1. Economic reforms that require legislative sanction have become victim of the politics of the day. Consensus on key reform initiatives seem distant and in the meantime, India is losing the window of opportunity that could propel economic growth to the next level. Critically comment.
Your introduction should outline the present status on Indian economy in brief. In continuation, how much India need various economic reforms for a sustainable and increasing growth.
You should mention about the recent controversies / reforms which get delayed because of politics.
Give examples of GST, LARR, Labour reforms, 1991 economic reforms, Insolvency and bankruptcy code
Also elaborate what impact it is having on Indian economy – short and long term.
You should also critically comment on other factors affecting the delay and also mention how delaying always doesn’t resulted into negative impact.
Your conclusion should mention that an effort should be made to make a consensus by the party in power. Political parties should also understand that for their personal benefits nations interest should not be compromised.
Having blessed with huge demographic dividend,India aspires to become a developed and leading economy.This requires timely economic reforms.However frequent tussle between political parties has continuously hampered India’s prospects which can be seen as-
>GST conundrum-Friction between parties led to delayed adoption of this crucial tax reform.Companies were not ready to invest in new ventures because of prevailing uncertainty in tax structure
>Land Acquisition Rehabilitation and resettlement bill-Confusion prevailing over the manner of land dealings has made industries to let their investment plans in cold bags
>Labour reforms-Labour plays critical factor in determining industrial locations. Constant friction over its framework has negatively hampered the economy
>Insolvency and bankruptcy code-Today major problem of economy is large NPAs. This proves worthiness of presence of an IBC code. However, party politics created immense hurdles on its way
Though Union has been able to get through IBC and GST but frictions do prevail.
Also we cannot out-rightly negate the role of opposition. But it is imperative to understand that democracy calls for debate and discussion and not disruptions.
>Constructive criticism must be the path followed by opposition. It would also deepen parliamentary credentials
>government should evolve mechanism to gain confidence of opposition and not undermine them
With rationality on part of political parties, India can definitely create a conducive environment where doing business is easier and just. Though India is climbing on Ease of doing business, we haven’t reached our potential and hence crucial economic reforms must be welcomed in interest of nation
2. With the budgetary allocations for the social sector going down and increased devolution of finances to the states, there is a need to rethink the roadmap for improving the key socio-economic indices. Do you agree? Examine in light of the schemes including the centrally sponsored schemes being given lesser share of allocations in the last budget.
The central government has cut the social sector budget to push for more Co-operative Federalism, this decision was taken after the 14th Finance Commission increased the State’s share from the Divisible Pool from 32% to 42%.
The states will get an extra Rs 63,941 crore as their increased share of taxes, money that needs to be shared out among programmes on agriculture, education, housing, water sanitation and health.
The central grant to states in the budget only covers capital expenditure, which means states now have to bear revenue expenditure such as salaries that are the bulk of the cost of development programmes.
The Centre has cut its grant to the Rashtriya Krishi Vikas Yojana, for instance, to Rs 4,500 crore from Rs 9,864 crore last year. The government stopped funding for eight schemes, including setting up 6,000 model schools, the National Mission on Food Processing and the Backward Regions Grant Fund. These schemes entailed a budgetary support of nearly Rs 10,000 crore this year.
Since the union budget has shrunk its social sector outlay to 1.68% of GDP this year (excluding the food subsidy) from 1.92% in FY14, states will now have to step up to keep these schemes running.
The Centre’s assistance to the states for social sector schemes has come down from a budgeted Rs 3.56 lakh crore in FY15 to Rs 2.20 lakh crore in FY16. The government gave Rs 1.42 lakh crore additionally to the states from the divisible tax pool, it cut back Rs 1.16 lakh under central government schemes.
Given the changed scenario in funding, socio economic development needs a need roadmap:
States must increase their budgetary allocation to health, education etc. as the sole responsibility of formulation and implementation lies on them.
States will be able to frame their own scheme with lesser “one size fits all” approach, which had led to distortions in target setting and also in redundant schemes in some parts.
