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Daily Current Affairs 14.10.2021 (‘Gati Shakti’ will boost infra projects: PM , A portrait of the Nobel masters of ‘metrics’)

Daily Current Affairs 14.10.2021 (‘Gati Shakti’ will boost infra projects: PM , A portrait of the Nobel masters of ‘metrics’)

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1.‘Gati Shakti’ will boost infra projects: PM 

‘It will help India realise its dream of becoming business capital of the world’

Prime Minister Narendra Modi on Wednesday kicked off ‘PM Gati Shakti’, a national master plan for synchronising connectivity infrastructure projects across modes of transport, and said it will help India realise its dream of becoming the “business capital” of the world.

Taking on “some political parties” for criticising infrastructure projects that he said were necessary for the country, Mr. Modi said, “The subject of infrastructure has not been a priority for most of India’s political parties.”

“This is not even visible in their manifesto… despite the fact that it is globally accepted that the creation of quality infrastructure for sustainable development is a proven way, which gives rise to many economic activities and creates employment on a large scale,” he said.

Referring to common instances of roads being built only to be dug up afresh for work necessitated by other utilities like water, the Prime Minister said there was a wide gap between macro planning and micro implementation due to the lack of coordination and advance information sharing as departments think and work in silos. This, he said, was leading to hampered construction and wastage of budget resources.

Logistics hubs

Citing the example of Dadri, where an integrated industrial township was coming up, the Prime Minister said India needed similar “plug and play” infrastructure so that investors could just come and begin working seamlessly.

Like in Greater Noida’s Dadri, such an integrated township could be connected to the eastern and western dedicated freight corridor. For that, multimodal logistics hubs would be built alongside, which would have a state-of-the-art railway terminus, inter and intra-State bus terminus, mass rapid transport system and other conveniences.

“By building these across different parts of the country, India could achieve the dream of becoming the world’s business capital,” he underlined.

“Our goals are extraordinary and will require extraordinary efforts. In realising these goals, PM Gati Shakti will be the most helpful factor. Just as JAM [Jan Dhan, Aadhar, Mobile] trinity revolutionised the access of government facilities to the people, PM Gati Shakti will do the same for the field of Infrastructure,” Mr. Modi said.

Recalling his initial findings after taking over as the Prime Minister in 2014, Mr. Modi said he reviewed hundreds of stalled infrastructure projects and decided to put all projects on a single platform and tried to remove hurdles. Now, with a “whole of government approach”, the collective power of the government is being channelled into fulfilling the schemes by avoiding delays caused by coordination gaps.

“Because of this, many unfinished projects are being completed for decades now,” he said, citing improved infrastructure outcomes in the past seven years across sectors, ranging from railway line electrification to gas pipelines, metro rail services and mega food parks.

Background

Recently, the government of India has launched the ambitious Gati Shakti scheme or National Master Plan for multi-modal connectivity plan, with the aim of coordinated planning and execution of infrastructure projects to bring down logistics costs.

About the Scheme

  • Aim: To ensure integrated planning and implementation of infrastructure projects in the next four years, with focus on expediting works on the ground, saving costs and creating jobs.
    • The Gati Shakti scheme will subsume the Rs 110 lakh crore National Infrastructure Pipeline that was launched in 2019.
    • Besides cutting logistics costs, the scheme is also aimed at increasing cargo handling capacity and reducing the turnaround time at ports to boost trade.
    • It also aims to have 11 industrial corridors and two new defence corridors – one in Tamil Nadu and other in Uttar Pradesh. Extending 4G connectivity to all villages is another aim. Adding 17,000 kms to the gas pipeline network is being planned.
    • It will help in fulfilling the ambitious targets set by the government for 2024-25, including expanding the length of the national highway network to 2 lakh kms, creation of more than 200 new airports, heliports and water aerodromes.
    • Integrated Approach: It intends to bring together 16 infrastructure related Ministries.
      • This will help in removing long-standing issues such as disjointed planning, lack of standardisation, problems with clearances, and timely creation and utilisation of infrastructure capacities.
    • Gati Shakti Digital Platform: It involves the creation of a common umbrella platform through which infrastructure projects can be planned and implemented in an efficacious manner by way of coordination between various ministries/departments on a real-time basis.
    • Expected Outcomes
      • The scheme will help mapping the existing and proposed connectivity projects.
      • Also, there will be immense clarity on how different regions and industrial hubs in the country are linked, particularly for last mile connectivity.
      • A holistic and integrated transport connectivity strategy will greatly support Make in India and integrate different modes of transport.
      • It will help India become the business capital of the world.
  • Need for Integrated Infrastructure Development:
    • There exists a wide gap between macro planning and micro implementation due to the lack of coordination and advanced information sharing as departments think and work in silos.
    • According to a study, the logistical cost in India is about 13% of GDP, which is higher than developed countries.
      • Due to this high logistical cost, the competitiveness of India’s exports is greatly reduced.
    • It is globally accepted that the creation of quality infrastructure for Sustainable Development is a proven way, which gives rise to many economic activities and creates employment on a large scale.
    • The scheme is in synergywith the National Monetisation Pipeline (NMP).
    • The NMP has been announced to provide a clear framework for monetisation and give potential investors a ready list of assets to generate investment interest.
  • Associated Concerns
    • Low Credit Off-take: Although the government had taken up ‘strong’ banking sector reforms and the Insolvency and Bankruptcy Code had yielded about Rs. 2.4 lakh crore of recoveries on bad loans, there are concerns about declining credit offtake trends.
      • Banks give credit off-takes to help businesses acquire financing for future projects through the promise of future income and proof of an existing market.
    • Lack of Demand: In the post-Covid-19 scenario,there is a lack of private demand and investment demand.
    • Structural Problems: Due to land acquisition delays and litigation issues, the rate of implementation of projects is very slow on global standards.
      • Getting approvals is very difficult in terms of land access, environmental clearances; also impending litigation in court delays the infrastructure projects.

