1. Can India Leverage Its Demographic Dividend for Economic Prosperity?
Introduction:
India has long been lauded for its demographic dividend, a period where the working-age population outnumbers dependents, offering a unique economic advantage. However, the dividend is not perpetual, and India must act swiftly before its window of opportunity closes, especially as its fertility rate declines and aging population increases.
- Demographic Dividend and Middle-Income Trap: While India’s large working-age population is currently seen as an economic asset, the fertility rate is dropping. Several states are already below the replacement fertility level of 2.1 children per woman. This demographic shift indicates that India’s dividend may soon wane. India risks entering a middle-income trap where growth stagnates before reaching high-income status.
- Declining Fertility and Workforce Participation: India’s total fertility rate (TFR) has declined from 2.6 in 2010 to 1.99 by 2023, placing it among lower-middle-income countries. Compounding this is the low female labor force participation rate, with only 10% of working-age women in the labor market.
- Sectoral Challenges: The country’s economic growth potential is further hindered by underutilized sectors, like agriculture, where productivity remains low. Despite liberalization reducing the agricultural workforce proportion from 63% to 46%, other sectors, especially manufacturing, have not absorbed labor efficiently.
Manufacturing faces several challenges, including cumbersome regulations, complex licensing, and high costs for land and building. India’s share of global manufacturing is shrinking as compared to competitors like Vietnam, exacerbating concerns that the window of demographic advantage is closing.
- Need for Manufacturing Push: To make the most of the demographic dividend, India must focus on job creation in higher-productivity sectors like manufacturing and services. Manufacturing has a crucial role in absorbing labor from agriculture, but the current ecosystem is stifling its growth due to regulatory challenges and high costs.
Conclusion:
India stands at a crossroads where the timely capitalization on its demographic dividend can lead to long-term economic growth. The country must prioritize enhancing the business climate, especially for manufacturing, while improving labor force participation. The demographic window will not remain open indefinitely, and failure to act promptly could see India grow old before it grows rich.
Mains Practice Question: |
Q: “India’s demographic dividend offers immense potential for economic growth. However, it faces the challenge of leveraging this advantage before it narrows. Discuss the strategies India must adopt to avoid the middle-income trap.” |
2. Addressing Exploitative Labor Dynamics on Gig Platforms
Introduction:
The gig economy in India has rapidly expanded, promising flexibility and employment opportunities for millions of workers. However, as this sector grows, it brings with it significant issues of labor exploitation, particularly for women. Recent movements led by the Gig and Platform Services Workers Union (GIPSWU) have highlighted the urgent need to address these exploitative practices.
- Case of Exploitation: Many platform companies offer discounts on services by cutting into workers’ earnings, especially during festival seasons. Gig workers, often categorized as independent contractors, do not receive labor protections, including fair wages and job security. The profits of tech startups are largely driven by the unchecked labor of these workers, while the companies continue to grow without sustainable profit models.
There have been recent public conversations, including one involving a prominent CEO, questioning whether gig workers’ exploitation is truly empowering for them or simply enriching tech corporations. As gig companies market their business models as innovative and beneficial for workers, many are questioning the extent to which these narratives obscure the harsh realities faced by workers.
- Women in the Gig Economy: Women gig workers, in particular, face additional challenges. Gig platforms often promise autonomy and flexible work arrangements, yet they subject workers to “auto-assigned” jobs that reinforce patriarchal roles, such as caregiving and household tasks. If these jobs are refused, workers risk being penalized or even terminated. Furthermore, the lack of social security and benefits exacerbates the vulnerability of women workers, forcing them into unstable jobs while juggling domestic responsibilities.
- Digital Strikes and Advocacy: Recent movements, such as the digital strike led by women gig workers, have gained significant media attention. They demand dignified employment, protection from exploitative practices, and access to social security benefits. These protests illustrate the growing grassroots power of gig workers advocating for their rights despite the lack of legal protections.
