📰 Bustards adapt to produce 2-egg clutch
New behaviour, a result of increased feed after excessive rain, hailed as a record
•The perceived beliefs and recorded observations of egg laying habit of Great Indian Bustard (GIB) have changed after the recent excessive rains in western Rajasthan. The critically endangered bird species has adopted an altogether new behaviour of giving clutch of two eggs at a time after getting additional protein diet during the monsoon season.
•Environmentalists in Rajasthan have hailed it as a new record, as all experts had been reporting a clutch of single egg by GIB for more than a century. Scientists working on ex situ breeding of these endangered birds have discovered the new proclivity in Jaisalmer district’s Desert National Park (DNP).
•Four female GIBs laid two eggs at a time during the current rainy season in the DNP, while two others were observed laying clutches of two eggs each earlier in the 2020 season. Dehradun-based Wildlife Institute of India’s (WII) scientist Sutirtha Dutta, who is leading the project for breeding of the rare species, told The Hindu that six nests with two eggs each had been detected so far in the DNP.
•Dr. Dutta said 5% to 10% of the female GIBs had been detected in the past laying two eggs each, but the high incidence, with the signs of an evolving habit, had been observed for the first time. “The natural feed for birds gets produced in abundance whenever it rains excessively in DNP,” he said. The rains exceeded 20 mm by mid-August in Jaisalmer district.
•Aimed at preserving the GIBs whose population has reduced to less than 150 in the wild, the breeding project focuses on spatial prioritisation, risk characterisation and conservation management with the endangered species.
The paradigm driving employment and labour policies needs to change for better-quality livelihoods, now and ahead
•Independent India was born at the midnight hour on August 15, 1947, 75 years ago, when India’s first Prime Minister Jawaharlal Nehru unfurled the country’s tricolour flag and announced to Parliament that India had made a “tryst with destiny”. India had won its independence after a long, remarkably peaceful struggle for freedom, led by Mahatma Gandhi.
•Gandhi had a vision of a country not divided into fragments by religious and communal walls. He envisioned a country in which all Indians, whether rich or poor, would hold their heads high in dignity. India’s “tryst with destiny” was to provide “poorna swaraj” (i.e., full freedom) to all its citizens: political freedom, social freedom, and economic freedom.
The country’s faultlines
•The country’s democratic Constitution created the world’s largest democracy. Sadly, 75 years later, political liberties and freedoms of speech are being curbed in India. Social equality amongst castes has not been achieved. Lower caste citizens continue to live in great indignity. Lower caste poor women live in abject poverty in India’s villages. They are among the most oppressed humans on the planet.
•While the numbers of Indian billionaires increased during the COVID-19 pandemic, hundreds of millions of Indians lost their incomes when the country locked down during the pandemic. They struggled to find shelter, food, and even drinking water for their families.
•India’s gravest socio-economic problem is the difficulty a vast majority of citizens have in earning good livelihoods. Their problem is not just employment. It is the poor quality of employment: insufficient and uncertain incomes, and poor working conditions, wherever they are employed — in factories, farms, service establishments, or homes.
•The dominant ‘theory-in-use’ to increase employment is to improve the ease of doing business, with the expectation that investments in businesses will improve citizens’ ease of earning good livelihoods. In this theory, large and formal enterprises create good jobs, and labour laws must be ‘flexible” to attract investments. Investors say the laws protect labour too much. Reforms were begun by the United Progressive Alliance government. Their principal thrust was to improve administration by simplifying procedures and digitisation. Those improvements were appreciated by employers as well as workers. However, they did not make the labour laws more employer friendly. Therefore, the National Democratic Alliance government became bolder in 2014 and moved to reform the content of the laws.
Impact of reforms
•The Government designed a framework for reforms and, since labour is a concurrent subject, it encouraged States to implement changes. First off the blocks was Rajasthan. Other States followed. Economic reforms are a process of learning. The V.V. Giri National Labour Institute’s interim report, “Impact Assessment Study of the Labour Reforms undertaken by the States”, provides insights into the impacts of the reforms so far. Labour laws cover many subjects — payment of wages, safety conditions, social security, terms of employment, and dispute resolution. The proposed national reforms the Government is gearing up to make shortly are the conversion of all these laws into four codes. The report has focused on the reform of the Industrial Disputes Act, which is to raise the limits of applicability of laws relating to terms of service and modes of dispute resolution (roles of unions) to 300 people.
