10 October 2024 : Indian Express Editorial Analysis

1. Don’t outsource development    

(Source: Indian Express; Section: The Ideas Page; Page: 15)

Topic: GS2 – Governance – Development processes and the development industry – Role of NGOs

Context:

The article criticizes how donor-driven agendas of international NGOs have historically harmed local communities, with a focus on their role in exacerbating female foeticide in India through the promotion of sex-determination technologies.

What are NGOs?

• As defined by the World Bank NGOs refers to not-for-profit organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development.
• These organisations are not a part of the governement, have a legal status and are registered under the specific Act (Societies Registration Act, 1860 in India) of the government.
• The term NGO in India denotes wide spectrum of organisations which may be non-governmental, quasi or semi governmental, voluntary or non-voluntary etc.

Donor-Driven Agendas and Local Communities

• For decades, international NGOs (INGOs) have been criticized for imposing donor-driven agendas that often harm local communities.
• In Tanzania and Kenya, conservation efforts led by INGOs displaced Maasai communities, disrupting their traditional way of life.
• Similarly, in Bolivia, water privatization backed by INGOs restricted public access, resulting in widespread protests and eventual policy reversals.
• In India, INGOs promoted projects that failed to account for local realities, which undermined development goals.
• These cases illustrate the recurring problem of external interventions not aligning with the needs and contexts of the affected populations.

Impact of INGOs on Female Foeticide in India

• Mara Hvistendahl’s book Unnatural Selection sheds light on how INGOs contributed to the rise in female foeticide in India.
• Western narratives often blame cultural preferences for this tragic practice, but they conveniently overlook the historical role of British colonial policies and Western NGOs in perpetuating gender imbalances on a large scale.
• Scholars like L. S. Vishwanath and Bernard S. Cohn have shown that British land reforms in the 18th and 19th centuries contributed to increased female infanticide among land-owning castes.
• After India’s independence, INGOs continued pushing agendas with a similar colonial mindset, exacerbating the issue.

Colonial Policies and INGO Interventions

• The narrative that female infanticide was rooted in India’s cultural backwardness was perpetuated by British colonial authorities and later INGOs.
• These organizations, driven by Malthusian fears of overpopulation, worsened female foeticide by introducing and promoting sex-determination technologies.
• Between the 1950s and 1980s, INGOs such as the Ford Foundation, Rockefeller Foundation, and Population Council played a central role in bringing these technologies to India.
• By the 1960s, India’s population was viewed as a global concern, and the country became a “test case” for population management efforts.

Role of INGOs in Promoting Sex Determination Technologies

• A key figure in this effort was Sheldon Segal, head of the Population Council’s biomedical division, who was posted in Delhi with backing from the Ford Foundation.
• Segal worked closely with India’s director of family planning, Lieutenant Colonel B. L. Raina, to focus the country’s health initiatives on population control.
• By the mid-1960s, the presence of INGO personnel in India’s capital rivaled that of the U.S. embassy, and their economic leverage allowed them to dictate the country’s family planning policies.
• By 1975, 59% of India’s Health Ministry budget was directed toward family planning, often at the expense of critical public health needs.

The Spread of Sex Determination and its Consequences

• At prestigious institutions like AIIMS, doctors promoted the use of amniocentesis tests, initially meant to detect fetal abnormalities, for sex determination.
• Studies conducted at AIIMS and supported by INGOs justified this practice as a way to reduce “unnecessary fecundity” by allowing families to stop having children once they had a male heir.
• This led to the widespread abortion of female fetuses, with over 1,000 aborted at AIIMS alone by 1978.
• Between 1978 and 1983, an estimated 78,000 female fetuses were aborted across India, as the technology spread to other hospitals.

Long-Term Effects on India’s Child Sex Ratio

• The introduction of sex-determination technologies in India had a devastating effect on the child sex ratio. In 1951, the ratio was 943 girls per 1,000 boys, but this began to decline sharply after the 1970s.
• By 1991, the ratio had dropped to 927, and by 2001, states like Punjab and Haryana saw drastic reductions in their child sex ratios to as low as 876 and 861, respectively.
• A study by Jha et al., published in The Lancet in 2006, estimated that sex-determination technologies led to 10 million missing female births in India over two decades.
• This grim reality highlights the lasting harm caused by INGOs, which played a central role in promoting these technologies.

