There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Ninth Edition we are covering the following news:
- Why India has been downgraded from ‘free’ to ‘partly free’ by US Think tank
- Indian economy out of technical recession
- USA’s New Afghan Peace Plan
- Domicile based preferential policy of Haryana
- 10,113 companies voluntarily shuttered operations during Apr 2020-Feb 2021 period
- CPSE assets sale to bring about a paradigm shift in infra
The US-based think tank Freedom House has downrated India from free to partially free. The think tank also expressed apprehensions that the world’s largest democracy is moving towards authoritarianism under the NDA government headed by Prime Minister Narendra Modi. Pointing to a decline in global democracy over the last 15 years, the report said that nearly 75% of the world’s population lived in a country that faced deterioration over the last year. While Finland, Norway and Sweden are the most free countries in the world, with a score of 100, and Tibet and Syria are the least free with a score of 1.
Freedom House, assesses every country with the help of about 125 analysts and more than 40 consultants. Scores are Based on firstly political rights indicators such as the electoral process, political pluralism and participation and government functioning and secondly on the basis of civil liberties indicators which are related to freedom of expression and belief, associational and organisational rights, the rule of law and personal autonomy and individual rights. Based on the total scores, countries are then declared as “free”, “partly free” or “not free”.
‘Freedom in the World Report 2021’ gave India a score of 67/100, declaring it partly free. India has fallen by four points since last year when it was still in the ‘free’ category due to “a crackdown on expressions of dissent by the media, academics, civil society groups, and protesters”. India appears to have abandoned its potential to serve as a global democratic leader. Some major reasons the report has stated for the fall in score:
Freedom of media – freedom of press has been compromised because of added government pressure on journalists, and there’s rising “activity” on campuses intent to disturb academic freedom.
Internet shutdown – In a year when social media censorship has been hotly seated, while the government shut down Internet connectivity in Kashmir and on Delhi’s borders, India’s Internet freedom score dropped to just 51.
Response to COVID -19 – Abrupt lockdown left millions of migrant workers displaced. Muslims were also scapegoated and blamed for the spread of the coronavirus and faced attacks by vigilante mobs.
Political pluralism – The government intensified its crackdown on protesters opposed to a discriminatory citizenship law and arrested dozens of journalists who aired criticism of the official pandemic response.
Laws – The report also made a note of Uttar Pradesh’s ‘love jihad’ law to prohibit forced religious conversion through interfaith marriage and said that a number of Muslim men had been arrested for allegedly forcing Hindu women to convert to Islam.
With India’s decline to Partly Free, less than 20 percent of the world’s population now lives in a Free country, the smallest proportion since 1995.
The Ministry of Statistics and Programme Implementation stated that the GDP in the third quarter of 2020-21 shows growth at 0.4 per cent. With this, the country’s economy is now out of a technical recession after the quarterly growth. The economy had shrunk by an unprecedented 24.4 per cent in the first quarter this fiscal following the coronavirus pandemic and resultant lockdowns. However, due to a spurt in economic activities in the second quarter, the GDP decline narrowed to 7.3 per cent. India has entered a “technical recession” in the first half of 2020-21 for the first time in its history. The technical recession occurs when GDP declines for two consecutive quarters. In the case of a nation’s economy, the term usually refers to back-to-back contractions in GDP.
To understand the technical recession in-depth, one must be able to distinguish between a recessionary phase and a recession. The recessionary phase is the counterpart of an expansionary phase. When the overall output of goods and services typically measured by the GDP increases from one quarter (or month) to another, the economy is said to be in an expansionary phase. And when the GDP contracts from one quarter to another, the economy is said to be in a recessionary phase. But when a recessionary phase sustains for long enough, it is called a recession. In other words, when the GDP contracts for a long enough period, the economy is said to be in a recession. But a technical recession is most often caused by a one-off event (in this case, the Covid-19 pandemic and the lockdowns imposed to combat it) and is generally shorter in duration.
Commenting on the growth numbers, the finance ministry said that real GDP growth has returned the economy to the pre-pandemic times of positive growth rates. It is also a reflection of a further strengthening of V-shaped recovery that began in Q2 of 2020-21 after a large GDP contraction in Q1 followed one of the most stringent lockdowns imposed by the government relative to other countries, it said. The V-shaped recovery has been driven by rebounds in private consumption and investments, the ministry said the initial policy choice of “lives over livelihoods” succeeded by “lives as well as livelihoods” is now bearing positive results.
Moreover, The Economic Survey 2020-21 also had expressed confidence that the Indian economy is poised for a smart V-shaped recovery, which will carry it through to a double-digit growth figure of 11% in real GDP, which would be the highest since Independence. The Indian economy has started to gain positive momentum in quarter 3 after it has seen investment demand grew by 2.6% and an increase in the centre’s capital expenditure. It is also speculated that the growth stimuli available from the union budget and the additional measures including the Production-Linked Incentive will lead to strong growth over the recovery horizon. And such recovery of activities has also been reinforced by some degree of the rollout of Covid-19 vaccines, and growing confidence in the market that things are getting back to normal.
