Poultry Sector of India

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Poultry Sector of India

This article deals with the ‘Poultry Sector of India .’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Scope

Poultry Sector in India

Potential of growth in India

  • No religious sentiment is associated with poultry (as is the case with pork or beef).
  • It takes far less to produce 1 Kg of chicken than beef & pork.
  • Many Indian youngsters are becoming Non-Vegetarian under the influence of the marketing of KFC & McD.
  • The development of the poultry industry can help satisfy the increasing demand for protein without causing inflation in the pulses.
  • Poultry can act as a source of side income for the small and marginal Indian farmers. 

Poultry Business in Different regions

The potential in the poultry sector can be achieved if companies do contract farming (backward linkage) with farmers by giving them raw materials, e.g. feed, antibiotics etc., to get uniform quality products without traces of antibiotics and then market them on a large scale. Large companies such as Venky’s, Saguna foods, etc., follow this model in India.

Backward Integration done by Industry

Poultry Case Study of Saguna

Case Study of Saguna Foods – They have made a contract with 20,000 farmers in 16 states.

Medicine They have their own pharma division in Tamil Nadu. They provide anti-bacterial, antibiotics, vitamins etc., to contract farmers manufactured in their pharma plants.
Feed They have their own feed manufacturing unit to provide scientifically manufactured feed to contract farmers. 
Training They also train farmers how to raise poultry scientifically.

 Above three results in chicken & eggs of uniform size & quality.

Processing They have established a HACCP certified plant in Coimbatore to process 35,000 birds per day.

Issues in Poultry Production

1. Maize deficit

  • Maize (poultry feed) constitute 60-70% of broiler cost. Fluctuations in maize price affect broiler price
  • Maize consumption is growing much faster than maize production. 

2. Bird Flu

  • India is continuously hit hard by Bird flu (Avian Influenza). 
  • Indian consumers decrease consumption of eggs & meat during that time, and foreign countries also impose a ban. 

Processing & Marketing Issues in Poultry

1. Poultry Hygiene

  • There is a shortage of clean water for washing, leading to contamination.
  • Poor hygiene practices in defeathering, chopping and removing viscera lead to contamination.
  • There is a lack of chilling facilities to store processed poultry.

2. Antibiotic Residue & Bird Flu

  • Bird flu & sometimes traces of banned antibiotics are found in the chicken, thus leading to the banning of Indian products in foreign markets.

Government Schemes for Poultry

1. Poultry Development Scheme

  • By Department of Animal Husbandry, Dairying & Fisheries (DADF) 

2. Poultry Venture Capital Fund

  • NABARD provides finance.
  • To set up poultry breeding farms and market poultry products.

3. Backyard Poultry Development Scheme

  • It aims to help the farmers, especially small and marginal farmers, set up small poultry farms in the farm households.

Fisheries in India

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Fisheries in India

This article deals with ‘Fisheries in India .’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Fisheries in India

Scope & Significance

Scope of Fisheries
Fisherman in India

Indian Fisheries sector classification

  • Deep-sea fishing
  • Inland (Freshwater)
  • Coastal fishing 
  • Aquaculture: Growing Marine organisms in a controlled environment (same as Agriculture is growing plants in a controlled environment) 

Upstream Issues

Upstream in Saltwater(Sea) Fisheries 

1. Tropical Quality Fishes

  • Indian fishes are of Tropical Quality and hence have a bitter taste (temperate fishes are sweeter). Therefore, the demand for Indian fish in the international market is less. 

2. Juvenile Fishes

  • Fishermen use fine-sized nets (although banned by the government), and as a result, even juvenile fish are caught. These fishes aren’t of use & dumped in the sea itself but resource lost.

3. Fishing during the breeding season

  • The government has banned fishing during the breeding season, but coastal authorities don’t enforce them strictly. It impacts breeding & leads to the lowering of population.  

4. Pakistani fisherman

  • Due to a lack of surveillance, even Pakistani fishermen carry operations in the Indian EEZ.

5. Primitive vessels

  • Indian vessels don’t have freezing facilities onboard. As a result, quality deteriorates. 
  • Indian vessels don’t have special equipment to do deep water fishing beyond the depth of 400m. As a result, they can’t exploit the whole EEZ. For example, Tuna is found around the Lakshadweep islands. 

6. Overexploitation in Tamil Nadu Coast

  • There is a massive problem of overfishing on the Tamil Nadu Coast. As a result, the catch is declining & fishermen venture into Sri-Lankan EEZ. Hence, fishing on the Tamil Nadu coast has become unsustainable. 

Upstream Issues in Aquaculture

1. Regulatory issues

National Fisheries Development Board & Department of Animal Husbandry, Dairying & Fisheries regulate the fishing sector in India. Both are doing nothing & blaming each other.

2. MNREGA

MNREGA is not properly used. It can be used to create more rainfed water bodies for the fishery.

3. Input

  • Fish feed is costly, which increases the operational cost.
  • Most fish farmers are small & don’t know best practices & post-harvest processing.

4. Other

  • Inadequate extension staff for fisheries and training for fishers and fisheries personnel. 
  • Absence of standardization and branding of fish products.

Processing Issues

Notable Players in the Fish processing include Adani Exports, Hindustan Lever, Vishal Exports, Liberty etc.

1. Water Quality

  • Indian fisheries are frequently rejected in foreign markers due to the traces of chemicals found in water used during processing.

2. Packaging

  • Need focussed research to develop low-cost packaging technology for seafood.

3. Low-value Addition

  • India merely freezes fish & shrimps and export them to China & Japan. Rest processing is done by them & re-exported at higher prices.

4. Investment needed

  • Fish processing units need massive investments to comply with EU and US regulations.

Downstream Issues

1. Indian Mentality

  • Indian consumers prefer fresh fish instead of processed fish. As a result, food processing units for fisheries have not developed in India. 

2. Marketing

  • There is inadequate awareness of the advantages of eating fish over meat in India. The industry needs intensive campaigns to make fish popular.

3. Dumping

  • The US has imposed anti-dumping duty on Indian Shrimp.

4. Rejections

  • US/EU  rejects Indian fish for traces of antibiotics, heavy metals, foul smell.

Government Schemes

1. Blue revolution

  • Under the new classification, the government has formulated an umbrella scheme, ‘Blue Revolution by merging all the existing schemes.
  • Various schemes under this include
    1. Pradhan Mantri Matsya Sampada Yojana (PMMSY): PMMSY aims at infrastructure development, post-harvest management and quality control to develop the fish food processing industry. 
    2. Sagar Mitras: Sagar Mitras are extension workers who advise fishermen in processing and marketing their products.
    1. Monetary help for modernization of boats
    2. Construction of cold storage infrastructure. 
    3. National scheme for welfare of fishermen 
    4. Promote Inland fisheries, aquaculture & pisciculture 
    5. Personal insurance and boat insurance for active fishermen

2. National Policy on Marine Fishery, 2017 

The Department of Animal Husbandry adopted the National Policy on Marine Fisheries, Dairying and Fisheries in 2017 due to following reasons.

  • Marine Fisheries need a new policy given the fact that it is the fastest-growing subsector of the food processing Industry, and protein requirement is increasing in India due to a significant increase in its Middle Class. 
  • The need was felt for a new policy when B. Meenakumar Committee suggested that India create buffer zones between the coastal fisheries and deep-sea fishery.
  • India needed a new policy to attract FDI in the deep-sea fishing sector.

Main Terms of Policy

  • Better Monitoring and surveillance (to prevent accidents and trespassing) using chip-based smart registration cards.  
  • Integrated approach on fisheries management: Species-specific and area-specific management plans for sustainable utilization of resources.  
  • Traditional Rights for Fishermen, i.e. areas where mechanized fishing is prohibited, and only small scale fishers are allowed, would be continued. 
  • Commercializing Fisheries 
    • Mariculture: Government will encourage the setting up of Mariculture farms like Open Cage Fishing.
    • Island Fisheries: Government will take steps to exploit the islands for fisheries. 
  • Safety Standards: Government would focus on harmonizing FSSAI standards with international bodies  
  • Credit: With the help of NABARD, the government will provide institutional credit to the fishers. 
  • Marine Environment: Government will review and periodically evaluate existing marine protected areas (MPAs). 

3. Fund

Fisheries Infrastructure Development Fund (FIDF) has been created by the government.

4. Marine Products Export Development Authority (MPEDA)

  • MPEDA is a statutory body established in 1972 under the Ministry of Commerce & Industry to promote the export of marine products from India.
  • MPEDA’s focus is mainly on 
    1. Market Promotion
    2. Capture Fisheries
    3. Culture Fisheries
    4. Processing Infrastructure & Value addition
    5. Quality Control, Research and Development.

