INDUSTRIAL policy via Twitter is a new development in economics but we may all have to get used to it over the next four (or eight) years. Donald Trump’s tweets on the car industry (and his planned cuts to corporate income tax) may or may not have persuaded Ford to keep a plant in Michigan, creating 700 jobs. But the problem with such headline-grabbing is that there are thousands of companies in America, and jobs are being created or destroyed every day; intervening in all these situations is impossible. Even in cars, for example, GM has recently announced 3,300 lay-offs , almost five times greater than the Ford additions.
History suggests that the aim of creating large numbers of manufacturing jobs will be a lost cause.
In 1979, the high point for American manufacturing jobs was reached at 19.5m. The subsequent recession of the early 1980s caused that number to fall but there were regularly 17m-18m jobs in the 1980s and 1990s. From the turn of the millennium, however, the total fell pretty remorselessly, with the 2008-09 recession proving the coup de grace. The low was just under 11.5m in early 2010. As the economy recovered, some jobs returned and a peak of 12.3m was reached early last year. But since then, the numbers have been drifting down again
The same kind of declines have been seen across the developed world, indicating that this is not a particular problem of American economic policy. A report from the Congressional Research Service sets the context; America’s share of global manufacturing value added fell 12 percentage points between 1993 and 2014 but Japan’s share fell 14 points over the same period.
Unsurprisingly, China has taken the bulk of the market share.
In terms of employment, the 31% decline in America between 1990 and 2014 compared with a 25% fall in Germany, 33% declines in France and Sweden, 34% in Japan and 49% in the UK.
The problem is not just China but technology.
Industries, like cars and steel, tend to be plagued by overcapacity. There can be good times in the cycle (American car sales are setting new records, for example). The 2008-09 slump caused people to postpone their purchases but eventually confidence recovered; cars wear out and must be replaced. But a downturn will inevitably come;research suggest that consumers’ budgets are stretched, leading them to finance today’s car buys over six to seven years, delaying the next car purchase. A competitive market means that car manufacturers must keep investing to add new features while keeping prices down; that may mean replacing people with machines. It also means that a lot of the value added in a car comes from the software that runs it; jobs that tend to go to college graduates or are not found in rustbelt states. In Britain, the share of low-skilled manufacturing jobs has fallen since the 2008 recession while foreign-born workers comprise 17% of the total, similar to banking. The service sector contributes more than 30% of value added in American manufacturing and more than 40% in France and Italy.
And herein lies the problem of focusing on manufacturing jobs which comprise just 10% of all employment in America (in percentage terms, there has been a virtually uninterrupted . Slapping on tariffs to punish manufacturers who export jobs makes little sense in a world of global value chains, every dollar of Mexican goods exported to America contains 40 cents of American goods embedded within it. Worse still, the disruption to trade in services that might result, let alone the higher prices that consumers would have to pay, would far outweigh the positive impact of keeping a few jobs in America.
The markets seem remarkably sanguine about all this; far more so than they would have done if a President Bernie Sanders were threatening American businesses with retaliation. But we have seen individual stocks take a hit (Boeing , for example) when they came into the Twitter firing line of Mr Trump. Eventually, one thinks, the unpredictability of the attacks will wear out investors’ nerves.
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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.