After weeks of sensitive deliberation and confidential meetings, 2 secret Afghanistan documents have been leaked to the public signaling a massive push for a new peace agreement between the Taliban and the Afghan government that would facilitate the withdrawal of US troops from the 20-year war.
There were strong beliefs that the Biden administration will either adhere to former president Donald Trump’s deal with the Taliban, which would require the withdrawal of all remaining 2500 US troops in the country by May 1 or may consider extending it beyond early May or scrap the deal altogether. But the two documents published by Afghanistan’s TOLO News show that the Biden administration may be seeking an alternative deal of accelerated peace which could potentially set the stage for a troop withdrawal by the end in his first term.
The new proposal lays out a draft agreement meant to spur talks between Afghan government and the Taliban. The deal looks forward to the following plan of action to achieve the goal of peace restoration. Biden’s peace plan has kept open the possibility that the 2500-odd troops, currently deployed in Afghanistan, might stay on for a while. Under the earlier agreement with the Taliban, the US had promised to withdraw all troops by May 1 this year. Many in Washington believe that Trump administration wanted US leverage by proclaiming a confirmed date for withdrawal. In keeping the possibility open, Biden hopes to generate some leverage with the Taliban that has refused to abide by its commitment to reduce the levels of violence. The US is also building pressure on Afghan president Ashraf Ghani to establish the peace negotiations with Taliban. Washington is pressing the Taliban to accept an immediate agreement to reduce violence for 90 days that will provide the space for the peace initiative. This would help prevent any decisive radical activity in the heat of a deal by the Taliban with the support of Pakistan. Zalmay Khalilzad, the US representative to Afghanistan, has handed over a set of written peace proposals to both Kabul and the Taliban. Further, in a letter to Ghani, the US secretary of state Antony Blinken even stressed on the fact that US is not dictating terms to Afghan parties, but facilitating the movement towards an inclusive interim government, an agreement on the foundational principles for a new political order and a permanent and comprehensive ceasefire. The US is asking Turkey to convene a meeting of the government of Kabul and the Taliban to finalize a peace settlement. This new role for Turkey in Afghan peace process comes as a surprise for many, given a rather unsupportive stance of Joe Biden towards Turkey in his election campaign. The Biden administration is asking the UN to convene a meeting of the foreign ministers from China, Russia, Pakistan, Iran, India and the US to develop a unified approach to peace in Afghanistan.
The prospective deal sounds very promising for the Afghanistan problem but there are elements to it that might be unacceptable either to Kabul or Taliban or both as both are unwilling to share power between them. Moreover, it is highly skeptical that the Taliban will accept any dilution of the strict Islamic system that it wants to enforce. Hence, the initiative may not end the two-decade old US military intervention in Afghanistan but it is being viewed as a significant transition in Afghanistan’s violent contemporary history that has played a major role in South Asia’s regional and international relations.
This week, Haryana has legislated the domicile based reservation policy preferring residents of their state. The Employment of Local Candidates Bill 2020, passed by the Haryana assembly in November last year and now it has received the assent of the governor. The BJP-led coalition government had moved this bill as it was a poll promise of its alliance partner, the Jannayak Janata Party. And in the light of the farmers’ agitation, in which a lot of pressure was mounted on JJP to withdraw from the coalition, the assent to the legislation by the governor is being seen as a move to keep the alliance intact. This new law provides 75% of reservations in the private sector to job seekers from the state with a specified salary reserved for the local youth. This is applicable for all jobs with a monthly payment of up to Rs 50,000 and will be in effect for ten years and applies to all the Companies, Societies, Trusts, Limited Liability Partnership firms, Partnership Firm and any person employing ten or more persons and an entity.
The data from the Centre for Monitoring Indian Economy (CMIE) showed that the unemployment rate in Haryana was at 26.4 percent as of February 2021, which is the highest in the country. The state government claims that this bill will provide tremendous benefits to the private employers directly or indirectly through qualified and trained local force and enhance the efficacy of industry. It will discourage the influx of migrants seeking low-paid jobs. But on the other hand hiring experts said that implementation of such a scheme is likely to have a ripple effect in other states and lead to a rise in unemployment. Moreover Haryana is the manufacturing hub for sectors such as consumer electronics and automobiles. Further, IT sector firms and startups have a large presence in that region and will be worst hit by this sudden change in policy.
Such a mandate to provide 75% of new jobs to local youth in private establishments has raised three potential constitutional concerns. Firstly, a state law providing for reservation in private establishments based on a residence may not be constitutional as this is a power that is vested in the Parliament and not in any state legislature. Secondly, reservation to the extent of 75% may violate the guidelines laid down by the Supreme Court as it was decided earlier that a 50% reservation limit should not be breached. Thirdly, reservation in private institutions may violate their right to carry on an occupation or business freely.
