Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
Note: Todays’ Newspaper has most of the article from Union Budget 2016 – 17. They have not been covered in 9 PM brief. They will be available as standalone issue article: Analysis & Excerpts – Union Budget – 2016 – 17 by the end of the week.
- GS PAPER 2
- Justice Dattu takes over as NHRC chief – {Statutory Body}
- Wigneswaran seeks India’s help on new Constitution – {India & Sri Lanka}
- GS PAPER 3
- Why the budget numbers don’t add up – {Budget}
- Banks need an autonomy stimulus – {Banking}
GS PAPER 2
[1]. Justice Dattu takes over as NHRC chief
Former Chief justice of India Handyala Lakshminarayanswamy Dattu appointed as national human rights commission’s chairperson. His name for the post is selected by the committee headed by Prime Minister Narendra Modi.
He is the seventh chief of NHRC following Justice K G Balakrishnan who completed his tenure on 11 may 2015.
Justice H L Dattu retired from the post of chief justice of India on 2 december 2016.
Important rulings:
- “ Bail is the rule and jail is an exception”, granted bail to 5 corporate executives in 2G spectrum scam case.
- Acquitted 11 persons charged under terror laws.
[2]. Wigneswaran seeks India’s help on new Constitution
What
Chief Minister of Sri Lanka’s Northern Province C.V.Wigneswaran want India to ensure that the spirit behind the 13th Constitutional Amendment be retained in the new Constitution.
The 13th Amendment is an outcome of the 1987 India-Sri Lanka accord.
Roadblock
The enactment of the Provincial Councils Act of 1987 has taken away what was granted by the 13th Amendment.
So, as per the Chief Minister, Provincial Council Act should be repealed.
Need India’s help
Many Constitutional experts from India were involved in the process of drafting the 13th Amendment.
So, India has helped in the ‘law’, now India’s help is being called for ‘spirit’ of the Constitution, which basically means that ‘federal features’ should be made an integral feature of the new Constitution.
GS PAPER 3
[1]. Why the budget numbers don’t add up
What
Budget is not promising as it is made out to be.
A hype has been created about the Indian economy being a bright spot in this gloomy international picture.
The global economic situation
Global economy is in a serious crisis and does not seem to be coming out of it any time soon.
There is limited scope for exports.
What we can do domestically
To generate demand, which would generate employment for the fast-growing unemployed youth population of this country.
This budget does little or nothing on that count.
What a good budget in such difficult times should do
It should address the problem of a slowdown in two ways:
Directly, by injecting the demand into the economy, which would make it a pro-people budget.
Indirectly, by creating opportunities for other sources of demand to pick up, which is demanded by the Business lobby and the media.
The strange thing about this budget is that it does neither.
How does an economy grows
An economy grows based on following sources of demand for its goods and services.
One, Consumption by the poor. Two, Consumption by the rich. Three, Private investment. Fourth, fiscal deficit. Fifth, Trade surplus.
Fiscal Consolidation
Fiscal consolidation means bringing down further the fiscal deficit as a proportion of GDP.
Fiscal deficit is essentially government expenditure minus its tax revenue. So bringing it down, means a fall in government expenditure and/or a rise in tax revenue as a proportion of GDP.
Means of current government for fiscal consolidation
Through increased collection in the indirect taxes and excise duties even as the non-plan expenditure has declined.
This is a clear case of Regressive Taxation because both the poor and the rich pay the same tax per unit of purchase of an item.
The problem of inflation is not an issue now because of low oil prices. But if oil prices go up, with this hiked indirect tax rates, inflation might hit the roof.
Proposed increase in Expenditure
It is important not to look at the absolute numbers but at their ratio with the estimated GDP since it is obvious that no government can afford to decrease the absolute number of allocation.
So, for example, if there is an increase in absolute allocation under the MNREGA, its proportion to the GDP has fallen from its previous figure in the revised estimate.
Conclusion
The belt-tightening requires the poor to pay increased indirect taxes while the cushion of the social sector is consistently taken away from them.
[2]. Banks need an autonomy stimulus
Concern: Banks need autonomy.
Public Sector Banks(PSBs) and NPAs
NPAs are more in PSBs of large corporate loans.
Corporate loans increased to 14% of GDP.
PSBs worked hard and showed ability to compete well with NPAs. They outperformed during and immediately after the global financial crisis.
Problems of PSBs
- Government interference
- Errors of Judgement
- External Risk
Because of first two, they have to give more loans to infrastructure units as development banks are not present now.
Interest rate hikes due to inflation which occurred in 2011 was also a cause of high NPAs.
NPAs were expected to come down as economy revived but external shocks and political logjams delayed the process.
Government Responsibilities
- Refinancing + Reforms to build proper incentive
- More independent PSB.
- Promoters should share risk and potential losses
- Easy to change management
- Equity infusion
- Provisions must be made for possible loans to NPA declared companies
- More transparent system
- Government can subsidize promoters if it is necessary at the time of losses.
Conclusion
Stronger boards and improved governance mechanisms can ensure that PSBs make independent decisions on purely commercial grounds.
Appropriate structural change makes some monetary stimulus feasible, both to reduce the pain and in response to the global slowdown. Many negatives need positive counters.
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