5. Pilot Project on Ornamental Fisheries

  • Ornamental Fishery is a sub-sector dealing with breeding and rearing coloured fish of freshwater and marine water. 
  • They are used for aesthetics like the aquarium. 

Inflation Targeting

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Inflation Targeting

This article deals with ‘Inflation Targeting .’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Urijit Committee Report

Urijit Committee was formed to revise and strengthen the Indian Monetary Policy Framework.

Recommendations

  • While making Monetary Policy, RBI must target inflation only & nothing else (like increasing employment, Increasing growth, stabilising ₹-$ exchange rate).
  • In inflation, use CPI instead of WPI.
  • The RBI should try to get inflation at 4% with a band of +\- 2%.
  • Make Monetary Policy Committee to make Monetary policy. 
Urijit Committee Report

Side Topic: Earlier System- Focus on Multiple Indicators

Earlier, RBI was using multiple indicators to make Monetary Policy

  1. Growth 
  2. Employment
  3. Inflation 
  4. Exchange Rate 

But this system wasn’t good because

  • There was no clear anchor of what RBI was trying to achieve, reducing the accountability in case of failure.
  • It makes the whole system prone to pressure groups. 

Why Target of 4% inflation???

  • Studies reveal that there is a sweet spot for a rate of inflation for any economy where it can achieve its largest growth potential. For the Indian Economy, that spot is 4%.
  • Studies have also revealed that
    • Minimum 2% inflation is necessary 
    • When inflation is greater than 6%, it negatively affects GDP & employment. 
  • Hence, RBI should try to achieve inflation of 4% with a band of +\- 2%.

Inflation Targeting

  • The agreement has been signed between RBI & Government of India for operationalising the modern monetary policy 
  • The agreement binds RBI to keep inflation (Consumer Price Index) pegged at 4% +- 2 %.
  • If unable to achieve a target for consecutive 3 quarters, then RBI will have to explain the government reason for this. 

Benefits

  • Takes Monetary Policy formation out of the vulnerability of populism during election seasons.
  • It leads to stability in the inflation expectations. 
  • It makes RBI more accountable as if it fails to meet the inflation targets; it will have to explain reasons.
  • Increases Transparency: RBI will publish the operating targets and an operational procedure to reach the target. 

Critics say 

  • In India, inflation is driven by food and fuel prices which the Monetary Policy doesn’t impact.
  • The agreement is one-sided as RBI has bound itself to contain the inflation, but the government hasn’t committed to observing fiscal prudence. 
  • Limited success of Inflation Targeting in developing economies: Inflation targeting works best in developed economies and has had little success in the few developing countries as banks don’t depend on RBI for funds. Hence, banks don’t react symmetrically to lowering of Repo Rate by RBI.  

Question: Should RBI have such independence,  given it isn’t democratically elected?

Yes

  • RBI avoids lavish spending by the governments. 
  • It helps in avoiding the use of monetary policy for achieving political goals. E.g., lowering interest rates before elections.
  • It has been a worldwide trend that when Central Bank’s independence is decreased, inflation in the country increases. In Europe, Germany has the most independent Central Bank and least inflation, and Portugal has the least independent Central Bank and highest inflation levels. 

No

  • Since RBI and its members aren’t directly answerable to the people of the nation, it shouldn’t be given such large powers.

Monetary Policy Committee is the best solution to this debate because

  • It will have the representatives of both Government as well as RBI.
  • Both will act as checks and balances on each other. None of the organs can entirely dominate others. 

Monetary Policy Committee (MPC)

After lengthy debate and tussle between Government, MPC has been formed

  • MPC was formed after the Amendment of the RBI Act (Hence, it is a Statutory Body) 
  • It has been formed on the England and Israel Model, which has members representing both RBI and Government.
  • Membership
    • 3 members are from RBI 
    • 3 members are appointed by the Government.  
    • Governor of RBI as the Ex-Officio Chairman with casting vote in case of a tie
Inflation Targeting
  • Government can send messages to MPC only in writing to maintain the independence of MPC.
  • Central Government shall, in consultation with Central Bank, determine the inflation target in terms of CPI once every 5 years (for 2016-2020, the target is 2-6%).  

Indian Private Sector in Space

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Last Update: May 2023 (Indian Private Sector in Space)

Indian Private Sector in Space

This article deals with ‘Indian Private Sector in Space‘. This is part of our series on ‘Science and Technology which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Introduction

  • Under the Atmanirbhar Bharat Abhiyaan, the Government has envisioned the private sector’s role in India’s space program, including satellites, launches, and space-based services.
  • The Government also announced Space Park in Bangalore in 100 Acres, where companies will set up their plants to synchronize their projects. 
  • ISRO is also taking up various steps to promote the Indian private sector in space. These include
    1. The private sector has been allowed to use ISRO facilities and other relevant assets to improve their capacities.
    2. ISRO is helping a consortium of companies to build polar satellite launch vehicles.
    3. In 2018, ISRO had signed a contract with three companies to build 27 satellites in three years.

Organizations

Indian Private Sector in Space

Antrix

  • Antrix is the private arm of ISRO & is helping ISRO to get commercial deals. 

Indian National Space Promotion and Authorization Centre (IN-SPACe)

  • The Government of India has created In-SPACe to boost private sector participation in the entire range of space activities like building routine satellites, rockets and commercial launch services.
  • It will have its directorates for technical, legal, safety and security, monitoring and activities promotion. It will function autonomously and parallel to ISRO.

New Space India Limited

  • NSIL is the commercial arm of ISRO. 
  • It was incorporated in 2019 as a Government-owned enterprise.
  • The main functions of NSIL include 
    • NSIL will enable Indian industries to build the capacity of the domestic market for space manufacturing.
    • NSIL will facilitate the transfer of ISRO technologies to the industry. 
  • The launch of a Brazilian satellite named ‘Amazonia-1’ in 2021 was the first commercial deal of NSIL.

Private Space Agencies

1. SpaceX

  • Owned by Elon Musk.

2. Blue Origin

  • Owned by Jeff Bezos (of Amazon). 
  • The primary rocket system of Blue Origin is called New Shephard, which will take tourists to space 100 km above Earth and start a new space tourism industry.
  • In June 2021, New Shephard auctioned the first ticket for space tourism sold for $28 million.

3. Virgin Galactic

  • Owned by Richard Branson. 
  • The company is working on space tourism. 

Indian Space Association (ISpA)

  • ISpA is an industrial body which consists of various stakeholders in the Indian space industry.
  • It acts as a single-window agency for opening the Indian space sector for the private sector and building global linkages. 

Indian Space Startups

1. Pixxel India

  • Pixxel India is a Bengaluru-based startup.
  • It is working on a project to place a large number of Remote Sensing Satellites for continuous observation of every part of the Earth, and data thus generated will be used for combating climate change, agriculture and urban planning. 
  • The first satellite of Pixxel India has been named called Anand.

2. Skyroot

  • Skyroot is a Hyderabad-based company that has made a Vikram-S launch vehicle to enter the launch market.
  • Properties of Vikram-S Launch Vehicle
    • It is a single-stage sub-orbital launch vehicle. 
    • It is 3D printed. 
    • The core structure is built using carbon composites. 
  • It made its first successful flight in November 2022. It was launched with support from ISRO and IN-SPACe (Indian National Space Promotion and Authorization Centre).
  • It is part of Mission Prarambh, which involves the Indian private sector’s entry into the space launch market.

3. Dhruva Space

  • It is a Bangalore based start-up. 
  • It is the first Indian start-up that will design and manufacture satellites with the capacity to manufacture 10-12 satellites annually.

4. Digantara

  • Digantara is an Indian space start-up of India that will set up a commercial Space Situational Awareness (SSA) observatory in the Garhwal region (Uttarakhand).
  • SSA refers to knowledge of the space environment, assessing any threats to space activities and implementing necessary mitigation measures to safeguard space assets. 

5. Earth2Orbit

  • Earth2Orbit (India’s first space startup) has been set up to solve climate change from outer space.

