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9 PM Daily NEWS Brief

9 PM Daily Brief – 10th October 2016

 


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NATIONAL

 

[1]. SC widens ambit of Domestic Violence Act

The Hindu

Context

15 days away from a decade to the Domestic Violence Act , the apex court in its landmark judgement ordered the deletion of the words “adult male” from the statute book saying it violated right to equality under the Constitution and thus  paved way for prosecution of any person irrespective of gender or age under the Domestic Violence Act.

What is Domestic violence act?

The domestic violence act came into force in 2005 to protect women from physical, sexual, verbal, emotional and economic abuse at home. The benefit, however, was not available to a woman if her daughter-in-law harassed her. The court’s decision fixes the anomaly.

Background

The verdict came on an appeal against the Bombay High Court judgement, which had resorted to the literal meaning of the term ‘adult male’ and discharged four persons, including two girls, a woman and a minor boy, of a family from a domestic violence case on the ground that they were not “adult male” and hence cannot be prosecuted under the DV Act.

A Writ petition was filed which challenged the definition of Section 2(q) of the “Protection of Women from Domestic Violence Act,2005” and after hearing the writ petition SC ordered deletion of the words “adult male” from the statute book making it gender neutral.

Why supreme court ordered the deletion of the words”adult male”?

According to the Supreme Courtthe term “adult male” contained in the Act was “discriminatory” and the microscopic difference between male and female, adult and non-adult is neither real nor substantial,nor does it have any rational relation.

  • Earlier, the daughter-in-law was the only woman who could sue her husband and all his women relatives, including his mother, sisters and even nieces. But a domestic violence complaint couldn’t be filed against the daughter-in-law as the accused under the law could only be adult males.

There have been growing complaints about the abuse of the law at the hands of daughters-in-law to put pressure on husbands, especially in seeking a hefty divorce settlement.

Conclusion

Deletion of the words “adult male” not only makes DV Act gender neutral but also widens the ambit of the law to protect the elder women from the harassment by the juveniles including minor grandchildren at home.

 

[2]. JananiSuraksha Yojana pays dividends

 The Hindu

Context

Article deals with the impact of Janani Suraksha Yojana in reducing ‘socioeconomic disparity’ based on India Human Development Survey (IHDS).

JananiSuraksha Yojana

Janani Suraksha Yojana (JSY) which falls under the umbrella of NHRM, is a nationwide, centrally sponsored scheme launched on 12 april 2005, with the objectives of reduction in infant and maternal mortality by improving coverage of institutional delivery among pregnant women.

  • Under the scheme, cash assistance is provided to pregnant women for giving birth in a health facility.Itcovers all pregnant women belonging to households of BPL category, above 19 years of age and up to two live birth.

Study

Study was done using data from 2 rounds of the India Human Development Survey (IHDS) round 1 of IHDS was conducted in 2004-05 when the JSY was not in place and round two was conducted six years after the launch, providing a before-after scenario for comparison.

The paper examines the patterns of maternal care usage and socioeconomic disparities in care before and after the initiation of the program among women in rural India.

From the study it has been found that

  • The proportion of women availing full antenatal care increased by 6 % from 19% during the pre-JSY period (IHDS-I) to 25% during the JSY period (IHDS-II)
  • The number of institutional deliveries almost doubled, going up from 32% in IHDS-I to more than 60% in IHDS-II.
  • The proportion of deliveries being assisted by trained health personnel showed a significant increase from 43% in IHDS-I to 65% in IHDS-II
  • A twofold increase in the number of postnatal care check-ups over the two periods
  • women in their early twenties were more likely to avail of each of the three maternal health care services as compared to their older women
  • the number of women availing maternal healthcare services decreases with the increase in the number of children they have delivered.
  • the gap in access to healthcare between the marginalised group of women and those who are financially better-off has declined since the advent of the JSY program.

Three maternal healthcare services were used for the analysis

  • full antenatal care (full ANC)
  • safe delivery
  • postnatal care

There were three major findings

  • the increase in utilisation of all three maternal healthcare services between the two rounds was remarkably higher among illiterate or less educated and poor women.
  • the usage of all three maternal healthcare services by the OBC, Dalit, Adivasi and Muslim women increased between the 2 surveys.
  • there was generally a narrowing of the gap between the less educated and more educated women and between the poorer and richer women

As per the latest lancer series on maternal health High incidence of maternal mortality continue to plague India. India accounted for 15 per cent of the total maternal deaths in the world in 2015 — second only to Nigeria — with 45,000 women dying during pregnancy or childbirth

Conclusion

Inequality in access to maternal care persists , but the findings indicate that the program has led to an enhancement in the utilization of health services among all groups but especially among the poorer and underserved sections in the rural areas, thereby reducing the prevalent disparities in maternal care.

