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INDEX

1. Understanding Migration Behaviour in India from PLFS Data 3

2. Is India’s Agricultural Export Policy Ambiguous? 5

3. Did the Implementation of GST Hurt Municipal Finances? 7

4. NITI Aayog’s Multidimensional Poverty Index 11

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GIST OF EPW
JANUARY 2023

reluctant is an important question that needs

1. UNDERSTANDING MIGRATION further analysis.

BEHAVIOUR IN INDIA FROM PLFS  A very large percentage of the migrants both in
the rural and urban areas are females, which
DATA could be because of marriage, though the
migration of women due to higher education
What is the background of the issue? and job is on the rise.

What are the broad patterns relating to

 The sudden crisis and the severity of job loss,
migration?
particularly in the urban areas, forced many to
shift to their native residences are the main
reasons for migration in India.  A little less than one-third (28.9) of the
population in India comprises migrants (all
regions) as the place of enumeration (PoE)
 The Periodic Labour Force Survey (PLFS) data
differs from the last usual place of residence
(2019–20), shows a massive decline in the
(UPR) in 2020–21.
workforce participation rate in the urban areas.

 The National Rural Livelihood Mission

(NRLM), later renamed as Deendayal
Antyodaya Yojana (DAY-NRLM), aims at
empowering the rural poor by helping them
access financial services, augmenting of the
household income.

What are the findings of the PLFS?

 Inter-spatial disparities in growth and

opportunities, in the face of limited population
mobility, pose serious challenges to
development.

 It is pertinent to know whether people move as

long-duration migrants or whether it is only a  Possibly, these were some of the rural migrants
temporary job search, especially during the working in the urban areas and comprised the
agricultural slack season. most vulnerable section of the urban labour
market participants.
 If the latter is prevalent, then the phenomenon
of return migration can be expectedly high.  However, return migration is possible among
the rural-to-rural migrants as well.
When a COVID-19-type crisis occurs, does it
affect the livelihood decisions permanently?  After completing one rural job, the migrant
workers return to their original rural residence.
 People may return to the place of origin as a
coping mechanism but it may not mean that
they would continue to reside there
permanently.

 Or the experience at the place of destination

might be so adverse that new opportunities at
the place of origin may be explored.

 So, who is willing to return as a migrant to the

previous place of destination and who is

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 However, among the migrants, only around 3%  As more economic opportunities may be
moved to the PoE after March 2020, indicating available in the urban areas of the developed
that COVID-19 and lockdown had reduced the states, people from the rural areas of the
pace of population flow considerably. relatively low-income states may like to migrate
at a rapid pace.
 These migrants were possibly the worst
sufferers during the lockdown and most What is the impact of COVID-19 lockdown?
probably travelled back to their rural
relatives/home after losing the urban jobs.  Among the migrant workers who worked as
casual labour, more that 90% moved to rural
What is the correlation between migrant areas from the urban area of other districts and
labourers and workers? also from other states after March 2020.

 At the time of leaving the past location, the  Among the migrant workers who were in
unemployment rate seems to be exorbitantly regular wage/salaried jobs, nearly 81% moved
high among the migrant labour force. to the rural area from the urban areas of
another state where they were employed.
 Besides, a very large percentage has been
engaged as self-employed and casual wage  This suggests that the casual wage earners were
workers. not the only sufferers.

 Only a small proportion (24%) was engaged as  Even those who were better off in the job
regular wage workers. market in terms of quality of employment had
to face the adversity in terms of livelihood loss.
 This suggests that bleak employment prospects
at the place of origin are the compelling push  On the other hand, the COVID-19-induced
factors prompting people to look for better return migrant’s desire to remain at the place,
opportunities outside. which is presumably rural, is indicative of the
rising pressure in the rural labour market.
 Given the engagement of the migrant workers
primarily in the agricultural sector prior to  The MGNREGA’s role in providing a cushion
migration, becomes more appalling to assess could be one of the reasons for not wanting to
the nature of activities after migration. move out any more.