Benefits of entry of Private Players

  • Increasing demand for satellites with the need to launch 18-20 satellites every year. With the existing ISRO workforce, it is challenging to meet this target, and the private sector can play a role here.
  • Getting latest innovations and trends: Public-Private Sector collaboration will boost the Indian space sector as the private sector can get access to ISRO’s cutting edge technology and innovations.
  • Reducing dependence on taxpayer’s money: Involvement of the private sector will help the government save government funds as private capital can be used to carry out expensive space projects.
  • Job creation: It will help in creating new jobs in the high skilled space industry.
  • Achieve our geopolitical objectives: Given the current geopolitical situation of the country and security threats, growth in the space sector can help the country gain leverage over others.  
  • Shift from supply-driven model to demand-driven model: Almost every sector, from agriculture to transport, weather department and even urban development, now wants satellite data and space technology. The private sector can fill this gap. 
  • Promote Make in India: With active private participation, India can aspire to become a satellite manufacturing hub and a launchpad for the world with a variety of rockets ranging from the Small Satellite Launch Vehicle to the Geosynchronous Satellite Launch Vehicle. 

Concerns

  • Security and strategic concerns as critical and sensitive information may fall into the wrong hands.
  • Conflicts of interest: As ISRO is both a regulator and an operator, this conflict of interest will likely manifest during dispute resolution between private players and ISRO entities.
  • It is a hazardous business involving negative returns and failures. Very few companies may have the appetite to bear the cost of such losses.
  • Social welfare may take a backseat: ISRO has always worked on applications like remote sensing, tracking of land use, resource mapping etc., enhancing social welfare. However, private companies will have more profitable interests than developing solutions.
  • Increase in space debris:  Estimates say there are already 23,000 pieces of debris larger than 10 centimetres and over 500,000 pieces of smaller junk circling Earth.
  • Issue of liability of private entities: Multilateral treaties of international law are outdated and do not correspond well with contemporary reality.  

Inclusive Growth

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Last Updated: May 2023 (Inclusive Growth)

Inclusive Growth

This article deals with ‘Inclusive Growth.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

What is Inclusive Growth?

According to United Nations Development Program (UNDP), ‘Inclusive Growth is a process and outcome where all groups have participated in the organization of growth and benefited equitably.‘

Inclusive Growth

Inclusive Growth is a very broad concept and includes the following aspects

Social Dimensions – Affordable Education
– Quality Healthcare
– Social Equality
– Gender Parity
– Regional Parity
– Women Empowerment
Economic Dimensions – Financial Inclusion
– Quality Employment
– Resilience to external shocks
– Agricultural development
Political Dimensions – Long term planning
– Transparent and efficient governance
– Safety to people
– Zero corruption
Environmental Dimensions – Sustainable Development
– Reduction of waste
– Inclusion of the needs of the future generation

Side Topic: Pro-Poor Growth

If the growth can bring more people out of poverty and raise people’s standard of living, it is termed as Pro-Poor Growth.

Pro-Poor Growth is a narrow concept than Inclusive Growth  

  • In Inclusive growth, we make sure that people at the bottom of the pyramid are not mere recipients of the benefit. 
  • We can achieve pro-poor growth via the Trickle Down Effect, where benefits provided to those at the top of the pyramid trickle down. But in Inclusive Growth, those at the bottom are also part of growth and aren’t just recipients of the benefits of growth. 

Side Topic: Trickle Down

  • It is a ‘Top-to-bottom approach’ to Economic Development.
  • The proponents of this approach argue that the benefits of growth would automatically trickle down to the bottom.
  • In this approach, Tax Breaks and other economic benefits are provided by the government to businesses. It is believed that these benefits provided to the businesses will ultimately benefit poor members of society as it will lead to more investments and higher job creation in the economy. 
Trickle Down
  • Evidence from around the world is that the economic policy paradigm of first increasing the overall size of the pie by reducing taxes at the top and then “redistributing” the wealth has not delivered benefits to people at the bottom of the pyramid. Tax cuts to the businesses and wealthy ultimately lead to a flight of wealth to the tax havens and greater inequalities.

Ways to ensure it

Enhancing human capability by providing

  1. Education
  2. Health facilities
  3. Skill development
  4. Equal opportunities to all
  5. Women empowerment

Employment generation: It can be created via

  1. Attracting investment in India
  2. Promoting entrepreneurship via schemes like StartUp India
  3. Focusing on labor-intensive sectors (like textile)

The target of the policies of the Indian government isn’t just faster growth but also inclusive growth. Following schemes are aimed at achieving it

  1. Poverty Reduction (through programs like MNREGA)
  2. Employment Generation (Make in India, Atma Nirbhar Campaign etc.)
  3. Access to essential services (PDS, Ayushman Bharat and RTE) 
  4. Equality of opportunity 
  5. Skill-building (Skill India Mission) 
  6. Good governance (Governance Reforms, RTI etc.)
  7. Women empowerment 

Question

  1. Can we achieve Inclusive growth through capitalism?

Unemployment

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Unemployment

This article deals with ‘Unemployment in India.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

Introduction

Unemployment can be defined as involuntary joblessness on the part of able people who are searching and willing to work.  In simple words, Unemployment is a problem faced when there are people who are willing and able to work at the prevailing wage rate but fail to find a job.

Definition of Unemployment

The unemployment rate in India reached 6.1% in 2017-18 (highest in the last 45 years), according to the data of the Labour Ministry. Moreover, according to NITI Aayog, India doesn’t face the problem of unemployment but severe underemployment, low women participation & voluntary unemployment.

Level of Unemployment in India

Unemployment Rate

  • NSO defines the Unemployment rate as the percentage of (𝑖𝑛𝑣𝑜𝑙𝑢𝑛𝑡𝑎𝑟𝑖𝑙𝑦) 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 𝑝𝑒𝑟𝑠𝑜𝑛𝑠 𝑖𝑛 𝑙𝑎𝑏𝑜𝑢𝑟 f𝑜𝑟𝑐𝑒 in relation to the total labour force of the country. 
  • Unemployment Rate = (𝑁umber 𝑜𝑓 (𝑖𝑛𝑣𝑜𝑙𝑢𝑛𝑡𝑎𝑟𝑖𝑙𝑦) 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 𝑝𝑒𝑟𝑠𝑜𝑛𝑠 𝑖𝑛 𝑙𝑎𝑏𝑜𝑢𝑟 𝑓𝑜𝑟𝑐𝑒) / (Total Labour Force) X 100
  • According to the latest data, the Unemployment Rate in India is 4.8% (2019).

How does NSO calculate Unemployment Rate?

  • NSO conducts surveys on unemployment
    1. Quinquennial Employment and Unemployment Surveys: Earlier, NSO used to conduct this survey after five years. The last such survey was conducted in 2011-2012. 
    2. Periodic Labour Force Survey (PLFS): In 2017, the government started to conduct annual surveys. Data is released with a lag of one year. Data for July 2019 to July 2020 was released in July 2021. 
  • NSO in survey calculates unemployment by worker’s Usual Status, i.e. whether the worker was unemployed for the majority of the year. If his answer is positive, then the worker is considered unemployed.

Labour Force Participation Rate (LFPR)

  • Labour Force Participation Rate is the percentage of the total population working or looking for a job.
  • It is calculated as the percentage of Total Labour Force (i.e. Employed + Involuntary Unemployed) in relation to Total Population of India.

LFPR = (Number of Employed Persons + Number of Involuntary Unemployed) / (Total Population) X 100

  • Labour Force Participation Rate (LFPR) in India is 40.1% in 2019-20.
  • But LFPR of women in India is low. According to the latest PLFS data, 
  • LFPR of women is 23% (2019-20).

Periodic Labour Force Survey (PLFS)

  • In 2019, NSSO started a new survey called Periodic Labour Force Survey (PLFS) to provide annual estimates of the labour force, employment, unemployment, nature of employment, and national and regional wages. 

Changes in PLFS

  • Households in urban areas are visited four times (one every quarter) analysing changes in seasonal employment and employment characteristics.
  • Usage of technology– adopted World Bank Computer Assisted Personal Interviewing (CAPI) platform with data collected using Tablets.  

Types of Unemployment

Cyclical Unemployment

  • The economy goes through boom-bust cycles. Cyclical unemployment happens during the downturn phase of the trade cycle in the economy when workers are laid off on a mass scale. E.g., A large number of people became unemployed during the Sub-prime crisis of 2008.
  • Cyclical unemployment can be cured by public investment or expansionary monetary policy.
Cyclical Unemployment

Seasonal Unemployment

  • It is a common feature of the rural sector. Since agriculture is a seasonal occupation, at least for five months in a year, a sizeable portion of the working force is unemployed.

Disguised Unemployment

  • It is a situation where a person appears to be employed, but enough work is not available. This happens when too many workers are engaged in doing a small job. The worker’s contribution to output is less than what he can produce by working for normal hours per day.
  • E.g. in Indian Agriculture, more people are engaged than required.
clvilspedia.com In Indian Agriculture, more people are engaged than required.

