THE HINDU EDITORIAL – October 3, 2017
THE HINDU EDITORIAL – October 3, 2017
- a) The numbers game
With the India Meteorological Department getting its monsoon forecast wrong this year, its modelling has necessarily come under the spotlight. In April, the IMD had predicted “near normal”, or 96%, rains and then upgraded the figure to 98% a couple of months later. These percentages refer to the proportion of rains to 89 cm, a 50-year average of monsoon rains. However, the country finally ended up with “below normal” rains (that is, less than 96% of the 50-year long period average). In itself, this is not a problem. Crop sowing is expected to be only a little less than last year, which saw a record harvest, with more districts posting deficient rain. Better drought management has over the years weakened the link between rain shortfall and food production, but the IMD continues to persevere with the meaningless practice of assigning a catch-all number to the quantum of rain expected during the monsoon. While initially conceived as a measure to bring rigour to the task of warning the government about a drought or weak rains, it has now become a numbers exercise, couched in statistical error margins and pedantic definitions, to ward offblame for getting its forecast wrong. While a single number, 96 or 95, has the power to brand rainfall as “near” or “below” normal, the IMD never admits to being in error. It relies on the security of generous error margins. Thus, a 98% forecast, say, implies a range from 94% to 102% and so could span “below normal” to “above normal”. The fallout of focussing on numbers to gauge a phenomenon as geographically and quantitatively varied as the Indian monsoon is that it has ripple effects of tricking everyone from policymakers to the stock markets that a ‘normal’ monsoon implies all will be well with rainfall distribution. So this year’s floods in Mumbai, Assam and Bihar, and the months-long drought in Karnataka and Vidarbha were all merged under an umbrella number. The Indian monsoon has over the centuries stayed remarkably consistent at around 89 cm during the monsoon months, give or take 10%. The challenge lies in capturing intra-seasonal variation or forecasting a sudden change in global weather (such as typhoons) that can affect rainfall over specific districts. Therefore, simply getting these blanket four-month forecasts right doesn’t really help. While more and more farmers are opting for crop insurance and have far greater access — via mobile phones — to news on weather patterns, what they seek are localised, actionable inputs to guide them on sowing or harvesting decisions. The IMD is increasingly relying on supercomputers and sophisticated models to warn of weather changes at the district level. These localised estimates aim to warn of threatening weather — and are operationally useful — rather than reduce rain to numerical jugglery. The IMD must give momentum to this shift.
- b) Tackling the economic slowdown
“All hat and no cattle” goes the Texan description of posturing without economic heft. The government of Narendra Modi should be prepared to receive such a verdict on its economic policy if things continue to go the way they are right now. Economic growth has slowed for five consecutive quarters, that is from late 2015-16 onwards. By now growth is slower than it was in the quarter in which it assumed office. For a government that had promised to turn around the economy through decisive governance, this must serve as a wake-up call.
Why growth matters
Why should it matter to us if the economy is growing more slowly? Growth matters in India as a large number of persons have to make do with far too few goods and services as it is, which is how poverty is defined. Note that these goods also include public goods or goods that are accessed by the entire populace of a country, such as parks, roads and bridges. Since these public goods are provided by government, the government needs tax revenues to supply them, and these depend upon national income. Then there is employment. A demand for labour exists only when there is a demand for goods. So growth is necessary if employment is to be assured. In India we not only have a pool of unemployed persons to absorb but we also need to provide employment to youth continuously entering the labour force. From this point of view, the slowing of the economy is a source of concern. An economy that has been slowing for five quarters is unlikely to turn around quickly. Also, it may not be able to do so on its own. Replying to the suggestion made that the economy needs a shot in the arm in the form of a fiscal stimulus, the government’s spokespersons have responded by saying that it is working on ‘transforming’ the economy, and that its policies will have long-term favourable consequences. Its transformative approach may be expected to fructify only with a lag, we are told. While the government itself has not ruled out expansionary macroeconomic policy, writers in the media, including an editorial in this newspaper, have poured cold water on the very proposal, championing instead structural reforms. This challenge must be met. The first thing that comes to mind when ‘more structural reforms’ is proposed is that reforming is what all governments have been claiming to do for more or less a quarter of a century now. Since 2014, in particular, “the ease of doing business” has received great attention from this government. The economy today is far less regulated than it was in 1991. It would be correct to say that labour market reforms have not been taken up yet in Parliament and that exit is necessary for a dynamic economy. Labour laws in India make exit difficult, and complying with requirements with respect to the hiring of labour is time consuming and therefore costly. It is possible that the share of manufacturing will rise if the labour market is liberalised. And, though only a one-time gain, this could even benefit labour. However, it is not clear how this relates to the situation today which is one of slowing growth.
