Background:-
There has been a hue and cry as far as demonetization is concerned since the night of November 8. Meanwhile, while we were observant of the various developments, we took a decision to wait until the whole story unfolds.Since November 9 , probably each newspaper had published more than 20 articles on the issue. Every erudite in the country , had an opinion about it, moreover every citizen of the country has an opinion about it.
The single move gave a rather “hungry media” a “giant meatloaf” and they have been chewing on it since then. Every day, and in every form of media, the story of demonetization is unfolding. Some analysis are vary personal and emotional in nature, while some are very rational in nature, some are individualistic and some have broader perspective.
But if you look closely, those who wanted to blame the move, they went on to sight and find cases where due to demonetization “someone” had suffered. Even a Bengali director made a movie about it named- “Shoonyata“, and of course as anticipated the movie shows the problems that unfold when a bride is about to get married and demonetization is announced. The movie is simply individualistic in nature, that means it tries to show the plight of a single bride, and through this the director wants to paint it as everybody’s plight.
So, before we delve into details of demonetization, it is certain that different corners of the society have different opinions about it as they endured the demonetization. To sum up, who are impacted and who are not, here is a rather simplified list :-
- Super rich/Rich with legitimate business- No impact or very little impact
- Upper-middle class- Not much impact
- Middle class-Not much impact beyond the obvious
- Neo-middle class- Probably hardest hit, mostly blue-collar workers who lost their job or were unable to be paid by their employer
- BPL household- Marginally hit
However, this is a historic move, because, there are no other such decisions which might impact each nook and corner of India and every citizen. Money after all is a basic necessity apart from the usual rhetoric of – “Roti,Kapda aur Makan” (“Food,Cloth and Shelter”)
Being a giant of a decision, it was necessary for us to not give into temptation and publish every article of the newspapers. So, we waited, watched, we observed and now is the time to publish.
History of demonetization:-
In 1971, the Wanchoo Committee had submitted an interim report in which it had recommended, among other reforms, the demonetisation of high-value currency notes. Y B Chavan was then finance minister. Retired civil servant, Madhav Godbole, in his book Unfinished Innings: Recollections and Reflections of a Civil Servant tells us that after many deliberations over the matter, demonetisation was accepted along with other reforms suggested by the committee.
However, “in view of the sensitive nature of the subject and the need for maintaining utmost secrecy”, the prime minister’s approval was needed. So Chavan went to meet Indira. And this is what he told Godbole about his meeting with Indira on the issue.
When Y.B. Chavan told Indira Gandhi about the proposal for demonetization and his view that it should be accepted and implemented forthwith, she asked Chavan only one question: “Chavanji, are no more elections to be fought by the Congress Party?” Chavan got the message and the recommendation was shelved.
Here is the Analysis:-
So, what exactly happened on 8 November?
Prime Minister addressed the nation and announced that effective from 9 November, all Rs 500 and Rs 1,000 notes of the current series (including pre-2005 ones) would cease to be legal tender. That means people could not use them to buy and sell goods and services. Technically, this was not demonetisation, but de-legalisation. The actual demonetisation happened with the proclamation, on 30 December, of the Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016, which reduced those notes to worthless bits of paper.
What does the ordinance do and why was it necessary?
Under Section 34 of the Reserve Bank of India (RBI) Act, 1934, the central bank has a liability to honour every currency note – anyone presenting that note has to get the value printed on it, whether Re 1 or Rs 2,000. As long as a note does not come back to the RBI, it continues to be a liability.
The only way this liability can end is for the government to expressly state that the old notes cannot be redeemed any more, which is what the ordinance does.
How much of old Rs 500 and Rs 1,000 notes were sloshing around before 8 November? How much has been returned or exchanged?
As of 9 November, the high denomination notes worth Rs 15.44 lakh crore was with the public.
There are various estimates of the money that has come in, based on data from the RBI, but it’s best to wait till the central bank puts out a figure. There could be double counting in the estimates that are going around right now.
