Daily Editorial Analysis for 11th June 2021

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The rope of federalism and an unwanted tug-of-war

Why in News

  • The Centre-West Bengal controversy on the conduct of Bengal’s former Chief Secretary, has thrown up several political and administrative issues that deserve our attention for the future health of our federal polity.
  • There are two elements which need to be kept in mind while discussing this subject:
  • India is a ‘union of states’ and in this union, the State governments are not subordinate agencies of the central government.
  • There are, no doubt, matters enunciated in our Constitution, where the Centre’s decisions have primacy over those of the State governments, but this does not extend to holding of meetings.
  • Second, the meeting that became a flashpoint was the one called by the Prime Minister on May 28 to review cyclone relief work — in connection with cyclone Yass — in West Bengal.

Relief and the third tier

  • Relief and rehabilitation work in the event of a natural calamity or management of a disaster is of a local nature and is carried out by the district, sub-divisional and village level officials working under the State governments.
  • Over time, the States have conceded space to the Centre for disaster management for getting financial, technical and logistical support.
  • The comprehensive framework under the Disaster Management Act, 2005 operates mainly at the State, district and local levels.
  • Conduct of an Indian Administrative Service (IAS) officer, must be seen in this overall context along with the central government’s reactions which together raise issues regarding the norms of civil service conduct, political and administrative arrogance and revengeful behaviour.

The services and fine balance

  • The All-India Services were conceived by the makers of our Constitution to provide uniformity and high standards of public service in both the Centre and the States, and to provide a measure of administrative unity in our diverse and plural society.
  • To ensure quality and as a measure of convenience, IAS officers are recruited by the Union Public Service Commission and formally appointed by the President of India.
  • But they are ultimately borne in State cadres which makes them subject to the control of the respective State governments as well, especially when they are in the employment of their States.
  • To that extent their position is somewhat different from that of the central services who go through similar recruitment procedures but are under the Centre’s total control.
  • The IAS officers work for the central government on “deputation” from their respective State cadres and during their central deputation, their loyalty is of course to the central government.
  • IAS officers will face acute trust-deficit, if while working for a state government, they show preferential allegiance or loyalty to central government functionaries.

High-handed approach

  • Action has been initiated against chief secretary of West Bengal under Section 51(b) of the Disaster Management Act for failing to comply with the Centre’s direction to attend the review meeting taken by the Prime Minister.
  • This an absurd interpretation of the provision that is meant to deal with cases of defiance of the lawful orders or action of the competent authorities under the Act.


  • It is very unfortunate that for some inexplicable reasons, a mountain has been made of a molehill, as the cliché goes.
  • In these circumstances one misses the sagacity, wisdom and sophistication of some of our tall political leaders who steered the destiny of our nation in the past.

GS PAPER III                    

COVID-19 impact on Indian economy

Why in News

  • The second wave of the Covid-19 pandemic has taken a vicious toll on India’s health, but the economic toll has also been heavy, though nothing like the carnage seen in the first quarter of the last fiscal year, when GDP growth crashed 23.9 per cent in response to the Centre’s no-notice lockdown.

GDP of India

  • India’s GDP shrank 7.3 per cent in 2020-21 (in real terms adjusted for inflation). This is the worst performance of the Indian economy in any year since Independence.
  • Almost all the sectors have been adversely affected as domestic demand and exports sharply plummeted with some notable exceptions where high growth was observed.
  • A major concern of the second wave is that the virus has spread into India’s hinterland and could wreak havoc in villages, towns and small cities.
  • Lockdowns may help break the chain of transmission; however, they will just postpone another surge unless the gap period is utilized to vaccinate the people.
  • As of now, the country’s GDP growth is likely to be below the expected 10 per cent.

Wholesale price-based inflation

  • The wholesale price-based inflation shot up to an all-time high of 10.49 per cent in April, on rising prices of food items, crude oil and manufactured goods.
  • Experts believe that the uptrend is likely to continue. This is the fourth straight month of uptick seen in the wholesale price index (WPI)-based inflation.
  • In March, 2021, it was 39 per cent.

