Failing India’s children: (The Hindu, Editorial)
- The government’s proposal to amend the Right to Education Act and allow States to drop the no-detention policy at the primary and middle school levels will have far-reaching negative consequences for the education scenario.
- The proposal, which will give States the choice to detain children in classes 5 and 8, does not consider socio-economic factors and the state’s limitations in providing education, especially for the weaker sections.
The drawbacks of the proposal:
1.The government’s latest proposal goes against the spirit of the RTE, which is a fundamental right guaranteeing free and compulsory education till the age of 14.
2.According to the Ministry of Human Resource Development, the dropout rate in elementary school was about 4% in 2014-2015.
- Detaining children on the basis of examinations will lead to an increase in the dropout rate.
- Parents may feel the child will be better off going to work as he/she can help bring additional income to the family and learn a skill for survival.
- Economically disadvantaged groups do not have access to private tuitions to train their children to perform better the following year in the same class.
- This will mean more youngsters out of school with no prospects of a productive future.
- In a society that considers the girl child a burden, and a country which has the second highest number of child marriages, parents will only find another reason to marry the girl off rather than send her to the same class for the second consecutive year.
- The RTE should not be curtailed for any reason. Many children from weaker sections have benefited from this right.
- Taking away the guarantee the Act offers up to the middle school level is not in the goodwill of the children.
A strange hybrid: (Indian Express, Editorial)
The Niti Aayog is all set to push states to privatise well functioning district hospitals in the Tier 2 and 3 cities like Pune, Baroda, Visakhapatnam, Madurai and so on.
- The proposed model consists of leasing out for 30 years a portion of the hospital to a private company to provide treatment for the three diseases — cardiology, cancer and pulmonology — that account for 35 per cent of mortality in India.
- It’s a strange hybrid that has no precedent anywhere in the world and can be called strategic, bizarre or hare-brained depending on which side of the equation you are on.
- The intention of the proposal, to hive off 60,000 sq ft of the hospital and vacant land, if any, to a private investor, is to attract private capital through equity and venture funds to build the required infrastructure to world class standards.
- The private entity will have its own staff and personnel, laboratories, pharmacy, ambulances and common services like cafeteria and bookshops down to the ATM.
- It will have an assured market, access to all confidential records and information and freedom to charge user fees.
- Complicated cases will, however, be referred to bigger hospitals — their own or of government
- Government reimbursements for patients referred to them will be on par with rates paid under the CGHS or the state-sponsored insurance scheme, if any.
- A grievance redressal mechanism is proposed.
- Overall accountability is confined to submitting some annual reports to the government.
- In case of any violation of conditions, the government will need to seek judicial relief.
- The rationale for coming up with this hybrid model is the fact that these three diseases do account for almost 35-40 per cent of total mortality in the country.
- India has a plethora of PPPs in health, starting with handing over free land and extensive custom duty waivers for imported equipment, to “strategic partnerships” under which public hospitals have been handed over to large corporate, outsourcing of diagnostics and dialysis units and so on.
- The largest PPPs are however, under the government sponsored insurance schemes where treatment costs for eligible patients are reimbursed by government at agreed package rates that have, however, witnessed steady increases as have premiums.
- The challenge in the Niti Aayog hybrid model is its implementation.
- Every day, there are instances of patients being denied treatment in private hospitals till payment is made or preferring paying patients to the government insured ones or levying additional charges in addition to the sum reimbursed.
- Private hospitals are also known to overcharge devices like stents and drugs that are the key revenue earning centres.
- The Aayog could easily have come up with a soundly argued, evidence-based white paper on the need for hospital reform, providing various options with fiscal implications.
- The model does not provide any information on the pricing strategy and its impact on public budgets.
- The CGHS is an imperfect instrument to rely upon as the rates fixed under that programme are based on tenders.
- Prices quoted, therefore, include cost of capital, liabilities and profit. Since under the Aayog model, several “costs” are being subsidised, rates charged ought to be half of the CGHS rates.
The Niti Aayog proposal has a sound rationale but the design is fraught with adverse implications for the existence of public hospitals that are a refuge for the poor. In the absence of government as the monopoly purchaser, such a hybrid model will be a challenge.
