Front Page / NATIONAL (The Hindu)
Economy (The Hindu)
Front Page / NATIONAL (The Hindu)
Article talks about the Indo-Japan civil nuclear agreement
Officials on both sides are not clear over the legality of the document signed as part of the nuclear deal in Tokyo
What is the document about?
Document titled “Note on Views and Understanding” which was signed directly after the nuclear cooperation agreement contains contentious clauses that effectively allow Japan to invoke an “emergency” suspension of supplies if India were to test a nuclear weapon, and to contest any compensation claims from India in court.
- Legality: Questions are now being raised over its legality. Officials in both India and Japan have different views regarding this
Traditional Indian position
India has traditionally refused to link its nuclear trade with pre-conditions on testing, holding it is a matter of nuclear sovereignty, and instead giving a voluntary moratorium on tests.
Indian side says
The document is “not legally binding”
- Just a record: The note is simply a “record by the negotiators of respective views on certain issues,” given “Japan’s special sensitivities as the only nation to have suffered a nuclear attack.”
Japanese side says
The document had been signed by the nuclear negotiators in the presence of Prime Ministers Shinzo Abe and Narendra Modi, and hence “legally binding.”
 SC sets up panel on night shelters
The Supreme Court has asked the government to respond on the lackadaisical (lacking enthusiasm and determination) attitude shown by authorities in providing sufficient number of night shelters to the poor and homeless in the towns and cities of northern States despite the availability of funds.
Observations by the court
- Funds are available: In spite of the availability of funds and a clear mechanism through which to disburse them, there was an extremely unsatisfactory state of affairs on the ground. A careful consideration of the submissions of parties and the material on record discloses that the destitute in urban areas continue to suffer without shelters
- Noting the disparity between the claims of the government and the adverse reports of the National Legal Services Authority (NALSA), the Bench observed that the city’s poor shiver in the winter cold as welfare measures like the National Urban Livelihoods Mission (NULM) scheme continue to remain a distant dream
Directions by court
Formation of a committee: The court directed that a committee headed by former Delhi High Court judge Justice Kailash Gambhir be constituted to verify the availability of night shelters, including if they are in compliance with the operational guidelines under the NULM and to inquire into the reasons for slow progress in setting up shelter homes by the States/Union Territories.
- Inquire about use/misuse of funds: The committee shall further inquire about non-utilisation and/or diversion/misutilisation of funds allocated for the scheme for providing shelters to the urban homeless
- Issue recommendations to states:The committee shall issue suitable recommendations to the States to ensure that at least temporary shelters are provided for the homeless in urban areas to protect them during winter season
- Compliance by state governments: The State governments shall ensure compliance with the recommendations along the time frame indicated by the committee
- 4 months: Committee has been given four months to submit its report
National Urban Livelihoods Mission(NULM)
Focus of NULM The key focus area of NULM are as follows:
- Organizing urban poor in Self Help Groups (SHGs)
- Creating opportunities for skill development for urban poor leading to market based employment
- Helping urban poor to set up self-employment ventures by ensuring easy access to credit
Aim of Mission
- Providing shelter equipped with essential services in phased manner to urban poor including urban homeless
- Addressing the livelihood concerns of urban poor including urban homeless
Implementation and Funding NULM is being implemented in two phases
Phase I (2013-2017) and Phase II (2017-2022)
- Phase 1: In Phase I, all district headquarter towns with a population of less than one lakh and all cities with a population of one lakh or more and as per Census of India 2011 will be covered. However, other towns may be allowed in exceptional cases on the request of the States
- Sharing of funding:Funding will be shared between the Centre and the States in the ratio of 75:25
- For North Eastern and Special Category States (Assam, Jammu & Kashmir, Arunachal Pradesh,Mizoram,Meghalaya, Manipur, Sikkim,Tripura, Nagaland, Himachal Pradesh and Uttarakhand), this ratio will be 90:10
Source: Details of the scheme has been referred from here. You can pursue the link for more details
Article talks about the recent nuclear agreement India signed with Japan during PM’s Tokyo visit.
In the first few paragraphs author has traced the backdrop of Indo-Japan relations which came to a grinding halt after Pokhran test in 1998. Japan imposed sanctions on India.
