5 August 2024 : The Hindu Editorial Analysis

1. The psychology of extravagance

(Source – The Hindu, International Edition – Page No. – 8)

Topic: GS1 – Indian Society – Poverty and developmental issues.

Context

The article explores the disparity between the lavish lifestyles of Indian billionaires and the widespread poverty in India, highlighting wealth concentration among the top 1%. It discusses the social, economic, and psychological factors contributing to this inequality, drawing on insights from economists and philosophers like Thorstein Veblen and Michael Sandel.

Introduction

• The article discusses the stark contrast between the wealth and extravagance of Indian billionaires and the poverty and inequality prevalent in the country.
• It references a study by economists Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj,” which highlights the concentration of wealth among the top 1% in India.

A Case of Gross Disproportion

• In 2022-23, the top 1% held 22.6% of income and 40.1% of wealth in India.
• The top 1% possesses an average of ₹54 million in wealth, which is 40 times the average Indian’s wealth, while the bottom 50% hold just ₹0.17 million.
• The wealthiest 10,000 individuals in India own an average of ₹22.6 billion, which is 16,763 times the average Indian’s wealth.

Wealth Disparities Across Castes

• A significant portion of wealth is concentrated among upper castes, who hold nearly 90% of billionaire wealth.
• Other Backward Classes (OBCs) own less than 10%, Scheduled Castes (SCs) own 2.6%, and Scheduled Tribes (STs) have no representation among the wealthiest Indians.

Abject Poverty and Nutrition

• Despite improvements in poverty reduction, a large portion of the Indian population struggles with food security.
• The NITI Aayog reported that 135 million Indians escaped multidimensional poverty between 2016 and 2021.
• In 2022, 56.5% of Indians were unable to afford a healthy diet, costing approximately $4.20 PPP per person per day, leaving nearly 790 million people unable to spend ₹350 daily on healthy food.

Contrasts in Spending: Weddings vs. CSR

• A recent extravagant wedding cost $600 million, starkly contrasting with the ₹1,271 crore spent on corporate social responsibility (CSR) by the same family’s business group in 2022-23.
• This raises questions about the motivations behind lavish spending and the priorities of the wealthy.

Thorstein Veblen and Conspicuous Consumption

• The article references Thorstein Veblen’s “The Theory of the Leisure Class,” which critiques the affluent’s profligacy and the drive for conspicuous consumption to gain social status.
• Veblen argues that extravagant spending is a means to display wealth and maintain superiority through “invidious pecuniary comparison.”

Michael Sandel and the Entitlement Mentality

• Harvard professor Michael J. Sandel’s book “The Tyranny of Merit” examines the mindset of the wealthy who believe they have an absolute right to their wealth and wasteful spending.
• Success is often attributed to fortunate circumstances beyond one’s control, and those who are successful have an obligation to contribute to the common good, recognizing that their achievements are supported by the broader community and environment in which they thrive.
• The entitlement mentality leads the rich to view their wealth as deserved and the poor as responsible for their fate.

Classism and Social Exclusion

• Extravagant weddings and events often become venues of classism, excluding the poor and ordinary while celebrating the wealthy in isolation.
• The “lower classes” are sometimes entertained separately, reinforcing social hierarchies and the magnanimity of the rich.

Psychological Capture of the Middle Class

• The poor and middle class often accept and admire the wealth of the rich, reflecting a psychological capture influenced by the myth of meritocracy.
• Sociologist Michèle Lamont notes that many middle-class workers accept the distribution of rewards as fair and see success as a result of hard work.

Religious Perspectives on Wealth

• The article references the Koran’s doctrine of trusteeship, which views wealth as god-given and held in trust for the poor.
• It emphasises the rights of the underprivileged, suggesting that wealth should be shared equitably to restore dignity and equality.

Conclusion:

• In conclusion, the stark wealth inequality in India, exacerbated by the extravagant displays of the ultra-rich, reflects deep-rooted socio-economic and psychological divides.
• Addressing this issue requires a shift in mindset among the wealthy and greater emphasis on equitable economic policies, aiming to enhance social cohesion and ensure that all citizens can benefit from the nation’s progress.