Landing an excuse
It is when it comes to the land market that the argument for more reforms is least obvious. Apart from restrictions on conversion of agricultural land, no policy stands in the way of private parties transacting with one another. Surely, we can’t treat the issue of the alienation of agricultural land so casually as to remove all discretion vesting with government. If the argument is that the government must ensure as much land to private industry as they seek, though at a price, this is an intervention out of sync with a market economy. In this context, it may be said that an intervention that government in India should avoid is facilitating land acquired for industry to be alienated from manufacturing activity. Cases in question range from land owned by public sector units in Bengaluru, private mills in Mumbai and private industry in rural Kerala. For credibility, the argument made for land and labour market reforms as a pre-requisite for accelerating growth today must be able to account for how the economy came close to achieving 10% growth in the late 1980s and during 2003-08 when the policy regime was no more liberal than it is now. Equally, it would be difficult to relate slowing domestic growth to sluggish world trade as data show 2016-17 to be a year of a major turnaround in exports. On the other hand, capital formation as a share of output has declined almost steadily for six years now. In 2014- 15 it rose slightly, as if in cue to Mr. Modi’s arrival, but soon resumed its sliding at a faster rate. The government appears to make light of this development. Actually, it contributed to the downward trend by reversing the rate of growth of expansion of public capital formation from 2015-16. It is generally the case that it is capital formation, or investment, that drives growth in the economy. Investment is an immediate source of demand as firms that invest buy goods and services to do so, but it also expands the economy’s capacity to produce. Of the two sources of investment, namely private and public, the first has been depressed for some years. In a slowing economy, private investment is unlikely to revive in the absence of some external force. This is so as investment involves committing funds for a long period under uncertainty. It is for this reason that economic theory prescribes the stepping-up of public investment when private firms are unwilling to invest more. Not only does increased public investment increase demand and quicken growth but it may be expected to encourage private investors, as the market for their goods expands. Other things being the same, increased public investment leads to a higher deficit, which is the gap between the government’s expenditure and its receipts. Among economists themselves there is resistance to governments running a deficit for fear that it may be inflationary. But in any such assessment, the increase in inflation must be offset with the increase in growth that would have been achieved due to greater public investment. In India, the increase in inflation that could come with higher growth would be due to the shortage of agricultural goods. So any plan for increasing the rate of growth, not just at the present moment but in general, must reckon with agricultural shortages. We have not yet fully solved this problem in India, whichever the party at the Centre.
Don’t be afraid of deficits
The government is urged by some to refrain from increasing the deficit. While it is right to be concerned with the consequences, the correct approach would be to aim to balance the budget over the growth cycle. That is, the deficit may be increased as the economy slows and contracted as the economy quickens. To object to an increase in the deficit irrespective of the state of the economy is to be dogmatic. Since 2014 the government has focussed aggressively on the supply side by making it easier for private firms to produce. But we are now facing a demand shortage in the economy. The immediate thing to do is to expand public investment in infrastructure. The argument found in the media that there are “no shovel ready projects” is to encourage lazy governance. Repair and reconstruction of India’s creaking infrastructure is the direction in which greater public investment must now flow. It is the most direct and potent measure that can be undertaken to address the slowdown the economy is experiencing.
WORDS/VOCABULARY
1) Spotlight
Meaning: Intense scrutiny or public attention.
Example: “she was constantly in the media spotlight”
2) Proportion
Meaning: A part, share, or number considered in comparative relation to a whole.
Example: “the proportion of greenhouse gases in the atmosphere is rising”
Synonyms: Portion, Segment
3) Conceived
Meaning: Form or devise (a plan or idea) in the mind.
Example: “the dam project was originally conceived in 1977”
Synonyms: Devise, Formulate
4) Couched
Meaning: Express (something) in language of a specified style.
Example: “the assurances were couched in general terms”
Synonyms: Express, Frame
5) Pedantic
Meaning: Excessively concerned with minor details or rules; overscrupulous.
Example: “his analyses are careful and even painstaking, but never pedantic”
Synonyms: Over scrupulous, Precise
6) Generous
Meaning: Showing a readiness to give more of something, especially money, than is strictly necessary or expected.
Example: “a generous benefactor to the University”
Synonyms: Liberal, Lavish
Antonyms: Mean, Selfish
7) Consistent
Meaning: Unchanging in nature, standard, or effect over time.
Example: “he is their most consistent player this season”
Synonyms: Steady, Constant
Antonyms: Inconsistent, Irregular
8) Relying
Meaning: Depend on with full trust or confidence; be dependent on.
Example: “I know I can rely on your discretion”
Synonyms: Depend, Reckon
Antonyms: Distrust
9) Sophisticated
Meaning: Having, revealing, or involving a great deal of worldly experience and knowledge of fashion and culture.
Example: “a chic, sophisticated woman”
Synonyms: Experienced, Enlightened
Antonyms: Naïve, Unsophisticated
10) Posturing
Meaning: Behave in a way that is intended to impress or mislead.
Example: “a masking of fear with macho posturing”
Synonyms: Pose, Strut
11) Heft
Meaning: Lift or carry (something heavy).
Example: “he lifted crates and hefted boxes”
Synonyms: Raise, Hoist
Antonyms: Put down
12) Decisive
Meaning: Settling an issue; producing a definite result.
