9 PM Daily Brief – May 11th ,2020

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mains ORIENTED CURRENT AFFAIRS

GS: 2

  1. Decentralized Governance and COVID 19
  2. Importance of NAM
  3. The trends shaping the post-COVID-19 world
  4. Labor law changes and implications
  5. The Migrant Crisis and the inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979.

GS: 3

  1. Revival of banks in post-COVID India

PRELIMS ORIENTED CURRENT AFFAIRS->FACtly


1.Decentralized Governance and COVID 19

Source The Hindu , Indian Express

Syllabus – GS Paper 2 – Powers, Functions and Responsibilities of various Constitutional Bodies

Context – Kerala’s success in democratic decentralization and combating COVID

What is Democratic Decentralization?

It is continuous process of devolving powers and functions to third tier of government which promotes grassroot governance for the people, by the people and of the people.

Constitutional Provisions

73rd and 74th Constitutional Amendment Acts of 1993 provides framework for rural local bodies and urban local bodies’ establishment and functioning across different states.

Kerala’s Model: Features

  • Decentralized power: Acclaimed for its investment in human resources, it was among very few states which decentralized power to Panchayat’s and other local bodies.
  • Strengthening PHCs: Health institutions were placed under direct administration of local bodies. This led to strengthening of Primary Health Care centers(PHCs) which are first point of contact for citizens, especially in unseen situations.
  • Funding: Also, Flexible Development and Maintenance Funds are devolved to Panchayat’s, even when State suffers from chronic fiscal stress.
  • Civil Society participation: For ensuring accountability of local bodies, civil society in state is strengthened. For instance, Kudambshree (self-help group) collaborates with local bodies for welfare of people as well as hold them accountable for decisions and actions they take.
  • Past Experience: It was the empowered local bodies and strengthened healthcare institutions which lead the successful battle against Nipah virus in 2018.
  • Investing in Education: Apart from health, Kerala has improved its human resources with better educational services. This has ensured that state has abundance of skilled workforce including women who can serve the public through local bodies as well as health institutions.

How is this model successful in COVID times?

Since, government has imposed lockdown to prevent community transmission at faster rate; movement of State and District public functionaries has been restricted except of police, health care professionals and few other essential service providers.

Thus, local bodies are serving the needs of citizens which include providing essential and basic amenities, especially to the vulnerable sections.

Way Forward – Political commitment and competent bureaucracy which doesn’t have fear of loss of patronage is the need of the hour in States as only this can empower the constitutional third tier system. 

2.Importance of NAM

Source: The Indian Express

Syllabus: GS 2- Issues related International Groupings involving India and/or affecting India’s interests.

Context: The video address of PM Narendra Modi to a Non-Aligned Nations Summit on promoting global cooperation in combating the coronavirus has generated lot of attraction. Modi called for international institutions that are more representative of the world today and highlighted the need to “promote human welfare and not focus on economic growth alone.”

Importance of Non-Aligned Movement (NAM) for India

  • Stakes for India: India has stakes in the so-called “Global South”, a term that refers to the entire developing world and not just members of the NAM. India is one of the founding members of NAM and has invested a significant amount of economic and diplomatic capital in it. So, India needs to consolidate it.
  • Not just anti-Western ideological Drive: NAM is neither an anti-Western ideological drive nor a ritual to be performed every three years (attending NAM summits). Rather, NAM remains a critical diplomatic forum for the pursuit of India’s international interests.

Why the NAM’s address got so much attention?

  • Importance of NAM: It is billed as PM Modi’s first address ever to the NAM after skipping the last two NAM summits. For those who believed that the current government has no real attachment for the non-aligned legacy of Jawaharlal Nehru, Modi’s engagement with the NAM is a welcome return.
  • Era of New Cold War: A new Cold War is beginning to unfold between the US and China. India needs to preserve some political space between the two as the conflict is expected to cover all dimensions of international society.
  • For Independent India: To become an independent power in global affairs, forums like the NAM can mobilize support on issues of India’s interest. An independent Indian line backed by strong support from NAM can make a big difference to the outcomes of the impending issues at the World Health Assembly as well as the WHO’s performance during the COVID crisis.
  • Significance of Multilateralism: The summit underlined the significance of multilateralism by addressing the challenges faced by NAM countries in dealing with the COVID-19.

Way Forward

The outbreak of COVID-19 has again opened the limitations of the current World Order. In the post COVID world, we need a new template of globalization based on fairness, equality and humanity in which NAM’s role will be very important. 

3.The trends shaping the post-COVID-19 world

Source: The Hindu

Syllabus: GS 2- Issues related to International Institutions, agencies and fora – their Structure, Mandate.

