Editorial 1 : Incentives, Not Resources
Context: Why the budget must prioritise incentives, not just resources
Introduction: Given the growth imperative, development and structural reforms tend to dominate thinking on macroeconomic policy in India. Post the pandemic macroeconomic policy helped induce a robust recovery by effectively smoothing external shocks.
Government Spending and Fiscal Policy
- Spending Slowdown
- Government spending slowed during election months.
- Capital expenditure by the Centre was 46.2% of the target by November, compared to 58.5% in the same period last year.
- States spent only ₹0.88 trillion of the ₹1.5 trillion allocated for capital expenditure.
- Countercyclical Fiscal Policy
- The government needs to meet spending targets but also focus on fiscal consolidation as India’s combined fiscal deficit is over 7% of GDP.
- Interest payments consume 19% of the Centre's expenditure.
- Fiscal consolidation helps build fiscal space, reduce risk premia, and lower interest rate spreads.
- Quality of Spending
- Public investment should be prioritized over revenue expenditure.
- Efficiencies in spending can free up resources for better investment allocation.
Private Investment and Corporate Behaviour
- Stagnant Corporate Investment
- Despite tax cuts, corporate investment has not significantly increased.
- Private corporate savings have risen, but fixed capital formation has declined, averaging 21.5% of GDP from 2015-2021.
- Proposed Solutions
- Tax incentives for investment, such as an investment tax credit, could stimulate corporate spending.
- Taxing non-business income to fund investment incentives may also be effective.
Consumption and Demand Dynamics
- K-Shaped Recovery
- There is evidence of good consumption growth (8-9% in 2022) and recovery in lower-income groups.
- Surveys highlight that India’s middle class, broadly defined, is large but concentrated at the lower end.
- Income Distribution and Demand
- Products catering to price-sensitive middle-class consumers can perform well.
- Tax cuts for lower-income groups could increase spending faster than government expenditure.
- Corporate Strategy Flaws: Businesses focusing only on premium markets risk overlooking the broader middle-class demand.
Food and Agricultural Reforms
- Changing Consumption Patterns: The share of food in consumption has dropped below 50%, with rising demand for diversified and processed foods.
- Price Volatility: Vegetable supply remains disorganized, contributing to price spikes.
- Agricultural Marketing Reforms
- 26 states have adopted private markets and farm gate sales, but only 14 have notified rules.
- Diversified agricultural production is more profitable for farmers than reliance on MSP sales.
- Policy Suggestions
- Focus on food supply chain development.
- Better coordination between the Centre and states for agricultural reforms.
Current Progress in Simplifying Regulations
- The Centre claims to have removed archaic laws, but businesses still face regulatory hurdles.
- Reforms need to trickle down to local government levels to simplify business operations effectively.
Way Forward: Budget Priorities
- Key Focus Areas
- Aligning budget priorities with production needs to lower costs and improve supply.
- Emphasis on well-designed incentives over mere allocation of resources.
- Strategic Policy: India’s economic diversity and policy flexibility demonstrated resilience during the pandemic, enabling effective countermeasures to external shocks.
Conclusion
Budget priorities, to be aligned to the needs of the economy, must facilitate an improvement in conditions of production, so more can be produced and made available at lower prices. Just resources will not achieve results, well-designed incentives are essential.
Editorial 2 : It’s Not Your BMI, Stupid
Introduction: Popularity of Body Mass Index (BMI)
- BMI is widely used for assessing obesity due to its simple calculation method, making it accessible on government websites and in gyms.
- It is often presented as the first step toward better health, with a higher BMI indicating the need for interventions like exercise, diet control, or even medical treatments.
Limitations of BMI
- A report published in the Lancet Diabetes and Endocrinology journal has called for an overhaul of our understanding of obesity, citing an over-reliance on BMI, which has had the peculiar effect of leading to both underdiagnosis and overdiagnosis of the condition.
- BMI does not provide a reliable picture of health.
- Neither is it a direct measure of fat, nor does it give accurate information about how fat is distributed in an individual’s body.
- It frequently fails to capture the true state of health of a person who may have excess body fat, while having “healthy” BMI.
- Rethinking the overreliance on BMI is long overdue, not least because of how it has been misused to reduce conversations about health to mere numbers on a scale.
Broader Cultural and Medical Perspectives
- Gaps in Understanding of the Human Body
- The Lancet report underscores the limited understanding of the human body, which remains one of the last frontiers in science and medicine.
- While medical professionals use a combination of clinical judgment, scientific evidence, and patient history, this nuanced approach is often lost in broader cultural narratives.
- Misuse of Medical Tools and Terms
- Medical jargon and tools like BMI are increasingly being used by laypersons to self-diagnose, often leading to misdiagnosis and unnecessary panic.
- This trend was not limited to the Covid-19 pandemic but has accelerated with the rise of easily accessible health information online.
The Dangers of Over-Self-Diagnosing
- The Digital Age's Impact
- The vast amounts of health-related information available on the internet can exacerbate existing health anxieties, especially when tools like BMI are misused to trigger panic or overreaction.
- Obsessive tracking of health metrics (e.g., sleep, calories, heart rate) has been linked to clinical conditions such as anxiety and eating disorders.
- The Unique Nature of Each Individual's Health
- Every individual’s health is influenced by a complex combination of genetics, socio-economic conditions, habits, and chance.
- A one-size-fits-all approach to diagnosis and treatment is ineffective, as it fails to acknowledge the nuances of each person’s body and circumstances.
Weight-Loss Drugs
- Drugs like Ozempic, originally used to treat conditions such as diabetes, are now being widely used for weight loss, often without proper medical oversight.
- This raises concerns about the potential for misuse, as these medications may be abused as a quick-fix solution to weight issues without addressing underlying health conditions.
Conclusion and Way Forward
- Revaluate BMI’s Role: While BMI can be a useful screening tool, it should not be the sole metric used to evaluate an individual's health. Health professionals must adopt a more comprehensive, individualized approach to diagnosing and treating conditions like obesity, recognizing the complexity of the human body.
- Encouraging Health Literacy: There is a need to shift the cultural narrative from focusing on superficial numbers to a more informed and nuanced understanding of health.