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IASbaba’s Daily Current Affairs – 28th April 2017

SOCIAL/ECONOMY

TOPIC:

General Studies 1

Population and associated issues.

General Studies 2

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

General Studies 3

Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Inclusive growth and issues arising from it.

India’s population growth story

Introduction

India being home to second largest population of the world has been striving hard to achieve stability. Population can be seen as a resource or a burden depending on the way it is used for the country’s progress. India has population policy that is well oriented.

National Population policy:

The National Population Policy (NPP) 2000 provides a policy framework of achieving goals and prioritizing strategies during the next decade to meet the reproductive and child health needs of the people of India along with the target to achieve the net replacement levels (Total Fertility Rate). It aims at stable population by 2045.

Issue:

Evidence from India’s last Census in 2011, confirmed by data from the recent National Family Health Survey 2017 (NFHS-4), shows that fertility in India is fast approaching replacement levels.

Replacement level means that couples will have children who will essentially replace their number, to stabilise population growth.
The NFHS-4 shows that in the past decade, the average number of children per family has come down from 2.7 to 2.2.
- With replacement fertility being 2.1 children per woman, this is good news for the land and the people.
Even after fertility rates drop to replacement levels, the total population will still grow, and is likely to reach 1.7 billion by 2050.
- The thrust of this growth will come from the youth bulge, with 365 million (10-24 years old) already in, or soon to enter, their reproductive ages.
- Even if they have children only in numbers that replace themselves, the resultant growth due to such a large base of young people will drive the growth momentum for population.
For India as a whole, 75% of population growth in the coming decade will be due to this momentum.
In States like Assam, Gujarat and Haryana, which are about to reach replacement levels, it would be more effective to adopt policies for delaying childbearing rather than limiting births.
Fertility reduction, where it still needs to take place, must come from increased availability and use of quality family planning services.

Focus on Working population demand:

When States are clustered in terms of fertility levels, one foresees a predominantly youthful north and an ageing south.
- Most of the current and future demographic potential is locked in the northern States and largely located in Bihar, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, and Uttar Pradesh.
- In the south, there will be a dearth of young working people to keep up and expand the level of economic development.
- Investing in young people in the north to realize the demographic dividend will be a win-win situation for all India, north and south.
From the policy perspective, this means that for India as a whole, it is time for the emphasis to be on momentum-focussed policies and programmes.
The Prime Minister will soon chair a meeting of the National Population Commission, in order to take stock of the situation and chart out the path ahead, especially keeping population stabilisation in mind.
The National Health Policy 2017 emphasises quality of care and commitment to sustainable development, and positions improved access, education and empowerment as the basis for population stabilisation.
It is now for States to align their own health and population policies to the national ones

Conclusion:

Population growth and the dynamics associated have multiple spillover effects on various sectors of economy, polity and society. Hence a policy orientation needs to take into consideration all the possible effects before a policy design.

Connecting the dots:

Analyse the impact of India achieving replacement levels of fertility on working population and demographic dividend of the country.

ECONOMY

TOPIC:

General Studies 3

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.

Hope for higher India economic growth

Belief in economic growth has come to be seen as a solution for all India’s social and political problems, including poverty, social exclusion and environmental degradation. Top government economists believe that for India, in order to transform itself and attain the desired level of economic and social outcomes, requires higher and sustainable growth in coming years. Higher economic growth will not only create employment, but will also generate higher revenue which will help increase government spending without disturbing the budgetary balance. Higher growth is the best way of lifting standards of living.

Therefore, towards this front, NITI Aayog, which has been recreated as a think tank for the Government after dissolving the erstwhile Planning Commission, has rolled out a fifteen year vision and a seven-year strategy document of transforming the Indian economy. It has also circulated a three-year action agenda.

Vice-chairman of NITI Aayog, Arvind Panagariya, said that the size of the Indian economy is expected to increase from a level of Rs137 trillion in 2015-16 to Rs469 trillion by 2031-32 (2015-16 prices)—a compound annual growth of about 8%. (Niti Aayog estimates provided in table below)

IASbaba’s Daily Current Affairs 28th April, 2017

Source: Arvind Panagariya, “India 2031-32: Vision, Strategy and Action Agenda”,Niti Aayog, April 2017

Link: http://quintype-01.imgix.net/southlive-english%2F2017-04%2Fd807dcee-94eb-4ad0-b7c6-ffb9e4ad1fb7%2Ftable.png?auto=format&q=60&fm=pjpeg

It has also been claimed that by 2031-32, the country will attain universal literacy and access to healthcare, besides ensuring housing with toilets, LPG connections, electricity and digital connectivity for all citizens. Even two-wheelers/cars and air conditioners would be available to “nearly all”.

