Daily UPSC Mains Question – July 21/2020

GS – 2

Indigo layoffs betoken larger crisis, engulfing even sound firms. Government must step up. Explain in detail.150 Words

In the News:

• Lockdowns and physical distancing have battered the economy. The damage has been noticeably severe on some businesses such as aviation and hospitality. Over the last few days, two airlines have resorted to shrinking their headcount to cope with the fallout.
• Market leader Indigo announced that it will lay off 10% of its 27,000 strong workforce. Earlier, Air India said it will implement a leave without pay scheme for a section of its employees that can stretch five years. These are symptoms of a severe underlying crisis.

Revival package:

• Domestic airlines face the prospect of accumulated losses of a staggering Rs 1.30 lakh crore over the two years to fiscal 2022. A vibrant industry characterised by a competitive low cost model will be history. The knock-on effect will include other industries, such as the struggling hotel segment.
• The situation for these beleaguered industries hasn’t been made easy by state governments alternating between lockdowns and temporary unlock phases. Steep fall in business shows up in the form of lay-offs. While states must figure out how to fully restore economic activity at the earliest, the government has to revisit its economic revival package.
• The one announced in May placed banks at the focal point of the revival. Two months after the announcement banks are lukewarm, not surprisingly as they face the prospect of another deluge of bad loans even before they have fully recovered from earlier ones.
•  Underlying assumptions of the first revival package were misplaced. It’s time for government to come up with another one where it directly does the heavy lifting.

Revive Activity:

• At this point the overriding priority must be to revive economic growth, because the systemic shock is hurting even sound businesses. If more borrowing is needed to revive activity which could be through more infrastructure spending and tax benefits for the worst affected businesses, it should be done.
•  RBI is already monetising the deficit through its liquidity operations. If the monetisation already carried out is to make sense, the economy needs to revive. Absent that, macroeconomic and social instability are inevitable.
• Unless businesses can survive this phase, there will be little interest in government’s plans for structural transformation. There can be no long term without the short term.

Oil economy eroding in Gulf countries, but India can intensify engagement in new sectors. Comment.150 Words

In the News:

• The successful launch of the UAE’s first mission to Mars – which also marks the first Arab space mission to the red planet – is a significant feat that highlights new ambitions in the Arab Gulf.
• Christened Al-Amal, or Hope, the spacecraft blasted off from Tanegashima Space Center in Japan and will reach Mars by February next year. The objective of the probe is to build the first full picture of Mars’ climate throughout the Martian year.

Catalyse growth:

• Besides joining the race to Mars – the US and China too are launching their own Mars missions in the coming weeks to take advantage of a window where Earth and its red neighbour are closest – the UAE wants this mission to catalyse growth in its STEM sector.
•  That in turn is part of the wider trend in the Arab Gulf to reorient their oil-dependent economies to focus more on areas such as IT, green energy, AI and the fourth industrial revolution.
• This creates an ocean of opportunities for India-UAE or even India-Gulf Cooperation Council ties. After all, given India’s prowess in IT and commendable proficiency in space technology – India too has gone to Mars with Mangalyaan – there is much that can be shared in terms of knowledge and human resources. Besides, the UAE is already the No 1 host of Indian migrants, with Indian professionals already well-established in tech and education sectors there.
• This can be enhanced further if Arab Gulf nations are looking to boost STEM-driven industries. Finally, the pitch for tech self-sufficiency among Arab Gulf nations is driven by a desire to outcompete regional rival Iran. With India-Iran relations hitting a rough patch due to geopolitical complications, India-Arab Gulf cooperation can hit a purple patch, compensating for the former.