IASbaba's Daily Current Affairs Analysis

IASbaba’s Daily Current Affairs (Prelims + Mains

Focus)- 11th January 2018

(PRELIMS+MAINS FOUCS)

Modifications in FDI rules

Part of: GS Mains Paper III- Indian Economy

Key pointers:

The Union Cabinet modified foreign investment rules Wednesday to allow 100 per cent foreign direct investment (FDI) in single-brand retail and real estate broking services through the automatic route.
Investment up to 49 per cent under approval mechanism was allowed in Air India to facilitate its divestment process and Foreign Portfolio Investors (FPIs) and Foreign Institutional Investors (FIIs) have been permitted to invest in power exchanges through the primary market.
The measures, the government said, are intended to “liberalise and simplify the FDI policy so as to provide ease of doing business in the country”.
In case of single-brand retail, while the current FDI policy allows 49 per cent FDI under the automatic route and FDI beyond 49 per cent and up to 100 per cent through the government approval route, the revised policy allows 100 per cent FDI under the automatic route.
Foreign airlines can now invest up to 49 per cent under approval route in Air India subject to the conditions that the foreign investment in Air India shall not exceed 49 per cent either directly or indirectly.
The government also liberalised FDI regime for medical devices.

Pic credit: http://images.indianexpress.com/2018/01/fdu.jpg

Article link: Click here

Sub-national Logistics Performance Index (LPI)

Part of: GS Mains Paper III- Infrastructure

Key pointers:

Logistics Performance Index (LPI) ranks states in terms of the logistical support they provide to promote trade.
Prepared by the commerce ministry
It will be a perception-based ranking and it is the first time in the world that it is coming at the sub-national level.
The index will act as a dynamic toll for the ministry to identify bottlenecks in this area.
The ranking is based on about eight parameters such as transportation facilities available in states and documentation procedures.
The ranking aims at encouraging states to work and improving upon their logistics related infrastructure. Inadequate infrastructure is impacting the country’s trade and investments.
In this year’s rankings- Gujarat has topped a perception-based index of mobility of goods and efficiency of logistics chain, closely followed by Punjab and Andhra Pradesh.

World Bank’s report:

In the World Bank’s Logistics Performance Index (LPI), India’s ranking improved to 35th as against 54th spot it occupied in the previous report. The report came in 2016 as it comes once-in-two-years.

Article link: Click here

(MAINS FOCUS)

NATIONAL/ECONOMY

TOPIC:

General studies 2:

Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes.

General studies 3:

Inclusive growth and issues arising from it
Investment and Infrastructure
Agrarian/Rural distress and Rural Development

Role of construction sector in addressing rural distress

Introduction:

Socio Economic and Caste Census (SECC) or Rural Census had highlighted that – ‘landlessness’ and ‘dependence on manual casual labour’ for livelihood – are key deprivations facing rural families.

SECC data has shown worrying levels of rural poverty.

SECC’s 7 Deprivation Indicators:

SECC census aims to rank rural households based on 7 Deprivation Indicators.

Households with only one room, kucha walls and kucha roof
Households without an adult member in working age (between the ages of 16 and 59)
Female headed households with no adult male member between 16 and 59
Households with a disabled member or without able-bodied adult
Households of Scheduled Castes/Scheduled Tribes (SC/ST)
Households without literate adults over 25 years
the landless engaged in manual labour

The more the number of above parameters on which a household is deprived, the worse its extent of poverty.

Households with the highest deprivation score will

Be first included in the BPL list.
Be first given benefit of Government welfare schemes.

According to SECC,

48.5% of all rural households suffer from at least one deprivation indicator
nearly 30% have two deprivations, 13% have three
only 0.01% suffer from all seven handicaps

“Landless households engaged in manual labour” are the most vulnerable:

According to SECC, nearly 54 million households are in the landless-labourer category and around 84% of all those who hold agricultural land are small and marginal farmers.

Along with landless families, small and marginal farmers are getting pauperized (a state of extreme poverty or destitution) and more engaged in manual labour.

The intersection of any of the six other handicaps with “landless labour” makes it more acute or worse (as shown below)

59% of households with kuchha houses are landless labourers
55% of those with no literate adult above 25 years are landless labourers
54% each of SC/ST households and female-headed households without adult male members are also landless households
47% households without an adult member of working age are landless labourers
45% of those with disabled members and no able-bodied adult members are landless labourers

Small and marginal farmers, equally vulnerable

The overall farm size of small and marginal farmers has been dropping since the early 1970s, and down from the 2.25 hectares (ha) average to a 1.25 ha average in 2010. It will continue to become even smaller.

For these farmers, agricultural incomes are also likely to fall.

Farmer distress has been growing, with the past year witnessing farmers protesting on the streets in several States.

Non-Agricultural jobs to rescue:

According to National Sample Survey (NSS) data, two demographic groups have done reasonably well in labour market outcomes both in terms of job growth as well as wage growth between 2004-5 and 2011-12.

the young ones who were getting educated
the older ones, (who were poorly educated add landless labour in agriculture) who shifted to non-agricultural jobs especially construction work

However, a big question raises – Does the economy have the capacity to create non-agricultural jobs for both groups whose numbers will grow over the next decade until 2030?