Niti Aayog need to consult, listen, collect evidence, analyse, understand and reflect, not prescribe based on the advice of the World Bank and a few interested corporate houses.
India and neighbors
UAE joins chorus of concern over Doklam: (The Hindu)
- Any military escalation between India and China would be “potentially very disruptive” for the region, said Anwar Gargash, the visiting Minister of Foreign Affairs from the United Arab Emirates.
Gargash discussing Doklam issue
- Mr. Gargash discussed the current standoff at Doklam with External Affairs Minister Sushma Swaraj and National Security Adviser Ajit Doval in Delhi on Wednesday.
- “We were informed of the developments and the concerns on Doklam and I have also been following the issue through reports in the press,” Mr. Gargash made his statement.
- Mr. Gargash joined other countries including Australia and the U.S. in expressing concern about the situation.
- Any escalation between two great powers, India and China is potentially very disruptive for all of us, said Mr. Gargash.
- The more there is a way to resolve these issues between two great nations, the more stable we feel we are,” he added.
Mr. Gargash visit
- Mr. Gargash was in Delhi on his fifth trip this year to discuss deepening bilateral ties, but also as a part of a diplomatic offensive by Gulf states following their economic blockade over what they call Qatar’s broken promises on ending support to “extremism, jihadism and terrorism”.
- The Minister assured the Indian leadership that Indian expatriates would not “suffer” because of the blockade and “Indian economic interests in the region” would not be affected by the clash between Saudi Arabia, Bahrain, UAE and Egypt against Qatar that has dragged on since June 3.
- Mr. Gargash also accepted that program on proposed investment from the UAE sovereign wealth fund (SWF) into Indian infrastructure projects had been overdue over procedural negotiations, and specifically the mandate of the governing body of the National Infrastructure Investment Fund (NIIF).
- The investment has been delayed despite two visits by UAE Crown Prince Sheikh Mohammed Bin Zayed al-Nahyan to India in the past two years, and a visit by Prime Minister Narendra Modi to the Emirates.
- The whole idea of UAE investment in India was an old model, and should have been more institutional that is why things have taken more time because of the establishment of the NIIF, according to Mr. Gargash.
- The minister wouldn’t confirm that the figure of $75 billion announced during Mr. Modi’s visit would flow into the NIIF’s coffers, as “UAE has said we have a huge appetite for India.”
Development of social sector
Towards a clean-up: (The Hindu)
- The Swachh Bharat Mission is a high-profile national programme enjoying extraordinary political and budgetary support with some achievement and challenges of its own.
- With its subsidy-based mass toilet-building programme, it has put up millions of individual house latrines in rural areas.
- A government-commissioned survey evaluates that the coverage now extends to 62.45% of households, up from 39% in 2014.
- Among these households, nearly 92% of people who have access actually use the toilets.
- Big gaps exist, but these are encouraging trends, given the many positive outcomes that sanitation produces.
- The most important of these is reduced stress for women.
- There are well-known gains to public health as well.
- There is data from undivided Andhra Pradesh to show that household latrines built before the current Swachh programme lapsed into disuse because many rural households did not have a water source.
- The newer ones may meet the same fate without access to water.
- Also, Dalit houses tend to have lower coverage, hinting at structural difficulties in accessing schemes.
- Rural housing also needs stronger policy support; without which it cannot wipe out the deficit of about 60 million units that are needed to plan for universal toilet access.
- In the Centre’s assessment, Bihar, Jammu and Kashmir, Odisha, Uttar Pradesh and Telangana have predominantly failed to upgrade rural sanitation.
- While Sikkim, Himachal Pradesh, Kerala, Uttarakhand, Haryana and Gujarat have exceeded the goals.
- Given the substantial funding available from the Centre, State governments cannot have a convincing reason for a poor record.
- The Union Ministry of Drinking Water and Sanitation, which has introduced a new district-level ranking, should persuade the more backward States to bring about infrastructure improvements.
- Nearly 60% of sewage generated in the cities currently flows untreated into rivers, waterways, lakes and the sea.
- The rules on segregation of waste remain on paper even in the bigger cities. It is now left to environmentally conscious citizens to adopt green practices, compost and sort their waste.
- The big metros generate a few thousand tonnes of garbage every day, and city managers focus their energies on transporting refuse to landfills.