Besides, though one will get a pretty accurate estimate in a few days or a week, an absolutely exact figure on notes returned will be known only after some months. Remember, that while the deadline for deposit of the old notes in banks ended on 30 December, resident Indians can still deposit these notes in the offices of the RBI till 31 March and non-resident Indians (NRIs) can do so till 30 June. These are the only two windows given by the ordinance. Resident Indians will have to give a declaration that they were outside the country between 9 November and 30 December.
In addition, people can declare their unaccounted wealth held in cash under the Pradhan Mantri Garib Kalyan Yojana, the second income declaration scheme that was announced on 16 December. The window for this too is open till 31 March. (Some of this could be in new notes, if black money holders have managed to launder the cash they held.)
But the amount returned by NRIs between 31 March and 30 June is not likely to be huge, so it is best to wait till mid-April to get a sense of how much of the demonetised currency has been returned.
Can the window given to NRIs be used to launder large sums of money?
Unlikely. A notification under the ordinance stipulates that the amount of demonetised currency returned by an NRI cannot exceed what is specified under the Foreign Exchange Management (Export and Import of Currency) Regulations, 2015, issued under the Foreign Exchange Management Act, 1999. That limit is Rs 25,000. That’s why the amount returned by NRIs is not likely to be huge.
What is this fuss about my not being able to even keep old notes with me?
The ordinance gives a grace period (31 March and 30 June) for the return of the demonetised currency. So it is not as if you will be penalised for holding old Rs 500 and Rs 1,000 notes between 30 December and 31 March. Beyond this grace period, a person can hold only a total of 10 notes of both denominations (five Rs 500 and five Rs 1,000 or two Rs 1,000 and eight Rs 500, or all 10 of the same value etc) or only 25 notes for study, research or numismatics.
Anyone holding more than this (other than the RBI or anyone ordered to do so by a court in connection with a case) will have to pay a fine of Rs 10,000 or five times the amount of the value of currency found with him, whichever is higher.
Since these notes will be just worthless pieces of paper, what is wrong if I, say, decide to make a collage of 100 pieces and put it up in my drawing room? Or just keep it in my locker and periodically rue the day I decided to evade taxes or make money through crooked means?
Good question, this provision does defy logic. But, no answer. It’s also not clear how the authorities will come to know about people holding more than the specified number of notes beyond the grace period.
Fifty days on, has the inconvenience ended?
The short answer to this is, no, though the situation has improved since the first two weeks post 8 November. Finance Minister Arun Jaitley and RBI governor Urjit Patel have assured that there is enough supply of cash. But all of this is not making its way to banks. The curbs on cash withdrawal have not been rolled back entirely; though the limits for ATM withdrawals have been increased from Rs 2,500 to Rs 4,500 but the weekly withdrawal limit remains at Rs 24,000. There are still ATMs and bank branches with no cash, even in metros. For every story of no inconvenience, there is another of inconvenience and harassment.
Has demonetisation met the objectives it was supposed to achieve?
The jury is still out on this.
In his 8 November address, PM said the move was meant to “break the grip of corruption and black money”.
But black money is a consequence and not a cause of corruption. Merely demonetising high value notes will not eliminate corruption; discretionary power in the hands of the politicians and bureaucrats has to end. This needs a complete recast of governance systems.
The fact that through the past 50 days, there have been seizures of large volumes and value of new currency notes shows that the money-laundering industry has not been hit at all by the demonetisation move. All that happened was that the commission dropped from 40 per cent before the announcement of the Pradhan Mantri Garib Kalyan Yojana to 25 per cent.
Funding of political parties also needs a complete revamp. Political parties are a major conduit for unaccounted money and large cash donations are quite common. Cash donations up to Rs 20,000 need not be reported to the Election Commission and this is a major loophole that all political parties exploit. Nothing has happened to change this.
In his address, the PM also spoke about how fake notes of Rs 500 and Rs 1,000 have been used in terror financing. The new notes have extra security features and were supposed to deal a body blow to the counterfeiting industry. But the seizure of some counterfeiting machines in the past week has raised some doubts about this as well.
