Editorial 1 : A New Tryst with Destiny
Context: India could not create mass prosperity. It’s not too late.
Economic Outcomes in India and China
- China: China delivered strong wage growth but weak public market shareholder returns (about minus 13% in the last 20 years).
- India: India delivered strong public market shareholder returns (about 1,300% in the last 20 years) but weak wage growth.
- India’s challenges arise from the stock of jobs since 1947 and the flow of jobs since 1991.
- Changing the future requires more manufacturing jobs and high-productivity firms.
India’s Achievements
- India has made remarkable progress since 1947. It has:
- created the world’s largest democracy on the infertile soil of a hierarchical society,
- raised life expectancy from 31 to 68 years,
- become a middle-income country.
Challenges
- Social Mobility
- India’s middle-income status brings social mobility challenges, with social mobility reportedly 40% lower in middle-income than in high-income countries.
- Employed Poverty
- India’s challenge of employed poverty (not unemployment) arises from the labour force stock.
- Only 11% are in manufacturing, 14% in construction, 45% in agriculture, and 30% in services.
- Most farmers dwell in the self-exploitation of (informal) self-employment.
- To achieve economic transformation, India must transition a significant portion of its labour force from agriculture to manufacturing.
Factors Impacting India’s Manufacturing Growth
- Infrastructure: Needs massive investments.
- Skills
- India has more kids in school, with more years of schooling and better learning outcomes than ever.
- NEP 2020 is a wonderful 15-year higher education roadmap that lifts the apartheid against employability, and embraces holistic learning.
- Vocational training and human capital reforms to remove the quality constraints for the next hiring surge.
- Regulatory Cholesterol
- Excessive employer compliance, filings, changes and criminalisation is the most potent suspect for India’s missing factories.
- This cholesterol doesn’t hurt big companies but sabotages productivity for small firms (flying under the radar) or informal ones.
Leveraging Domestic Consumption and Strategic Protectionism
- Domestic Consumption as an Asset
- Services sectors (sales, customer service, logistics) are growing, supported by strong domestic demand.
- Smart Policy for Manufacturing
- India can strategically use tariffs to foster domestic manufacturing, avoiding complete reliance on imports and building competitive local supply chains.
- The experience with automobile manufacturing illustrates that protecting domestic markets while fostering competition encourages industrial growth and scale.
Conclusion: India missed her tryst with destiny despite building the world’s largest democracy because she didn’t create mass prosperity. But she has made a new appointment which she will keep through high-productivity firms and factories.
Editorial 2 : DAP Crisis Lessons
Context: DAP crisis: Lessons from a fertiliser shortage
Di-ammonium phosphate (DAP)
- DAP contains 46% phosphorus, a key nutrient that crops require at the early stage of root establishment and development.
- Farmers apply it at the time of sowing along with seeds.
- Seasonal Demand: An estimated 60 lakh tonnes (lt) of DAP are required during the rabi season, primarily between mid-October and mid-December.
Causes of the Current DAP Shortage
- Inadequate Opening Stocks
- Stock Levels: Only 15-16 lt of DAP were available in stock as of October 1, compared to the recommended 27-30 lt.
- Poor Planning: This low stock level indicates a lack of advance planning for the peak demand season.
- Decline in Imports and Domestic Production
- Imports: DAP imports dropped significantly, with only 19.7 lt imported during April-September, versus 34.5 lt in the same period of 2023.
- Domestic Production: Domestic DAP production was also lower, at 21.5 lt compared to 23.3 lt the previous year.
- Unviable Imports due to Price Controls
- Government Price Control: Government has set a maximum retail price (MRP) of Rs 27,000 per tonne for DAP, coupled with a subsidy of Rs 21,911 per tonne.
- Rising Import Costs: The total cost of importing and distributing DAP is around Rs 65,000 per tonne, making it financially unfeasible for companies under the current price control and subsidy regime.
Consequences of the DAP Shortage
- Reduced Availability: Many states have reported insufficient supplies or allocations of DAP, affecting their ability to meet local demand.
- Farmer Protests: Long queues and protests have erupted as farmers struggle to acquire the fertilizer in time for the narrow sowing window for crops like mustard, potato, and wheat.
- Price Hikes: Despite the government-fixed MRP of Rs 1,350 per 50-kg bag, farmers reportedly pay Rs 250-350 more due to shortages.
Way Forward and Conclusion
- DAP crisis highlights the futility of price controls.
- Farmers interests are better served by a regime that induces competition among suppliers to make available more and better fertilisers.
- Farmers should be discouraged from applying urea, DAP and muriate of potash that contain too much of nitrogen, phosphorus or potassium.
- They can be replaced by complexes and water-soluble fertilisers containing less of the same nutrients, but delivering them more efficiently and directly to the crop’s root zone or sprayed to the leaves.
- It’s high time to do away with both price controls and product-specific subsidies on fertilisers. Let there be, instead, a flat per-acre payment made every crop season to all farmers conditional upon their purchase of nutrients.