{"id":52620,"date":"2019-09-27T19:00:25","date_gmt":"2019-09-27T13:30:25","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?p=52620"},"modified":"2019-09-27T16:12:53","modified_gmt":"2019-09-27T10:42:53","slug":"7-pm-rural-indias-bane-from-policy-paralysis-to-policy-vacuum-27th-september-2019","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/7-pm-rural-indias-bane-from-policy-paralysis-to-policy-vacuum-27th-september-2019\/","title":{"rendered":"7 PM | Rural India\u2019s bane: from policy paralysis to policy vacuum | 27th September, 2019"},"content":{"rendered":"\n<p><strong>Context:\n<\/strong>Economic\nslowdown and apathy for rural India is the\nresult of a growth model that gives corporate interests higher priority.<\/p>\n\n\n\n<p><strong>Economic\nSlowdown:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>An&nbsp;economic slowdown&nbsp;occurs\nwhen the rate of economic growth slows in an economy. Countries usually measure\neconomic growth in terms of&nbsp;gross domestic product (GDP), which is the\ntotal value of goods and services produced in an economy during a specific\nperiod of time.<\/li><li>The GDP growth rate of the economy has\nslipped to 5 per cent in the first quarter of FY20, the lowest in over six\nyears.<\/li><li>This is the third instance of an\neconomic slowdown for India in the past decade after the ones that began in\nJune 2008 and March 2011. <\/li><li>The technical term for the same is\ngrowth recession. A recession is defined in economics as three consecutive\nquarters of contraction in GDP. <\/li><li>But since India is a large developing\neconomy, contraction is a rarity. The last instance of negative growth for India\nwas in 1979. <\/li><li>A growth recession is more commonplace\nwhere the economy continues to grow but at a slower pace than usual for a\nsustained period, what India has been facing nowadays.<\/li><\/ul>\n\n\n\n<p><strong>Steps\ntaken by government to revive economic slowdown:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Mergers:<\/strong> in the\nbiggest consolidation exercise in the banking space, the government announced\nfour major mergers of public sector banks, bringing down their total number\nfrom 27 to 12, a move aimed at making state-owned lenders global sized banks<\/li><li>The\nmerger of PSBs will unlock new potential. Big banks with their national\npresence and global reach will have larger credit appetite and ability to\nmeasure risk.<\/li><li><strong>Sectoral measures:<\/strong> The auto sector is to get some relief on\ndepreciation on vehicles and the government has clarified on the validity of\nregistration on Bharat IV vehicles, the government will now be buying new\nvehicles, which was barred earlier.<\/li><li><strong>Slashed corporate tax:<\/strong> It has been lowered from 30% to 22%, which together with\nsurcharge and cess would amount to an effective rate of 25.2%. For new\ncompanies, the rate has been kept at 15%.<\/li><li><strong>Tax Incentives: <\/strong>The Central Board of Direct Taxes (the CBDT) has provided in a\nrecently issued notification, that an investment fund set up by a Category-I or\nCategory-II Foreign Portfolio Investor (FPI) registered with the Securities and\nExchange Board of India (the SEBI) need not satisfy the investor\ndiversification conditions stated in the ITL to qualify as an EIF. <\/li><li>Additionally, the CBDT\nhas specified the list of countries in which the investment fund should be\nestablished, incorporated or registered to be eligible for benefits under the\nsafe harbor regime.<\/li><li><strong>Recapitalization:<\/strong>\nThe government on Friday announced a fresh capital infusion of about $10\nbillion (Rs.&nbsp;70,000crore) into debt-burdened\nstate banks and credit guarantees to support shadow lenders in a bid to boost\nlending and revive the economy.<\/li><li><strong>SME payments:<\/strong> SME payments are to be streamlined with a one-time settlement\nplan in place and the government is to ensure that it makes its payments on\ntime for projects (over Rs 40,000crore is stuck in the pipeline).<\/li><li><strong>FDI measures:<\/strong> The FDI rules now give single brand more\nbreathing space in terms of local procurement and setting up of physical\nstructures. Also, 100 per cent FDI through the automatic route in coal mining\nand related activities has been permitted.<\/li><li>As has 26\nper cent FDI under the government route for uploading\/ streaming of news and\ncurrent affairs in digital media. However, these rules take time to work out\nand one does not expect to see a flurry of capital flows.<\/li><\/ul>\n\n\n\n<p><strong>Policy\nparalysis to policy vacuum:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The previous United Progressive Alliance\ngovernment was characterized by policy paralysis in its second term. Rural\nIndia suffered from this policy paralysis and the weak monsoon.<\/li><li>Now this government seems to be\noperating in policy vacuum. Policy Vacuums&nbsp;occur when there is an absence\nof specific policies relating to a specific situation. Often, either no\npolicies for conduct in these situations exist or existing policies seem\ninadequate.