civils360 Editorials for mains
Print Friendly, PDF & Email

Today’s Talk on Editorials November 22,2017-Civils360

Change in economic policy priority- The Hindu business line

Background: The government has set up an economic advisory council to advise on economic policy priorities. It is a unique independent institutional mechanism. It is required to address issues of macroeconomic importance and presenting views thereon. The current PMEAC was set up when the GDP growth has fallen to 5.7% in the first quarter of FY18.

  • The recently held second meeting of EAC gives a positive outlook on its priorities. The roadmap lists skill development, job creation and investment in social sectors such as health and education.
  • It also outlines the framework for the 15th Finance Commission which includes incentives for States to achieve better outcomes in health, education and social inclusion. The EAC is thus rightly shifting away from a mere focus on GDP growth to better social indicator growth.
  • EAC also plans to link economic growth indicators with social indicators. That means, if economic and social indicators do not converge positively, then there have to be a reconsideration of economic policies.
  • While reorienting the social indicator outcome approach, it is necessary to consider the regional disparity in social sector output of different States. For example, Kerala, TamilNadu, Tripura are having excellent social development indicator but the BIMARU states not so.
  • Therefore, Centre-State cooperation is vital for achieving a better governance output and the desired aims of social and economic indicator growth. The recent example of Delhi air pollution is that of a lack of cooperation and action between both. Whereas, the introduction of GST was a fundamentally positive policy outcome.
  • The laggard States have to be better governed with better administrative performance. The quality of administration is the single biggest issue faced by these states. As a result, they fall even more behind the progressive states. The government has to synchronise the flagship programmes like Digital India with administrative efficiency for desired results.

Make in India- Economic Times

Background: Make in India programme was launched as part of a wider set of nation-building activities. It was devised to transform India into a design and manufacturing hub. It represents a change of Government mindset – shifts from license raj system to Minimum government, Maximum governance.

  • The flagship programme of Make in India is in trouble. It aims to increase the share of manufacturing from 16% of GDP to 25% by 2022, creating 100 million jobs. But, the investment rate has fallen, formal employment growth is reduced and exports have stagnated.
  • Rather than boosting a specific sector, the policy initiatives have to focus on improving ease of doing business ranking, remove regulatory cholesterol, ease the exit problem of entrepreneurship.
  • India’s comparative competitiveness with respect to the economies of ASEAN has been below the desired level. Thus, most of the businesses are shifting to ASEAN countries. For example, the electricity for industry costs twice as much as in ASEAN.
  • The factors of production have risen in cost, thus industrial output and exports are reducing over the years. The regressive tax regime affects many industries. For example, the heavy tax regimes for raw materials in cotton and leather industry.
  • India’s hi-tech industries are growing but the labour intensive industries are falling behind. This explains why India is facing the problem of underemployment and unemployment in recent years.
  • Therefore, policymakers have to focus on improving services embedded in the manufacturing sector. That is, steps must be taken to reduce speed and cost of logistics like transport, warehousing, paperwork etc.
  • Also, the threat of digitisation and automation looms large over the labour intensive industries. The policies have to be tweaked to reduce the cost of factors of production and improving efficiency in every stage like improving the skill set of the workforce, reducing corruption, improving government services etc.