 This is because the urban areas are less likely to  There seems to be a loss of hope as the urban
offer any activity of similar nature, though the centres are not able to promise profitable
rural-to-rural migrants may still get absorbed opportunities; individuals are now forced to
in similar activities. explore livelihood sources in the trade and
services sector within the rural areas.
What are the reasons for migration?
What are the conclusions?
 Though marriage is found to be the major
reason for migration, for those who migrated  The migrants witnessed a very high
after March 2020, job loss, unemployment, unemployment rate compared to the non-
search for better employment have been the migrants.
major reasons.
 Among the migrants, a very large percentage
 Loss of job/closure of unit/lack of were engaged in self-employment and casual
employment opportunities have been the major wage jobs prior to migration.
reasons of migration for around one-fifth of
the COVID-19-induced return migrants.  Only a small proportion (24%) of them were
employed as regular wage workers.
 The regular salaried/wage workers among the
migrants did suffer in the post-lockdown  This suggests that bleak employment prospects
period. at the place of origin are some of the compelling
push factors prompting people to look for better
 A majority of those who lost their jobs after opportunities outside.
the announcement of lockdown are casual
workers followed by regular wage/salary  The general belief is that the incidence of
earners. migration is more among the females than the
males.

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 The probability to migrate to urban areas is  The sectoral contribution of agriculture to

higher than the rural areas, which is again due India’s gross domestic product (GDP) is 20.2%
to economic factors. in 2020–21 and it also remains a
significant contributor to foreign exchange
 Non-availability of jobs in a persistent manner earnings with over $56 billion of exports in
leads to the phenomenon of discouraged drop- 2021.
outs from the labour force.

 On the whole, the pandemic and the lockdown

affected those at the lower echelons with a
greater intensity so much so that their future
perspective in terms of willingness to migrate
was dampened significantly.

 Modelling the responses in terms of those who

want to move out and those who do not want to
move out, we note that a very large percentage
of the respondents did not want to migrate in
the future.

2. IS INDIA’S AGRICULTURAL
EXPORT POLICY AMBIGUOUS? What are the challenges associated with
agricultural exports in India?

What is the background of the issue?  The lack of proper infrastructure such as roads,
ports, and cold storage facilities remains a
Despite the agricultural export policy was announced in major challenge for agricultural exports.
2018 to transform the ecosystem of India’s agricultural
exports, the country’s agricultural exports have faced  The poor infrastructure catalytically leads to
several policy-induced restrictions. delays and losses in transit, affecting the quality
of the product and reducing its shelf-life.
What is the status of agriculture in India?
 Moreover, compliance with international
 India is one of the largest agricultural quality standards and regulations is a major
producers in the world, and its agricultural concern as Indian exporting firms face several
exports are an important part of its economy. challenges on quality and compliance issues.

 India exports a wide variety of agricultural  Failure to meet these quality and compliance
products, including grains, fruits, vegetables, standards can result in the rejection of the
spices, tea, coffee, and cotton. produce and can potentially damage India’s
reputation in the international market.
 India has significant potential for agricultural
exports due to its diverse agro climatic  Furthermore, pests and diseases can
conditions, large land area used with intensive significantly affect the quality and quantity of
agricultural cultivation, and skilled farming exportable agricultural produce and can result
population. in higher rejections and loss of market access.

 Agriculture is still a crucial source of livelihood  Price volatility is a major challenge faced by
for a significant portion of the Indian Indian farmers as well as exporters because it
population. can adversely affect profitability and also make
it challenging to plan for the future.
 As per the latest available data from the annual
report, 2020–21 of the Ministry of Agriculture  Lastly, India also faces several trade barriers
and Farmers’ Welfare, Government of India, such as tariffs, non-tariff barriers, and technical
agriculture and allied sectors employ around barriers to trade in the international markets.
55% of the country’s workforce, directly or
indirectly.

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What are the measures taken towards What are the ambiguities associated with the
agricultural exports? policy?

 On the one hand, policymakers came up with an  Such restrictions have been criticized for their
expansive agricultural export policy (AEP) in adverse impact on the agriculture sector,
2018 to double agricultural exports by 2022. particularly on farmers’ incomes and their
ability to access global markets.
 The policy provides a comprehensive
framework for the development of agricultural  In 2022, India imposed export bans on various
exports. agricultural products to ensure their enhanced
domestic availability and affordability, and
 It addresses various issues related to export control escalating food inflation amid
promotion, infrastructure international supply chain disruptions.
development, market access, research and
development, financing, value-addition  Similarly, India has used a minimum export
practices, quality standards, and promoting a price (MEP) mechanism to restrict the export of
cluster-based model. agricultural products such as onions, rice,
edible oils, and potatoes.
What are the impacts of export restrictions?
 Under the MEP mechanism, a minimum price
 Export restrictions hamper the country’s efforts is set for exports, and exports are allowed only
to promote its agricultural exports. above that price.