UPSCTREE’s understanding of the issue:-
Was it a “bold” move, is there any ethics involved ?
A simple example can clear whether it was a bold move or not. Following India’s demonetization , another country followed suit, i.e. Venezuela and it resulted in civil war and govt of that country had to roll back the decision.So, in sum, it was a a bold move, and given the size of the country and 87% transaction being carried out via cash, it was not only a bold but probably an audacious move.It could have been a political disaster and the PM would have no more been the PM- it was that big a risk to take on this “gamble”.The example of Venezuela is testament to it.
So, the next question is why there was no civil war, and this is purely a question of ethics, more specifically virtue ethics.
As per virtue ethics, an act seems ethical because it is carried out by an ethical person.In this case, people don’t judge the act but they judge the actor and form opinions according to it.Given the PM’s persona, people of India, took a leap of faith in the PM, majority were judging the PM than the act of PM.
This is because, there can not be a “Yes and No ” or “black and white” answer to this decision.Some benefits are visible and some benefits will never be visible and same goes for the “bad impacts” as well.It is a indeed a matter of “grey”, however most opinions emanating from different corners of society is either Yes or No.Economists themselves don’t have enough statistics of black economy, so it is worthwhile to ponder how general populace form their opinion and this is precisely the reason why we looked at it from an ethical angel and that gives us some clue of the popular psyche and the way they form the decisions.
Is there any benefit of this decision ?
The PM has a record of being an incremental reformer, but this is a “disruptive” move.The benefit , both short term and long-term are listed below :-
Economy
- Cost of real estate will come down- making housing affordable.It is indeed a recession like condition for real-estate mafias, and if accompanied by amendment to Benami Trasaction Act , it will have some real impact in this sector.
- Inflation is low
- Push for digital-economy
- Helps in curbing terror-financing and other threats to state such as Naxalism
- A fat deposit in banks may lead to cut in lending rates. It helped in debt-recovery and reduced NPA to some extent
Goveranance
In terms of governance, it helped establish the trust between people and state. For long, the many had the notion that they can get away with illegal means (tax evasion) etc, but this decision established the fact that govt. is willing to go any length to reward good-ones and punish the bad-ones. For long it was other way around, the bad-ones used to garner ill-gotten wealth and managed to get away with it (Just a recall of almost all movies of the last few decades may give the idea, where the good-ones are punished by the wicked , although the good-ones win at the end but that part of the movie was more of a fantasy than reality)
Consider this statistics – 24 lakh people have a declared income of more than 10lakh per annum (24 lakh in a country of more than 120 crore population- is this not tax-evasion?)-this statistics proves that many had such notion of getting away with their ill-gotten wealth. And the decision tries to bridge the gulf of trust deficit between the ruler and the ruled.
Socio-behavioral Impact
This is probably the hardest one to judge. Nevertheless, data shows that online transactions are on a up-swing and rise of more than 200% is evident of it. So this might be the trigger point for Indian economy to go cash-less or less-cash.
Other impacts and harsities are well-known and requires no elaboration.
Was this good decision badly implemented ?
This is indeed the next line of argument put forth by different sections and it has some merit in it. But given the nature of decision and the level of secrecy it required, those who implemented it were probably well aware of it. After all decision of this nature looses steam when it looses secrecy.
However, it could have been better implemented and there should have been an ad-hoc grievance call center set up across the country, where if an organization denies accepting the old notes or a medical denies the treatment to the public deliberately then a complaint should have been registered immediately and action should be taken immediately. This is a giant task , but the Panchayats and block-development-offices should have been ideal nodal point to deal with this kind of matter and some form of authority should have been delegated to them with standards of protocol.
The essence is – the state should have to pull all its strings , so that the basic facilities and services are not denied to the general public which requires adequate planning, co-ordination and data-dissemination in real-time. In short, it could have been better implemented.
The next question is whether the black money will be eradicated ?
There can not be any conclusive evidence of it, simply because it is “black” – that means no one can certainly say how much of it is “black”. However, this decision, although will curb black-money in short term, what it aims essentially is to raise the cost of money-laundering. That acts as a deterrence. When the cost and pain of money laundering outweighs the benefit of it then money-laundering as an act looses relevance.