- In 2001, Japan lifted the sanctions
- In 2009, India & Japan began an annual strategic dialogue
- In 2016, India & Japan sign a civil nuclear agreement
Importance of the deal for India
- Critical to India’s renewable energy plans: Japanese companies that produce cutting-edge reactor technology were previously not allowed to supply parts to India. In addition, Japanese companies have significant holdings in their U.S. and French partners negotiating for nuclear reactors now, and that would have held up the deals
- Boost relationship: The move will boost the bilateral trade which as of now stands at $15 billion, and further boost the strategic military and defence relationship
- Bolster India’s NSG bid: Signing of the nuclear civil agreement will provide a fillip to India’s effort for NSG membership
More on this: Read it here
Caveats attached with the deal
- Still to be approved by Japanese Parliament (known as National Diet): Japanese PM has to get the deal approved by a sceptic Japanese Parliament. After the Fukushima disaster more than 70 per cent population in Japan is against nuclear energy
- Nullification clause: There is a provision for emergency suspension of the deal in case India tests a nuclear weapon
As the two Asian rivals to China, India and Japan might need the partnership even more in the days to come, as the U.S. President-elect has indicated a lower level of interest in “playing policeman” in the region.
This article by former RBI governor tries to look at the current state of Indian economy and where it is headed
Author begins by presenting us with two questions,
Q: Are there green shoots (sign of growth or revival especially of economy) which show a decisive revival of the economy?
Q: Have we laid the foundation for a faster rate of growth of the economy in the medium term?
Conflicting sets of Data
Author says that the problem of conflicting data continues. He takes up the National Income data for the first quarter (April – June),
- GDP growth: 7.1 per cent
- Value added in manufacturing growth: 9.1 per cent
Conflicting IIP: However, according to the Index of Industrial Production (IIP) during this quarter, manufacturing fell by 0.6 per cent.
The Central Statistics Office (CSO) now uses IIP data for measuring only a small segment of manufacturing. It uses the corporate data for estimating 75 per cent of the manufacturing sector
Author says that an attempt can be made to find out whether the current year will be better than the last year by looking at the performance of different segments.
- Author says that Agriculture will do better this year
- Reason: Better monsoon. The rainfall during the monsoon over the country as a whole was 97 per cent of the long period average (LPA) while in 2015 it was 86 per cent of LPA
- Impact: Based on a study of the impact of rainfall on agricultural production, this should lead to an increase in value added in agricultural and allied activities by 2.7 per cent
Demand side perspective
Author says that from demand side there are four factors that need to be examined,
- Private consumption expenditure: It is set to increase
What is private consumption expenditure?
This is also called personal consumption or consumer expenditure. Consumer expenditure is personal (mainly household) spending on goods and services. Thus it include rents on owner-occupied dwellings; and administrative costs of life assurance and pension funds. It excludes interest payments; the purchase of land and buildings; transfers abroad; all business expenditure; and spending on second-hand goods, which reflects a transfer of ownership rather than new production.
Expenditure takes place when goods are purchased, while consumption may take place over several years. For example, the benefit derived from a car or television is enjoyed (consumed) over several years. In practice it is hard to measure consumption and the term is used loosely to mean expenditure. Thus consumer expenditure, personal expenditure and private consumption are all the same thing.
- Increase in pay due to 7th pay commission. Government’s salary and pension expenditures are expected to rise by 20 per cent. The effect of this factor will be visible in second half as the recommendations were implemented from August 2016
- Increase in Rural demand: Due to a good monsoon rural demand may also pick up
- Government expenditure particularly on investment: Author says that the bulk of the public investment comes from public sector enterprises & as of now, there is no information how much additional investment has been made by PSUs. Roads and railways seem to be doing well.
- Private investment particularly corporate investment: Bulk of the investment expenditures in any year are the result of the projects initiated in the previous two to three years. With the slowdown in new projects undertaken in recent years, it is unlikely that investment expenditures by the corporate sector in 2016-17 can be higher than in 2015-16.
- External demand: Author says that the external demand is largely a reflection of global economy, which is on a path of slow recovery. All forecasts indicate a slowing down in the world growth rate in 2016. The expectation is a slight improvement in 2017.
Decline in Exports: Exports of India started declining in 2015-16. For the year as a whole, the decline was 15.5 per cent. Much of this was due to the fall in the value of oil exports. However, some improvement in the current year is seen. The decline in exports during April-September was 1.26 per cent. In the month of September 2016, exports grew by 4.03 per cent.
India’s exports are doing a little better in 2016. Author states that we need to maintain this momentum.
Positive signs in the economy
- Improved agricultural performance
- A pick-up in rural demand
- Some increase in private consumption expenditure primarily due to the implementation of the Seventh Pay Commission recommendations and an enhanced capital expenditure by government
- GVA: Author says that the growth rate of GVA (gross value added) in 2016may be slightly better mainly because of improved agricultural performance. This estimate of the growth rate will likely reduce if the disruptions caused by demonetization persist for a long time.
What is GVA?
It is the measure of the value of goods and services produced in an area, industry or sector of an economy, in economics
Negative signs in the economy
Negative indicators are
- A continued stagnation in corporate investment
- A poor external environment
Author points out that Indian economy has acquired a certain amount of stability
- Inflation is under control: Both CPI (consumer price index) and WPI (wholesale price index) inflation are below 5 per cent. Improved agricultural performance may further bring down food prices
- Low CA deficit
Banks under stress
Author points out that the Banking system is under stress due to the problem of NPAs
- Insurance Act passed to facilitate greater foreign investment
- Bankruptcy Act has been enacted
- Real estate Regulation and development Act, 2016 was passed
- Finally, the goods and services tax is becoming a reality.