 

EDITORIAL

 

[1]. Why a ‘bad bank’ is tricky

The Hindu

Context

Article deals with the problem of NPA and its possible solutions, focusing mainly on ‘creation of bad banks’

How Banks usually deal with bad loans?

Once an asset is recognised as a non-performing asset (NPA), banks must decide what to do with it. They have several options.

  1. One, they can try to seize the assets pledged by the borrower and sell these. This typically involves large losses on loans as the assets have to be sold at steep discounts to their book value.
  1. Two, under the RBI’s Strategic Debt Restructuring (SDR) scheme, they can convert their loans into equity, acquire a majority stake in the firm, dislodge the promoters or management and bring in new promoters and management.
 Reasons for failure of SDR Scheme in India:

SDR scheme has not taken off in India. Indian banks do not have experience in running businesses till such time as new promoters are found. Nor do they have experience in locating promoters and management who can take over the stressed assets.

  1. Three, banks can restructure the loans so that borrowers are able to service them. This involves extending the period of payment, or waiving a portion of the loans, or reducing the interest rate on loans, or some combination of these. In any restructuring, banks incur losses on the loans they have made.
  1. A fourth option for banks is to sell the NPA at a discount to an Asset Restructuring Company. This again involves a significant loss on loans when the transaction is made. But it has the effect of getting an NPA off the books of the bank or ‘cleaning up the balance sheet’. The bank’s capital is eroded to the extent of the loss. However, since 100 per cent of the loan has exited the balance sheet, the ratio of regulatory capital to assets — or what is called ‘capital adequacy’— improves. The bank now looks more attractive to investors.

Bad Bank

It is a variant of the 4th option listed above.

Core idea: The idea is to transfer NPAs of banks, perhaps only PSBs, to the bad bank.

What a bad bank will do?

The bad bank will manage these NPAs in suitable ways — some may be liquidated, others may be restructured, etc. A bad bank will be better focussed on the task of recovery. If it’s a private entity, it can also bring in superior expertise. It would appear that the bad bank concept has many things going for it.

Free up the PSBs: Getting NPAs off the books will help the PSB management focus on new business instead of having to expend their energies on trying to effect recoveries.

Problems with the Bad bank

Problem 1

First, who will have the majority stake in the bad bank? Will it be the government or private investors?

Case 1: Government has a majority stake

Problems with case 1

  1. Given the size of NPAs at PSBs, the capital required by a bad bank for acquiring NPAs will be substantial. If the government is to be the majority owner, how does it find the required funds?
  2. Second, a government-owned bad bank will be subject to the same constraints in managing bad loans as PSBs.
  3. Third, managing the sheer size and diversity of bad loans acquired from multiple PSBs will be a tall order.
  4. Fourthly, a government entity may not be able to pay specialists what it takes. Whichever way you look at it, a government-owned bad bank appears to be transferring the problem from one part of the government to another

Case 2: private investors have a majority stake

Pricing issue: The price at which PSB loans are sold to the bad bank could become a major issue.

  • If the price is too high, the bad bank will not viable.
  • If it’s too low, PSBs will be accused of selling their loans too cheaply to private investors — we will have the makings of an ‘NPA scam’

Problem 2

Most NPAs can be turned around: a big chunk of NPAs at PSBs pertains to projects that are viable. These projects have not gone through to completion for reasons that are mostly extraneous to the project, such as problems in land acquisition or environmental clearance. With restructuring and additional funding, they can be completed and would create significant capacities.

Problem: Selling these loans to a bad bank, on the other hand, would be a time-consuming process. It would impede fresh flow of funds into these projects. Their debt would rise as the interest piles up. Bad banks were typically intended for situations where projects were not viable. They were not meant for a situation where projects are viable.

 So, if bad bank idea is riddled with problems then what is the motivation behind it being floated around?

Well the motivation seems to be the dressing up of PSBs meaning to rid the PSBs of their bad loans making them attractive again for the private capital

A possible solution

Author suggests that it would be lot better to set up a bad bank which deals with NPAs at some of the weaker PSBs, instead of one that picks up NPAs from all PSBs. It would prove less controversial if the government had a majority stake in it

The above step should be complemented with other measures like,

  • Infusion of more capital into the better-performing PSBs.
  • Creation of an apex Loan Resolution Authority for tackling bad loans at PSBsthrough an act of Parliament. The authority would vet restructuring of the bigger loans at PSBs. This would mitigate the paralysis that has set in at the PSBs because of the fear factor and get funds flowing into stalled projects.

Conclusion

Resolution of bad loans and restoring the health of PSBs is among the biggest challenges the economy faces today. It’s a challenge that requires a response on multiple fronts. A bad bank cannot be the sole response.