 They limit the availability of Indian agricultural  Furthermore, India has imposed export quotas
products in the international market which not on agricultural products such as sugar, to
only drives up the import prices but puts a regulate exports and ensure domestic
question mark on India’s capability as a reliable availability.
supplier of these public goods.
 It has also imposed export duties on various
What is the agricultural export policy, 2018? agricultural products, such as spices, beverages,
animal feed, edible oil, wool, and cotton to
 It was lunched by the Ministry of Commerce discourage exports and increase domestic
and Industry. availability.

 It aims to capitalize on the global food crisis in  India has also imposed quality control
the face of an ever-growing population, climatic measures on agricultural products such as
changes, dwindling farmland, and other onion, peanuts, and sesame seeds, to ensure
associated factors. that only high-quality products are exported.

 The policy aims to achieve $60 billion in  Such export restrictions are intended to protect
exports by 2022 by diversifying the export public stock-holding or trading businesses’
basket, increasing high-value and value-added monopoly over the amount of merchandise that
agricultural products, implementing rigorous is exported or imported as this can have an
export promotion, facilitating logistics for impact on domestic supply, demand, prices,
perishable agricultural products, and executing and consumer’s as well as producer’s welfare.
horizontal reforms internally to improve
domestic availability and affordability.

 The AEP recommendations are divided into

two groups, strategic and operational.

 The AEP emphasises capacity-building of the

micro, small and medium enterprises (MSMEs)
of India.

 It also aims to take the initiative of geographical

indication registrations to promote Brand India
and appeals for an enhanced level of private
investment in export-oriented activities.

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What is the conclusion? What is the role of urbanization on

municipalities?
 The use of export restrictions has been a
contentious issue in the World  Nations all over the world, particularly
Trade Organization (WTO) as they are seen as a developing countries see urbanisation as a key
violation of WTO rules on trade. to accelerate economic growth and reduce
poverty.
 The WTO rules allow countries to impose
export restrictions only in exceptional  Agglomeration economies, economies of scale,
circumstances, and that too for a limited and economies of scope make cities the centres
period. of growth.

 Export restrictions can affect the  There is ample evidence to show that cities
competitiveness of Indian agricultural exports facilitate and accelerate economic growth.
and hinder their growth in the international
market.  There is consensus among scholars and
policymakers on the positive impact of
 A clear and consistent export policy is urbanisation on poverty reduction and
important for promoting sustainable and employment generation in the economy.
competitive engagement of India’s agricultural
exports in global markets.  Around one-third (35%) of Indians are living in
urban areas, Urban population is expected to
 It is important for policymakers to balance the grow to 814 million by 2050.
need for domestic supply with the benefits of
exporting agricultural products, and to  The size and pace of Indian urbanisation is
consider the potential impacts of export smaller compared to its Asian and African
restrictions on farmers, exporters, and counterparts.
consumers.
 In China, it is 54%, in Indonesia it is 53%, South
 It may be beneficial for India to focus on Africa 64%, and Nigeria 47%. Globally, 54% of
agricultural products where it has a genuine people live in urban areas.
agricultural surplus, rather than concentrating
on agricultural export promotion, which has  In recent years, India has been pushing for
failed to deliver in the past. urbanisation aggressively.

 It is crucial for India to carefully balance the  The Smart Cities Mission, Atal Mission for
need for domestic supply with the benefits of Rejuvenation and Urban Transformation
exporting agricultural products and avoid (AMRUT), Pradhan Mantri Awas Yojana
ambiguity in its AEP. (PMAY), Heritage City Development and
Augmentation Yojana (HRIDAY), Jawaharlal
 A clear and consistent export policy that takes Nehru National Urban Renewal Mission
into account the interests of both domestic (JNNURM) and Swachh Bharat Mission (SBM)
consumers and international buyers can help are aimed in this direction.
ensure that India remains a reliable supplier of
agricultural products in the international  The country perceives urbanisation to reduce
market. its overdependency on agriculture and provide
meaningful employment to the youth.