Moreover, this years budget and tax decision will have impact on this. If the tax is lowered and tax base in increased then govt. will have all the money it wants to run the state and citizens will be least bothered about paying a marginal tax. In short, the govt. has to make tax percentage attractive enough so that money-laundering looses its relevance.So, that is one of the reason why the decision of this nature can not be judged in short-term as many other decision are interlinked with it.
There was demonetization before, so why this one is historic ?
It is all about timing. Gandhi would not have been Gandhi if he entered India after 1940 or in 1900. Gandhi is Gandhi because of his timing. Same logic can be applied to this decision. The decision before it had no ecosystem of digital payment to support, that means people had not much of alternative. Hence the past decisions had less impact. But this one is perfectly timed. It is the era of digital economy and there is the ecosystem of digital payment and alternative methods to go cash-less , hence important and historic. This will have impact.
So to sum it up, it was good decision, but could have been better implemented. The benefits and demerits are has both short term and long term connotations. Hence, it is wise to wait a little longer and look at the data to see and judge the impact. And there is the budget announcements to be made as well. So , jumping to a conclusion is neither called for nor wise at this juncture.
We all understand certain parts of it, we all don’t understand certain parts of it and nobody knows the exact statistics. And that’s demonetization in a nut-shell thus far.
And yes, there is a last question that went through everyone’s mind though .
Why 2000 rupees notes ?
At first instance one might think this is a moronic move by the govt., but we urge you to think harder. If you look at the data, most of the high value day-to-day transactions lie between 500 to 1000 rupees and by releasing 2000 notes instead of 1000, govt. is deliberately pushing people to do cashless transactions. It is little harder to do retail shopping with 2000 rupees notes and this is precisely govt. is trying to achieve – to give you the note but make it little inconvenient for us to transact. This is much to do with human psychology and less to do with economy. A slight inconvenience leads us to look for alternatives and govt. is trying to tap into this socio-economic-behavior. We wonder, whether the govt. has hired any behavioral scientist to do this. After all there is a whole new world of behavioral economics as well.
Of course, the above one is our interpretation, but if this is what the govt., is trying to do then it is indeed a well-though out move which looks moronic on the face of it.
Conclusion:-
There are some merit in the decision, however this decision is not aimed at black money only. For the simple reason that the stock of black wealth held in currency form has been generally estimated at around 5 to 6 per cent of the total black economy.
The stock of black economy does not get affected much and only a small portion of black money is held in currency. Most of it is stashed abroad or held in real estate, gold or foreign currency. Moreover, black money generation is a continuing process that involves evading taxes, regulations and engaging in corrupt and criminal activities. These cannot be tackled with a one-time measure.
The claim that the demonetisation was aimed at immobilising counterfeit currency also lacks some credibility, because such currency is estimated to value no more than Rs 400 crore, a very small proportion of the value of the high-denomination notes that were in circulation.
There is bound to be arrested growth in economy for short term.
- The informal sector is largely cash-dependent and alone accounts for 40 per cent of the GDP and employs 80 per cent of the workforce.
- The NBFC are unable to provide loan to small farmers and MSME sectors.
- Rupee exchange rates have increased and there is a downward swirl of stock market.
- The state of the economy matters significantly here because that will primarily determine response capacities of each segment, sub-segment and interactions within to influence aggregate outcome.
Some economists put the above arguments to justify that the move was nothing but disastrous. so why did the government go for this move causing much hardship to the common man,the very safety and security of whom the government wants to protect? Did the government take a very myopic step?
A deeper analysis gives a big NO as the answer. Because the sole and underlying motive of the government was TO MOVE TOWARDS A DIGITAL ECONOMY. The subsequent actions of the government bring testimony to this fact:-
a. Discount in digital transactions.
b. Facilitating several methods of digital transaction
c. Circulation of 2000 rupees.