Context: As the COVID-19 pandemic spread rapidly across nations, they responded with a lockdown triggering a global economic crisis. The COVID-19 handling has brought certain geopolitical trendlines into focus.

Six geopolitical lines are defining the Emerging global order:

  1. Rise of Asia:
    • Resilience of Asian Economies: The 2008 financial crisis showed the resilience and the economic forecasts indicate that only China and India from G-20 nations are likely to register economic growth during 2020.
    • More readiness in dealing Pandemic: Asia showed a greater readiness in tackling the pandemic compared to the US and Europe with greater responsiveness and more effective state capacity.
  2. Retreat of US:
    • Lack of resources: Due to its interventions in Afghanistan and Iraq.
    • America Alone Policy: During the current crisis, the U.S.’s efforts are at cornering supplies of scarce medical equipment and medicines and acquiring biotech companies engaged in research and development in allied states.
    • Mismanagement in handling crisis at home: Its pandemic handling has not been successful at home and showed that countries are losing trust in the U.S.’s leadership.
  3. Internal Challenges of Europe:
    • Expansion of membership to EU: There is difference in threat perception between the old Europe and new Europe making it difficult to reach agreement on political matters e:g relations with Russia and China.
    • Rise of Euroscepticism: The rising populism has permitted some EU members to welcome the virtues of “illiberal democracy”. It has worsened with the Brexit.
    • North-South divide within the Eurozone: When austerity measures were imposed on Greece, Italy, Spain and Portugal by the ECB, the strains came up. The ECB chief’s statement that “ECB is not here to close spreads” undermined solidarity as the Italians are battling with the pandemic and growing borrowing costs.
    • Export Control: The medical equipments were denied to Italy by its EU members who introduced export controls leading to China airlifting medical teams and critical supplies.
    • Failure of concept of Shared Sovereignty: The Schengen visa or free-border movement became the victim to the pandemic.
  4. Rising China:
    • Assertive China: While China’s growing economic role has been visible since it joined the WTO, its more assertive stand has taken shape under President Xi Jinping’s leadership with the call that a rejuvenated China is now ready to assume global responsibilities.
    • Concerns regarding Chinese Rise: Chinese assertiveness has raised concerns in its neighborhood and the U.S. which feels betrayed because it assisted China in the hope that an economically integrated China would become politically open. The pandemic has seen increasing rhetoric on both sides.
    • Belt and Road Initiative: It seeks to connect China to the Eurasia and Africa through both maritime and land routes by investing trillions of dollars in infrastructure building as a kind of pre-emptive move against any U.S. attempts at containment.
  5. Failure of International Bodies:
    • Global Concerns: The COVID-19 shows the failure of international and multilateral bodies in dealing them. The WHO which was expected to lead global efforts against the health crisis became a victim of politics.
    • Subject to Big Power Politics: During the Cold War, U.S.-Soviet rivalry blocked the UNSC on many sensitive issues and now with major power rivalry returning, they are becoming ineffective again.
    • Losing Autonomy: Agencies such as WHO have lost autonomy over time as their regular budgets have reduced forcing them to increasingly rely on voluntary contributions sourced largely from western countries and foundations.
  6. The energy Factor:
    • Changing Energy Markets: There is a growing interest in renewables and green technologies on account of climate change concerns and the U.S. is emerging as a major energy producer.
    • Tensions in West Asia: The emerging economic recession and depressed oil prices will worsen the internal tensions in West Asia which are solely dependent on oil revenues.

Way Forward

Rising nationalism and protectionist responses will prolong the economic recession into a depression, sharpening inequalities and polarisations due to COVID-19. More unpredictable and turbulent times lie ahead. 

4.Labor law changes and implications

SourceIndian Express

Syllabus – GS Paper 2 – Issues Relating to Development and Management of Social Sector/Services relating to Health, Education, Human Resources.

Context – Recently a number of state governments, like MP, UP made key changes in the application of labour laws

What are Indian labour laws?

There are over 200 state laws and close to 50 central laws. And yet there is no set definition of “labour laws” in the country. 

Labor laws can generally be classified into following categories:

     a. Wages and Remuneration – Minimum Wages act, 1948.
     b. Social Security – Employees Provident Fund Act, 1952 and Workmen Compensation Act, 1923
     c. Conditions of work – Factories Act, 1948 and Contract labor Act, 1970
     d. Industrial Relations – Industrial Dispute Acts, 1947 

Criticism of labor laws 

  1. Inflexible – Multiple legal requirements discourage firms (those employing more than 100 workers) from hiring new workers because firing them requires government approvals.

