IASbhai Daily Editorial Hunt | 3rd September

Hardships often prepare ordinary people for an extraordinary destiny. – C.S. Lewis

Dear Aspirants
IASbhai Editorial Hunt is an initiative to dilute major Editorials of leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Here we choose two editorials on daily basis and analyse them with respect to UPSC MAINS 2020.

EDITORIAL HUNT #122 :“Flattening The Economic Curve | UPSC

Flattening The Economic Curve _ UPSC

Jayati Ghosh
Flattening The Economic Curve | UPSC

Jayati Ghosh is a professor of economics at the Jawaharlal Nehru University (JNU), New Delhi

      HEADLINES:

A guide to flattening the curve of economic chaos

      CENTRAL THEME:

Well-thought-out policies can reverse the results of incompetence; the onus is on the Centre to spend now

SYLLABUS COVERED: GS 3: Economy

      MAINS QUESTION:

Indian Economy has contracted the most in G-20 space. Critically Analyse -(GS 3)

      LEARNING: 

  • Relevant Data
  • Fiscal Policies
  • Quick Actions

      INTRODUCTION: 

India has become the global leader in the number of new daily cases of COVID-19 .

  • India is also worst performing of all major economies during the pandemic so far.

      BODY: 

DATA ON THE DECLINE

  • CONTRACTION : The estimated 24% GDP contraction in April-June 2020 compared to the previous year is the worst performance among G20 economies.
  • EXTRAPOLATION : These numbers are likely underestimates as information is from organised sector, extrapolated to informal unorganised activities.
  • INDUSTRIAL PRODUCTION : Physical indicators such as the index of industrial production declined by more than 20%.
  • MSME : Many micro, small and medium enterprises (MSMEs) in manufacturing and services are still closed or functioning at a small fraction of their capacity.

DECLINING WAGES  : Wage incomes are falling more sharply than GDP because of the combination of employment declines and falling wage rates.

  • AGRICULTURE SECTOR : Every sector other than agriculture is declining sharply, especially the more employment-intensive sectors.
  • FARMERS UNREST : The good rabi harvest , farm prices are unlikely to revive and ensure sufficient returns for cultivators over the year.
  • CONSUMPTION EXPENDITURE : Government consumption expenditure increased by about 16% over the same period in the previous year, but since total investment fell drastically.
  • VALUE ADDITIONGross value added in public administration, defence and other services fell by more than 10%.Around 90% of this is salaries.

GRAVE DISTRESS

  • RECOVERY RATES : All talk of “flattening the curve” has vanished, replaced by the completely meaningless indicator of recovery rates which are bound to improve with more cases.
  • ECONOMIC COLLAPSE : The brutal national lock down generated economic collapse even before the disease had spread much.

Testing, tracing, isolating and treating — is costly but is still the only effective way to deal with this disease .

  • COMPENSATION : Then it provided no compensation and almost no social protection to those (around 80% of workers) who lost livelihood.
  • MIGRANT WORKERS : Migrant workers were forced to return in terrible conditions to their homes, where they have unwittingly spread the disease in rural areas with poor health facilities.
  • LACK OF NUTRITION : Working people have been impoverished and debilitated by lack of nutrition because they have been less able to afford food.
  • THE DOWNTURN  : Current quarter, and probably the rest of the year, so we are staring at the biggest economic crisis in independent India.

BLOW AGAINST STATES

  • DEMAND : Lack of demand is a crucial reason for this.
  • PRECONDITIONING : Consumption and investment were declining well before the pandemic struck.

Despite the enormity of the economic collapse, the relief responses have barely touch the hundreds of millions of people affected .

  • LIQUIDITY CRUNCH : The halting steps taken on increasing liquidity have been effectively useless: bank credit has declined overall.
  • CO-ORDINATION : Despite the centralising imposition of the national Disaster Management Act, there was almost no coordination.

State governments have been forced to do all the heavy lifting of dealing with the health crisis

  • CESS : The Centre is even denying the States their legal dues of the Goods and Services Tax (GST) compensation cess.

      IASbhai Windup: 

ROLL OUT A FISCAL PACKAGE

State must immediately provide a large fiscal package including the following:

  • DUES : Pay the State governments their pending GST compensation dues .
  • RESOURCES : Provide more resources in addition to deal with the pandemic and its effects.
  • NUTRITION : Universalise the Public Distribution System (PDS) .
  • EMERGENCY BUFFER : Provide free foodgrain (10 kg per household per month) for at least the next six months to anyone who needs it.
  • WAGES : Provide ₹7,000 per family for three months as compensation for the incomes lost during the draconian lockdown.

Double the number of days of employment per household under the Mahatma Gandhi National Rural Employment Guarantee Act to 200 per year .

  • CREDIT EXTENSIONS : Extend the debt moratorium and convert into a standstill and make sure that fresh credit reaches MSMEs.
  • HEALTH INFRASTRUCTURE : Provide much more dedicated resources for health.
  • This will cost money, for sure; but not doing this will be even more costly for the economy and the people.

Not spending now will push the economy into a deeper hole, reducing incomes and, therefore, also taxes, and creating a bigger fiscal deficit even with lower spending.

       SOURCES:   THE HINDU EDITORIAL HUNT | Flattening The Economic Curve | UPSC

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