•The report spans the period 2004-05 to 2018-19. It focuses on six States which have implemented reforms: Rajasthan, Maharashtra, Andhra Pradesh, Tamil Nadu, Jharkhand, and Uttar Pradesh. The report reminds readers that labour laws are only one factor affecting business investment decisions. Investors do not go out to hire people just because it has become easy to fire them. An enterprise must have a growing market for its products, and many things must be put together to produce for the market — capital, machinery, materials, land, etc. not just labour. Therefore, it must be worthwhile to employ more people before firing them.
What is clear
•Reading through the report, one conclusion is unmistakable. Reforms of labour laws have had little effect on increasing employment in large enterprises. The report says that the effects of labour reforms cannot be revealed immediately: they will take time. Therefore, it is telling that Rajasthan, the first State to implement the reforms, seems to have benefited the least from them.
•The overall story is hardly better. The share of employment in plants employing more than 300 people increased from 51.1% to 55.3% between 2010-11 to 2014-15 (the period when the emphasis was on administrative reforms), and then increased less, from 55.3% to 56.3%, in 2017-18, when some States made the bolder reforms favourable for employers. Though overall employment is affected by many factors, the bolder reforms post 2014 were designed to promote larger factories.
•This hardly happened because labour reforms that increase the threshold of application of the Industrial Disputes Act are conceptually flawed. They cannot induce creation of large enterprises to whom the laws will continue to apply. In fact, the report says, employment in formal enterprises is becoming more informal. Large investors can afford to use more capital and are also employing increasing numbers of people on short-term contracts, while perversely demanding more flexibility in laws.
•The report defines “formal” employment as the grant of paid leave, a written contract, and some “social security”. An enterprise should not have to employ more than 300 people before it provides these benefits. Along with the right to be heard and dignity at work, these are the minimal “essentials” all employers must provide to all those who work for them, whether in small enterprises or domestic help. Increasing the threshold of the laws dilutes the rights of association and representation of workers in small enterprises.
•The question the report leaves unanswered is whether the reforms have benefited workers. After all, the primary purpose of labour laws is to protect the rights of workers, not promote the interests of investors. Surely, the benefits of reforms should be assessed from workers’ perspectives too. It is sad that the report includes a long chapter on the views of employer associations about the benefits of the reforms, and nothing about the views of employees and unions. The employers’ associations say the reforms have been beneficial. The question is, beneficial for whom?
A widening gap
•Rising above the analysis of numbers and trends of employment in the report to see the big picture again, the conclusion is clear. The gap between where our economy is and where it needs to be is increasing. As seen in the article by Praveen Chakravarty, “Whose GDP is it anyway?” (The Hindu, July 27, 2022), between 1980 and 1990, every 1% of GDP growth generated roughly two lakh new jobs; between 1990 to 2000, it decreased to one lakh jobs per per cent growth; and from 2000 to 2010, it fell to half a lakh only. Fundamental reforms are required in the theory of economic growth: more GDP does not automatically produce more incomes at the bottom. And the paradigm driving employment and labour policies must also change to enable the generation of better-quality livelihoods for Indian citizens, now and in the future.
•To achieve this, fundamental reform is required in the ways policies are made. If the benefit of reforms is supposed to be the improvement of ease of earning better livelihoods for all citizens and with more dignity, whether they are farmers, factory workers, or service employees, should they not be listened to most of all, within their enterprises, and in the process of shaping policies?
📰 Should there be limits on ‘freebies’?
We need to distinguish between freebies and welfare, and raise revenue expenditure
•While hearing a petition demanding the de-recognition of political parties that promise “irrational freebies” to voters, the Supreme Court recently drew attention to the substantial fiscal cost of freebies. The court noted that a legislation banning freebies is not advisable, but at the same time called for a balance between welfare measures and loss to the public exchequer. The Supreme Court’s observation comes in the backdrop of the clash between the Bharatiya Janata Party and the Aam Aadmi Party on the issue of wasteful spending on freebies. It also takes in the larger public debate on how to differentiate welfare spending from freebies. Reetika Khera and N.R. Bhanumurthy discuss various aspects of the subject in a discussion moderated by Prashanth Perumal J. Edited excerpts:
Where do we draw the line between welfare and freebies?
