Editorial 1: Mixed Signals: On macro-economic data
Context: Manufacturing has gained momentum, but inflation still a concern
Index of Industrial Production
- It is an indicator that measures the changes in the volume of production of industrial products during a given period.
- IIP is compiled and published monthly by the Central Statistical Organization (CSO), Ministry of Statistics and Programme Implementation.
- It is a composite indicator that measures the growth rate of industry groups classified under:
- Broad sectors, namely, Mining, Manufacturing, and Electricity.
- Use-based sectors, namely Basic Goods, Capital Goods, and Intermediate Goods.
- Base Year for IIP is 2011-2012.
Eight Core Sectors
- Eight Core Industries comprise 40.27% of the weight of items included in the Index of Industrial Production (IIP).
- The eight core sector industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.
Recent macro-economic data
- The government’s provisional data show that output across the core industries, spanning coal to electricity, grew by an average 5.4% year-on-year in November.
- Double-digit expansions in cement, coal, electricity and steel led the index higher. However, on a sequential basis, contractions in six of the eight sectors, including in the heavyweight sectors of electricity and refinery products, which together represent almost half the index, kept average core output unchanged.
- While electricity output shrank 2.1% from October, refinery products contracted by 3.1% sequentially.
Positives
- The uptrend in cement is heartening as consumption of the key building material spans the job-intensive housing and infrastructure segments and, if sustained, could help undergird broader economic momentum.
- The 12.3% year-on-year and 15.1% sequential expansion in coal output is also a positive augury as it indicates an improvement in availability of the fuel to fire captive power plants and furnaces in the crucial process and metal-making industries.
- Separately, the more up-to-date December PMI data show that manufacturing momentum strengthened appreciably as businesses reported the fastest rise in new orders since February 2021.
- The private survey of purchasing managers at about 400 manufacturers signalled that average output growth across these firms hit a 13-month high last month, with the PMI reading of 57.8 pointing to the strongest sectoral expansion since October 2020.
- Producers of goods stepped up hiring to help them meet a backlog of orders. And though the increase in jobs was the slowest since September, employment across the sector rose for a tenth straight month reflecting the heightened optimism among manufacturers.
Way forward
- The PMI survey shows that overall output charge inflation across the private sector has intensified, with manufacturers reporting inflation in selling prices outpacing gains in input costs for the first time in almost two-and-a-half years. Policymakers can ill-afford to drop their guard on inflation at this stage.
Editorial 2: The Values of local-self governance
Context: Debates on federalism should include larger discussions on how power should be divided and shared between governments at the Union, State, and local level.
Introduction
- In December 1992, Parliament passed the 73rd and 74th constitutional amendments, which instituted panchayats and municipalities, respectively.
- These amendments mandated that State governments constitute panchayats (at the village, block and district levels) and municipalities (in the form of municipal corporations, municipal councils and nagar panchayats) in every region.
- They sought to institute a third-tier of governance in the federal framework through the devolution of functions, funds, and functionaries to local governments.
Normative basis of Local Self Governance
- Local self-governance is linked to the idea of subsidiarity and is typically grounded on two broad arguments.
- First, it provides for efficient provision of public goods since governments with smaller jurisdictions can provide services as per the preferences of their residents.
- Second, it promotes deeper democracy since governments that are closer to the people allow citizens to engage with public affairs more easily.
- India’s decentralisation agenda is also arguably driven by these values.
- The 73rd and 74th amendments require States to vest panchayats and municipalities with the authority “to enable them to function as institutions of self-government”, including the powers to prepare and implement plans and schemes for economic development and social justice.
Mandatory provisions of the 73rd and 74th Amendment act
- They also mandate the regular conduct of local elections, provide for the reservation of seats for Scheduled Castes, Schedules Tribes and women in local councils, and institute participative forums like gram sabhas in panchayats and ward committees in municipal corporations.
- Hence, the core values that the amendments sought to entrench are that of deepening local democracy and devolving functions for meeting the ends of economic development and social justice.
Limitations
Conclusion
- As India is undergoing a centralising shift in its politics, economy, and culture, there’s also been a renewed assertion of federalism. However, this assertion of State rights is hardly articulated as value-based normative claims.
- If we unpack the intellectual arguments for federalism, many of them are also applicable for local self-governance.
- Hence, debates on federalism should include larger discussions on how power should be divided and shared between governments at the Union, State, and local level since local governments are, normatively and structurally, an integral part of the federal framework of the Constitution.