Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
- GS PAPER 2
- A National Court of Appeal? Aye. {Bill and Laws}
- GS PAPER 3
- Commerce Minister complains of ‘sledging’ in trade talks {Trade Agreement}
- Modi launches LPG scheme for poor women {Govt Scheme}
- Where are India’s taxpayers? {Indian Economy}
- ‘Overall economic slowdown’ to blame for bad loans: Rajan {Indian Economy}
- Band-aid solutions {Agriculture}
- Banks Board Bureau: Old wine in a new bottle?{Indian Economy}
- Economics needs a new paradigm {GDP}
GS PAPER 2
[1] A National Court of Appeal? Aye.
Context
- The author is in favour of setting up of National Court of Appeal.
To understand NCA comprehensively, click here.
How the Supreme Court works
- Every week, the court spends three days in final hearings of cases.
- Two other days are meant for admission of fresh cases called Special Leave Petitions (SLPs).
- Each Bench of two judges has before it 60 to 70 cases, each with its mass accumulation of bulky case papers gathered over years of litigation in the courts below.
- The hearing of each case lasts for a couple of minutes or less before the judges decide whether to admit or dismiss it, the latter being the fate of the overwhelming majority.
- A substantial portion of four days of the country’s senior-most judges thus goes in just deciding which cases should join the appeals docket of the Supreme Court.
Waste of Resources
- Being tasked with the filtering process is a waste of the time, experience and wisdom of a Supreme Court judge.
- It prevents full consideration of the substantive cases before these judges; it reduces the quality of judgments which need to be drafted, crafted, refined and embellished to mark the definitive and lasting pronouncements of law expected from a Supreme Court.
- And it provides no space for wider reading, for pause and reflection.
All this, prevents Supreme Court to focus on examining a question of law of general public importance and to restate, clarify, change existing precedent, or create a new one.
Paucity of Constitution Benches
- This is illustrated by the current relative paucity of Constitution Benches.
- These are formed by grouping five or more judges to decide major questions of law.
- The cases unique to the court are not getting heard, including issues of religious freedom, rights of minorities, the right to privacy, governance, and validity of statutes.
- Another concern arises when cases of importance are dealt with by just a couple of judges, for lack of Constitution Benches.
Why we need larger benches?
- Larger Benches bring more judicial thinking to an issue, a balancing of different points of view and greater authority to the ruling of the court.
Access to Justice, not feasible under current circumstances
- A vastly disproportionate percentage of appeals to the Supreme Court come from Delhi and its neighbouring States; for those beyond, the court seems out of reach.
Restoration
- We need to restore the Supreme Court to what the Constitution envisaged, and what an apex court should be — to decide the weighty issues under the Constitution and other laws, with appropriate judge strength, and give the judges the time and opportunity to do their best in the cases which matter most to all of us.
GS PAPER 3
[1] Commerce Minister complains of ‘sledging’ in trade talks
What happened?
- Commerce Minister Nirmala Sitharaman alleged that attempts has been made by certain countries to portray India as “obstructionist” in the FTA talks.
What else she said?
- She has dismissed allegations that India’s “negative and protectionist” approach — of not agreeing to eliminate duties on most goods — was leading to delays in pacts.
- She said delays were instead due to India’s partner countries opposing its ‘ambitious offers’ in services and investment.
- Owing to its strength in services trade, India has been pitching for removal of restrictions on temporary movement of skilled workers in many FTAs (with Australia, European Union, as well as for the Regional Comprehensive Economic Partnership FTAs), on a reciprocal basis.
- This proposal, for instance, had even got China’s support in the RCEP talks
- India will not yield to pressure from these countries as they want India to eliminate tariffs even on sensitive items in agriculture (eg: wheat) and industry (automobiles) as part of the respective FTAs.
- She said huge trade-distorting” agricultural subsidies of rich nations had not yet been properly discussed at the World Trade Organisation.
- She also referred to subsidies “given by China to its industry” and said this was hurting Indian manufacturers in sectors including steel.
India is not “defensive”
- India pointed out that it had made better offers than the other RCEP members on temporary movement of skilled workers and investment. Though India asked other RCEP members to make matching offers, they did not do so.
- India also cited the foreign investment reforms made by it and contrasted it with investment restrictions even in certain developed nations who are RCEP members to prove that it (India) was not “defensive” in its approach.