Increased emphasis on weaknesses of the institutional capacity of the states, as the poorest states need to upgrade their capacities for the implementation, they will have to earmark large funds and human resources to be able to compete with the rich states.
As accountability of states will increase, appropriate mechanism to monitor these schemes is crucial.
(Write a brief conclusion.)
Guided by the principle of cooperative federalism and fourteenth finance commission recommendation governemnt devolved 42% of funds from divisible pools to states increased from 32% .
However in my opinion roadmap to socioeconomic indices needs following changes
With the increase of “untied ” funds ,states should priroritise their spendings according to specific requirements.Eg- Bihar may go for increased spending in primary education while Tamilnadu in higher education
Also restructuring and consolidating of centrals ector schemes in core of the core will lead to greater focus.Eg MGNREGA
States needs capacity buliding to effectively implement these schemes.State administration and agencies needs suport and training in the transition period.
Outcome based monitoring should be adopted in health and education schemes like jannasi Swasth yojna,ICDS and Sarva shiksha Abhiyan as suggested by NITI AYOG
However budget cuts in central sponsered schemes needs to complemented with increased states share but this will lead to reduced fiscal space for states and thus limit their ability to go for state specific programs
The whole mechanism of social sector spendings needs to be stabilised quickly as many of the schemes are instrumental to achieve Sustainable Developemnt Goals related to pverty,health,education etc by 2030
3. The key impediments for the economy lies neither in policy paralysis nor in the vagaries of the external sector. It is the crisis of political economy in India that has constrained it’s potential from being realized fully. Only if the parliamentarians learn to manage the floor and adopt an inclusive approach, key economic legislations can be passed. Critically examine.
Your introduction should mention about the growth trajectory of Indian economy in brief.
Also mention why it suffered in recent times.
Mention what is political economy in brief.
Political economy is the study of production and trade and their links with custom, government and law.
Mention how crisis of political economy impacted Indian economy
Important legislations delayed: like GST, Land Acquisition Bill, labor reforms, CAMPA etc.
Unproductive Parliamentary sessions: avoiding meaningful debate on important issues of economy. PRS India points out that 40% of the time in upper house and 24% of the time in the lower house during 2004-2014 was lost due to walkouts, stalling of house proceedings etc.
Neglect of Private Members Bill: as giving credit to other party members has led to non-passing of such bills since 46 years.
Continuous elections in some or other part of the country forces parties to take populist measures and avoiding hard steps.
Coalition governments resulted into political instability. Major reforms were delayed due to pressure from various parties.
State Governments not taken on board: despite legislations needing due support from them.
Lack of coordination with opposition parties: Converting ordinary or financial bills to money bill thus losing confidence of opposition, and lack of acceptance to bill in opposition ruled States.
However, it’s not fair to blame everything on political failure. Other reasons include:
Turbulent Global Market and instability at large.
Impact of 2008 financial crisis.
Weak demand in global market.
Fall in petroleum prices
Policy paralysis: –
bureaucratic hurdles: Recent scams like 2G scam, coal scam put questions on bureaucratic decision which instill fear in the bureaucratic circles and resulted into non decisive behavior.
These all factor, resulted into slow growth of Indian economy. However, even after these events India emerged as a winner among its co-players by maintaining a steady growth. IMF recently said that India emerged as a sweet spot in global economy in present times.
Your conclusion should mention that though India had survived the turbulent period due to its strong economic fundamental but to maintain its position it is required that the political class should rise above their political motives and work in coordination to realize the true potential of our growing economy.
Generally, phrases like policy paralysis coined by Former PM or issues like unstable external conditions as often quoted in galleries of South Block isn’t the main culprit of below potential economy, but main reasons like in Political Economy of the economy.
Political Economy refers to linkages between politics & economics, which lead to changing economics in country. They are perhaps the main reason for lacunae as:
1) Important legislations delayed: like GST, Land Acquisition Bill, CAMPA, etc.
