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CAA and economic slowdown in India: A test for logical minds

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There are two topics dominating writings these days in media, one on the Citizenship Amendment Act (CAA) and the other on the economic slowdown in India. In the former, the CAA is said to be discriminatory without ever saying how it is so. In a recent article by Gurcharan Das in TOI (14/01/2020), such one-liner has been used and there is no effort taken to explain or justify the statement made.

On the other extreme is Nadella, the Microsoft Chief. He has said many things but net result is utmost ambiguity and it appears that he has not read the text of the amendment. However, the CAA is essentially very straightforward and easily understandable as may be seen from the following.

CAA seeks to grant citizenship to non-Muslim immigrants from Pakistan, Bangladesh and Afghanistan if they faced religious persecution there. In order to acquire citizenship in India, one needs to go through a naturalization process. One of the criteria of naturalization is that the concerned person has to live in India, or work in the Central Government for 11 years. What this amendment does is that it reduces this period to six years for Hindus, Sikhs, Buddhists, Jains, Parsis and Christians from Afghanistan, Bangladesh and Pakistan. But they still have to go through the process of naturalization.

The point to note is that these refugees were citizens of undivided India and they were forced to flee their own homes for saving their lives after being subjected to atrocities on the grounds of religion. They are different from the migrants who left Bangladesh/Pakistan/Afghanistan for economic reasons. Every logical mind should therefore welcome the grant of citizenship to all such people, taking into consideration historical reality and the humanitarian aspect.

It must at the same time be clearly understood that applications for citizenship in India by Muslims have been and will continue to be entertained under the citizenship act. In the last six years, as many as 2838 Pakistani refugees, 914 Afghan refugees and 172 Bangladeshi refugees including Muslims have been given Indian citizenship. Further, the argument that the CAA discriminates against Muslims and therefore ultra vires the constitution is not tenable. It instead positively discriminates in favour of other religions which is allowed by the constitution. This was similarly done in case of reservation for SC & ST. Moreover, CAA has nothing to do with the current citizens of India or the rights they are guaranteed under the Constitution. This is what the intellectuals and academics should put forward before the masses especially the Muslims who have been incited by this false propaganda that it is discriminatory against the Muslims in India.

This false propaganda has created unrest among the Muslims and instability in the country. This is very unfortunate in the context of prevailing slowdown in India, when the whole nation’s focus should be on how to revive the economy. It is, however, unlikely that national interests will override short time political gains in the calculations of our political parties.  Economic remedies have to be devised factoring in the continued troubles and pinpricks created by the opposition.

 

In the writings on economic slowdown in India, the various possible reasons for this are extensively enumerated without much specifying or suggesting the remedial measures that need to be taken except that the demand need to be boosted. How this demand boosting in the backdrop of the prevailing difficult fiscal situation is to be done is not indicated most of the times. These writings are not directed at finding solutions, but at shoring up the writers’ credentials with the like-minded.

But Shri Deepak Nayyar said it in Mint (10/10/2019): the government should use counter-cyclical, expansionary, macroeconomic policies to revive growth. Fiscal policy should provide a stimulus, preferably by stepping up public investment. Monetary policy should provide a stimulus to private investment by lowering interest rates. There is nothing in macroeconomics that stipulates an optimum level to which the fiscal deficit must be reduced as a proportion of GDP. Government borrowing is always sustainable if it is used to finance investment and if the rate of return on such investment is greater than the interest rate payable.

The solution, therefore, is to allow the fiscal deficit to rise some say by 0.5% of GDP, using that to finance public investment, and to drop interest rates in steps by at least 2 percentage points, which would also help the exchange rate depreciate. Together, these would stimulate investment and promote exports, to revive economic growth. This is likely, although, to lead to lower deposit interest rates impacting small savings.

 

It may revive the consumption by pumping more money into the hands of farmers and urban consumers, but also simultaneously reducing subsidies like fertiliser subsidy, which can be subsumed in another dollop of a PM Kisan Samman pay out of Rs 6,000 annually to each farmer.

To boost demand further, the disposable income of households must be increased. The govt. may mull over introducing a basic income scheme for the poorer section of the society. It can also consider increasing the minimum pension adequately for the retirees in the govt./public sector. It will put more money into the hands of these two sections of populace where marginal propensity to consume is high. The resource-transfer of ₹1.76 trillion from RBI has provided the government with a windfall bonanza, meant to finance the fiscal deficit, Further, If the RBI board agrees to interim dividend based on their six-month performance, it would provide some financial relief to the government, which all can be used partly for this purpose.

The writer is a long standing commentator on contemporary issues.

 

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