 

ECONOMY

 

[1]. Treaty hurdle no bar for U.S. investments

 The Hindu

Context

As talks remain in a limbo over a proposed Bilateral Investment Treaty (BIT) U.S. companies are finding alternate ways to address investment protection and dispute-related issues with their Indian counterparts

What is BIT?

bilateral investment treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state.It is aimed at promoting and protecting 2 way direct investment.

BIT b/w US & India

U.S. and India had held the first round of BIT negotiations in August 2009, talks have not progressed much, but as companies are finding innovative ways to deal with dispute resolution hence   the BIT is “no showstopper” for the flow of funds between the two nations

Few innovative ways used by investors are

  • the Gujarat International Finance Tec-City (GIFT City) has offered American investors the option of using the Singapore arbitration model to solve disputes
  • S. investors are also signing up with Indian firms to use London and Brussels as seats of arbitration

U.S and China has a robust bilateral FDI  without a BIT

To make GIFT city an attractive destination

  • ease of doing business initiatives
  • Tax incentives
  • Robust dispute resolution mechanism are needed.

US Ambassador points the problems associated with Indo-US BIT:

  • India’s new ‘Model BIT’ substantially narrows the scope of investments.
  • disputes be exhausted in local jurisdictions before alternative investor-state dispute mechanisms can be initiated.
  • Investors are concerned with the ‘judicial delays’ in India. Investors want to take disputes to international arbitration tribunals without waiting to exhaust remedies available in India.

 

[2]. Rate cut by central bank unlikely to boost investment

The Hindu

Context

Repo rate has been cut by 25 basis points. This is lower than the 50 basis points cut that markets were expecting but enough to shed the hawk image that his predecessor had acquired.

What is Repo rate?

It is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used to control inflation.

Would banks transmit this rate cut forward?

Banks are not in a position to pass on interest rate cuts in spite of the Marginal Cost of Funds based Lending Rate (MCLR) regime (up to March 31, 2016, banks used the base rate as the benchmark rate to lend). At least, they are not expected to transmit lower rates to borrowers till their own non performing assets (NPAs) come down significantly.

 

[3]. From plate to plough: Rural change challenge

Indian Express

Context

Article focuses its attention towards the recently released Rural Development Report (RDR) 2016 of the International Fund for Agricultural Development

What is International fund for Agricultural Development?

The International Fund for Agricultural Development (IFAD), a specialized agency of the United Nations, was established as an international financial institution in 1977 as one of the major outcomes of the 1974 World Food Conference.

  • The conference was organized in response to the food crises of the early 1970s that primarily affected the Sahelian countries of Africa. It resolved that “an International Fund for Agricultural Development should be established immediately to finance agricultural development projects primarily for food production in the developing countries.”
  • Aim:IFAD is dedicated to eradicating rural poverty in developing countries. Seventy-five per cent of the world’s poorest people – 1.4 billion women, children and men – live in rural areas and depend on agriculture and related activities for their livelihoods.

Sahelian countries (Source: Wiki)

What is RDR?

The report tries to understand the role of rural transformation in eradicating poverty and securing food and nutritional security within the context of economy-wide structural transformation in several countries.

  • It is based on an empirical analysis of 60 countries drawn from various regions

Author, now, details the reader on various lessons contained in the report.

First lesson

It notes that economies of almost all the 60 countries are undergoing some sort of structural transformation.

  • The transformation is reflected in rising productivities in agriculture and the urban economy as well as in the changing character of the economy which is now beginning to be dominated by industry and services, greater integration with global trade and investments and growing urbanisation

Second lesson

Rural areas cannot remain insulated from this economy-wide change.

  • They are also transformed with rising agricultural productivity, increasing commercialization and marketable surpluses, diversification to high-value agriculture and off-farm employment through the development of agri-value chains.

Third lesson

The most important lesson, especially for policymakers, is that rural transformation on its own may not be effective in reducing poverty unless it is inclusive. This challenge is at the heart of the report.

Lessons for India

The RDR 2016 says that India’s poverty reduction was slow during 1988-2005, but during 2005-12, it accelerated dramatically — almost three times faster than during the earlier period.

What did India do during this period?

Research reveals that the relative price scenario changed significantly (by more than 50 per cent) in favour of agriculture in the wake of rising global prices. This boosted private investments in agriculture by more than 50 per cent.

  • Real farm wages rose by seven per cent per annum. All these led to an unprecedented fall in poverty.

Lesson 1: A good price incentive can thus trigger investments in agriculture, leading to productivity gains, increases in real farm wages and fall in poverty

Way ahead

To make the rural transformation more inclusive, India will have to focus on raising productivity in agriculture through higher R&D (seeds) and irrigation and build value chains for high value agri-products like livestock and horticulture

  • Large investments both by the private and public sector are required.
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