2) Ruckus in the House: avoiding meaningful debate on important issues of economy.
3) Neglect of Private Members Bill: as giving credit to other party members has led to non-passing of such bills since 46 years.
4) State Governments not taken on board: despite legislations needing due support from them.
5) Converting ordinary or financial bills to money bill: thus, losing confidence of opposition, and lack of acceptance to bill in opposition ruled States.
However, blaming Political Economy would be wrong as:
1) External conditions weakening: has been affecting global phenomenon where India is emerging like the bright star.
2) Policy paralysis was evident when bills & key policy decisions were turned down by State Governments. Ex: West Bengal, TN Government.
3) Reports of IMF also recognize that countries like India, China are driving world economy. Ex: if world’s GDP increase by 1%, Indian GDP increases by .42%
4) Bill delayed have improved faulty bills: ex: GST, which is landmark legislations and couple of years rarely matter.
Political economy is part of democracy which has both positives & negatives, both sides must be weighed for rightful comparison to arrive at definite conclusion.
Best Answer2: -ManojTanajiMane
The GST idea was first mooted in 2002-03. In the subsequent 14 years , India had several sweet spots as – the most attractive FDI destination(2007,2015), close to double digit growth rates(2008-09), rising income levels and trade (2004-2014; per capita income shored unprecedently), improved BoP and so on. Yet one of the most discussed idea – GST – could not translate into an act. This period was not one of economic turmoil for India, nor was it an era of policy paralysis. Still the delay points out the major impediment that is the indifference of political class.
Several other key legislations like Aadhar Bill, the Land Acquisition Bill and Insurance Bill wandered in the houses of parliaments for years, some still continue to, while other had to be passed using routes that are debatable (Aadhar).
PRS India points out that 40% of the time in upper house and 24% of the time in the lower house during 2004-2014 was lost due to walkouts, stalling of house proceedings, etc. The temple of debate, discourse and discussion has translated into one of disagreements, scathing criticisms and blockade. This has not only resulted in key reforms being stalled but has also decreased the confidence of poeple in the organs of democracy.
There is a need to evolve a gentlemen agreement between opposition and ruling party regarding cnsensus based approach. Moreover, the parliamentary committees, the ethics committee as well as the presiding officers should evolve a blend of tough and accomodating measures to ensure smooth functioning. The government of the day should make it a point to prepare the draft of bill including ideas from public and the opposition and to keep it in as simple terms as possible, to avoid disagreements.
The parliamentary democracy is loosing its sheen, its time those involved make a concerted effort to bring back its lustre
4. The recently enacted Foreign Income and Assets (Imposition of Tax) Act, 2015 can act as a deterrent against future evasions but as far as bringing back the money stashed abroad is concerned, it has it’s set of limitations. Identify and discuss those limitations. Also suggest a roadmap that should be pursued in dealing with the menace of black money.
In order to curb black money generation and bring in those slashed abroad, FIA bill was enacted to help people come clean by imposing penalties on the undeclared assets and incomes.
But the bill has its own limitations like:-
-Lack of Stringent Prosecution:- Same authorities leading to appeals and counter appeals and offenders roam free.
– Exemption clause:- 5 lakh and below not covered.
-Unrealistic Penalty:- 3times the tax amount payable plus 30% will lead to more evation and harrasment by officials.
-Tax heavens:- moving from one heaven to another in case of any agrrement by government with one heaven.
-Corporate firms:- Help in evading discloser through various channels.Ex:- Mossack Fonseca
-More powers to ED.
-Banning cash transaction more than fixed amount.
-Banning cash deposition at bank above certain limit even at home branch. ( In home branch any amount can be deposited and no limit unlike 50,000 in other branches).
-More co-operations on multinational forums and working closely with financial action task force.
-Detailed information of NRI’s and Indian citizens foreign ventures.
-MOU with countries on lines like with Mauritus to limit P-notes and exchange of financial information on all investors from offshore.
