.

Later, the 91st Amendment Act of 2003 made one change in the provisions of the Tenth Schedule. It omitted an exception provision i.e., disqualification on ground of defection not to apply in case of split.

Purpose of the Anti-Defection law

Defections are a source of political instability; breach or representative faith and indicate power-hunger among legislators. Therefore, they need to be prevented and punished.

The Anti-Defection law was added by the 52nd amendment to the Constitution through the Tenth Schedule with an aim to do that.

The main intent of the law was to deter “the evil or mischief of political defections” by legislators motivated by the lure of office or material benefits or other similar considerations.
It was intended to strengthen the fabric of Indian parliamentary democracy by curbing unprincipled and unethical political defections.

The law has helped to provide ‘stability’ to the government and has ensured that candidates elected with party support and on the basis of party manifestoes remain loyal to the party policies. It has also promoted party discipline.

However some provisions of the law have been the subject of a huge amount of controversy and is alleged that its purpose was not served.

Various controversies regarding this law

Exemptions given under the Anti-defection in India is a major source of ineffectiveness of the law in preventing defections.

Disqualification on the ground of defection does not apply if a member goes out of his party as a result of a merger of the party with another party. A merger takes place when two-thirds of the members of the party have agreed to such merger.
Controversy regarding the questions of ‘split’ and ‘merger’. The provision which allows two-thirds of the members to split is a handy solution for power-seekers. It allows wholesale rather than retail horse-trading.

To take away the Speaker’s power to decide the issue of disqualification. Its vesting of decision-making authority in the presiding officer is criticised on two grounds:

Firstly, he may not exercise this authority in an impartial and objective manner due to political exigencies.
Secondly, he lacks the legal knowledge and experience to adjudicate upon the cases.
Rather than the Speaker being the sole determining authority, critics demand for a neutral institution like the Election Commission, which is a quasi-judicial three-member body, to be approached.

No specific provision has been made to protect smaller parties who are vulnerable to splits.
It does not provide for the expulsion of a legislator from his party for his activities outside the legislature.
Its discrimination between an independent member and a nominated member is illogical. If the former joins a party, he is disqualified while the latter is allowed to do the same.

Does the law restrict Parliamentary debate in any way?

Critics have argued that the law does not make a differentiation between dissent and defection. It curbs the legislator’s right to dissent and freedom of conscience. Thus, ‘it clearly puts party bossism on a pedestral and sanctions tyranny of the party in the name of the party discipline’.

However in Kihota Hollohon vs. Zachilhu and Others AIR 1993, the SC held that the provisions do not subvert the democratic rights of elected members in Parliament and state legislatures. It does not violate their conscience. The provisions do not violate any right or freedom under Articles 105 and 194 of the Constitution.

Criticism

Though the anti-defection law been hailed as a bold step towards cleansing our political life and started as new epoch in the political life of the country, it has revealed many lacunae in its operation and failed to prevent defections in total. It came to be criticised on the following grounds:

It does not make a differentiation between dissent and defection. It curbs the legislator’s right to dissent and freedom of conscience. Thus, ‘it clearly puts party bossism on a pedestral and sanctions tyranny of the party in the name of the party discipline’.
Its distinction between individual defection and group defection is irrational. In other words, ‘it banned only retail defections and legalised wholesale defections’.
It does not provide for the expulsion of a legislator from his party for his activities outside the legislature.

Connecting the dots:

What was the purpose of the Anti-Defection law when it got enacted – has the law served the purpose? What are the various controversies regarding this law? Does the law restrict Parliamentary debate in any way? Analyse.