Consequence of same is:

    1. Increased contractual employment- Even the organized sector is increasingly employing workers without formal contracts.
    2. Dwarf firms – This constrains the growth of firms which affect economies of scale.
    3. Exploitation of workers – In absence of formal contracts, no social security is being provided to them. 
  1. Corruption and rent-seeking – Multiplicity of laws and complicated procedures of labor laws has promoted corruption in bureaucracy. This in turn negatively impacts ease of doing business and foreign investment in nation. 
  1. Substitution of capital for labor – The high cost associated with the labor laws and their maintenance has led to substitution of capital for labor in a capital deficient and labor abundant economy.

Steps taken by States:

Steps taken by states like Madhya Pradesh and Uttar Pradesh under Section 5 of Factories Act (Section 5 of Factories Act grants exemption from provisions of Act for 3 months in case of public emergency.) :

  1. Working hours for labourer’s increased from 8 to 12 hours
  2. Exempted Industries from Right of worker’s section of Factory Act, 1948 – thus employer not bound to provide light, first aid, canteen, rest time, ventilation to workers.
  3. Industries not bound to maintain register of adult and child worker

Negative Implications of Reforms

  1. Informalisation of economy – According to ILO, nearly 81% of India’s employed population is in informal sector. The new labor law changes will increase this share as the existing formal workers would not get any social security.
  2. Right to negotiation violated – The labor unions now will have no bargaining power which in turn impinges on other rights of labourers and thus creating an enabling environment for exploitation.
  3. Fall in wages and vicious cycle of poverty – If all labour laws are removed, most employment will effectively turn informal and bring down the wage rate sharply. And there is no mechanism for any worker to even seek grievance redressal.
  4. No substantial rise in employment – Since labor laws changes are to attract investment and revival of industries which will boost employment, but this may not happen as due to COVID there is lack of consumer confidence and thus dampened demand.

Solutions

  1. Increasing the number of shifts – Instead of increasing number of hours from 8 to 12, increasing shifts from 1 to 2 will pave way for more employment.
  2. Government to partner with industries – Most governments across the world have partnered with the industry and allocated 3% or 5% of the GDP towards sharing the wage burden and ensuring the health of the laborers because if Covid hits laborers, the whole country would be sunk.

Way Forward- Stringent labor laws surely need to be amended. But during COVID distress, labor reform will work if labor is seen as key stakeholder.

 

5.The Migrant Crisis and the inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979.

Source: The Hindu and The Indian Express

Syllabus: GS 2- Issues related to Poverty and Hunger and Laws constituted for the Protection and Betterment of Vulnerable Sections.

Context: The nationwide lockdown announced in order to reduce the spread of COVID-19 highlights the urgent need to rationalize the legislative framework for labours in India. The lockdown has caused immense distress to migrant workers around the country. There are questions being raised about their welfare and the lack of legal protection for their rights.

The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979:

  • Objective: To prevent the exploitation of inter-state migrant workmen by contractors and to ensure fair and decent conditions of employment.
  • Applicable to: It is applicable to every establishment that employs five or more migrant workmen from other States; or if it had employed five or more such workmen on any day in the preceding 12 months.
  • It is also applicable to contractors who employed a similar number of inter-State workmen. The Act would apply regardless of whether the five or more workmen were in addition to others employed in the establishment or by the contractors.
  • Requirement of Registration: It requires all establishments hiring inter-state migrants to be registered and contractors who recruit such workmen to be licensed.
  • Benefits:
    • Accountability: It acts as the first layer of formalizing the utilization of their labor.
    • Legal basis: It helps the government to keep track of the number of workers employed and provides a legal basis for regulating their conditions of service.
    • Protection of Wages: The wage rates, holidays, hours of work and other conditions of service of an inter-State migrant workman shall be the same as those extended to other workmen in the same establishment, if the nature of their work is similar. In no case, shall the wages be lower than what is prescribed under the Minimum Wages Act.
    • They are entitled to displacement allowance, journey allowance and payment of wages during the period of journey.
    • Other benefits: Contractors are also required to ensure regular payment, non-discrimination, provisioning of suitable accommodation, free medical facilities and protective clothing for the workmen.

Importance of the Inter-state Migrant Act during COVID-19:

  • With proper implementation of the act, the state governments would have the complete details of inter-state migrant workmen coming through contractors within their states.
  • Though, this would still leave out migrants who move across states on their own, a large segment would be automatically registered due to the requirements of the Act.
  • States would have better prepared to take steps to protect such workmen during this lockdown.