This vision is premised on a projected real GDP growth rate of 8 percent annually over a fifteen year period and maintaining annual government expenditure at around 27 percent of nominal GDP.

Attaining and sustaining this level of growth is feasible, but will need policy action on various fronts.

As per official estimates, the Indian economy achieved annual GDP growth rates of 7.2 percent, 7.9 percent and 7.1 percent for the financial years 2014-15, 2015-16 and 2016-17, respectively.

Four broad areas to focus:

In order to push both potential and actual output growth, policymakers should focus on at least four broad areas.

Strengthening macroeconomic fundamentals

Firstly, policymakers should focus on strengthening macroeconomic fundamentals. A sound macroeconomic environment is a prerequisite for sustained higher growth.

India has made significant progress over the last few years on this front, and all efforts should be made to attain the medium-term fiscal and monetary policy targets.
The N.K. Singh committee has proposed a new fiscal architecture that will reduce the level of total debt stock with steady reduction in fiscal deficit.
On the monetary policy side, the RBI’s rate-setting committee is targeting 4% inflation on a durable basis. Continued progress in both these areas will help strengthen economic stability.

One of the reasons for softer growth in recent years is a decline in savings rate. Higher growth in the last decade was backed by higher savings. India’s savings rate is estimated to have declined from the level of about 37% of the gross domestic product in 2007-08 to under 30% in 2016-17.

India will need higher savings to sustain higher growth. A stable macro environment should augment savings and investment.

Fix the banking sector

Secondly, policymakers should focus on high levels of non-performing assets—particularly in public sector banks, which are a drag on investments and growth.

The sector needs a fresh road map in the short to medium term that not only addresses the current problem, but also provides the necessary checks and balances so that a similar situation is avoided in the future.
NITI Aayog’s action agenda has suggested auctioning assets to private asset reconstruction companies.
For a durable solution, the government should reconsider its role in the sector. A significant reduction in government holding in banks will augur well for the economy.

Further, India also needs a lively corporate bond market as it will provide an alternative source of financing and reduce the pressure on the banking sector. A vibrant, competitive and stable financial sector will help push investment and growth in the medium to long run.

Improve conditions in land and labour markets

In order to sustain higher growth, the government will need to make it easier for businesses to acquire land and hire labour.

India is a country of small enterprises. The latest economic census shows that on an average, enterprises in India employ only 2.24 workers. The small and informal nature of business enterprises in India affects productivity and is an impediment to growth.
One of the reasons for having too many small enterprises is rigid labour laws. The government should work on creating a flexible labour market, which will allow businesses to take advantage of economies of scale.
Similarly, the government also needs to make it easier for businesses to acquire land. A number of projects are stuck because of land acquisition problems. Reforms in these markets would require greater coordination between the Centre and states.

Reforms in government functioning

Finally, the government needs to review its own functioning and change in a way that allows the market to attain its full potential.

For instance, it will need to withdraw from commercial activities through privatization and focus on strengthening regulatory capabilities. Further, it should always be careful about the unintended consequences of intervention.
The recent decision of the Narendra Modi government to impose price caps on coronary stents is an example of exactly what the government should not be doing. Price caps inevitably result in shortages with adverse consequences. The government should always avoid such decisions.

Conclusion:

It can be said with near certainty that like the last decade and a half, the next 15 years will also bring tremendous change, especially in the area of technology, and throw up new opportunities and challenges. Therefore, policymakers will need to constantly work on multiple levels in order to create enabling conditions that will allow the Indian economy to develop at a rapid pace and achieve long-term goals.

Connecting the dots:

Higher economic growth is seen as a solution for all India’s social and political problems and the best way of lifting standards of living. Do you agree? Give arguments in favour of your answer.
In your opinion, how can India achieve higher and sustainable economic growth? Critically analyse.
NITI Aayog has rolled out a vision to achieve real GDP growth rate of 8 percent annually over a fifteen year period and maintaining annual government expenditure at around 27 percent of nominal GDP. Are these optimistic long-term projections for the Indian economy justified, given the current macroeconomic and financial conditions? Critically analyse.