Under Employment

  • It is a situation in which a person is employed, but his capacity is not utilised to the full extent. His wages are not in accordance with his ability.

Technological Unemployment

  • Technological Unemployment is the result of the situation when workers are replaced with labour-saving machines. 
  • E.g., The textile sector introduced power loom to cut labour costs. 

Structural Unemployment

  • Structural unemployment is due to an exponential change in the structure of the economy and technology. It results in a fall in demand for certain goods and rises in demand for other goods. 
  • For example rise in demand for mobile phones has adversely affected the demand for cameras, tape recorders etc.

Frictional Unemployment

  • It is temporary unemployment that occurs when workers are searching for new employment or transitioning from their old jobs to new jobs. 

Keynesian Unemployment

  • It is the result of a deficiency of aggregate demand in an economy. 

Types of Employed workers

Different agencies define employed workers differently. These are as follows

#1. NSO Classification

According to NSO, the types of employed workers are of the following types

Self Employed

  • Persons who work for themselves and charge fees. They don’t sell their labour to anyone for a wage but are their own boss. 

Regular Wage Employees

  • Workers who sell their labour to the employer for a wage. They work on a predetermined wage, and their job continues around the year.

Casual Employees

  • Workers who sell their labour to the employee for a wage but their job doesn’t continue around the year. Usually, the employer hires them for a particular time. 

#2. Census Classification

According to Census, types of employed workers are as follows

Main  workers A worker employed for at least 183 days/year.
Marginal Workers A worker employed for less than 183 days/year.

#3. Labour Ministry Classification

According to Labour Ministry, types of workers are of the following types

Organised Sector workers

  • Workers employed in the organised sector. Eg: employed in companies like Infosys, Wipro, TCS, Maruti etc.
  • They are covered under at least one of the acts i.e. Factories Act, Companies Act, EPFO,  Shop establishment act or working in any Public Sector Undertaking or Government Organisation (except defence sector).
  • 17% of workers in India are employed in the Organised Sector.

Unorganised Sector Workers

  • Workers employed in the unorganised sector. Eg: Domestic Workers
  • They are not covered in any of the above acts. Hence, they are vulnerable due to a lack of social security.
  • 83% of workers in India are employed in Unorganised Sector.

Side Topic: Gig Economy

Gig Economy is the economy in which organizations work with independent workers for a short duration. Companies like Uber, Ola etc., don’t treat the workers as employees of the company. Instead, they are treated as freelance contractors, and traditional employee rights like minimum wages, pension, provident fund, insurance etc., aren’t given to them by the company.

Features of Gig Economy

  • Gig Economy has two sets of agents (i.e. Buyer and Seller), which interact through intermediaries or aggregators.
  • Gig Worker is not an employee on the company’s payroll. Instead, they are treated as independent service contractors. 
  • They are paid in terms of ‘piece rate’ (depend on gigs completed) and ‘rewards’ (dependent on the rating given). The company doesn’t pay them a fixed salary.
  • Gig Workers (or contractors) aren’t eligible for social security incentives such as provident fund, insurance, pension etc., provided by the company. 
Gig Economy

Case Studies

  • Uber: It is the most famous company that employs the gig economy. It has re-defined the gig economy. 
Gig Economy in Taxi
  • Udemy: In Udemy, instructors develop courses and sell them on the platform to those who want to learn that skill. Udemy is just the host of the content and pays the instructors according to the sale of their courses after cutting their share.
udemy and gig economy
  • Airbnb: Airbnb provides a platform to the house owners with extra space to rent their space to the travellers. Airbnb provides the platform to connect buyers and sellers and take the commission in return for services. 
Airbnb and gig economy

Benefits of Gig Economy

  • The gig economy is generating a large number of jobs in the economy.
  • It provides an easy way to monetize resources like vacant spaces in homes (Airbnb) and ordinary vehicles (Uber and Ola).
  • It guards the companies against the fluctuations in demand as companies don’t have to pay the workers if there is a lack of demand.

Issues with Gig Economy

  • The gig workers don’t have the cover of social security such as provident fund, pension etc.
  • There is no security of a job in the gig economy.
  • The income of the gig workers is not fixed, and companies enjoy large powers vis-a-vis workers enabling them to exploit workers. 
  • The gig economy is not adequately regulated and gives a lot of opportunity to the companies to evade taxes and harass workers.

Steps taken wrt protection of workers in the Gig Economy

#1. Steps taken by Indian Government

  1. Budget 2021-22: The Government has announced that the law on minimum wages act and Employee State Insurance Corporation will apply to all firms. 
  2. Regulation: Central Government has announced that Taxi-hailing apps cant charge more than 20% commission from driving contractors. Along with that, contractors cant work more than 12 hours per day.

#2. International Examples

  • In 2021, the UK Supreme Court ruled that Uber drivers should be considered workers and not freelance contractors, making them eligible for all employment-related benefits such as minimum wage, annual leaves, and insurance.

Side Topic: Demographic Dividend

A country is said to be in the Demographic dividend phase WHEN

  • The majority of its population is in the working-age group.
  • The dependency ratio is minimum, i.e. very few people below 15 & above 64.
  • The age pyramid shows a bulge in the middle.
Demographic Dividend
  • As East Asian countries in the past, and Ireland today, India is supposed to benefit from a ‘demographic dividend. This dividend results from large working-age people with a relatively small percentage of older people to support.
  • In 2020, the average Indian was 29 years old, compared with 43 in China and the 38 in the United States and 48 in Japan. It implies a large and growing labour force, which can deliver unexpected benefits in terms of growth and prosperity.
  • But to reap the Demographic Dividend, the government have to 
    • Invest in education & skill development of the young generation.
    • Produce enough good jobs to absorb them in employment.

Otherwise, this huge population would become burden onerous to handle instead of becoming an asset.

Demographic Dividend and India

Causes of Unemployment in India

1 . Not Producing what Industry demands

  • Indian system is producing more than required graduates and not focussing on giving vocational training. Hence, India is facing a paradoxical situation, i.e. a large population is unemployed, but there is a labour shortage in many sectors.  

2. Defective planning and development model

  • Indian Policymakers adopted (faulty) Capital Intensive Industrial Model in a Labour Intensive nation. The model failed to create enough jobs.

3. Low Employment Elasticity (after LPG)

  • Employment Elasticity is defined as the number of jobs created per unit of growth. But after LPG Reforms, Employment Elasticity has decreased drastically. 
    1. Till 1991: 1% growth in the GDP increased jobs by 0.4%. 
    2. Presently: 1 % Growth in the GDP increases jobs by (just) 0.02%.
  • This is because only highly skilled jobs in the Service Sector (IT, BPO etc.) are being produced. 

4. Slow pace of labour reforms

  • The slow pace of labour reforms has dissuaded companies from creating formal employment and incentivised investments in automation.

5. Impact of mechanisation

  • In the face of high competition, to cut their costs, labour-intensive industries (like textile) are beginning to mechanise their operations shrinking job opportunities increasingly.

6. Global Slowdown

  • The world is passing through a slowdown. Indian Industry is facing the heat as well since Indian companies are part of large global supply chains. 

7. Dependence on Agriculture

  • Agriculture provides seasonal employment & includes work for a few months. So this gives rise to disguised unemployment.

8. Joint Family System

  • In big families having a big business, many such persons will be available who do not do any work and depend on the family’s joint income. Hence, the Joint structure of the family system also encourages unemployment

9. Immobility of Labour

  • The mobility of labour in India is low. Due to attachment to the family, people do not go too far off areas for jobs. Factors like language, religion, and climate are also responsible for low mobility. The immobility of labour adds to unemployment.

Impact of Unemployment

  • It has increased the crime rates as unemployed youth gets involved in crimes to earn a living. 
  • Unemployment has caused a lot of hardship, agony, frustration & depression, particularly among the youngsters. Patel & Jat Reservation issue is the result of this frustration only. 
  • Brain drain: As a consequence of the lack of opportunities in India, intelligent youth migrate to foreign countries. Their intellectual abilities are used by foreign governments, causing loss to India.
  • Demographic dividend not achieved: India is fast losing the narrow window of opportunity provided by a large proportion of the working-age group population. 

Case of India’s  Jobless Growth

  • Jobless growth is a situation in which, although the economy grows, but unemployment remains stubbornly high. 
  • In this decade, although the Indian economy grew by the average rate of 7%, it has not provided jobs to job seekers. According to Census 2011, employment in India increased at the rate of 1.4%, which is significantly lower than the growth rate of the Indian economy.