- She referred to protectionist measures of many in the G20 (or the world’s 20 leading economies) and said if India (also a G20 member) took any measure they (the rich nations) perceived to be negative, they went on a campaign to brand India protectionist.
- But if they [rich countries] take protectionist measures, they don’t want to talk about it.
Competitive devaluations
- In the backdrop of competitive devaluations of currency by several countries including China to boost their exports, she cited the persisting contraction in India’s exports and said she personally felt the Indian currency needs to be devalued a bit. However, she added that it was up to the RBI to take a final call.
[2] Modi launches LPG scheme for poor women
What Happened?
- Government has launched the Pradhan Mantri Ujjwala Yojana. The tagline for the scheme is Swachh Indhan, Behtar Jeevan.
About the Scheme
- It aims to provide five crore LPG connections to women in Below Poverty Line (BPL) households over the next three financial years, at a cost of Rs. 8,000 crore.
- Under PMUY, each of the beneficiaries will receive monetary support of about 1,600 rupees to get a connection of cooking gas. It includes administrative cost, pressure regulator booklet and safety hose.
- It is being implemented by Union Ministry of Petroleum and Natural Gas. It is for the first time this ministry is implementing a welfare scheme.
Funding of the Scheme
- The scheme is to be partially funded from the savings accruing to the government from LPG users who gave up their subsidy as part of the Give It Up programme.
- Apart from those who voluntarily gave up their LPG connections, those earning Rs. 10 lakh or more a year have been deemed ineligible for the subsidy.
- Removing the LPG subsidy from these people would save the government Rs. 173 crore a year.
Expansion plans
- Nearly 10,000 new distributorships and infrastructure expansion plans were in the works to cater to the increased demand arising out of the new connections.
- The households will be selected using the socio-economic and caste census data.
- Currently, India has 16.64 crore active LPG consumers with a requirement of about 21 million tonnes per annum.
Larger Objective of the Scheme
- As LPG coverage is being increased, there are serious health hazards associated with cooking based on fossil fuels.
- According to World Health Organisation estimates, about 5 lakh deaths occur in India alone due to unclean cooking fuels. Experts say having an open fire in the kitchen is like burning 400 cigarettes an hour.
- Providing LPG connections to BPL households will ensure universal coverage of cooking gas in the country and this will empower women and protect their health.
[3] Where are India’s taxpayers?
Only 2.9 crore Indians filed personal income tax returns for the assessment year 2012-13
Issue
- This figure of 2.9 crore is only the 4 % of total adults enumerated in 2011 census.
- More than half of these 2.9 crore individuals paid no tax at all.
- Direct tax base is narrowing which is a problem.
Data released by the income tax department of India is showing that the revenue from direct tax is declining and indirect tax is increasing in past years.
Due to the failure in bringing enough well-off Indians into the direct tax net, the country has been mobilising revenue through indirect tax collection.
In 2015-16, direct taxes contributed only 51 per cent of the tax revenue, lower than in recent years.
Increase in indirect tax collection is a situation which needs a whistle blow. Why?
Indirect tax
- A tax levied on goods and services rather than on income or profits.
- Indirect taxes affect all Indians alike, rich and poor. Indeed, given that the poor generally spend a greater fraction of their income on essentials than the rich do, with wider indirect taxation, they end up paying a higher individual tax rate than people considerably wealthier.
What is crystal clear?
- indirect taxation needs to be rationalised.
- direct taxes continue to be evaded in substantial measure.
Conclusion:
- India’s direct tax revenue base is too narrow — an uncomfortable position for an economy steadfastly trying to scale up social and infrastructure investments while maintaining a semblance of fiscal discipline.
- The government needs to push through meaningful reform like taxing large farm incomes and rationalising bounties enjoyed by the well-off, to widen the base.
[4] ‘Overall economic slowdown’ to blame for bad loans: Rajan
Explaining real causes for bad loans at public sector banks, the Reserve Bank of India (RBI) Governor Raghuram Rajan has put the blame on overall economic downturn, among other reasons, in his submission to a key Parliamentary panel.
Public Accounts Committee (PAC),led by Congress leader K. V. Thomas:
- The Parliamentary panel had suo motu decided to examine the non-performing assets of the public sector banks, which touched Rs.3.61 lakh crore at the end of December 2015.
- PAC can ask the RBI Governor to appear before it in future.
- Various public sector banks may also be asked to appear before the panel again to explain their position.