Legal experts have described this law as unconstitutional as it creates a “policy of exclusion” to exclude the other people of the country. If every state adopts this policy then migrants can’t get a job or education anywhere else other than the state they were born in which violates their constitutional rights. This bill is constitutionally indefensible as the Constitution prohibits discrimination based on place of birth. The right to move freely in the country and reside and settle in any part of it, the right to carry out any trade or profession, is all established rights. Moreover, Haryana is not only the first state to adopt this policy as some other states have also enacted laws to provide reservation for their local youth in the private sector. These states include Maharashtra (up to 80% quota), Karnataka (75%), Andhra Pradesh (75%) and Madhya Pradesh (70%). However, many of these state laws have been challenged in court and, therefore, not implemented.
Lastly, it is often argued that giving preferential treatment to the residents of a state will help in the rightful allocation of the resources of the state and would encourage people to work within the boundaries of their state and also seen as a way to stop the migration of people from backward states to metropolitans, thereby reducing the burden on such cities. But such a kind of parochialism encourages regionalism and threatens the unity of the nation. The move to give reservation to the candidates born in the state itself runs against the spirit of constitutional equality and fraternity. It is more likely that such politically motivated steps would be overturned by the judiciary as has been done several times in the past. Also, the government is not an employment guaranteeing agency rather an authority that should create an environment through its policies that minimize inequalities in income, status, facilities and opportunities.
Considering the past activities of the COVID-19 virus in consideration and the crash of the economy due to disruption of all activities by the lockdown, the latest data available with the Ministry of Corporate Affairs (MCA) showed that a total of 10,113 companies were struck off under Section 248(2) of the Companies Act, 2013, in the current financial year till February specifically on a voluntary basis. Section 248(2) implies that the companies had shut their businesses voluntarily and not due to any penal action. The ministry administers the Act and maintains the registry of companies on the basis of documents and applications filed.
In a written reply to the Lok Sabha on Monday, Minister of State for Corporate Affairs Anurag Singh Thakur said the ministry does not maintain any record of the companies that have gone out of business. “A total of 10,113 companies during the year 2020-21 (from the month of April 2020 to February 2021) have been struck off under section 248(2) of the Act. MCA has not run any drive to strike off companies suo-moto during 2020-21,” he said.
As per the ministry’s data, a total of 2,394 companies were struck off in Delhi while the number stood at 1,936 companies in Uttar Pradesh. Tamil Nadu and Maharashtra saw a shutting down of 1,322 companies and 1,279 companies, respectively, during the April 2020-February 2021 period. The data was provided in response to a query by a member seeking state-wise details of the number of registered companies that have gone out of business during the year 2020-21.
In the wake of the pandemic, the central government had imposed a nationwide lockdown in late March 2020 to curb the spreading of coronavirus infections and the restrictions began to be eased in May that year. In the latter months, many states had also imposed restrictions on movements amid the number of spiraling coronavirus cases. With so many companies shutting down, it is obvious that there should be a visible impact on the employment rate and economy and an immediate recovery cannot be expected so soon.
Finance Minister Nirmala Sitharaman on 9th March said monetization of CPSE assets is based on the principle of value creation for the government and investors and would bring about a paradigm shift in infrastructure augmentation and maintenance. Chairing the National Workshop with the states/UTs on Asset Monetisation organized by Niti Aayog, the minister sought the collaboration of states for the holistic development of infrastructure. She said India can become a USD 5 trillion economy, while striking the right balance between fiscal imperatives and socio-economic welfare, through active collaboration between the public and private sector.
“Asset Monetisation needs to be viewed not just as a funding mechanism, but as an overall strategy for bringing about a paradigm shift in infrastructure augmentation and maintenance,” she added. Sitharaman also underlined the government’s resolve for value creation and improvement in the productivity of brownfield infrastructure assets via innovative instruments. Observing that asset monetization is based on the principle of Value Creation for Government and investors, she said, “Our vision for Infrastructure is ultimately of, for and by our States. Without whose collaboration, holistic development of infrastructure is neither feasible nor impactful”.
Prime Minister Narendra Modi had last month said that 100 under-utilized or unutilized assets with public sector units (PSUs), such as those in the oil and gas and power sectors, will be monetized, creating Rs 2.5 lakh crore of investment opportunities. Sitharaman in her 2021-22 Budget speech had said monetizing operating public infrastructure assets is a very important financing option for new infrastructure construction. “A National Monetisation Pipeline of potential brownfield infrastructure assets will be launched. An asset monetization dashboard will also be created for tracking the progress and to provide visibility to investors,” she had said.
After a devastating year for the economy, it is imperative that the government ensures its assets are rightly balanced at all times helping maintain the balance in the private-public sector and at the same time manage its own pockets for efficient working of the economy.