The cause of jobless growth are many 

  • Between 1947 and 1991, India chose the Capital Intensive Model instead of the Labour Intensive Model of Industrialisation.
  • After LPG Reforms, the job elasticity was reduced due to high skilled jobs produced in the service sector. As a result, GDP is increasing, but jobs are not growing  at the same pace ( 1% GDP Growth leads to 0.02% increase in employment)
  • Large scale mechanisation & automation is eating away a large number of jobs.
  • The slow pace of labour reforms has dissuaded companies from creating formal employment and incentivised investments in automation.
  • Government policies have abandoned MSMEs in favour of Large firms. It has to be noted that MSMEs are 4X labour intensive than Capital Intensive large firms set by MNCs. 
  • In India, the BPO sector was a huge job provider. Still, this sector is also feeling the heat of technology and job cuts due to self-service portals, interactive voice response (IVR) & upcoming Artificial Intelligence.

Side Topic: Covid and Unemployment in India

  • Unemployment has worsened in India due to the Covid pandemic.
  • Within the different sectors as well, the level of recovery is different. Hence, e-commerce and IT companies have recovered and are working at levels higher than pre-pandemic levels thus creating more number of jobs than pre-pandemic. But the unorganised sector has not been able to recover properly. Since the unorganised sector employs the majority of people in India, it has resulted in higher unemployment in India.
  • The number of workers enrolled under MNREGA has also increased. It shows that the unorganised sector has not been able to recover properly.

Voluntary Unemployment

  • Voluntary unemployment is a condition in which a person is not employed and is not willing to join the workforce. It happens because people choose not to work below a certain income level after ‘investing’ in education. 
  • E.g., Seen in Kerala in India in the highest proportion. 

NITI Aayog has also reported that voluntary unemployment & underemployment is a more severe issue than unemployment.

Budgeting Process

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Budgeting Process

This article deals with the ‘Budgeting Process.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

What is Budgeting?

Budgeting is the process/strategy with which the budget is prepared.

Line Item Budget

  • Line item budget clusters proposed expenses of each department. It represents the allocation of funds to each item in a single line. It includes detailed ceilings on the amount of salaries, travelling allowances, office expenses, etc. The focus is on ensuring that the agencies or units do not exceed the ceilings prescribed.
Line Item Budget

Advantages 

  • This type of budget is easily understandable and implementable.
  • It facilitates centralized control and fixing of authority and responsibility of the spending units.
  • This aggregation method can easily illustrate which department and cost centre absorbs the bulk of the entity’s funds.

Disadvantages 

  • It leads to incrementalism.
  • It does not provide enough information to the top levels about the activities and achievements of individual units. 

Weaknesses of the line item budgeting were sought to be remedied by introducing certain reforms. Performance budgeting was the first such reform. 

Performance Budget

It was propounded by First Hoover Commission (USA) and implemented by President Truman in 1950. On the recommendations of the First ARC in 1968, Indira Gandhi Government tried to implement it in 1968. But this experiment doesn’t prove to be successful. Hence, Line Item Budget is still popular in India.

A performance budget reflects the resource inputs and service outputs for each unit of an organization. 

Process to make Performance Budget

  • The purpose of every Organisation / Ministry is defined.
  • Programmes, activities, projects and works are charted out to meet that purpose. 
  • It is different from Line Item Budget in the sense that it doesn’t look only into expenditure. Instead, the main emphasis is on programs, activities and works that will be carried out to achieve the stated purpose. (Eg: to increase Primary Education, Line Item Budget will tell the amount to be spent on Education whereas the Performance Budget will tell us about programs, activities and works that will be carried out to achieve that purpose.)  
Performance Budget

Line Item Budgeting vs Performance Budgeting

Line Item Performance Budget
Expenditures are arranged from Major Expenditure Item to Smaller Expenditure Items.   Itemised Expenditures are not shown. Emphasis is on showing accomplishment of program, activity and work with given expenditure.
Aim: Reducing the expenditure Aim: Achieving the purpose and objectives with given expenditure.
Old projects and programmes are continued, and new items are joined with it. The budget maker has to perform more work every year. For every financial year, he has to define purpose, programme, activity and work. Hence, new programs are seen every year.
Generalists are required for its operationalisation. Specialists are required for its operationalisation.

For a developing country like India,  reasons for failure of its implementation

  • Performance Budget requires Specialist Bureaucracy, but Generalists are powerful in India.
  • Frank Cruze, in 1964, commented that until Accounting is decentralised, it cant be implemented in India.
  • It becomes difficult to stop old programs in developing countries. In such a situation, a Performance Budget cant be implemented because, in this system, programs keep on changing every year.
  • In India, the Budget is used for political purposes. For that, Line Item Budget is more helpful as more items can be added to it.
  • Everything from purpose to work has to be defined every year. In India, it is impossible because here, even the aims of Organisations / Ministries are not defined in a proper way.

Output Budget

  • It was introduced in India in the financial year 2005-2006.
  • It is an Indian version of Performance Budget.
  • Budgeting scheme that gives program / project-wise outlays for all central ministries, departments and organisations listed against corresponding outcomes (measurable physical targets) to be achieved during the year.
Output Budget
  • The government is continuously increasing the number of departments whose Budget is made on this basis. It started with the Department of Space.
  • 2017: Delhi Government introduced Outcome Based Budgeting in 2017 Budget.

Features / Nature

  • Under Outcome Budget, Organisation’s Budget is made in such a way that it has monitorable and measurable targets. 
  • Cost-benefit analysis of every unit is carried out to yield maximum benefit at minimum cost. 
  • Benchmarking of services and goods is provided.
  • The feedback mechanism is strengthened to get feedback from customers / citizens
  • Management Information System (MIS) is operationalised to digitalise expenditure and outcomes for rapid evaluation.

Impact of Outcome Budget

More than one decade has passed since India has adopted the Outcome Budget. The number of Departments under this has increased.

  • In Winter Session (in September), every Department where Outcome Budget is operational presents their Report Card.
  • Accountability of the Executive: Linking funds to the results is a powerful tool to increase the accountability of the executive.
  • It helps in better utilisation of money.

Problems in Outcome Based Budgeting

  • Difficulty to define targets.
  • A large number of ministries are involved in achieving the target. E.g. to achieve an IMR of say 20, the Ministry of Health and the Ministry of Woman and Child Welfare need to work in synergy. 
  • Not only the Union but help of States and Local Governments is also needed to achieve targets.  

What more needs to be done?

  • Apart from implementing Outcome Budget in all Central Departments, it should also be implemented in all the states. 
  • Many programmes are run jointly by states and union. These programs always face the issue of ‘Match Funding’. This need to be brought under the Outcome Budget.
  • Like Performance Budget, Outcome Budget also requires decentralisation of accounts to make it a success. 

Zero Based Budget (ZBB)

  • It was invented by Peter Pyhrr in 1969 and implemented in Texas Instrument (company) for the first time. 
  • It was implemented in 1972 in the Georgia state of USA by Jimmy Carter as Governor, and in 1978-79, it was implemented in the Federal Budget of USA. 
  • In India, we tried to implement it in 1974. But it proved to be a failure.

What is Zero Based Budgeting (ZBB)

The budgeting process in which the rationale of every expense needs to be justified for a new period is known as Zero-Based Budgeting (ZBB).

Process of formation of ZBB 

  • In this Budget, all the running programs and projects are zeroed at the end of each financial year, i.e. old facts and figures aren’t taken.
  • Budget maker plans for next financial year keeping in mind which programs and projects are needed for the present situation.  

Reasons for failure of ZBB in India 

  • The digitalisation of records of finances is required. But in India, all the departments are not digitalised even today.
  • Managerial autonomy is required. But in India, the enormous influence of politics can be seen on administration.
  • Citizens in India don’t like frequent changes in government programs. But in ZBB, there are chances of changing programs. 
  • For operationalisation of ZBB, Specialist Bureaucracy is required (India has Generalist Bureaucracy).

15th Finance Commission

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Last Update: 2023 May (15th Finance Commission)

15th Finance Commission

This article deals with ‘15th Finance Commission .’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

Introduction

15th Finance Commission came up with two reports due to the sudden creation of the Union Territory of Jammu and Kashmir and Ladakh as more time was required to analyze the impact of these developments.