 Any urban rejuvenation plans inevitably have

3. DID THE IMPLEMENTATION OF two broad objectives:
GST HURT MUNICIPAL FINANCES? 1. First, to facilitate and accelerate
production and consumption activities
What is the issue? and thus fuel economic growth.

The revenue sources of urban local governments are too 2. Second, to provide the necessary socio-
small to meet their expenditure needs, the goods and economical infrastructure for the
services tax (GST) has adversely affected municipal residents in the jurisdiction.
finance.

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What are urban local governments (ULGs)? What is the status of municipal finance in
India?
 Urban local governments (ULGs) are
responsible for looking after the governance of  The size of municipal finance in India is
the concerned town/city jurisdiction. abysmal compared to its size considering
nations with a similar development trajectory.
 The 74th Constitutional Amendment in India
has recognised urban local bodies (ULBs) as  The municipal expenditure and revenue in
independent governments. India as a percentage of gross domestic product
(GDP) has remained around 1% in the last
 The 12th Schedule of the Indian Constitution decade, while it is 7.4% and 6% of GDP in Brazil
entrusts huge functional responsibilities and South Africa, respectively.
to ULGs.
 The constitutional provision for devolution
 These include urban planning, including town to ULBs is weak and the Indian urban
planning, roads and bridges, water supply, governments are the weakest in terms of fiscal
public health and sanitation, public amenities autonomy.
like street lights, parking, other public
convenience, and slum improvement  The fiscal capacity of ULGs to provide civic
upgradation. amenities and to foster economic growth is
limited.
 Functional distribution and financing remain
an enigma in Indian fiscal decentralization. What are the trends of municipal revenue?

 Though the Constitution has assigned a vast  Total municipal revenue has increased
functional responsibility to local governments, from `73,259.8 crore to `1,71,697.1 crore
the financial position of municipal during the observed period, registering a
governments is too weak to discharge these growth rate 57%. Nevertheless, it remains at 1%
responsibilities. of GDP as of 2018.

Why is urban infrastructure in India vastly  The per capita municipal revenue has increased
underfinanced? from `2,703.2 in 2011–12 to `4,624.2 in 2017–
18.
 The weak constitutional provisions on the
financing of the ULGs is the main reason for the  The decline in the growth rate in 2017–18 is a
fragile municipal financing in India. matter of concern given the implementation of
the GST in the 2017.
 Unlike the clear constitutional demarcation on
centre–state finance devolution, the financing  Total ULG revenue consists of its own source
of the municipality has been largely left to the revenue (OSR) and grants from the state and
mercy of the state governments. central governments.

 ULGs’ internal revenue mobilization has been  It is important to separately look at OSR and
weak due to a poor tax base, inefficient tax transfers because of their policy implications.
collection, and unprofessional tax
management.  Own Source Revenue - Internal resource
mobilisation, that is, revenue generation
 Except for property tax, there is no significant within ULGs, is important as far as fiscal
buoyant tax available for municipal accountability is concerned.
government.
 The OSR of Indian municipal government is
 Apart from tax revenues, user charges, fees, and one of the smallest compared to other
license charges are the major non-tax revenues developing countries.
of the ULGs.
 The OSR of Indian municipal government as a
 The implementation of the goods and services percentage of GDP was 0.43% in 2017–18,
tax (GST) has adversely affected the already while it is 7.4% in Brazil, 6% in South Africa,
shrunken source of municipal revenue. and 4.5% in Poland.

 In India, property tax is the only major tax

revenue collected by municipal governments.

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 OSR is the real indicator of the fiscal autonomy

of the local governments.

 The per capita OSR of Municipal Corporation

was `3,000, while that of the municipal council
was `500, and that of nagar panchayat
was `400 in 2017.

 Thus, it can be said that the larger the size of the

municipal governments, the bigger is their
internal resource generation.

 Indian municipalities hardly have access to any

buoyant taxes; property tax is the only
significant tax source for municipal
governments.
What is the relationship between GST and
What are intergovernmental transfers? Municipal Finance in India?