Optimistic conclusion like this is a small step which has to be continued and tough actions to be taken so that it sends a signal for future evaders and others to come out clean as per law.
Best answer: (No Best Answer) — Either part 1 was not good or part 2 of the answer
5. Issues pertaining to governance, funding, institutional oversight and sustainability are the major stumbling blocks in the path of creating 100 smart cities. What are these issues? Discuss. Also suggest ways that can truly impart smartness to the urban landscape in India.
For the information of candidates, we are sharing these mind maps regarding ‘Smart Cities’.
Now the question asks about major stumbling blocks. i.e.- Governance, Funding, Institutional Oversight and sustainability.
Governance: The issue with governance is that, these cities are not union territories. Hence the responsibility of governing these cities will rest on the State Government. But since this is a Central Project, Central Government would want to interfere. Also, Special Purpose Vehicles are being used for the implementation of the project. This has caused Local Self Government bodies to take a back seat.
Funding: Initially the Central Government has assigned 100 Cr Rupees per city. If you see this amount, these days high budget bollywood movies are made with almost 100 Cr. So this is a minuscule amount for a smart city. The rest has to be put in by the State Government. Also we are asking for FDIs and foreign funding for the project. Non-availability of funds can stall the projects.
Institutional Oversight: Since SPVs are involved and on the ground the power of local government is curtailed, this is a big question of which agency will be responsible for the working and maintenance of the project.
Sustainability: (Here the question doesn’t ask about the environmental sustainability which many of you have mentioned. It is asking about the sustainability of the project. Since the project is to create the new infrastructure but old problems will remain unchecked like overpopulation, creation of slums, waste management etc. Mechanism should be developed to check these problems.
Smartness can be truly imparted to the urban landscape by behavioural change. There is a need to inculcate civic sense and basic mannerism and good civic habits should be taught in schools and should be strictly followed in public offices.
Smart cities should be supported by smart villages so that in migration can be checked.
More employment opportunities should be created in rural areas.
Fast grievance mechanism should be there in cities and basic services like sanitation, plumbing, electric work and communication network should be provided under the supervision of government.
(Many more unique points can be added here by you.)
Best Answer: ManojTanajiMane
The best way to predict the future is to design it, they say. However, if the very design is plagued by the the same problems which made past a failure, their is little scope for a different future. Smart cities project also point out such impediments, which must be rectified , before they blow out of proportion –
The problem with Indian cities is that they are dysfunctiona and expanding their infrastructure would require funds. Yet funds if solely dependent on market (which is the case in Smart City) would only be attracted by existing infrastructure -> thus limiting the smartness to a select few urban centres.
The debt-laden balance-sheets of urban local bodies would need guarantees from state governments to raise project equity forfeiting their autonomous status.
The conflict between ULBs, the state government, the center and the SPV would require a definite policy structure to in place.
Multiple Bureaucracies; the case of the national capital Delhi; MCD (Solid Waste, Storm Water Drainage), Delhi Jal Board (Water Supply and Sewerage), and enclaves managed by the Cantonment Board and NDMC are almost always in conflict.
The Smart City is very much based on Smart People and Smart Management: This would require capacity building in the people to access the various services and at the same time infrastructure to manage the possible issues – grievance redressal, etc.
Thus, a combination of state-led funding, roadmap for proliferation of smart cities into tir 2 tier t3 with private funding and following a cluster approach would be needed. This would require:
Political and fiscal autonomy as well as reinforcing administrative capacity at the local level.
Power should be divested to local government structures in order to set political accountability that can be ballot-tested by its patrons. This may even involve exploring the idea of having an elected mayor.
Using Municipal Bond led funding mechanism, and resource pooling for achieving distributed growth as done in Tamil Nadu.
Ensuring convergence between various bodies and introducing the concept of utility fee, instead of pure governement funded amenities.
Fiscal devolution, governance strengthening and benchmarking it to institutional capacity, could yield results that would really make the intiative SMART.