Conclusion: The Need for Localized Approaches

• The case of female foeticide in India demonstrates how INGOs, despite their good intentions, can cause significant and lasting harm when they impose external solutions that disregard local contexts.
• While traditional biases against females exist, the large-scale practice of foeticide was the result of deliberate actions by external agencies.
• This underscores the need for local policymakers to exercise caution and skepticism when accepting advice from INGOs and international consultancies, ensuring that interventions align with the needs and cultural realities of local communities.

Need of NGOs

Two-Way Communication: NGOs act as a two-way communication channel i.e. upward from people to the government and downward from the government to people. Upward Communication involves informing government about views of local people while downward communication involves informing local people about what the government is planning and executing. Self Organization: NGOs enable people to work together voluntarily to promote significant social civic values. They promote local initiative and problem solving. Through their work in a broad array of fields – environment, health, poverty alleviation, culture & the arts, education, etc. NGOs reflect the diversity of society itself. They also help the society by empowering citizens and promoting change at the “grass roots”. Representative of Poor: NGOs bring social issues to the fore and thus act as a spokesperson for the poor. They adopt various means to increase awareness among people leading to more and more participation from people. Thus, influencing the government decision-making on people’s behalf. Improved service delivery: With the help of NGOs, government officials mingle with private individuals to find solution to various societal problems. This allows for smooth functioning due to involvement of locals at all levels i.e., from policy making to policy implementation. Also, more involvement of people increases transparency and thus reduces corruption at all levels. Crises management: NGOs play critical role in promoting intercommunity harmony and authorities often take their help to manage riots and hostile situations. Apart from it NGOs also play positive role in assisting in relief work undertaken by government during natural and man made disasters.

Practice Question:  Discuss how donor-driven agendas of international NGOs (INGOs) have impacted local communities in developing countries, with specific reference to their role in promoting sex-determination technologies and exacerbating gender imbalances in India. (250 words/15 m)

2. Ready for a lower rate  

(Source: Indian Express; Section: The Ideas Page; Page: 15)

Topic: GS3 – Indian Economy

Context:

The article discusses the Reserve Bank of India’s (RBI) monetary policy stance, highlighting the impact of high food inflation, global monetary trends, and domestic inflation on the potential for a rate cut in December.

What is the Monetary Policy Committee?

• Origin: Under Section 45ZB of the amended (in 2016) RBI Act, 1934, the central government is empowered to constitute a six-member Monetary Policy Committee (MPC).
• Objective: Further, Section 45ZB lays down that “the Monetary Policy Committee shall determine the Policy Rate required to achieve the inflation target”.
• The decision of the Monetary Policy Committee shall be binding on the Bank.
• Composition: Section 45ZB says the MPC shall consist of 6 members:
• RBI Governor as its ex officio chairperson,
• Deputy Governor in charge of monetary policy,
• An officer of the Bank to be nominated by the Central Board,
• Three persons to be appointed by the central government.
• This category of appointments must be from “persons of ability, integrity and standing, having knowledge and experience in the field of economics or banking or finance or monetary policy”.

RBI’s Monetary Policy Stance: A Shift to Neutral

• The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has shifted its stance to “neutral” while keeping the policy rate unchanged. This decision is largely driven by high food inflation, which has constrained the MPC’s ability to make rate cuts.
• Although non-food inflation remains low at 2.3% in August, the pressure from food prices, which constitute a significant portion of the inflation basket, continues to influence policy decisions.
• As food inflation is expected to ease, it opens the possibility for a 25 basis point (bps) rate cut during the December review meeting, assuming no further geopolitical tensions impact commodity prices.

Global Monetary Policy and Its Influence on India

• Global monetary trends have turned favorable for emerging markets like India after the U.S. Federal Reserve cut its interest rate by 50 bps in September, the first such move in four years.
• This marked a turning point in the global monetary policy cycle, as other major central banks such as the European Central Bank (ECB) and Bank of England also reduced their rates earlier.
• Another 50 bps rate cut is expected from the Fed this year, followed by 125 bps in 2025. Typically, U.S. rate cuts encourage capital inflows into emerging markets, which can appreciate the local currency and give central banks like the RBI more room to adjust their policies in support of domestic growth.