- Many Indians do not see the waste they generate as their problem, and consider it to be someone else’s responsibility.
Indian Economy. Planning, Growth and Employment
Note ban dents RBI income: (The Hindu)
The Reserve Bank of India (RBI) on Thursday announced that it will transfer Rs 30,659 crore as surplus to the government for the year ended June 2017, less than half the amount transferred last year.
- The RBI’s central board, which met on Thursday, approved the amount to be transferred.
- In November, the Centre had announced that Rs 500 and Rs 1,000 denomination currency notes were invalid and further issued a new series of Rs 2,000 notes.
- For the year 2015-16, the RBI board had approved the transfer of surplus amounting to Rs 65,876 crore to the government.
- In the previous year, the Central bank had paid Rs 65,896 crore to the government, which came as a boon to the government in covering the deficit.
- The surplus transferred to the government was Rs 52,679 crore in 2013-14.
- The RBI did not give reasons of the sharp fall in the surplus income for the year ended June 2017.
Malegam panel report:
- The YH Malegam committee had suggested in 2014 that the Central bank can transfer its entire surplus to the government, without allocating anything to its various reserve funds, for three years because it had adequate reserve funds.
- Following the recommendations of the Malegam committee, the RBI stopped transfers to internal reserves since its accounting year 2013-14 which is now a part of expenditure.
- According to the Malegam panel report, the RBI transfers the balance of its profits to the Central Government as per Section 47 of the RBI Act, 1934, after making provisions for bad and doubtful debts, depreciation in assets, contribution to staff and superannuation fund and for all matters for which provision is to be made by or under the Act or which are usually provided by bankers.
- For the 12 months ended June 30, 2017, the RBI will transfer a surplus of Rs 30,659 crore to the Government of India, sharply lower than the previous year’s Rs 65,876 crore.
- This is the lowest-ever surplus transfer by the RBI to the Centre since 2011-12 when it transferred Rs 16,010 crore.
- RBI transferred about 80% of its income as surplus in the previous three years.
- Technically, the transfer of profits is provided in Section 47 of the RBI Act, which states that after making provisions for bad and doubtful debts, depreciation in assets, contribution to staff and superannuation fund and for all matters for which provisions are to be made by or under the Act or that are usually provided by bankers, the balance of the profits of the bank is required to be paid to the Central government.
- The RBI’s profit essentially represents the difference of income over expenditure. The key source of income for the Central bank is interest arising from its foreign assets and domestic assets.
Specified Bank Notes (Cessation of Liabilities) Act, 2017:
- As per the Specified Bank Notes (Cessation of Liabilities) Act, 2017, the scrapped currency notes of Rs 500 and Rs 1,000) “shall cease to be liabilities of the RBI under section 34 of the Reserve Bank of India Act, 1934 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act”.
- The lower amount will be a concern since the government’s non-tax receipts will be affected.
- In the Budget it was assumed that around Rs 75,000 crore would come from the RBI, public sector banks and financial institutions compared with a little over Rs 76,000 cr in FY17,” rating firm Care Ratings said.
- “As public sector banks are unlikely to do better than last year and the RBI will be transferring a smaller amount, this will impact the fiscal deficit numbers. If other conditions remain unchanged, the fiscal deficit can increase from 3.2 per cent to 3.4 per cent this year,” Care Rating pointed out.
Reasons for decline:
- The cost of seigniorage-which is higher than RBI’ printed notes.
- There were costs of printing a huge amount of new notes to replace the notes rendered invalid following demonetization.
Parliament passes bill empowering RBI to recover NPAs
The Rajya Sabha on Thursday passed the Banking Regulation (Amendment) Bill, which empowers the Reserve Bank of India to issue instruction to the banks to act against major defaulters.
- The bill, earlier passed by the Lok Sabha, will replace the Banking Regulation (Amendment) Ordinance, 2017.
- It empowers the Reserve Bank of India to issue instructions to PSBs to act against major defaulters.
- The measure allows the RBI to initiate insolvency resolution process on specific stressed assets.
- Finance Minister Arun Jaitley said there was nothing wrong in banks giving out loans and trying to recover them. It was only on the strength of the banking finance that businesses expanded, jobs were created and the economy moved on.