 Local governments all over the world do  GST is a destination-based indirect tax regime
receives funds from higher-level governments. that came into existence in India on 1 July 2017
replacing VAT.
 It will be particularly inevitable for
Indian ULGs because of the weak internal  The GST has subsumed major taxes of
resource mobilisation capacity. municipal governments, including entry tax,
entertainment and advertisement tax.
 In India, the state governments are primarily
responsible for the financing of ULGs.  Octroi - It is an entry tax, was the biggest
causality of GST implementation apart from
 Of the transfers to municipal governmental, numerous local body tax (LBT).
80% are from state governments.
 An entry tax is an indirect tax levied by urban
 The Central Finance Commission (CFC) has municipal corporations when goods enter into
also started devolving fund directly their jurisdiction.
to ULGs from the Tenth Finance Commission
onwards in addition to other transfers from the  Entertainment tax are taxes from theatres,
central government in the form of centrally shows, stadiums, and cable televisions.
sponsored schemes (CSS).
 Advertisement tax are the incomes accruing
 The transfers to municipal governments in from hoarding and billboards set up in the local
India have been undersized and haphazard jurisdictions.
compared to other developing countries.
 Unfortunately, each GST Council meeting ends
 The smaller the size of the ULGs, the higher the up encroaching some revenue source of local
dependency of the local bodies on transfers. government directly or indirectly.

 Municipal councils and nagar panchayats What is the magnitude and implications of
receive higher per capita grants from higher- subsumed revenue?
tier governments than municipal corporations.
 Octroi - Octroi is the tax levied by the local
 Certain bigger corporations finance 80% of the governments, particularly municipal
total expenditure by their internal resource governments on certain categories of goods as
generation. they enter the area.

 The implementation of GST necessitates more  It is a charge for the transit of goods through the
funding from state governments to municipal jurisdiction and it was the biggest causality of
governments. the implementation of the GST.

 Whether the state governments can provide  Other entry taxes - LBT is a tax imposed by
additional funds to ULGs is a different local municipal governments on goods entering
question. into local area for consumption, use or sale.

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Maharashtra and Gujarat are the major states  For example, there are reports of Kerala
in India imposing LBT. reducing the share of local governments due to
fiscal pressure.
 Entertainment taxes - Entertainment tax
was the sole domain of the local governments. What are the reactions of State Governments to
Municipal Revenue Loss?
 Entertainment tax contributed around 10%–
15% of the total tax revenue to municipal  The GST Constitutional Amendment Act has
governments. the provision to compensate the state
governments for their exchequer loss owing to
 On an average, `15 crore was the per capita the implementation of the GST but it remains
collection from the entertainment tax. muted on the exchequer loss of local
governments.
 The Municipal Corporation, particularly in the
tier 1 and tier 2 cities, have incurred more loss  It was expected that state governments will
than municipalities and town bodies. compensate the civic bodies of their revenue
loss owed to GST implementation.
 Advertisement taxes - Advertisement tax is
the income that accrues from hoardings and  It has not been made mandatory for state
billboards set up in the local jurisdictions. governments, hence subjected to the will and
mercy of the state governments.
 It contributed 2%–5% of total tax revenue to
urban governments.  There was no uniformity in the way the states
responded to the revenue loss of the local
governments.

 Some states promised the compensation for the

loss to local governments.

What is the conclusion?

 The municipal finance crisis in India has not

happened on account of GST, but has been
exacerbated by its implementation.

 This is not only an issue of revenue forgone, but

rather the removal of revenue sources of
independent local governments without
consultation and proper compensatory
What is the association between GST and mechanism.
transfers loss?
 The GST is an ever-expanding tax process,
 There is a connection between GST and grants hence, sharing a fixed percentage
from the state governments. Many state of GST revenue will be the ideal way forward.
governments are yet to receive GST arrears
from the central government.
 It will not only compensate the revenue loss of
municipalities but also provide a buoyant and
 State government transfers to local assured revenue source to municipal
governments are often at the mercy of the governments to finance the humongous
former. municipal expenditures.

 Unlike the sanctity attached to union finance  It is also justified as most of the consumption of
commission’s recommendation, state finance goods and services is in urban areas.
commission’s recommendation, particularly
devolution, is not being honored.

 The first causality of a shrunk state exchequer

is the local government, particularly
municipalities.