  • 1st Report: Recommendations from 1/April 2020 to 31/ March/2021
  • 2nd Report: Recommendations from 1/April/2021 to 31/March/2026 

Composition of 15th Finance Commission

It consists of 5 members, including the Chairman (according to the provisions of the Indian Constitution)

NK Singh Chairman
Shantikanta Das (Member) RBI Governor
Dr Anoop Singh (Member) Professor
Dr. Ashok Lahiri  (Member) Senior Executive of Bandhan Bank
Prof. Ramesh Chand (Member) Agriculture Economist

Terms of Reference of 15th Finance Commission

Terms of Reference for all Finance Commissions mentioned in the Indian Constitution are as follows.

  1. Distribution of the net proceeds of the divisible pool of taxes to be shared between Centre and states (Vertical Distribution), and the allocation between states (Horizontal Distribution) 
  2. Principles that should govern the grants-in-aid to the states by the Centre.
  3. Measures needed to augment the consolidated fund of a state to supplement the resources of Panchayats and municipalities. 
  4. Any other matter referred to it by the President in the interests of sound finance.
  5. Constitution also allows Finance Commission to make broader recommendations in the interests of sound finance. 

President referred the following additional matters. 

  1. For population, use data of Census of 2011 instead of Census of 1971.
  2. Keep New India 2022 vision in mind (i.e. Smart City, Swachh Bharat Scheme etc.).
  3. Keep Union’s Defence and Internal Security responsibilities in mind.
  4. Recommend whether Union should continue to give Revenue Deficit Grants or not along with the additional conditions that Union can impose on states while borrowing from external sources.
  5. Finance Commission should propose performance-based incentives (PBI) in areas such as
    • Steps taken by a particular state towards expanding and deepening GST.
    • Steps taken to achieve population replacement rate.
    • Improvement in ease of doing business.
    • Sanitation
    • Reign in populist measures 
    • Promoting savings through the adoption of direct benefit transfers.
    • Promoting the digital economy.

States are apprehensive on the additional terms of references

Issue 1: Using 2011 census for population

  • 14th Finance Commission had used both Census of 1971 and 2011 for horizontal distribution of taxes among states. 17% weightage was given to the 1971 population, and 10% weightage was given to the 2011 population.
  • But 15th Finance Commission was ordered to use the Census data of 2011 only. Hence, the Southern States and states like Punjab who have reduced their fertility rate between 1971 to 2011, are bound to lose some share in favour of states like UP, Bihar, etc. who have performed worse in reducing their fertility rate. Therefore, Commission is punishing the states for performing better in the initiative started on the directions of the Union government to reduce population growth in the 1970s-80s.

Counter Argument: 12.5% weightage is also given to demographic performance to appreciate the work of states that have performed well to reduce the Total Fertility Rate in their states (shown below)

Issue 2: Issues with keeping New India-2022 vision in mind

  • States are apprehensive that this can reduce the percentage of devolved funds to states.
  • Along with that, another apprehension is that Local Governments will get more grants with tied objectives. Hence, their independence and the ability to start area-specific schemes will be curtailed. 

Issue 3: Issues with keeping Union’s defence responsibilities in mind

  • It will also reduce the share of the state’s in the devolved funds as defence is the Union’s responsibility.
  • In the final report, the 15th Finance Commission has reduced the vertical distribution to 41% (i.e. 1% less than 14th Finance Commission), keeping Jammu and Kashmir’s security concerns in mind.

Issue 4: Debt and Grants

  • 15th Finance Commission examined whether revenue deficit grants given to the states should be abolished.
  • Article 293: States can’t borrow without consent of the Union. Terms of Reference include the suggestion on additional conditions that Union could impose on the states when states borrow from external sources? States fear that this will reduce their autonomy in raising loans from the market.

Issue 5: Issues with performance-based incentives

States are apprehensive about them because

  1. Small states like Mizoram, Manipur etc., due to their geographical constraints, can’t deepen their GST tax net in the same way as can be done by states like Punjab, Haryana or Maharashtra. 
  2. Northern states are apprehensive that they will lose money due to higher fertility rates.
  3. The southern States have apprehensions that they will have to stop their populist schemes like Amma Canteens (Tamil Nadu).

Recommendations of 15th Finance Commission

1. Vertical Devolution

All the money collected by the Union government through direct and indirect taxes is shared by the Union government with the states on the formula suggested by the Finance Commission.

Such arrangement has been made because

  • Taxation powers of State governments are low. 
  • The Union government collects all the important direct taxes like Income and corporate taxes.

Previous Finance Commissions have suggested that the following percentage of Union Government’s devisable taxes be shared with states.

Finance Commission Vertical Devolution Trends

Presently, the 15th Finance Commission has recommended that for the financial year 2020-21, Union should share 41% of devisable taxes with the states.

15th Finance Commission recommendations

Why did the 15th Finance Commission reduce the percentage of taxes to be devolved? 

15th Finance Commission headed by NK Singh believed that, because of the creation of new Union Territories of Jammu and Kashmir and Ladakh, Union’s responsibilities have increased.

2. Horizontal Devolution

  • Horizontal devolution means distributing the devolved taxes horizontally between the individual States.
  • 15th Finance Commission considered the following criteria to divide the devolved taxes between the states.
    • 45% weightage to Income distance (states with lesser per capita GSDP (Gross State Domestic Product), i.e. poorer states will get more share)
    • 15% weightage to the area (states with more area will get more share)
    • 15% weightage to the population as per 2011 census (more population means more share)
    • 12.5% weightage to demographic performance (states that have reduced Total Fertility Rate will get more share)
    • 10% weightage to forest and ecology (states with more area under forest will get more share)
    • 2.5% weightage to tax efforts (States who have improved their per capita (State) tax collection in the last three years will get more share)
  • After doing calculations based on the above formula, the final list is as follows
Rank State %age
1 UP 17.93%
2 Bihar 10.06%
3 MP 7.89%
—- —– —–
6 Rajasthan 5.979%
—– —– —–
16 Kerala 1.943%
17 Punjab 1.788%
—- —- —-
26 Mizoram 0.51%
27 Sikkim 0.39%
28 (last) Goa 0.39%
Note Any Union Territory 0%

3. Grants from Union to States

Apart from the tax devolution, Finance Commission also suggest Union to give some grants to the states. These grants are as follows:-

3.1 Grants to Local Bodies

  • Union Government should give ₹4.36Lcr for 2021-26 to local bodies.

3.2 Post devolution Revenue Deficit Grant

Some states like Andhra Pradesh and Punjab, which have revenue deficits even after devolved taxes from the Union, get this grant to cover that deficit. Union government will give ₹ 2.94 lakh crore to such states in the form of Revenue Deficit Grants.

There are 14 such states eligible for this: Assam, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Uttarakhand, Andhra, Kerala, Punjab, Tamil Nadu, West Bengal.

Revenue Deficit Grants by Finance Commission

3.3 Special Grants

  • If any state receives less money than earlier getting under 14th Finance Commission, it will be compensated through Special Grants.
  • There are three such states under the 15th Finance Commission, i.e. Telangana, Karnataka and Mizoram. 

3.4 Disaster Management Grants

Four funds have been created under Disaster Management Act 2005 (two at the union level and two at the state level, respectively). 15th Finance Commissions recommendations have been explained in the infographic given below.

Disaster Management Grant

3.5 Sector-Specific Grants

  • 15th Finance Commission has recommended special grants for seven sectors mentioned in its Terms of Reference, i.e. health, pre-primary education, judiciary, rural connectivity, railways, statistics and housing. 
  • For example, 
    1. Health Sector has been given 1.06 lakh crore for upgrading the PHCs, building new hospitals, training doctors and healthcare workers. 
    2. State-specific grants of ₹ 49,599 crores have been allocated for developing tourism, historical monuments, infrastructure, water etc.
    3. ₹ 2.38 lakh crore has been given to the Union for Defense and Internal Security Fund.
    4. ₹45,000 crores have been allocated for the implementation of agricultural reforms.
    5. ₹27,000 crores have been allocated to maintain Pradhan Mantri Gram Sadak Yojana (PMGSY) roads.
    6. ₹10,000 crores have been allocated for the judiciary to set up infrastructure to settle the property cases pending for five years or more, civil cases of marginalized people, POSCO cases (child sex abuse) & heinous crimes. 
    7. ₹6,000 crores have been allocated for developing online learning and translating medical engineering courses in regional languages.