- The RBI would also be empowered to issue other directions for resolution, appoint or approve for appointment, authorities or committees to advise the banking companies for stressed asset resolution.
- Last month, the RBI identified 12 large loan defaulters who account for 25 per cent of the total NPAs, or bad loans, in the banking sector.
- NPAs stood at Rs 6.41 lakh crore by March this year. They were growing because of accumulated interest. Along with the stressed assets, they amounted to over Rs 8 lakh crore.
- NPAs of banks have risen to over Rs 9 lakh crore and the RBI is now being given power to refer these cases to the Insolvency and Bankruptcy Board.
- The law provides for a window of 180 days for debtors to settle the matter or face eviction and subsequent takeover of management by debt reconstruction companies, things had started improving
- Under the bill, the central government may authorise the RBI to issue directions to any banking company to initiate insolvency in respect of a default under the provision of the Insolvency and Bankruptcy Code.
- It also has provisions empowering the RBI to issue directions to banks for resolution of stressed assets.
- The sectors most responsible for the accumulated NPAs are steel, power, textiles and infrastructure
Need for legislation:
- The capacity of banks to lend money to small creditors is being impacted, the growth is impacted.
- Public sector banks were hit the most as big industrial and infrastructure programme were supported by them in the hope that there would be further expansion
- It also performed other functions like public debt management.
- Earlier rules of debt recovery were time consuming. The new parallel mechanism was more effective.
- The British government is seeking Indian investment to to support its drive to create more affordable housing across the country.
- The Minister of State for Trade and Investment, Greg Hands, is keen on getting investment from India beyond London particularly in real estate, infrastructure, and energy infrastructure.
Affordable Housing Agenda of UK
- Real estate trends across the U.K. continue to be strong from offices in London to logistics in the Midlands to urban regeneration projects in Edinburgh.
- Investors from across the U.K. are seeing stable and profitable opportunities to seize business opportunities after Brexit.
- The UK Government has estimated that at least 250,000 new homes are needed each year to keep pace with demand.
- The UK government has vowed n their recently published White Paper to build more affordable houses and help people buy and rent, after admitting that the current real estate market of UK is “broken”.
- The new housing strategy for England includes to pressurise developers to start building on land they own.
Opportunity for India and UK:
- While foreign investors including from China and Qatar have made big inroads into the U.K. real estate market, the country has seen limited investment beyond private investments in housing or hotels from India.
- The exception is the Lodha group, which has two luxury housing projects in London and has expressed its confidence about moving to new price categories and beyond the residential sector.
- Recently, at an event at the House of Lords for delegates of the Confederation of Real Estate Developers’ Associations of India (CREDAI), the Department for International Trade highlighted infrastructure and property development opportunities in northern England and the Midlands, including in and around Birmingham.
- During next round of the U.K.-Indian joint economic and trade committee (JETCO) talks due to take place in London later this year, UK has expressed confidence in efforts to boost bilateral trade and investment.
GST and the remapping of India: (Indian Express, Editorial)
The Goods and Services Tax (GST) will unify the nation into a common economic market, obviating the need for goods to be taxed each time they cross a state border.
- New tax regime could bring a shift in production and storage centres
- New tax regime could bring a shift in production and storage centres. It will require a nimble reading of where markets will grow, their logistical requirements
Pre GST regime:
Prior to GST, the internal movement of goods was subject to a number of barriers.
- There were taxes on the inter-state movement of goods and cross-state differences in VAT structures.
- There were cumbersome inspections, especially at state borders.
- A recent World Bank-funded study, undertaken by the Ministry of Road Transport and Highways, used GPS-time-stamped data of freight trucks to suggest that roughly 20 per cent of the transit time is spent at the border on verification of documents.
- GST will eliminate taxes on inter-state movement and harmonise the VAT structure across states (except for exempted goods).
- GST is expected to result in a significant increase in internal trade — by as much as 30 to 40 per cent, according to some estimates
Beyond the increase in internal trade, other economic factors are at play that can significantly alter the economic map of the country.
- Large transport costs, production benefits by locating itself near the largest market to minimise transportation costs.