During the examination:
- The PAC found that in a number of cases the same bankers were trying to retrieve the bad loans who had earlier sanctioned the loans.
- Since the same officers, who sanctioned the loans are trying to retrieve it.
- It remains to be seen how successful they will be… It seems they did not have a mechanism.
The panel also observed that private sector banks and foreign banks do not have as much NPAs as the Public Sector Banks.
- Despite, Constraints on all banking sector operates is same, except for the Priority Sector Lending (PSL) requirements.
- Private Sector Banks and Foreign Banks have 2.2 per cent non-performing assets
- Public Sector Banks have 5.98 per cent NPAs, the PAC felt
- It is not justifiable that the difference is due to PSL only.
The PAC Chairman also sought to know:
- Whether the cause of NPA’s at present are really different from those listed by the Narasimham Committee in 1998.
RBI governor said:
While some of the reasons for NPAs could be subset of those indicated by Narasimham Committee.
What are key six reasons for stressed assets?
- Domestic and global economic slowdown,
- Delays in statutory and other approvals especially for projects under implementation
- Aggressive lending practices during upturn as evidenced from high corporate leverage.
- Laxity in credit risk appraisal
- Loan monitoring in banks
- Lack of appraising skills for projects that need specialised skills resulting in acceptance of inflated cost and aggressive projections.
Other reasons
- Wilful default
- Loan frauds
- Corruption
PAC, felt that the six reasons cited by RBI governor were not mutually exclusive.
The parliamentary panel wanted to know how much of non-performing assets and stressed assets are attributable to genuine business/commercial risk and those which are not.
- Mr. Rajan said that during the internal study conducted to assess the causative factors of NPAs last year
- Primarily qualitative information on causes of non-performing assets in banks were sought from the responses received from banks, the main reasons with broad categorisation of ‘economy-wide factors, borrower-level reasons and bank level inadequacies’ came to the fore.
- However, based on responses, it was not possible to specifically derive how much of the NPA (quantum) were attributable to which specific reason.
[5] Band-aid solutions
Concern
- India’s agriculture sector needs less regulation, greater play of market forces.
Indian agriculture suffering from excess government intervention.
- There is enough evidence to show that excessive regulation has hurt not just agricultural productivity but also farmers and, eventually, consumers.
- Even economic liberalisation in 1991 could hardly loosen the government’s stranglehold on this sector.
Recent regulations:
- Last week saw yet another round of regulations -the Maharashtra cabinet adopted a draft legislation aimed at regulating and capping them.
- On the same day, the Centre asked states to crack down on hoarding by imposing stockholding limits for traders on all varieties of pulses.
- A day later, the Centre issued a similar decision on sugar, empowering Central agencies and state governments to control prices by imposing stock limits, and regulating its supply, distribution, storage and trade.
Hoarding
- Is the practice of obtaining and holding scarce resources, possibly so that they can be sold to customers for profit.
- Activity that robs the farmer, increases prices for consumers, and benefits only the middlemen.
- crackdown on hoarding has instant appeal as hoarding is often perceived in a negative sense.
- It must also be noted that government is the biggest hoarder in the agricultural market.
Hoarding is not always bad
- Timely hoarding of commodities, enabled by proper warehousing facilities in the country, can go a long way in stabilising price fluctuations.
- Like in case of onions because of poor govt. Policies prices have crashed to below Re 1 per kg
- This is when hoarding, or creating a buffer stock, helps the farmer and smooths prices, both for consumers and producers.
Conclusion
- Cracking down on hoarding and arbitrarily controlling prices, is not a sustainable solution.
- The government should allow greater play of market forces in agriculture.
- Prices signal the direction in which farmers must move to remain profitable.
- Government’s temporary solution is a poor alternative.
[6] Banks Board Bureau: Old wine in a new bottle?
Context
- The Government set up Banks Board Bureau to improve the governance of public sector banks but the problem of bad loans, raising capital, and an overhaul of the banking sector cannot be done by merely asking the bureau to select bankers for top jobs.
About Banks Board Bureau
- The bureau was announced by the Union Government in August 2015 as part of seven point Indradhanush Mission to revamp the PSBs.
- BBB will be a super authority (Autonomous Body) of eminent professionals and officials for public sector banks (PSBs). It will replace the Appointments Board of Government.
- It will give recommendations for appointment of full-time Directors as well as non-Executive Chairman of PSBs.