- Role of the State: The absence of legal frameworks for gig work enables tech platforms to exploit labor under the guise of flexibility. Additionally, the lack of data privacy laws allows these companies to manipulate worker ratings and monitor performance, deepening the power imbalance between employers and workers. The Indian state must intervene to ensure fair treatment, regulate gig platforms, and secure basic rights for workers in this sector.
Conclusion:
India’s gig economy, despite its promise of freedom and flexibility, continues to exploit vulnerable workers, especially women. The struggle for fair wages, benefits, and job security has sparked significant resistance from gig workers. Movements like GIPSWU represent the beginning of a larger effort to reform the gig economy and secure justice for millions of informal workers.
Mains Practice Question: |
Q: “Discuss the issues of exploitation in the gig economy and the measures needed to ensure fair labor practices for platform workers in India.” |
3. The Centre's ‘Net Borrowing Ceiling’ and Its Impact on States' Fiscal Autonomy
Introduction:
In 2023, the Indian central government imposed a ‘Net Borrowing Ceiling’ (NBC) on Kerala, limiting the state’s borrowing capacity to 3% of its projected Gross State Domestic Product (GSDP) for FY2023-24.
This restriction includes not only market loans but also financial liabilities of state-run enterprises, thereby affecting Kerala’s ability to fund developmental and welfare projects. This has led to a broader constitutional and political debate on fiscal federalism and the extent of state autonomy in financial matters.
- Borrowing Powers under the Constitution: Articles 292 and 293 of the Indian Constitution deal with the borrowing powers of the Centre and the States. While Article 292 allows the central government to borrow on the security of the Consolidated Fund of India, Article 293 grants similar borrowing rights to states, but with the condition that states must seek the Centre’s consent if they are indebted to the central government.
In Kerala’s case, the state argued that the NBC imposed by the Centre violated its fiscal autonomy and restricted its ability to invest in key development areas. This has led to political tensions and the first legal case in history where Article 293 has been raised before the Supreme Court.
- Centre-State Tensions: Kerala’s financial strain under the NBC reflects a broader issue of federalism in India. The Centre’s power to impose borrowing limits on states, especially when states are heavily reliant on central loans, raises concerns about the unequal power dynamic between the two. Critics argue that these borrowing caps limit states’ ability to meet their financial obligations and develop infrastructure, especially in times of economic crisis.
Kerala’s contention is that the Centre’s unilateral decision on borrowing limits violates the spirit of cooperative federalism. It has also pointed to the need for more equitable and transparent guidelines on borrowing that take into account individual state circumstances.
- Judicial and Historical Context: Article 293, originally derived from the Government of India Act, 1935, was intended to ensure that borrowing was done responsibly to protect future generations from unsustainable debt. In the Constituent Assembly, there was debate on whether borrowing powers should be regulated to maintain fiscal balance. However, Kerala’s legal challenge has highlighted the ambiguity in the application of Article 293, especially when it comes to determining “reasonable conditions” under which the Centre can refuse borrowing requests.
- Need for Reform: Experts have argued that the fiscal constraints placed on states by the Centre must be balanced with states’ need for financial flexibility. To strengthen fiscal decentralization, reforms to Article 293 are necessary, including the establishment of an independent commission to assess state borrowing needs and impose conditions only when absolutely required.
Additionally, there is a call for more predictable and clear guidelines on borrowing to avoid arbitrary decisions that could disrupt state finances. Ensuring a stable and cooperative Centre-State relationship is key to sustaining the fiscal health of the Indian federation.
Conclusion:
The imposition of the Net Borrowing Ceiling on Kerala raises critical questions about the balance of power between the Centre and the States in India’s federal structure. As states face growing financial burdens, there is an urgent need to revisit and clarify borrowing provisions to protect states’ fiscal autonomy while ensuring responsible borrowing practices.
Mains Practice Question: |
Q: “Discuss the constitutional provisions related to state borrowing powers in India and examine the challenges posed by the Centre’s imposition of a Net Borrowing Ceiling on states like Kerala.”
|