Merchandise exports

  • Centre’s flagship welfare schemes have kept pace despite slowdown.
  • Schemes like MGNREGA, Ujjwala, NSAP and PM Awas Yojana have seen a big jump in both physical and financial achievements in FY21 as additional succor was provided by the Centre to people affected by Covid-19.
  • Merchandise exports surged a record 196 per cent year-on-year in April as the country had witnessed a Covid-induced lockdown throughout April last year.
  • However, what comes as a pleasant surprise is that even in absolute terms, exports in April stood at $30.6 billion, up almost 18 per cent from the same month in 2019.

Rise in prices of common goods

  • There has been a sudden surge in prices of edible oil and pulses.
  • In the past few weeks, tur prices in retail markets have been over Rs 7,000 per quintal, which is almost Rs 1,000 more than its 2020-21 MSP.
  • Urad prices are ruling even higher, at around Rs 8,000 per quintal.
  • The market price of moong is also near its MSP of Rs 7,196 per quintal.
  • To keep retail prices from rising further, the central government allowed free import of tur, urad and moong. The move, following a gap of three years, comes weeks before the beginning of sowing for the kharif season.

Impact of high fuel prices in India

  • Fuel prices in India continued to inch towards the Rs 100-mark.
  • The spike in diesel prices have contributed to a growth in freight rates across ways of transport. High transport cost leads to increase in higher inflation, impacting industry.
  • High fuel prices will have an impact not only on people but also on the automotive sector – a large source of employment in the country – as vehicle sales may see a sharp drop.
  • A contraction in demand will impact lakhs of MSMEs that supply goods to the sector.
  • The public transportation sector is already mulling a hike in rates in view of rising operational costs.
  • Firming international crude oil rates and extremely high taxes levied on fuel are the key reasons behind the latest round of petrol and diesel price hike in the country.
  • The biggest reason behind higher fuel prices in the country is the high rate of central and state taxes.
  • Even when international crude oil prices plummeted in 2020 due to lower demand, Indians kept paying higher rates for petrol and diesel due to the various taxes levied.
  • At the moment, Indians pay one of the highest taxes on fuel in the world.

Lessons from pandemic

  • This pandemic has taught many money management lessons.
  • Most Indian corporates expect the ongoing pandemic to influence the direction of their business strategy over the next three years.
  • What is striking about the trends in high-frequency unemployment rates is their volatility throughout the Covid-19 period save those during absolute lockdown.
  • The volatility has some implications for the labour market and earnings. This confuses people as to whether to enter the labour market or not. This could rather lead to ‘discouragement effect’ in the sense that people might be dropping out of the labour force far more speedily than they did before.
  • Also, they disrupt the earnings of workers which would have led to two effects, dis-savings (exhaustion of the cash reserves and may be pawning of small assets) and resorting to fresh borrowing which could be weaker and thereby they may end up paying usurious interest rates.
  • As informal sectors were impacted in terms of job losses, the lower strata of society and daily wage workers faced the greatest impact due to social distancing as well as reduced household income.

Government security (G-Sec) rates

  • The flurry of activity at the start of the current financial year: interest rates on small savings schemes, of which the post office schemes are a part, were reduced drastically through a government notification, on March 31.
  • The very next day, the order was withdrawn and the erstwhile rates were maintained.
  • As per a historical decision of the government, the rate of interest on small savings schemes are aligned with the government security (G-Sec) rates of similar maturity with a spread of 25 basis points (bps), with certain exceptions.
  • But there is a huge gap in existing interest rates in comparison to the general existing formula. Currently the Post Office Savings Deposit rate is at four per cent, whereas interest rates on many small saving instruments are higher, like in National Savings Certificate (NSC), Kisan Vikas Patra (KVP), Term Deposits, etc.
  • The next review is due on June 30. In case the rates are revised downwards, it is advisable to lock in at the currently available rates, where applicable, by June 30.


  • The prospects for the Indian economy, though impacted by the second wave, remain resilient, backed by the prospects of another bumper rabi crop, the gathering momentum of activity in several sectors of the economy till March, especially housing, road construction, and services activity in construction, freight transportation, and information technology (IT).
  • India will continue to see a surge in the gig economy across all sectors. Furthermore, organisations will be tempted to move away from legacy models of hiring by choosing performance over pedigree.
  • India’s growing reliance on collaborative tools and technologies, such as artificial intelligence, machine learning, and cloud computing, will yield new skill sets and roles in the coming years.

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