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4. NITI AAYOG’S India and all the states as well as all districts of
India both for the rural and the urban areas.
MULTIDIMENSIONAL POVERTY
What is multidimensional deprivation index
INDEX (MDI) and the methodological issues
associated with it?
What is the issue?
 Many key indicators with regard to the
The multidimensional poverty index computed by the dimensions of health, education and standard
Niti Aayog suffers from several methodological of living are absent in this data set as well as in
shortcomings as well as wrong or improper selections of these estimates.
indicators.
 The cut-off point of 0.33 sounds arbitrary
What is the background of the issue? without a strong theoretical justification,
clearly pinning on the Indian context.
 The most glaring mistake in the report is the
inclusion of multidimensional deprivation  The inclusion of a few indicators, for example,
index estimates for urban areas for all districts. access to banking in the standard of living
domain appears a bit absurd, given that more
 This reduces the validity of the findings for than 90% of the families have some kind of
policy intervention as well as international access to banking, whether public, private, or
comparison. through post offices.

 During the last decade, the use of  The chosen indicators for health are inadequate
multidimensional poverty index (MPI) has to capture the deprivations in these
become popular in academic and policymaking dimensions.
circles all over the world.
 Such an outlook towards deprivation overlooks
What is the multidimensional poverty index the differential vulnerability to
(MPI) about? undernourishment between the early ages and
adulthood.
 The MPI is a much wider concept than the
income poverty concept as it captures multiple  Further, owing to rapid fertility transition, a
and overlapping deprivations faced by the poor. good number of households will escape the
counting of child undernourishment in the
 The MPI is based on the aggregation of multiple complete absence of children below the age of
indicators related to three aspects: (i) health, five years.
(ii) education, and (iii) standard of living.
 The survivorship domain being represented by
 The MPI, thus, provides a more comprehensive the experience of child/adolescent mortality in
a household during a reference period of five
depiction of poverty, which can serve as a policy
tool to tackle poverty in each dimension at years is not the most suitable indicator due to
different levels. varied reasons.

 The multidimensional poverty measure was  The mortality experience below the age of 18
first developed by the Oxford Poverty and could be due to varied reasons and bracketing
Human Development Initiative (OPHI) and the child and adolescent mortality together
United Nations Development Programme cannot reflect the survivorship transition that is
(UNDP). underway.

 The report is based on the unit-level data  Given that educational attainment happens at
an age and stage in life, educational deprivation
collected for the fourth National Family Health
Survey (NFHS)-4 and refers to the year 2015– needs to remain limited to current educational
16. ages and not those who have passed the age of
attaining education.
 The MPI is calculated by multiplying the
 Also, the proposed indicator does not involve
headcount ratio of poverty with intensity of
poverty. any aspect of the quality of school education.

 The report presents estimates of  While multidimensional poverty is an ideal

multidimensional deprivation index (MDI) for construct, it is systematically responsive to the
state of development as poverty/deprivation

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becomes less and less with improvements in the

state of development.

Is the urban MDI estimate reliable?

 An important consideration is the statistical

reliability of the estimates, which depends on
the size of the sample and selection of
households.

 A careful reading of NFHS-4 report, on which

the MDI estimates are based, indicates that the
urban sample is inadequate for the majority of
districts.

 The district-level factsheets of the report give

only rural and total estimates for the remaining
districts and skip urban estimates as the sample
is not adequate.

 This important point has been missed or

overlooked by the NITI Aayog team while
preparing the MDI report.

 Thus, the NITI Aayog estimates for the

majority of districts are not statistically reliable
as far as the urban areas are concerned.

What is the conclusion?

 The MPI computed by the NITI Aayog, though

a welcome effort, suffers from several
methodological shortcomings as well as wrong
or improper selections of indicators.

 The most glaring mistake in the report is the

estimation of the urban poverty index, which is
statistically reliable for only 157 out of 650
districts.

 This is important to highlight especially

because the report claims that district level
estimates are a unique feature of the report and
provide policy guidelines to district level
officials.

 This claim is not valid with respect to most of

the districts as far as urban poverty estimates
are concerned.

 On the other hand, the report may give wrong

signals and may make district-level authorities
complacent about the real situation.

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CHENNAI | SALEM | MADURAI | COIMBATORE DELHI | BANGALORE | THIRUVANANTHAPURAM