<\/li><li>The\nindifference towards the rural economy is part of a larger political economy\nframework that successive governments have followed after the 1991 economic\nreforms. <\/li><li>As it\nremains important for political mobilization, governments only tend to remember\nit just before elections to patronize voters through loan waivers, cash\ntransfers or increased subsidies. <\/li><li>There has\nhardly been an attempt to examine and correct imbalances in input and output\nprices, market structures, access to credit and other measures of support from\nthe government, most of which are stuck in the same policy and economic\nstructures that prevailed in the 1980s.<strong><\/strong><\/li><\/ul>\n\n\n\n<p><strong>India\u2019s\nRural Economy:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>It is important to\nunderscore that India\u2019s growth story is fuelled by agricultural productivity\nand rising rural incomes.<\/li><li>This year, however,\nerratic monsoons meant many farmers were unable to reap their crops such as\nwheat and soybean on schedule. This rendered much of the agricultural labour\nunemployed.&nbsp;<\/li><li>Such falls in demand\nfor consumer products tend to trigger vicious cycles resulting in unemployment\nin other sectors and further reductions in purchasing power and sales. <\/li><li>The Indian government\nmust realise that 45 per cent of the demand for consumer products comes from\nrural India. It should, therefore, focus on reviving the rural economy first.<strong><\/strong><\/li><\/ul>\n\n\n\n<p><strong>Conclusion:\n<\/strong>The\ngovernment took some of the strong measures to revive the economic slowdown.\nHowever, it still forgot the more than half of the population residing in rural\nIndia. The falling demand can be revived not by just taking supply side\nmeasures but the government should focus on generating demand in rural India as\nwell. <\/p>\n\n\n\n<p>Government needs\nto focus on the following measures as well:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Public\nemployment: <\/strong>It should raise public employment by filling all\nvacant sanctioned posts in the Central and State governments, which would be\naround 2.5 million jobs. <\/li><li><strong>Regularize\nother employments:<\/strong> The government should also regularize\ncontract, casual and \u201chonorary\u201d jobs and make them regular jobs.&nbsp;<\/li><li><strong>Human\ncapital formation<\/strong>: improving on skill development will\ngive a big push to start-ups and MSMEs. <\/li><li><strong>Focus\non labour intensive sectors: <\/strong>The government should also focus on\npromoting labour intensive sectors such as gems and jewellery, textiles and\ngarments and leather goods.<\/li><li><strong>Increase\npublic expenditure in agriculture: <\/strong>government\nshould increase investments in infrastructure, inputs, extension, marketing and\nstorage and training and in providing profitable prices to farmers.&nbsp;<\/li><li>Government should also raise funds for\nthe Mahatma Gandhi National Rural Employment Guarantee Act to push up demand by\nfollowing a Keynesian approach.<\/li><\/ul>\n\n\n\n<p><strong>Source:\n<\/strong><a href=\"https:\/\/www.livemint.com\/opinion\/columns\/opinion-rural-india-s-bane-from-policy-paralysis-to-policy-vacuum-1569490903146.html\">https:\/\/www.livemint.com\/opinion\/columns\/opinion-rural-india-s-bane-from-policy-paralysis-to-policy-vacuum-1569490903146.html<\/a><strong><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: Economic slowdown and apathy for rural India is the result of a growth model that gives corporate interests higher priority. Economic Slowdown: An&nbsp;economic slowdown&nbsp;occurs when the rate of economic growth slows in an economy. Countries usually measure economic growth in terms of&nbsp;gross domestic product (GDP), which is the total value of goods and services&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/7-pm-rural-indias-bane-from-policy-paralysis-to-policy-vacuum-27th-september-2019\/\">Continue reading <span class=\"screen-reader-text\">7 PM | Rural India\u2019s bane: from policy paralysis to policy vacuum | 27th September, 2019<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":49370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130,9],"tags":[],"class_list":["post-52620","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-7-pm","category-public","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2019\/07\/7-PM.png?fit=1000%2C500&ssl=1","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/52620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=52620"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/52620\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/49370"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=52620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=52620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=52620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}