Example: “the archers played a decisive part in the victory”
Synonyms: Deciding, Conclusive
Antonyms: Insignificant
13) Wake-up call
Meaning: A thing that alerts people to an unsatisfactory situation and prompts them to remedy it.
Example: “today’s statistics will be a wake-up call for the administration”
14) Populace
Meaning: The people living in a particular country or area.
Example: “the party misjudged the mood of the populace”
Synonyms: Population, Nation
15) Concern
Meaning: Be relevant or important to; affect or involve.
Example: “she was prying into that which did not concern her”
Synonyms: Affect, Involve
16) Stimulus
Meaning: A thing that arouses activity or energy in someone or something; a spur or incentive.
Example: “if the tax were abolished, it would act as a stimulus to exports”
Synonyms: Spur, Stimulant
Antonyms: Deterrent, Discouragement
17) Consequences
Meaning: A result or effect, typically one that is unwelcome or unpleasant.
Example: “abrupt withdrawal of drug treatment can have serious consequences”
Synonyms: Result, Outcome
Antonyms: Cause
18) Fructify
Meaning: Make (something) fruitful or productive.
Example: “they were sacrificed in order that their blood might fructify the crops”
19) Expansionary
Meaning: (of a policy or action) intended to result in economic or political expansion.
Example: “an expansionary budget”
20) Poured
Meaning: Flow rapidly in a steady stream.
Example: “water poured off the roof”
Synonyms: Stream, Gush
21) Hiring
Meaning: Employ (someone) for wages.
Example: “management hired and fired labour in line with demand”
Synonyms: Recruit, Enroll
Antonyms: Dismiss
22) Liberalised
Meaning: remove or loosen restrictions on (something, typically an economic or political system).
Example: “several agreements to liberalize trade were signed”
23) Alienation
Meaning: The state or experience of being alienated.
Example: “a sense of alienation from our environment”
Synonyms: Isolation, Detachment
24) Discretion
Meaning: The quality of behaving or speaking in such a way as to avoid causing offence or revealing confidential information.
Example: “she knew she could rely on his discretion”
Synonyms: Caution, Care
Antonyms: Indiscretion
25) Intervention
Meaning: The action or process of intervening.
Example: “a high degree of state intervention in the economy”
Synonyms: Involvement, Intercession
26) Facilitating
Meaning: Make (an action or process) easy or easier.
Example: “schools were located in the same campus to facilitate the sharing of resources”
Synonyms: Smooth, Ease
Antonyms: Impede
27) Credibility
Meaning: The quality of being trusted and believed in.
Example: “the government’s loss of credibility”
Synonyms: Reliability, Integrity
28) Liberal
Meaning: Favourable to or respectful of individual rights and freedoms.
Example: “liberal citizenship laws”
Synonyms: Tolerant, Enlightened
Antonyms: Narrow-minded, Bigoted
29) Contributed
Meaning: Give (something, especially money) in order to help achieve or provide something.
Example: “taxpayers had contributed £141.8 million towards the cost of local services”
Synonyms: Donate, Give
30) Depressed
Meaning: (of a person) in a state of unhappiness or despondency.
Example: “she felt lonely and depressed”
Synonyms: Unhappy, Gloomy
Antonyms: Cheerful
31) Revive
Meaning: Give new strength or energy to.
Example: “the cool, refreshing water revived us all”
Synonyms: Revitalize, Energize
Antonyms: Torpefy
32) Stepping-up
Meaning: An increase in the amount, speed, or intensity of something.
Example: “the recent stepping-up of the campaign”
33) Resistance
Meaning: The use of force or violence to oppose someone or something.
Example: “government forces were unable to crush guerrilla-style resistance”
Synonyms: Fight, Struggle
Antonyms: Submission, Surrender
34) Assessment
Meaning: The action of assessing someone or something.
Example: “the assessment of educational needs”
Synonyms: Evaluation, Rating
35) Reckon
Meaning: Establish by calculation.
Example: “his debts were reckoned at £300,000”
Synonyms: Calculate, Compute
36) Dogmatic
Meaning: Inclined to lay down principles as undeniably true.
Example: “she was not tempted to be dogmatic about what she believed”
Synonyms: Imperative, Emphatic
Antonyms: Open-minded, Tentative
37) Aggressively
Meaning: In a manner resulting from or betraying aggression.
Example: “he resisted violently and continued to behave aggressively in the police car”
38) Reconstruction
Meaning: The action or process of reconstructing or being reconstructed.
Example: “the economic reconstruction of Russia”
39) Potent
Meaning: Having great power, influence, or effect.
Example: “thrones were potent symbols of authority”
Synonyms: Powerful, Strong
Antonyms: Weak, Impotent
40) Undertaken
Meaning: Commit oneself to and begin (an enterprise or responsibility); take on.
Example: “a firm of builders undertook the construction work”
Synonyms: Accept, Handle
Antonyms: Neglect, Forgo
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