- It will give advice to PSBs in developing differentiated strategies for raising funds through innovative financial methods and instruments and to deal with issues of stressed assets.
- It will also guide banks on mergers and consolidations and also ways to address the bad loans problem among other issues
Composition of the Banks Board Bureau
- Vinod Rai, a former comptroller and auditor general of India, is the chairman of the bureau.
- Its members include Anil K. Khandelwal, a former chairman of Bank of Baroda.
- H.N. Sinor, a former joint managing director of ICICI Bank Ltd.
- Roopa Kudva, a former managing director of rating company Crisil Ltd
- Then, there are three ex officio members—
- R. Gandhi, a deputy governor of the RBI
- Anjuly Chib Duggal, secretary, department of financial services, in the ministry of finance; Ameising Luikham, secretary, department of public enterprises.
Why Government wants Banks Board Bureau
- Government wants BBB to restructure business strategy of PSBs and also suggest way forward for their consolidation and merger with other banks as they are grappling with a huge problem of bad loans and high collective gross NPAs (Non-Performing Assets).
- Saddled with a large pile of bad assets, public sector banks need huge amount of capital.
- They also need to focus on sharpening efficiency and strengthening corporate governance.
How will the board help banks in developing strategies and raising capital?
- If there is no change in the constitution of the board and the bureau does not have any say in the selection of independent directors, it will be difficult to help these banks develop strategies and raise capital as many directors on the boards of various banks neither understand strategy nor do they lend credibility to their institutions.
Inception of BBB
- A committee set up by the RBI to review the governance of bank boards, headed by former chairman and managing director of Axis Bank Ltd P.J. Nayak, in May 2014 had suggested the formation of the bureau as a first stage in a three-phase process to empower the boards of public sector banks.
- In the run-up to the incorporation of a Bank Investment Company as an intermediate holding company for these banks, the bureau would advise on all board appointments, including the whole-time directors and the top bank management, to “professionalize and depoliticize” the appointment process. the panel had recommended.
BBB is meant to be a temporary provision, until Bank Investment Company is set up.
- The government has maintained that BBB is the first step towards a holding company for the government’s stakes in the public sector banks and facilitate consolidation in the sector.
- According to P.J.Nayak Committee, the members of the bureau would have a tenure of three years or until powers are passed on to the investment company, whichever is shorter, and their remuneration would at least be on a par with the senior bank chiefs.
Why it is temporary?
The investment company can be set up only after legislative changes. And it is a time-consuming activity (considering the recent trend in the way of functioning of the Parliament)
According to the author, BBB is a Old wine in a new Bottle. How?
- The government has done nothing, but has replaced the earlier appointments committee with the bureau.
- As there is no change in its constituents: An RBI deputy governor, two bureaucrats and four external experts—Rai, Khandelwal, Sinor and Kudva.
What should be done?
- It will not be easy to raise capital unless the government plans to overhaul the way public sector banks operate and this cannot be done by merely asking the bureau to select bankers for the top jobs.
- The government must clarify whether it is an intermediate step towards setting up the investment company.
- And if it is, then the scope of work must be widened to include the appointment of independent directors of the board, as envisaged by the Nayak committee.
- It also must look at the tenure of the managing director and the chief executive and the compensation of senior bankers, among other things. Finally, the process of appointment must also change.
[7] Economics needs a new paradigm
India will be a $10 trillion dollar gross domestic product (GDP) economy by 2032
Concern
- Whether this growth will create enough jobs?
Current scenario:
- India has generated fewer jobs every percentage point increase in GDP as compared to other lower GDP countries.
Governor of the Reserve Bank of India said:
- High growth of GDP is not a sufficient measure of a good economy.
Why GDP is a misnomer?
- This statement of RBI governor is backed by many thinkers and studies which shows that human beings have emotions, that they cherish many traditions of their communities, that they value their identities, that they have many aspirations that cannot be accounted in monetary terms. So GDP is a misnomer in true sense.
- There has been an over reliance on GDP as a measure of economic progress and other factors have often been ignored.
Conclusion
- For India to realize its aspirations to be a global leader in the 21st century, it must lead the development of a new, democratic and inclusive, and sustainable, paradigm of economic management.
- To begin with, its leaders must report to citizens their plans and progress with a better scorecard than the growth of GDP.
1. The lead article of the day is covered under Editorial Today. Click here to read.
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