3.6 Performance-based Incentives

  • Finance Commission has also proposed performance-based incentives (PBI) in areas such as
    1. Efforts made by the states in expansion and deepening of the tax net under GST.
    2. Efforts and progress made in moving towards replacement rate of population growth.
    3. Improvement in ease of doing business.
    4. Sanitation 
    5. Reign in populist measures.
    6. Promoting savings through the adoption of direct benefit transfers.
    7. Boosting a digital economy, etc.
  • If States perform well in the above areas, they will get more money in grants.
  • 15th Finance Commission hasn’t decided the amount yet.

4. Other Recommendations by Finance Commission

  • Government should reform the direct tax system to increase tax collection.
  • Government should review the outcomes of all Government schemes and abolish non-essential schemes.
  • Government should follow FRBM Act in letter and spirit. It should avoid off-budget borrowings through para-statal entities.
  • Union and State Government should together spend 2.5% of their GDP on the Healthcare sector by 2025.
  • Form All India Medical and Health Service as 4th All India Service and IAS, IPS and IFS.
  • Some States have requested special category status. But Finance Commission has refrained from commenting on this matter as it wasn’t part of their Terms of Reference.

Issues

  • Some State governments are unhappy that the 15th finance commission should stick to its Constitutional mandate of giving funds to States & not allot them to the Union. ESLE less money available for State Governments’ development works.

Public Service Values

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Public Service Values

This article deals with the topic titled ‘Public Service Values’ This is part of our series on ‘Ethics’. For more articles, you can click here.

Introduction

We have already seen Core Foundational Values. Those were the uppermost hierarchy of values. Apart from them, there are many other values (secondary values)

In these values, the question asked are 

  • Define that particular value.
  • How can you form this value in yourself?
  • If you are the head of some institution, how can you form these values in your organisation )Common Answer – Give space to juniors, open to them, set an example by having that quality in yourself, use Emotional Intelligence etc.) 

Public Trust

  • Public Trust is the measure of public confidence and faith commanded by an officer or an institution. 
  • Public Trust in the civil servant enables him to take bold steps.
  • Public trust in civil services can be achieved through transparency and efficient and consistent service delivery.
  • Example: Election Commission of India enjoys high trust, which has helped it implement the Model Code of Conduct even without the Legislature‘s backing. 

Diligence

  • Diligence is the quality of showing perseverance in carrying out the work.

How to teach this among civil servants?

  • By role modelling: There have been various public personalities who showed exemplary diligence in their general conduct. Authorities should try to make such personalities the role model for civil servants. e.g. M. Shreedharan, T.N. Sheshan, J.Lyngdoh.
  • Social recognition & awarding performing civil servants.
  • Giving adequate autonomy to the civil servant: freedom from political pressure will allow the civil servant to engage in his work actively.

Perseverance

  • It is the quality of continuing to try to achieve a particular aim despite difficulties.  
  • It is seen in people like Abraham Lincoln, Mahatma Gandhi etc., as they were never disappointed because of hardships or failures.
  • The single-minded focus of researchers that keep on repeating experiments for several years is an excellent example of perseverance.
  • For civil services, perseverance is a key value. The changes that policies bring, e.g. removing open defecation or improving the sex ratio in a district, are goals that cannot be achieved overnight. Many people oppose the schemes because they did not show results in one year or two years. Civil servants have to persevere if they honestly believe that the current policy/scheme is the best way to achieve desired goals. However, there may not be an immediately visible impact.

Commitment

  • The act of binding oneself with a particular cause intellectually or emotionally is called commitment.  
  • Examples include : 
    • Abraham Lincoln was committed to ending slavery. 
    • Gandhi was Commitment to Non-Violence.

Courage (Fortitude)

  • Courage or fortitude means showing strong will even in the face of danger.
  • It is another feature of gutsy bureaucrats because they can take transformational steps only if they dare to accept the responsibility of failure, if there is any.
  • Civil servants work in a dynamic environment where they may be subjected to various external pulls and pressures. They must demonstrate steadfastness and commitment to values that they adhere to.
  • As Nelson Mandela put it, “Courage is not the absence of fear, but the triumph over it”

Courage enables people to face harsh consequences for their acts. For instance, whistle-blowers like Edward Snowden often pay a heavy price for disclosures.

  • Without courage, it is challenging to display qualities like leadership which entails laying out roadmaps for the future amidst uncertainty. For example, it is “courage” that enabled Mahatma Gandhi to demonstrate the virtue of nonviolence against the oppressive colonial regime.
  • It encourages people to take firm decisions and attempt things that they have not tried before. For instance, it takes courage to invest in novel & seemingly impractical/commercially unviable ideas like SpaceX.

Innovativeness and Creativity

  • With the rapid advancement of ICT, civil servants have to be innovative and creative to make their administrative work faster, smoother and more efficient using such technology.
  • Moreover, the administration should be ecology-based. When there are fast pace changes in ecology, the civil servants must be creative enough to match the changing environment to fulfil their duties innovatively.

Selflessness

Holders of the public office should act in the public interest. He shouldn’t work to gain financial or any other benefits for himself, his family, or friends. 

Temperance

  • It is the ability to restrain & self-control.
  • Emotionally Intelligent Persons show Temperance as well.

Humility

  • Humility is not denying the qualities you have but not demanding special treatment and higher importance because you have specific attributes. 
  • Humility is the mother of all virtues. Being humble is essential for civil servants. They can turn arrogant because of power and authority. Civil servants should not think of themselves so big that other people look small.  
  • Humility is essential when there is extreme asymmetry of power (like civil servants and ordinary people).

Gratitude

  • It is a feeling of being grateful and thankful. 

Adaptability

  • It is the ability to change in order to deal successfully with new situations. 

Magnanimity

  • It is a quality of being kind, generous and forgiving, especially toward an enemy or a rival.

This marks the end of the article ‘Public Service Values’. For the entire series on ‘Ethics’, CLICK HERE.

Social Influence and Persuasion

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Social Influence and Persuasion

This article deals with the topic titled ‘Moral Influence and Persuasion’ This is part of our series on ‘Ethics’. For more articles, you can click here.

Attitude Change Theory 

Attitudinal change means changing someone else’s perception of what is right or wrong according to our will.

Attitudes change can manifest itself as:

  1. A person receiving new information from others or media – Cognitive change
  2. Through direct experience with the attitude object – Affective change
  3. Force a person to behave in a way different than normal – Behavioural change

Attitude change can happen through the following mechanisms.

1 . Creating Dissonance 

  • This method can be used to alter cognitive based attitude.
  • For example, a person might not have thought that not paying tax is also a form of corruption. Hence, we can change this attitude by planting an idea in a person mind that challenges his beliefs by arguing that tax evasion is the same as corruption  
  • Application for Civil Servants: In advertisements or via mass campaigns we give information to challenge the beliefs of the public.

2. Operant Conditioning

  • This method can be used to alter behaviour-based attitude. 
  • Punish when somebody does the wrong thing. He will stop doing that thing.

3. Classical Conditioning

  • It can be used to change attitude, especially of children. For example: Create phobia in children of things you don’t want them to do.

4. Social Influence

  • Explained below.

5. By Persuasion

  • Explained below.

Persuasion Theory

  • Persuasion refers to the process of changing the attitudes and behaviours of the TARGET GROUP  towards some event, idea, object, or another person (s) in the intended direction, by using written or spoken words to convey information, feelings, or reasoning, or a combination thereof.
  • It should be noted that Persuasion is a RECEIVER CENTRIC EXERCISE. It is not what the source says it is what the receiver understands.  

Persuasion involves 4 elements

  • Source / Persuader: Which is the originator of the information or message
  • Receiver / Target Group: It receives the information presented by the source 
  • Persuasive Message: Appeal issued by the source 
  • Channel / Medium through which message/information is delivered to the Receiver 

It can be summed up as – Who says, what, to Whom through what means. 

Why Public Officials are not able to Persuade the Target group?

  • The reason for this is the presence of certain barriers: Semantics, Psychological and Physical Barriers. If the Public Official can overcome those barriers, only then Persuasion will be successful.
Persuasion Theory
  • To overcome these barriers, District Magistrate can use various influence tactics such as involving Sarpanch to overcome these barriers. Along with that, he/she must take feedback from the Target Audience to rectify any shortcomings.
Persuasion UPSC Case Study

Source, Receiver and Message Characteristics

1 . Source

The source will communicate the message.

It should have the following three characteristics:-

Credible 1. Expertness 2. Trustworthiness Attractiveness 000 1. Physical Features 2. Communication Styl 3.AttitudinaI Similarity civils Power ia.com 1. Power enjoyed by person

1.1 Credibility 

  • To access credibility, we have to look into two things i.e. 
    1. Expertness (judged by the knowledge base of source). 
    2. Trustworthiness (judged by finding out whether the source has a vested interest). 
  • A high credibility source is more successful in bringing about the desired attitude change as the credibility of the source will make the Target Group listen to the message delivered by the source. 