- A reduction in transport barriers, as is the case with GST, can change the location of production within a country quite dramatically — away from the largest market to low production-cost locations, thus diluting the home-market effect.
- The relocation of production away from the United States to China in the last couple of decades was driven in significant part by the lowering of transport costs.
- With the removal of barriers within India, another related outcome is the geographic centralisation of production and warehousing.
- Another possibility is the agglomeration of economic activity in the more productive states.
- As economic corridors change, the demand for new investment in transport and logistics infrastructure will increase.
- Supplying this demand will require a nimble reading of where markets will grow and where new investments will be necessary
- Logistical inefficiency in India amounts to around 4 per cent of the GDP — this could well increase as the GST intensifies logistical needs Infrastructure is often identified as a “binding constraint” to growth.
- Much economic and political effort will be required to arrive at optimal investment choices — on the modal mix, the balance between road and rail, air and water, on the location of the vaunted multi-modal logistics “parks”, on technology adoption and on the setting of standards to support inter modal transport inter alia — and to achieve efficient funding.
- India’s economic destiny will crucially rely on its ability to anticipate, support and leverage its evolving economic geography.
- China’s economic trajectory could teach us, productivity and growth require intention and provisioning.
It’s time to focus on the toxic air we breathe: (The Hindu, Editorial)
NITI Aayog’s draft energy policy ignores the health impacts of energy choices.
Issues related to subsidies
- On June 27, 2017, the Niti Aayog released the draft National Energy Policy.
- But the draft energy policy ignores the health impacts of energy choices
Draft policy ignores health:
- An important aspect that the draft policy ignores is public health, especially in the context of the energy mix envisaged under the NITI Ambition Scenario. (The Ambition Scenario is a tool to arrive at a range of possible energy futures for the energy sector till 2040.)
- In the document, there are 14 references to health, of which only five relate to public health in the context of household cooking fuel. The rest are analogies to describe the health of the coal sector and discoms.
- Moreover, according to environmental health researchers, children represent the subgroup of the population most affected by air pollution.
- Although the National Health Policy of 2017 views reducing air pollution as vital to India’s health trajectory, the National Energy Policy neither reflects nor supports the commitment outlined by the MHFW
- Vision documents like the National Energy Policy have to strive to minimise the unavoidable health impacts of energy production, and their associated health costs, especially given the policy’s stated objectives of sustainability and economic growth.
- The policy should include a health impact assessment framework to weigh the health hazards and health costs associated with the entire life cycle of existing and future energy projects and technologies.
By ’20, petroleum subsidy bill to halve: (The Hindu)
- The Food subsidy bill estimated to shoot up to Rs. 1.45 lakh crore by the Financial Year’ 2020.
- The food subsidy bill is estimated to shoot up sharply from Rs. 1.45 lakh crore this year to Rs. 2,00,000 crore by 2019-20, as per the medium-term expenditure framework tabled by the finance ministry in Parliament on 10th August, 2017.
- Also, following the abolition of price controls over diesel and petrol prices, the government has set its eye on rationalising kerosene and LPG subsidies, with a March 2018 target for eliminating the LPG cylinder subsidy altogether by raising prices by Rs. 4 each month.
- Efforts are also underway to bring kerosene subsidies under the direct benefit transfer regime or while making some States ‘kerosene-free.’
The reason behind the increase:
- One of the main reasons for an increase in food subsidy is to meet the repayment obligations of FCI (Food Corporation of India) to the National Small Savings Fund.
Army advances winter exercises in Sikkim: (The Hindu)
- Sukna headquartered 33 Corps has already issued an operational alert for troop movement to hold its annual exercises before the end of August.
- The Indian Army is all quiet about the move, even as some reports spoke of China beefing up its military presence in the vicinity of the standoff site in Doklam in recent days.
- Troop movement towards their areas of possible action during a conflict is already under way. The exercise would last two weeks.
- Reports had emerged from the border that residents of Nathang village, 35 km from Doklam, where the two sides are on a military standoff, have been asked to vacate.
- However, Army sources denied reports of a border village being evacuated.
- Traditionally, the annual exercises are held in September, before snow sets in.
- During the exercise period, troops will be exercising in their likely areas of operation during a conflict.
- The development comes even as the Chinese side continues to up its rhetoric.