Hindu Editorial Analysis Today – UPSC Daily Current Affairs

Model Answer

India's corporate investment as a share of GDP has been on a singular decline since demonetisation in 2016, falling below even the levels witnessed during the Global Financial Crisis of 2008-09. Despite significant corporate tax cuts since 2019 and a sustained low-interest-rate regime, the investment slump persists — raising fundamental questions about the effectiveness of the current policy approach.

The structural explanation lies in the differentiated constraints facing firms of different sizes. For smaller firms, the binding constraint is not the cost of credit but its availability. Michal Kalecki's 'principle of increasing risk' demonstrates that the cost curve rises sharply for smaller firms as they borrow beyond their own capital base — making them credit-constrained regardless of the repo rate. For larger firms, the constraint is demand rather than finance. Their own capital is so substantial that interest rates are inconsequential to investment decisions. They invest when they expect profitable demand — and when domestic demand is weak, lower interest rates cannot create the conditions for profitable investment.

This explains why monetary policy has been ineffective. Interest rate cuts cannot simultaneously solve the credit availability problem for small firms and the demand deficiency problem for large firms. Tax cuts improve post-tax profitability on paper but do not create new demand. The investment slump is structural, requiring a structural fiscal response.

The alternative approach is government expenditure acting as autonomous stimulus. Public investment in infrastructure, health, education and rural economy creates direct demand and multiplier effects that shift the profitability curve outward for all firms. This increases expected profitability, encouraging both small and large firms to invest. For small firms specifically, better lending mechanisms and credit guarantee schemes can improve credit availability alongside lower rates. India must recognise that when the private sector's animal spirits are dampened by demand uncertainty, only public investment can restart the investment cycle.

Model Answer

The transition from MGNREGA to the Viksit Bharat-Guarantee for Rozgar and Ajeevika Mission (VB-G RAM G) — India's renamed employment guarantee programme — has produced an unprecedented crisis in rural employment that is disproportionately affecting the country's poorest States and most vulnerable workers.

The data is alarming. Employment generation in the first four months of 2026-27 crashed by approximately 43% compared to the average of the previous two years — from roughly 123.5 crore person-days to only 70 crore. The decline was far from uniform: 10 of 19 major States experienced employment crashes of 60-85%, with Himachal Pradesh (84.6%), Uttarakhand (80%), Punjab (76.9%), Jharkhand (75.5%), and critically Uttar Pradesh (74.3%) and Madhya Pradesh (68.8%) — India's largest and poorest States — virtually ceasing employment generation.

The causes are primarily administrative and institutional rather than fiscal. The VB-G RAM G Bill was rushed through Parliament in December 2025 with an April 1 transition date that was entirely missed because the Ministry had not framed the implementing Rules. MGNREGA continued by default during April-June, but functionaries on the ground refused to open new works — creating a vacuum where "the old world of MGNREGA was dying and the new world of VB-G RAM G was struggling to be born." The summer months — normally peak demand for rural employment during the agricultural slack season — were lost entirely. The draft Rules released on May 22 were largely a rehash of MGNREGA provisions, and final Rules were pushed through only at end of June for a July 1 replacement.

Paradoxically, the VB-G RAM G budget allocation of ₹95,692 crore is slightly more than actual MGNREGA expenditure in 2025-26. With State contributions (40% for most States), total available funds reach approximately ₹1.5 lakh crore — a 70% increase over previous year's expenditure. The crisis is therefore one of execution, not funding.

Corrective measures must include immediate unblocking of employment generation at the block and panchayat level; completing and disseminating the VB-G RAM G rule framework; providing dedicated support to worst-affected States; simplifying technological requirements like facial recognition that may exclude vulnerable workers; and transparently acknowledging the scale of the employment crisis rather than attributing it to a few States suspending operations. The right to guaranteed rural employment must remain operationally inviolable regardless of what the programme is called.

Model Answer

The July 2024 Uprising in Bangladesh, which brought the Bangladesh Nationalist Party (BNP) to power under PM Tarique Rahman, represents a significant political transition in India's most important South Asian neighbour. Understanding how this transition affects India-Bangladesh bilateral relations requires examining both the opportunities it creates and the challenges it presents.

The opportunities are substantive. The BNP government's explicit commitment to minority rights protection — including the first-ever appointment of a Special Assistant to the PM with State Minister status for minority rights, appointment of Hindu and indigenous representatives in the Cabinet, and a stated principle that Bangladesh should not be defined through a majority-minority framework — addresses one of India's longstanding concerns about the safety of religious minorities. The BNP's expressed interest in reviving SAARC could reinvigorate regional multilateralism. The government's emphasis on treating citizens of all faiths equally, demonstrated by reciting from the Koran, Gita, Tripitaka and Bible at state functions, signals genuine institutional commitment to religious pluralism.

However, challenges exist. The BNP's foreign policy emphasises sovereign equality, non-interference and "putting Bangladesh first" — a calibrated distancing from the close alignment that characterised the previous government's relationship with India. BNP founder Ziaur Rahman's legacy and the party's historical positioning suggest a more multi-vector foreign policy balancing relationships with multiple powers including China, the Gulf and the West. The transition period itself created uncertainty, and the robustness of minority protection commitments will be tested during communal incidents.

India should engage proactively with the new government, maintaining constructive dialogue while respecting Bangladesh's sovereignty emphasis. Monitoring whether institutional appointments translate into genuine ground-level protection and using the SAARC channel for regional engagement would serve India's interests. The transition, if managed well diplomatically, can strengthen rather than weaken Indo-Bangla cooperation.