1.2 Attractiveness

  • An attractive Source is more likely to succeed in persuasion.
  • The primary factors that decide the attractiveness of the source include 
    1. Physical Features 
    2. Communicative Versatility 
    3. Attitudinal Similarity

1.3 Power

  • Power is the potential to change the behaviour of the target group in the intended direction despite their resistance.

Power, Attractiveness and Credibility will cause behaviour change in different ways

Power Compliance
Attractiveness Identification
Credibility Internalisation

Hence, Credibility is the best way to change behaviour because it will lead internalization of values and attitudes. If all three things are present, nothing better than that.

Note:  The biggest barrier to behavioural changes in India is that the common citizen does not have an emotional connection with the chief change agent—the government. Governments are considered corrupt and inefficient.

2. Message

2.1 Message Discrepancy

  • It means the degree of inconsistency in the message the source should present to the target group. 
  • The message should be such that it should be within the zone of acceptance of the target group. 
    1. Some people have a wider zone of acceptance and they are facilitators. 
    2. Some people have a very narrow zone of acceptance and they are resistors. 
Message Discrepancy

2.2 Emotional Factor

  • The message should have emotional content in that.
  • For example, to motivate someone to stay fit or to quit smoking, one should not only cite scientific evidence to prove the point but can also convince using the fear of deadly diseases or the joy of a healthy life.

2.3 Fear Appeal

  • Mild and moderate appeals to fear generally work better than strong fear appeals. 
  • Strong fear appeals produce defensive avoidance wherein the target group insulate itself from the message.

2.4 Targeting values

  • People can manage their self-images by yielding to requests for action that fits or enhances their identities.
  • Influence professionals can increase compliance by linking their requests to the values to which people feel committed, especially when these values are prominent in consciousness.

2.5 Other factors

  • Persuasion requires a message to be presented in vivid language and backed by data.
  • The message should be such that it establishes a common ground with target people. For example- Sabka Sath Sabka Vikas Slogan used by BJP during election campaign established common ground with the public.
  • Point out the benefits: Persuader should highlight the major benefits of changed behaviour or attitude.
  • Social proof technique: People tend to follow others (bandwagon effect) more so when they don’t have sufficient information to decide on their own. This technique will involve you telling the target population that other people are getting benefits from the suggested change, with empirical evidence. For example, in campaigning against female feticide in Haryana we may invoke the examples of some female sportspersons who have won laurels like S. Nehwal in Badminton.
  • Scarcity: This involves letting people know that they stand to lose on a chance to get the benefits out of the proposed change. For example, we often see the end of the season or hoardings like Hurry!! Limited offer.

Best results are obtained when the Persuasive message has both emotional and factual element in it.

3. Receiver Characteristics

3.1 Personality factors

  • Individuals with high self-efficacy, high self-esteem, moderate level of arousal and internal locus of control are difficult to persuade but when they are presented with logical arguments supported by relevant facts, they are likely to be won over. 

3.2 Intelligence

  • Intelligence refers to the information processing ability of an individual.  
  • Intelligent people because of their superior critical thinking abilities are less likely to be influenced by appeals that are illogical or not supported by relevant facts. However, when presented with appeals that have factual backing, they are likely to be convinced. 

4. Channel Factor

  • Use appropriate channel of communication (Don’t show the picture to the blind).
Radio civilsped' •a.com Natak Digital Marketing

Cognitive Route to Persuasion – Elaboration Likelihood Model (ELM)

  • It is an influential cognitive model of persuasion and it suggests that attitude change can occur either through
    • Careful processing of attitude relevant information i.e. Central Route OR 
    • In a relatively automatic manner in response to various persuasion cues i.e. Peripheral Route
  • Attitude change produced through Central Route is more lasting and has a stronger impact upon the old behaviour. 
Elaboration Likelihood Model

Central Route: When the target group finds the message interesting, important and personally relevant and when nothing else prevents them from devoting careful attention to it, they are likely to examine the message in a careful and thoughtful manner evaluating the strength and rationality of the arguments made. If they find the arguments appealing, relevant and factually supported, then they are likely to change their attitude and Persuasion occurs. 

Peripheral Route: In contrast, if they find the message uninteresting or uninvolving, they are not motivated to process it carefully but still the persuasion occurs but this time through the peripheral route. If the message contains something that induces a positive feeling or the source of a message is high in prestige and status, under these conditions Attitude change may occur without critical analysis of message content. 

Attitude Change accomplished through Central Route is more desirable because

  • It lasts longer than one achieved through the peripheral route.
  • It is more resistant to later attempts at persuasion. 
  • It is more closely related to behaviour than the attitudes changed through the peripheral route. 

Culture and Attitude Change

  • In the west, people are more individualistic (not bothered about what others feel about them). But Asian Culture is different & people are more interdependent
  • The western ad should let people feel that they are free but Indian ad should be such that you will be treated positively by the community if you do something (because here what society thinks about you is more important).

Social Influence / Peer Pressure

  • Social Influence can be defined as a change in behaviour caused by real and imagined pressure from others (in the society). 
  • It plays a very important role in  
    1. Attitude formation and change. 
    2. Removal of Prejudice 
    3. Group Decision making 
  • It gets manifested through three mechanisms
Conformity Group influence in action
Compliance Making a request
Obedience Giving orders

1. Conformity

  • Involves changing one’s behaviour to match the responses of others and to fit in with those around us.
  • Why person do this?
    • Human beings, being inherently social, desire companionship or associations. For a successful and healthy atmosphere in the group, people try to blend in.
    • They change their behaviour somewhat so that they are liked.
    • To avoid social rejection and fear of being different from the group. 

Case Study of #SelfieWithDaughter

The selfie campaign showcased examples of parents around the country who were celebrating the birth child. Most people wanted to conform, and more and more parents posted selfies with their girls. Started by one proud father in a village in Haryana, the campaign went viral and #SelfieWithDaughter became a worldwide hit.

2. Compliance

  • Act of changing one’s behaviour in response to a direct request from friends, neighbours, relatives etc.
  • In this, people appear to agree with others in public but keep their dissenting opinions private.

3. Obedience

  • Obedience is a special type of compliance that involves changing one’s behaviour in response to a directive from an authority figure.
  • One reason authorities are influential is that they are often experts, and, by following an authority’s directives, people can usually choose correctly without having to think hard about the issue themselves.
  • Reasons for Obedience 
    1. Visible Badges: Badges on the dress of General is different from Captain to remind them who is IN-CHARGE. 
    2. Transfer / Diffusion of Responsibility: Transfer of responsibility in case you are ordered to do that work by your superior or person of authority and diffusion of responsibility when a person is working in a group.

Milgram’s Experiment

  • To show that how people indulge in acts of destructive obedience. 
  • Hitler was an evil dictator. But even ordinary Germans participated in atrocities against Jews. The reason for this observation was given by Milgram’s Experiment. 
  • Prof. Stanley Milgram of Yale University (1961) did this study and experiment.

Experiment

  • In this experiment, Confederate (Learner / Actor) and Subject (Teacher) were made to sit in two rooms separated by transparent glass. 
    • Subject (Teacher) was asked to give a shock to the Student if he did a mistake and increase the magnitude of shock with each mistake. 
    • Confederate (Actor) was the person implanted by the Experimenter in the experiment who deliberately committed mistakes and pretended to be hurt by the shocks and scream in pain when the button was pushed.
  • 2/3rd of the participants gave shocks to a fatal level (450 volts).
  • Reason: There was a doctor (Person of Authority) who kept saying “increase the voltage, the person will not die.”
Milgram Experiment

Moral of the story

  • Ordinary people are willing although with some reluctance to harm an innocent stranger if ordered to do so by someone in authority. They did so because of (destructive) Obedience since there was 
    • Visible badge (person of authority) 
    • Transfer of responsibility (responsibility was of a person who gave order)
    • The gradual escalation of orders by an authority figure. 
  • This is the reason why German Officers many of whom were not even anti-Semitic killed Jews.  

How to resist Destructive Obedience 

  • Exposure to Disobedient Morals such as Mahatma Gandhi’s philosophy of Civil Disobedience. A person should learn to say no to things which his/her conscience won’t allow. 
  • Making the target group members realize that it is them and not authorities that would be responsible for the harm produced. 

Successful Case Studies

Successful Case Study of Changing Attitude : Swachh Bharat Mission
Successful Case Study of Changing Attitude