The young have been entering and remaining in education in unprecedented numbers for the last two decades. Hence, the young joining the labour force will indeed grow significantly.
Also the numbers of landless and small and marginal farmers looking for non-agricultural work is also set to increase.

Construction employment

According to National Sample Survey (NSS) and Labour Bureau data –

The real net domestic product or the growth rate of the construction sector has steadily increased from 1970s to 2011-12.
Employment in the construction sector increased 13 times during the past four decades. This led to its share in rural employment rising.
This sector absorbed 74% of the new jobs created in non-farm sectors in rural areas between 2004-05 and 2011-12.

Note: Number of rural workers in construction is higher as compared to manufacturing or services sectors – because there are fewer skill and educational requirements in construction.

This was possible because of the sustained growth in investment in infrastructure, especially over the 11th Five Year Plan period (2007-12) of $100 billion per annum, two-thirds of which was public, and the remainder private. In addition, there was a real boom in real estate, residential and commercial, throughout the country.

Construction is the main activity absorbing poorly educated rural labour in the rural and urban areas.

However, construction jobs are growing more slowly since 2011-12, as public investment has fallen. And with the rising non-performing assets of banks, private investment has fallen as well. The result: fewer workers have been leaving agriculture since 2011-12.

This is hurting landless labour and small and marginal farmers the most, since their households had benefited the most from the tightening of the labour market that had ensued in rural and urban areas because of rising construction jobs.

The way ahead:

The Union government should sustain rural development expenditure, especially for rural roads, under the Pradhan Mantri Gram Sadak Yojana and rural housing under the Pradhan Mantri Awas Yojana (Urban).

The Surface Transport Ministry should also attempt to sustain public investment in infrastructure to generate construction jobs for growing surplus rural labour.

Allocation for investment in infrastructure should be top priority in this Union Budget (which is to be presented on February 1)

Because, investment in infrastructure will open new jobs in non-farm sectors and construction sector – which is vital for addressing rural distress.

The Budget for 2018-19 should sustain this public investment effort. The announcement that the government plans to borrow an additional Rs. 50,000 crore in this financial year, is welcome. Hopefully, the intention here is to raise public investment, especially for infrastructure investment.

Greater construction activities-rural roads, housing and irrigation-will also do a lot to raise rural incomes and jobs and to take the pressure off the farm sector.

Connecting the dots:

Does the economy have the capacity to create non-agricultural jobs for rural people whose numbers will grow over the next decade until 2030? Examine.
Critically examine the role of construction sector in addressing rural deprivations.

NATIONAL

TOPIC: General Studies 2:

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

Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections

Reservation System: Concerns and solution

Background:

The Gujjars in Rajasthan, the Jats in Haryana and the Patels in Gujarat have shown that politically powerful communities nurturing a sense of victimhood can mount a powerful challenge to the Indian state. It shows our incapacity and our growing powerlessness before vested interests that have acted together to take the system in completely different directions”.

Basis of reservations:

The 93rd Constitutional Amendment allows the government to make special provisions for “advancement of any socially and educationally backward classes of citizens”, including their admission in aided or unaided private educational institutions.

Article 15(4) of our constitution empowers the government to make special provisions for advancement of backward classes. Similarly, Article 16(4) empowers the state to make special provision for the reservation of appointments of posts in favor of any backward class of citizens which in the opinion of the state are not adequately represented in the services.

Concerns:

Almost half, and in some instance even more than that, educational and job opportunities in the public sector going to candidates coming under the reserved category has raised concerns.
This is a widely shared feeling across the country by communities feeling marginalised because of policy of reservation which was once limited, focussed as well as necessary but is now spiralling out of control.
In the constitution is the term ‘backward classes defined. What actually constitutes a backward class? What are the determinants of a backward class? These questions remain unanswered and it is only with the help of judicial pronouncements that they have been given some meaning. Question arises how can reservations be made for something that has not been defined?

Way ahead:

What the young are looking for today is not more of the same — admissions to courses that lead to nowhere and low-entry jobs in the government. By empowering them with skills the world needs today and tomorrow, the government will be building the country’s human capital far more quickly than any more reservations ever can.

The vocational training schemes in the country are inadequate and woefully behind the times with many addressing yesterday’s needs. There are some good schemes like those offered by the Nettur Technical Training Foundation (NTTF) in Bengaluru but they are simply too few.
Technical training is also constrained by a small educational base — 70% of India’s workforce is without tertiary education — and a crippling lack of well-qualified trainers.

Conclusion:

We have lost more than a decade in not complementing a mass welfare scheme like the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) with a bigger programme to train the young for employment. One outcome of such neglect is that there is a clamour for more reservations, often with devastating effects. The government needs to acknowledge and address this soon.

Connecting the dots:

There have been demands of doing away with the reservation system, in its present form, by various sections of the society. Discuss the reasons behind it. Also, highlight how the issue can be addressed by providing training to the youth for employment.