This paradigm shift in the economy will increase the transparency in transactions making the illegal activities difficult and riskier.It will lead to increase in tax base thus reducing tax rate and enhancing the revenue generation.
Note :- This analysis is exclusive to UPSCTREE, and if you have any other alternatives, please do let us know and we can debate and deliberate on this. It took us a while to write this , however we have a strong belief that it will help you enrich your understanding of this issue. And if you think it is enriching, please don’t hesitate to share.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.
Globally, around 80% of wastewater flows back into the ecosystem without being treated or reused, according to the United Nations.
This can pose a significant environmental and health threat.
In the absence of cost-effective, sustainable, disruptive water management solutions, about 70% of sewage is discharged untreated into India’s water bodies.
A staggering 21% of diseases are caused by contaminated water in India, according to the World Bank, and one in five children die before their fifth birthday because of poor sanitation and hygiene conditions, according to Startup India.
As we confront these public health challenges emerging out of environmental concerns, expanding the scope of public health/environmental engineering science becomes pivotal.
For India to achieve its sustainable development goals of clean water and sanitation and to address the growing demands for water consumption and preservation of both surface water bodies and groundwater resources, it is essential to find and implement innovative ways of treating wastewater.
It is in this context why the specialised cadre of public health engineers, also known as sanitation engineers or environmental engineers, is best suited to provide the growing urban and rural water supply and to manage solid waste and wastewater.
Traditionally, engineering and public health have been understood as different fields.
Currently in India, civil engineering incorporates a course or two on environmental engineering for students to learn about wastewater management as a part of their pre-service and in-service training.
Most often, civil engineers do not have adequate skills to address public health problems. And public health professionals do not have adequate engineering skills.
India aims to supply 55 litres of water per person per day by 2024 under its Jal Jeevan Mission to install functional household tap connections.
The goal of reaching every rural household with functional tap water can be achieved in a sustainable and resilient manner only if the cadre of public health engineers is expanded and strengthened.
In India, public health engineering is executed by the Public Works Department or by health officials.
This differs from international trends. To manage a wastewater treatment plant in Europe, for example, a candidate must specialise in wastewater engineering.
Furthermore, public health engineering should be developed as an interdisciplinary field. Engineers can significantly contribute to public health in defining what is possible, identifying limitations, and shaping workable solutions with a problem-solving approach.
Similarly, public health professionals can contribute to engineering through well-researched understanding of health issues, measured risks and how course correction can be initiated.
Once both meet, a public health engineer can identify a health risk, work on developing concrete solutions such as new health and safety practices or specialised equipment, in order to correct the safety concern..
There is no doubt that the majority of diseases are water-related, transmitted through consumption of contaminated water, vectors breeding in stagnated water, or lack of adequate quantity of good quality water for proper personal hygiene.
Diseases cannot be contained unless we provide good quality and adequate quantity of water. Most of the world’s diseases can be prevented by considering this.
Training our young minds towards creating sustainable water management systems would be the first step.
Currently, institutions like the Indian Institute of Technology, Madras (IIT-M) are considering initiating public health engineering as a separate discipline.
To leverage this opportunity even further, India needs to scale up in the same direction.
Consider this hypothetical situation: Rajalakshmi, from a remote Karnataka village spots a business opportunity.
She knows that flowers, discarded in the thousands by temples can be handcrafted into incense sticks.
She wants to find a market for the product and hopefully, employ some people to help her. Soon enough though, she discovers that starting a business is a herculean task for a person like her.
There is a laborious process of rules and regulations to go through, bribes to pay on the way and no actual means to transport her product to its market.
After making her first batch of agarbathis and taking it to Bengaluru by bus, she decides the venture is not easy and gives up.
On the flipside of this is a young entrepreneur in Bengaluru. Let’s call him Deepak. He wants to start an internet-based business selling sustainably made agarbathis.
He has no trouble getting investors and to mobilise supply chains. His paperwork is over in a matter of days and his business is set up quickly and ready to grow.
Never mind that the business is built on aggregation of small sellers who will not see half the profit .
Is this scenario really all that hypothetical or emblematic of how we think about entrepreneurship in India?