•Reetika Khera: This is not an easy question to answer because it depends on your perspective and where you sit on income distribution pyramid. Also, even if people are sitting at the top of the income distribution pyramid, you could still see something that the petitioner describes as a “freebie” as a welfare measure. There’s a reference in the petition to the Directive Principles. Directive Principles can certainly guide state policy. But it is not always possible to clearly say this is welfare, and this is a freebie. We can take the example of the Dravida Munnetra Kazhagam’s response to this petition where they refer to electricity, which is one of the things that the petitioner objects to as a freebie, as something that can provide clean fuel in the house, keep you warm, help a child study, etc. So, there are all kinds of ripple effects. Something at first glance may look like a freebie to someone who is privileged, but it may be something that enhances the future earnings of a poor person.
•N.R. Bhanumurthy: If we limit ourselves to the economic and public policy perspective, a freebie is any public policy intervention that will have a long-term impact on production as well as productivity. Any public policy intervention that doesn’t support medium-term to long-term production and productivity may be termed as a freebie. Many States and even the Central government follow some policies that don’t really support production and productivity. We need to have an institutional mechanism to control wasteful expenditure. We just talked about electricity. It is also important to understand and identify who can be the beneficiary of a particular public policy. You cannot have a blanket policy — for instance, say that you will give free electricity for all. So, there is a need to identify the policies that have a long-term impact. At the same time, there is a need to identify the beneficiary sets.
Is India spending too much on welfare or freebies? What do you think of comparisons with Sri Lanka?
•NRB: First, let’s first understand what’s happening to the fiscal situation of the States. Studies, especially by the Reserve Bank of India (Study on State Finances), have showed that from 2014 onwards, the social sector expenditure at the State level has been declining even after States were given more resources. We all know that health and education are important sectors to be funded by State governments. But we see that the allocation to those sectors by the States is actually declining. So, while one can argue that there is a need to spend more resources on welfare schemes, we also need to understand to what extent State governments can spend, and if there is a need for conditional grants. Second, an RBI report two months ago brought to light the fiscal situation of States. Going forward, at least five States are going to see fiscal pressure. Ultimately, I think we need to keep track of allocations to the social sector. At the same time, it is high time we started talking about public expenditure efficiency in this country.
•It would be unfair to compare India with Sri Lanka. But clearly, there are some lessons to be learned, especially when we look at government liabilities. We always talk about fiscal deficit, revenue deficit, GDP growth, etc., but I think the most crucial variable in this whole debate is the public debt or outstanding liabilities. Fiscal crises happen not because of the fiscal deficit of any particular year, but due to the public debt stock that is accumulating over a period of time.
•RK: Welfare spending in India is woefully low. It is low in comparison to other developing countries – some years ago, public spending on health and education was 4.7% in India, compared to 7% in sub-Saharan Africa. And it is also declining in many States. Even at the Central level, welfare spending, at least in the sectors I track, has been declining. Beyond that, whenever we talk about welfare spending, we only focus on whether we are spending too little or too much. We never discuss whether we are raising enough revenues in the first place. Why is that question not asked in the Indian context when we know that we are not doing enough on the revenue front? For instance, the income tax base has been more or less stagnant in spite of the high economic growth we experienced until a few years ago. But there are also many tax instruments that we are not using at all in India. We don’t have a wealth tax, estate tax, inheritance tax, etc. Property taxes in India are very low compared to other countries. If we raised more revenues, we would have more to redistribute. The elite and the privileged don’t want to talk about these issues because they will end up paying these taxes. You referred to what happened in Sri Lanka. But I’m not really sure that the fiscal situation there was triggered by welfare spending alone. There are many other things happening there which led to the crisis.
Is there truth to the belief that States are more profligate in their spending than the Centre?