2.A portrait of the Nobel masters of ‘metrics’

The quest for causality, the subject of the Economics Nobel for 2021, is doubly important in this era of big data

Every year on the second Monday of October, The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel a.k.a. the Nobel Prize for Economics is announced. This year, on October 11, three econometricians – David Card, Joshua D. Angrist and Guido W. Imbens — were given this distinct honour. Interestingly, David Card was awarded half the prize while the remaining half was split equally between Angrist and Imbens. Incidentally, every year the actual prize is awarded in a grand ceremony on December 10 which coincides with the death anniversary of Alfred Nobel.

A connecting thread

The Nobel citation says that the prize was awarded “for empirical labour economics and methodological contributions to the analysis of causal relationships”. All three have many more things in common beyond their interest in this aspect of econometrics. Not surprisingly, they teach at some of the finest universities in the world — Card teaches at UC Berkeley, Angrist at MIT and Imbens at Stanford. Both Card and Angrist got their PhDs from Princeton, and their doctoral supervisor was the legendary labour economist, Orley Ashenfelter. Imbens obtained his doctoral degree from Brown University, and all three are fellows of the Econometric Society, a rare honour among economists. Their list of honours is extensive, but it is worth mentioning that the unique honour of being Guido Imbens ‘best man” goes to Joshua Angrist.

An important quest

For me this year’s Nobel Prize for economics is especially precious since it has been given to those making a methodological contribution for establishing causality. Economics has always been interested in causal relationships, already evident from Adam Smith’s book title, An Inquiry into the Nature and Causes of the Wealth of Nations. This is particularly important in matters of human behaviour as casual relationships are critical for making policy. Suppose you observe that whenever my sister buys shoes, it rains in Bhubaneswar. If this was a coincidence or spurious correlation, then we have nothing to worry about. But if this was causal, then a flood prevention policy for Bhubaneswar would be to put an end to my sister’s shoe shopping sprees! This quest for causality is doubly important in this era of big data where analysts simply look for patterns in the data and not for behaviours that might give rise to the data generating process.

When we observe two events, A and B, being correlated, in general we cannot conclude that A causes B simply because a bunch of confounding factors that we have not taken into account may be present or there may even be reverse causality. A way out is to consider an experimental framework where we think of event A as a treatment and see what events it generates.

However, even this is problematic. Once we offer a treatment to an individual, it is not possible to study the same individual without the treatment. Therefore, we need to resort to statistical techniques. One type of statistical technique in this vein which was introduced and popularised in economics by the winners of the 2019 Nobel Prize Abhijit Banerjee, Esther Duflo (incidentally Angrist was one of Duflo’s PhD supervisors) and Michael Kremer is called a Randomized Controlled Trial (RCT). In this approach we compare the outcomes in the treatment and no treatment (control) groups just like in a medicine trial to establish causality while guarding against things like contamination across the two groups.

A different technique

This year’s Nobel Prize winners use a different technique called Natural Experiments. To quote Peter Fredriksson, Chair of the Prize Committee, “Sometimes nature or policy changes provide situations that resemble randomized experiments,” and the brilliance of those scholars lies in their ability to recognise these situations and identify the conditions under which causal links can be established using these naturally occurring phenomena.

Take for instance the work of David Card (with the late Alan Krueger who many believed would have shared the Nobel) on minimum wages. Typically, economists believed that raising the minimum wage will lead to greater unemployment as firms will hire fewer workers. In 1992, New Jersey increased its minimum wage while neighbouring Pennsylvania did not. Card and Krueger surveyed a large number of fast food workers on either side of the New Jersey-Pennsylvania border in this natural experiment and established that the higher wages had no impact on employment! This study has helped change how economists view minimum wages; today it is widely believed that minimum wages may not affect employment since firms may pass on the costs to consumers.

Statistical techniques

One drawback of natural experiments is that we cannot control who participates in them. This is where the work of Angrist and Imbens has been very important to economics and other related fields. Angrist and Imbens developed a framework and demonstrated how statistical techniques can be used to draw precise conclusions about causal relationships from natural experiments.

Finally, if you are looking to access some of the work of these scholars you can find plenty of papers on Google Scholar. Angrist is one of the authors of two excellent introductory books: Mostly Harmless Econometrics and Mastering Metrics that are probably the most accessible of all their work. Imbens is the author of an all-encompassing book titled Causal Inference for Statistics, Social and Biomedical Sciences. David Card is one of the editors of several volumes of the encyclopedic, Handbook of Labor Economics.

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