Between our national obsession with unicorns on one side and glorifying the person running a pakora stall for survival as an example of viable entrepreneurship on the other, is the middle ground in entrepreneurship—a space that should have seen millions of thriving small and medium businesses, but remains so sparsely occupied that you could almost miss it.
If we are to achieve meaningful economic growth in our country, we need to incorporate, in our national conversation on entrepreneurship, ways of addressing the missing middle.
Spread out across India’s small towns and cities, this is a class of entrepreneurs that have been hit by a triple wave over the last five years, buffeted first by the inadvertent fallout of demonetization, being unprepared for GST, and then by the endless pain of the covid-19 pandemic.
As we finally appear to be reaching some level of normality, now is the opportune time to identify the kind of industries that make up this layer, the opportunities they should be afforded, and the best ways to scale up their functioning in the shortest time frame.
But, why pay so much attention to these industries when we should be celebrating, as we do, our booming startup space?
It is indeed true that India has the third largest number of unicorns in the world now, adding 42 in 2021 alone. Braving all the disruptions of the pandemic, it was a year in which Indian startups raised $24.1 billion in equity investments, according to a NASSCOM-Zinnov report last year.
However, this is a story of lopsided growth.
The cities of Bengaluru, Delhi/NCR, and Mumbai together claim three-fourths of these startup deals while emerging hubs like Ahmedabad, Coimbatore, and Jaipur account for the rest.
This leap in the startup space has created 6.6 lakh direct jobs and a few million indirect jobs. Is that good enough for a country that sends 12 million fresh graduates to its workforce every year?
It doesn’t even make a dent on arguably our biggest unemployment in recent history—in April 2020 when the country shutdown to battle covid-19.
Technology-intensive start-ups are constrained in their ability to create jobs—and hybrid work models and artificial intelligence (AI) have further accelerated unemployment.
What we need to focus on, therefore, is the labour-intensive micro, small and medium enterprise (MSME). Here, we begin to get to a definitional notion of what we called the mundane middle and the problems it currently faces.
India has an estimated 63 million enterprises. But, out of 100 companies, 95 are micro enterprises—employing less than five people, four are small to medium and barely one is large.
The questions to ask are: why are Indian MSMEs failing to grow from micro to small and medium and then be spurred on to make the leap into large companies?
At the Global Alliance for Mass Entrepreneurship (GAME), we have advocated for a National Mission for Mass Entrepreneurship, the need for which is more pronounced now than ever before.
Whenever India has worked to achieve a significant economic milestone in a limited span of time, it has worked best in mission mode. Think of the Green Revolution or Operation Flood.
From across various states, there are enough examples of approaches that work to catalyse mass entrepreneurship.
The introduction of entrepreneurship mindset curriculum (EMC) in schools through alliance mode of working by a number of agencies has shown significant improvement in academic and life outcomes.
Through creative teaching methods, students are encouraged to inculcate 21st century skills like creativity, problem solving, critical thinking and leadership which are not only foundational for entrepreneurship but essential to thrive in our complex world.
Udhyam Learning Foundation has been involved with the Government of Delhi since 2018 to help young people across over 1,000 schools to develop an entrepreneurial mindset.
One pilot programme introduced the concept of ‘seed money’ and saw 41 students turn their ideas into profit-making ventures. Other programmes teach qualities like grit and resourcefulness.
If you think these are isolated examples, consider some larger data trends.
The Observer Research Foundation and The World Economic Forum released the Young India and Work: A Survey of Youth Aspirations in 2018.
When asked which type of work arrangement they prefer, 49% of the youth surveyed said they prefer a job in the public sector.
However, 38% selected self-employment as an entrepreneur as their ideal type of job. The spirit of entrepreneurship is latent and waiting to be unleashed.
The same can be said for building networks of successful women entrepreneurs—so crucial when the participation of women in the Indian economy has declined to an abysmal 20%.
The majority of India’s 63 million firms are informal —fewer than 20% are registered for GST.
Research shows that companies that start out as formal enterprises become two-three times more productive than a similar informal business.