•NRB: When we talk about the fiscal situation of States, we need to keep in mind that before 2015-16, States used to spend more resources on capital expenditure largely following their Medium-Term Fiscal Frameworks. But after that, as RBI studies pointed out, there is a deterioration in the quality of expenditures. It looks like State governments are taking the easy path, and that’s the reason we are debating freebies. It has led to a decline in tax resources as well. As you’re not spending on productive activities, it ends up driving down your tax revenues also. I think the problem seems to be on the revenue side as well as the expenditure side. Ultimately, we need to have a good tax framework, where you have much better resources for more social sector expenditure while also ensuring medium-term debt sustainability.
Is there room, considering India is still a developing country, to raise taxes and engage in greater redistribution?
•NRB: We all know that less than 6% of the people pay income tax in this country. Many policy measures and institutions have been brought in to address the issue of widening the direct tax base. But in the case of indirect taxes I certainly feel that the Goods and Services Tax is going to be a game changer. I’ve seen that the government is also actually looking at how to remove multiple tax exemptions because of the perverse incentives. That is one thing. The second is when it comes to non-tax revenues, while we do see that there is a significant growth at the Central government level, there is a substantial decline at the State government level over a period of time. Although Finance Commissions keep providing incentives, I don’t see States actually taking advantage of that.
•RK: There is an old paper by Thomas Piketty and his co-author that explores the reasons why India has not been able to expand its income tax base, like China or Brazil, which at that time (about 10-15 years ago) already had a tax base of around 8%. One is that the tax exemption limit in India keeps getting raised year after year. Now, there is clearly a compliance issue. Are we to believe that there are only 6% Indians who are above the threshold for the income tax? If it is true, this is a very serious situation. It tells you how dire the conditions are. And if more people are earning more than the income tax threshold, then basically we have a serious compliance issue. That is one very clear source of tax revenue. I’m not even asking for income tax rates to be raised, but rather, have better compliance. During COVID-19, one estimate suggested that the average net worth of the 953 richest Indians was more than 5,000 crore rupees. Their combined wealth is about one-quarter of India’s GDP. If you levy a one-time 4% wealth tax on them, you could get revenues worth 1% of GDP, which is not something to scoff at. Similarly, to put things in perspective, we are raising 0.2% of GDP through property tax, whereas the developing country average is 0.6% of GDP and in OECD countries it is 2% of GDP. So again, there is great scope to raise revenues. There has to be some redistribution – it is a core function of the government. The unfortunate thing is that a lot of people who are sitting at the top of the income distribution think of themselves as “middle class” and therefore grudge any taxes. I think they don't realise that the tail [of the distribution] behind them is much longer. So, we need some perspective, and this discussion has to happen with data.
What is your view on the Supreme Court’s suggestion to balance welfare spending and the loss that such spending may cause to the public exchequer?
•RK: The court has mentioned the need to balance welfare spending and our fiscal concerns. But I would also ask why the court isn’t saying that we have to balance the sops that are given to the privileged with our fiscal concerns. If there is no possibility of raising more revenues and you have a redistributive role to play, then clearly you should reduce the money that is flowing to the privileged. And it is flowing in many different ways. One is, of course, these big bad loan waivers, given to big corporations. There is also the reduction in corporate taxes. And there are things like the vanity projects that many governments have been spending on, whether it is these big statues, going into thousands of crores, bullet trains, etc. But also, on a more micro basis — for instance, for women in government service, there’s child care leave for up to two years. I understand and support the expansion of maternity benefits. But what is this two years of paid leave for child care? Why should that not be questioned?
The many sops that are flowing to the most privileged should be the first ones that should go if there is no possibility of raising revenues and expenditures have to be cut.
•NRB: Unfortunately, subsidy has become a bad word in this country. Although it’s certainly needed in some areas, it is very important for us to look also at implicit subsidies, which are mostly non-merit subsidies across sectors. And we have many studies, especially by Govinda Rao and Sudipto Mundle, which have showed that even today in India, we have more than 8% of GDP that actually gets spent on implicit subsidies. I think we need to really look at whether those implicit subsidies can be reduced so that you get more resources for the welfare or social sector expenditure.