Reasons for Poor Implementation of Inter-State Migrant Workmen Act:

  • Excessive Compliance Requirement: It makes their employment and cost of hiring significantly more expensive than intra-state workmen.
  • Failing in its Objective: It exists as another law that potentially provides rent-seeking opportunities to enterprising government inspectors while failing in its main objective.
  • Lack of State Capacity: To implement this law, government inspectors would not only have to maintain records of inter-state workmen but also to verify all other requirements regarding wages, allowances, accommodation and health care.
  • Disincentives for Employers: The excessive requirements set out in this law incentivize contractors and employers to under-report inter-state workmen rather than to register them.

Problems due to Informal nature:

  • No protection: Those in Informal System get almost no protections.
  • Problem in Cities: Welfare schemes are established on the basis of those getting the benefits. So, informal workers, especially in urban areas, fall through cracks in the system. While farmers get cash transfers, and labourers in rural areas have MGNREGA, there are hardly any schemes for informal workers in urban areas.

Proposed Code for Reforming Labour Laws in Parliament:

  • Consolidation of Laws: For consolidating and reforming labour law, a Bill has been introduced in Parliament called the Occupational Safety, Health and Working Conditions Code, 2019.
  • It seeks to repeal 13 Acts such as the Factories Act, Mines Act, Dock Workers’ Act, the Inter-State Migrant Workmen Act and other enactments relating to those working in plantations, construction, cinema, beedi and cigarette manufacture, motor transport, and the media.
  • Regarding inter-State migrant workers: The Act includes them in the definition of ‘contract labour’. At the same time, an inter-State migrant worker is also separately defined as a person recruited either by an employer or a contractor for an establishment situated in another State.
  • Similarity with 1979 Act: Provisions regarding registration of establishments, licensing of contractors and the inclusion of terms and conditions on hours of work, wages and amenities are same. Also, both envisage the payment of a displacement allowance and a journey allowance to inter-State migrant workers.

Views against Code:

  • Better to have separate Act: The unprecedented distress and misery faced by migrant workers due to the current lockdown has drawn attention to a beneficial legislation dedicated to their welfare.
  • Problem is poor implementation: Even though both the States where they work and home States have obligations cast upon them in the existing law, it has been poorly implemented. Preserving the separate act and enforcing it well is a better option than subsuming it under a larger code.

Way Forward

The government must be pragmatic and ensure that employers and contractors have incentives to come forward and register labourers without being worried about punitive action or impractical social safety requirements.

6.Revival of banks in post-COVID India

Source Indian Express

Syllabus – GS Paper 3 – Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment

Context – Following the Covid-19 shock, the twin balance sheet problem will increase its sphere among industries

 Twin balance sheet problem

It refers to the stressed balance sheets of banks due to non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other. Now the real estate sector as well as Non-Banking Financial Companies also has the stressed balance sheets.

 Impact of COVID on economy

Figure 1- Vicious cycle of COVID’s impact on economy
Figure 1- Vicious cycle of COVID’s impact on economy

 

 Reforms recommended by Arvind Subramaniam to revive this stressed sheet issue: 

  1. SNAP (Special Non-Adversarial Procedures for COVID) affected firms – IBC creditor committees (CoCs) would assess the NPAs of Lockdown Affected Enterprises (LAEs) which have risen due to economic crisis amidst the lockdown and classify them on two grounds:
  2. A) Companies with debt more than Rs 10,000 crore would be sent to the IBC.
  3. B) Companies with debt less than Rs. 10000 crores would be eligible under SNAP.

Under SNAP:

  • Insolvency Professional (IP) appointed by the CoC would work with existing management (who would continue to run the firm) to arrange for interim finance.
  • IP can assess how much of a debt reduction the firm needs, and within three months, would present a specific proposal to the CoC. If the CoC can reach a two-third majority in favor of the proposal, the promoter would keep the firm, while the firm would be granted a haircut and immediately released from bankruptcy.
  • To avoid overloading in National Company Law Tribunal, it would not be involved at all in SNAP. 
  1. Reformed IBC – Rather than directly initiating insolvency procedures, a reformed IBC would focus on loss-minimization of all the firms.
  2. Bad bank – Creation of PARA (Public Sector Asset Rehabilitation Agency) for two specific sectors i.e. power and the real estate sector. This is because the power sector is dependent on government policies and the real estate sector needs to balance the interest of the consumers.

 Way Forward – These steps will quickly set the stage for the economic recovery India badly needs — one that saves lives and saves livelihoods.


FACtly for prelims

 

Factly articles for 11th May 2020

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