So why do firms prefer to be informal? In most cases, it’s because of the sheer cost and difficulty of complying with the different regulations.
We have academia and non-profits working as ecosystem enablers providing insights and evidence-based models for growth. We have large private corporations and philanthropic and funding agencies ready to invest.
It should be in the scope of a National Mass Entrepreneurship Mission to bring all of them together to work in mission mode so that the gap between thought leadership and action can finally be bridged.
Heat wave is a condition of air temperature which becomes fatal to human body when exposed. Often times, it is defined based on the temperature thresholds over a region in terms of actual temperature or its departure from normal.
Heat wave is considered if maximum temperature of a station reaches at least 400C or more for Plains and at least 300C or more for Hilly regions.
a) Based on Departure from Normal
Heat Wave: Departure from normal is 4.50C to 6.40C
Severe Heat Wave: Departure from normal is >6.40C
b) Based on Actual Maximum Temperature
Heat Wave: When actual maximum temperature ≥ 450C
Severe Heat Wave: When actual maximum temperature ≥470C
If above criteria met at least in 2 stations in a Meteorological sub-division for at least two consecutive days and it declared on the second day
It is occurring mainly during March to June and in some rare cases even in July. The peak month of the heat wave over India is May.
Heat wave generally occurs over plains of northwest India, Central, East & north Peninsular India during March to June.
It covers Punjab, Haryana, Delhi, Uttar Pradesh, Bihar, Jharkhand, West Bengal, Odisha, Madhya Pradesh, Rajasthan, Gujarat, parts of Maharashtra & Karnataka, Andhra Pradesh and Telengana.
Sometimes it occurs over Tamilnadu & Kerala also.
Heat waves adversely affect human and animal lives.
However, maximum temperatures more than 45°C observed mainly over Rajasthan and Vidarbha region in month of May.
a. Transportation / Prevalence of hot dry air over a region (There should be a region of warm dry air and appropriate flow pattern for transporting hot air over the region).
b. Absence of moisture in the upper atmosphere (As the presence of moisture restricts the temperature rise).
c. The sky should be practically cloudless (To allow maximum insulation over the region).
d. Large amplitude anti-cyclonic flow over the area.
Heat waves generally develop over Northwest India and spread gradually eastwards & southwards but not westwards (since the prevailing winds during the season are westerly to northwesterly).
The health impacts of Heat Waves typically involve dehydration, heat cramps, heat exhaustion and/or heat stroke. The signs and symptoms are as follows:
1. Heat Cramps: Ederna (swelling) and Syncope (Fainting) generally accompanied by fever below 39*C i.e.102*F.
2. Heat Exhaustion: Fatigue, weakness, dizziness, headache, nausea, vomiting, muscle cramps and sweating.
3. Heat Stoke: Body temperatures of 40*C i.e. 104*F or more along with delirium, seizures or coma. This is a potential fatal condition.
Norman Borlaug and MS Swaminathan in a wheat field in north India in March 1964
Political independence does not have much meaning without economic independence.
One of the important indicators of economic independence is self-sufficiency in food grain production.
The overall food grain scenario in India has undergone a drastic transformation in the last 75 years.
India was a food-deficit country on the eve of Independence. It had to import foodgrains to feed its people.
The situation became more acute during the 1960s. The imported food had to be sent to households within the shortest possible time.
The situation was referred to as ‘ship to mouth’.
Presently, Food Corporation of India (FCI) godowns are overflowing with food grain stocks and the Union government is unable to ensure remunerative price to the farmers for their produce.
This transformation, however, was not smooth.
In the 1960s, it was disgraceful, but unavoidable for the Prime Minister of India to go to foreign countries with a begging bowl.
To avoid such situations, the government motivated agricultural scientists to make India self-sufficient in food grain production.
As a result, high-yield varieties (HYV) were developed. The combination of seeds, water and fertiliser gave a boost to food grain production in the country which is generally referred to as the Green Revolution.