Emerging Market Monetary Policies: A Balancing Act

• Many emerging markets had anticipated the Fed’s rate cuts and had already begun reducing their own rates.
• Countries like the Philippines and Indonesia initiated rate cuts prior to the Fed’s move, creating more space for further reductions.
• However, Brazil, which aggressively cut rates before the Fed, had to reverse course as inflationary pressures arose.
• This highlights how emerging market monetary policies are often more influenced by domestic economic conditions than by global trends, making the RBI’s future rate cuts contingent on India’s inflation and growth dynamics.

Impact of U.S. Fed Rate Cuts on India’s Monetary Policy

• The Fed’s rate cuts have created room for the RBI to reduce its rates, as India’s interest rate hikes have been more moderate compared to the Fed.
• While the Fed increased its rates by 525 bps during the most recent cycle, the RBI only raised its rates by 250 bps.
• This created a wider gap between Indian and U.S. policy rates, leading to increased capital inflows and a stronger rupee.
• According to S&P Global, Asian emerging markets, particularly those with robust macroeconomic performance like India, are expected to benefit more from these capital inflows.
• Additionally, India’s inclusion in global bond indices is set to further boost capital inflows, strengthening the rupee and providing the RBI more flexibility in monetary policy.

Inflation: The Key Driver for RBI’s Decisions

• Despite the global monetary easing, domestic inflation remains the primary concern for the RBI. Although headline inflation briefly dropped to 3.6% in July-August, the central bank is cautious about making rate cuts until inflation is consistently aligned with its long-term target of 4%.
• Food inflation, which contributes heavily to overall inflation due to its 46% weight in the consumer basket, remains a critical factor.
• Persistent high food inflation could spill over into non-food inflation, creating inflationary expectations that lead to a wage-price spiral. Therefore, while non-food inflation remains subdued, food inflation will continue to influence RBI’s decisions.

Food Inflation and Climate Risks

• Food inflation has become unpredictable due to shifting rainfall patterns and increasing climate risks.
• However, recent data shows that food grain inflation is softening thanks to plentiful rains, with the monsoon ending at 8% above normal.
• This bodes well for the upcoming rabi harvest, as improved reservoir levels and groundwater recharge should support crop production.
• However, vegetable prices, particularly in the tomato, onion, and potato (TOP) categories, remain firm due to weather-induced shocks.
• While food inflation remains a challenge, there is optimism that vegetable prices will ease in the winter months with the arrival of fresh harvests.

Outlook for Monetary Policy in India

• A combination of moderate non-food inflation, cooling food inflation, and further U.S. Fed rate cuts is likely to create the conditions for the RBI to reduce interest rates by December.
• The easing of inflationary pressures and continued capital inflows due to global bond index inclusions will give the RBI the flexibility it needs to support growth while maintaining price stability.
• However, the central bank remains cautious, especially given the uncertainties around food inflation and its potential impact on overall inflation.

Significance of Monetary Policy

It plays an important role in maintaining price stability and ensuring economic growth. By maintaining price stability, it helps manage inflation. It shapes variables like Consumption, Savings, Investment, and capital formation. An increase in the money supply helps to stimulate the business sector, which also helps to create more jobs. By controlling the money supply in the market, it helps balance Currency Exchange Rates.

PYQ: If the RBI decides to adopt an expansionist monetary policy, which of the following would it not do (2020)   1) Cut and optimize the Statutory Liquidity Ratio 2) Increase the Marginal Standing Facility Rate 3) Cut the Bank Rate and Repo Rate Select the correct answer using the code given below: (a) 1 and 2 only (b) 2 only (c) 1 and 3 only (d) 1, 2 and 3 Ans: (b)

Practice Question:  Discuss the factors influencing the Reserve Bank of India’s monetary policy decisions, with emphasis on the role of inflation, global monetary trends, and domestic economic conditions. (250 words/15 m)