PYQ: COVID-19 pandemic accelerated class inequalities and poverty in India. Comment. (150 words/10m) (UPSC CSE (M) GS-1 2020)

Practice Question:  Critically analyse the socio-economic and psychological factors contributing to wealth inequality in India, as highlighted in recent studies on income and wealth distribution. Discuss the implications of this wealth disparity. (250 Words /15 marks)

2. Balancing competition and sustainability for India

(Source – The Hindu, International Edition – Page No. – 9)

Topic: GS3 – Sustainable Development

Context

This article explores the intersection of market dynamics, sustainability, and competition policies, highlighting how climate change affects supply and demand. It discusses global and national frameworks like SEBI’s sustainability reporting in India and initiatives by Japan and the EU to integrate sustainability into competition law. It emphasises the need for India to align competition policies with sustainability goals to achieve net-zero emissions.

Introduction to Market Dynamics

• Markets have evolved from the barter system to digital marketplaces, with supply and demand being the primary forces that determine prices and consumer preferences.
• Climate change disrupts the supply side of markets, causing a mismatch between supply and demand, which affects consumer demand and the overall economy.

Sustainability Reporting in India

• In 2023, the Securities and Exchange Board of India (SEBI) introduced a framework for corporate sustainability reporting.
• The Business Responsibility and Sustainability Report framework requires companies to disclose their value chain’s environmental impact.
• This framework aims to enhance transparency, combat greenwashing, and ensure sustainability benefits permeate through the value chain.

Global Perspectives on Sustainability and Competition

• Globally, competition authorities have been cautious about embracing sustainability considerations, fearing competitors might use them as an excuse to collude.
• Authorities should encourage companies to pursue sustainability goals jointly and assess cooperation that demonstrates the objective of sustainability.

Japan’s Approach to Sustainability

• Japan’s Anti-Monopoly Act includes guidelines for achieving a ‘green society’ through horizontal collaborations.
• These guidelines suggest that activities aimed at environmental sustainability are unlikely to restrict competition.
• Pro-competitive effects of sustainability activities can lead to consumer benefits.

European Commission’s Guidelines

• The European Commission has revised guidelines on horizontal agreements to include sustainability agreements.
• Concerns arise only if such agreements entail serious competition restrictions or produce negative effects contrary to Article 101(1).
• Objectives include addressing climate change, reducing pollution, limiting natural resource use, and promoting innovation.

India’s Competition Commission and Sustainability

• The Competition Commission of India (CCI) may explore including sustainability policies in its evaluations.
• India has pledged to achieve net-zero emissions by 2070 and ranks fifth in global warming contributions.
• CCI Chairperson Ravneet Kaur indicated the CCI will consider sustainability policies in market assessments.

CCI’s Response to COVID-19 and Sustainability

• During the pandemic, the CCI issued an advisory recognizing supply chain disruptions and the need for information sharing to ensure fair distribution.
• The Competition Act, 2002 includes safeguards to protect necessary business collaborations addressing COVID-19 concerns.
• The CCI can issue advisories exempting collaborations for sustainable goals or greener technological innovations when necessary.

Advocacy and Policy Formulation

• Under Section 49(3) of the Competition Act, 2002, the CCI can promote competition advocacy and participate in formulating economic policies related to competition and sustainability.
• The CCI can emphasise sustainability policies, enterprise collaboration for greener innovations, and release guidance on sustainability agreements.

Lessons from the U.K. and Other Initiatives

• The U.K.’s Competition and Markets Authority conducted a market study on the electric vehicle charging sector, considering competition alongside innovation and quality improvements.
• A similar study on green initiatives would benefit the Indian market.
• In 2011, TRAI recommended sustainability practices be part of the National Telecom Policy, promoting an environmentally friendly telecom sector.
• The CCI can consider incorporating sustainability practices into the National Competition Policy.

Conclusion: Integrating Competition and Sustainability

• Competition cannot remain isolated from sustainability concerns.
• Combating climate change requires adopting new technologies that reduce resource consumption and increase innovation through sustainability policies.
• Every economic sector in India must contribute to greener production to reach net-zero emissions.
• The CCI can enforce competition policies that improve innovation while considering environmental concerns.
• Integrating sustainability economics into competition policy can address market failures and collective action problems.
• By issuing guidelines, the benefits of sustainability will outweigh potential negative effects on competition.
• Including sustainability considerations in assessments of cooperation among competitors can significantly benefit market sustainability.

PYQ: Explain intra-generational and inter-generational issues of equity from the perspective of inclusive growth and sustainable development. (150 Words /10 marks)(UPSC CSE (M) GS-3 2020)

Practice Question:  Discuss the role of competition policy in promoting sustainability and combating climate change. How can India integrate sustainability considerations into its competition law framework to achieve its net-zero emissions target? (250 Words /15 marks)