The impact of the Green Revolution, however, was confined to a few areas like Punjab, Haryana, western Uttar Pradesh in the north and (unified) Andhra Pradesh in the south.
Most of the remaining areas were deficit in food grain production.
Therefore the Union government had to procure food grain from surplus states to distribute it among deficit ones.
At the time, farmers in the surplus states viewed procurement as a tax as they were prevented from selling their surplus foodgrains at high prices in the deficit states.
As production of food grains increased, there was decentralisation of procurement. State governments were permitted to procure grain to meet their requirement.
The distribution of food grains was left to the concerned state governments.
Kerala, for instance, was totally a deficit state and had to adopt a distribution policy which was almost universal in nature.
Some states adopted a vigorous public distribution system (PDS) policy.
It is not out of place to narrate an interesting incident regarding food grain distribution in Andhra Pradesh. The Government of Andhra Pradesh in the early 1980s implemented a highly subsidised rice scheme under which poor households were given five kilograms of rice per person per month, subject to a ceiling of 25 kilograms at Rs 2 per kg. The state government required two million tonnes of rice to implement the scheme. But it received only on one million tonne from the Union government.
The state government had to purchase another million tonne of rice from rice millers in the state at a negotiated price, which was higher than the procurement price offered by the Centre, but lower than the open market price.
A large number of studies have revealed that many poor households have been excluded from the PDS network, while many undeserving households have managed to get benefits from it.
Various policy measures have been implemented to streamline PDS. A revamped PDS was introduced in 1992 to make food grain easily accessible to people in tribal and hilly areas, by providing relatively higher subsidies.
Targeted PDS was launched in 1997 to focus on households below the poverty line (BPL).
Antyodaya Anna Yojana (AAY) was introduced to cover the poorest of the poor.
Annapoorna Scheme was introduced in 2001 to distribute 10 kg of food grains free of cost to destitutes above the age of 65 years.
In 2013, the National Food Security Act (NFSA) was passed by Parliament to expand and legalise the entitlement.
Conventionally, a card holder has to go to a particular fair price shop (FPS) and that particular shop has to be open when s/he visits it. Stock must be available in the shop. The card holder should also have sufficient time to stand in the queue to purchase his quota. The card holder has to put with rough treatment at the hands of a FPS dealer.
These problems do not exist once ration cards become smart cards. A card holder can go to any shop which is open and has available stocks. In short, the scheme has become card holder-friendly and curbed the monopoly power of the FPS dealer. Some states other than Chhattisgarh are also trying to introduce such a scheme on an experimental basis.
More recently, the Government of India has introduced a scheme called ‘One Nation One Ration Card’ which enables migrant labourers to purchase rations from the place where they reside. In August 2021, it was operational in 34 states and Union territories.
The intentions of the scheme are good but there are some hurdles in its implementation which need to be addressed. These problems arise on account of variation in:
It is not clear whether a migrant labourer gets items provided in his/her native state or those in the state s/he has migrated to and what prices will s/he be able to purchase them.
The Centre must learn lessons from the experiences of different countries in order to make PDS sustainable in the long-run.
For instance, Sri Lanka recently shifted to organic manure from chemical fertiliser without required planning. Consequently, it had to face an acute food shortage due to a shortage of organic manure.
Some analysts have cautioned against excessive dependence on chemical fertiliser.
Phosphorus is an important input in the production of chemical fertiliser and about 70-80 per cent of known resources of phosphorus are available only in Morocco.
There is possibility that Morocco may manipulate the price of phosphorus.
Providing excessive subsidies and unemployment relief may make people dependent, as in the case of Venezuela and Zimbabwe.
It is better to teach a person how to catch a fish rather than give free fish to him / her.
Hence, the government should give the right amount of subsidy to deserving people.
The government has to increase livestock as in the case of Uruguay to make the food basket broad-based and nutritious. It has to see to it that the organic content in the soil is adequate, in order to make cultivation environmentally-friendly and sustainable in the long-run.
In short, India has transformed from a food-deficit state to a food-surplus one 75 years after independence. However, the government must adopt environmental-friendly measures to sustain this achievement.