All of these are enabling legislations. The impact of these legislations on the economy will take some time to come. But they are moves in the right direction.
Economy (The Hindu)
The demonetization cannot be treated as an isolated exercise but must be viewed as a larger effort to push the society into a cashless one.
Author states that the underlying motive of the demonetization move is,
- Addressing the problem of black money
- Curbing corruption
- Eliminating counterfeit currency
Demonetization was planned earlier too
Author points out that the RaghuramRajan-led Reserve Bank of India had sought to completely demonetize the notes issued before 2005. It provided enough time-window for the public to exchange these currencies.
- The apex bank had said then that these notes were legal tender but must be exchanged for new ones from banks
- Rationale: The idea then was to replace the older notes with new ones with hugely beefed-up security features. By withdrawing these notes, the RBI, it was pointed out, wanted to weed out fake notes in the system if any and also ensure that faking becomes difficult and costly by introducing new notes with tighter security features
- Continuation of process: Author states that the current demonetization move must be taken as a continuation of that larger process
Author points out that this current demonetization move must be seen in the light of other measures taken up by the government to have an organized system to act as a check against black money, like a connected web of Aadhaar number, PAN and Bank account numbers etc
Author states that the move to demonetize is a part of the larger process of moving towards a cashless economy
. Young and alienated
Kashmiri youth are dejected. Delhi must abandon the security-centric approach, acknowledge that economic measures can’t stand in for political outreach.
Article states that,
- The Kashmir issue has been overtaken by separatist leaders, while the political parties in power have limited itself to issues like electricity, water, road and unemployment. There is considerable social acceptance to separatism as it is centered on political freedom
Youth power: Kashmir is a state with 60 per cent youth population and around 20 lakh students admitted in schools. The stakeholders are youngsters. It is unfortunate, however, that our politics doesn’t engage and target them at the age they are attracted to a divergent ideology.
- Victims: Many of those who die in the protests are youngsters below 18 years of age. In three earlier cycles of protest, in 2008, 2009 and 2010, the major casualties were largely among those who are below 18. A majority of them were children.
Author states that the main challenge in Kashmir today is to connect to the youngsters who are below 18. He further states that,
- These youngsters need good parenting rather than policing and they need to be listened patiently
- Huge presence of army and the never ending conflict has eroded the idea of eldership in villages of Kashmir
- Kashmir’s youth look dejected and without any hope
- Economic measures & packages would not be a replacement for political outreach
Not merely in geographical terms
Author points out that whenever India refers to Kashmir as its integral part, it refers to it in geographical terms, ignoring the people while Pakistan handles its part of Kashmir more emotionally. Author expresses astonishment that a nation which unites for rape and murder victims like Jessica Lal, conveniently ignores similar victims in Kashmir
Case in point: The mysterious deaths of 2009 “rape and murder” victims, Aasiya and Nilofar, in Shopian
Harassment of Kashmiri youth
Author says that those young boys and girls who go out to study under scholarship schemes like Prime Minister’s Special Scholarship Scheme (PMSSS), were earlier subjected to harassment and arbitrary arrests by police but now they are being subjected to beatings by general public. This feeling of contempt and suspicion towards Kashmiri youth further alienates them from the mainstream.
Need to revive the peace process
Author states that there is a serious need to revive the peace process but no such steps are being taken presently.
- Aim: The scheme envisages to build capacities of the youth of J&K to enable them to compete in the normal course. Scholarship to meet the expenditure towards tuition fees, hostel fees, cost of books and other incidental charges is provided to the eligible students, who are in the merit list
- Total number of scholarship is 5000 (4500 for General degree, 250 for Engineering and 250 for Medical/BDS)
More details: Read it here
A healing touch and not a military crackdown should form the core of the Kashmir policy. The policy of consistent inconsistency practiced by earlier Central governments hasn’t helped. Delhi has to be different this time
 Demonetization is a hollow move
Narendra Modi’s publicity coup has penalized the entire informal sector while doing nothing to curb corruption or tax evasion.
Author begins by critically analysing the supposed benefits of the demonetization measure,
- Demonetization will curb black money: Author says that behind this benefit is an assumption that all those who have accumulated substantial amounts of black money keep it in the form of cash, and use this cash to amass even more black money. If this is indeed true, then the demonetization will certainly have a huge positive impact on the state of the Indian economy. Unfortunately, this assumption is only partially, and not even substantially, true
Reality:While there are certain criminal activities (such as smuggling, drug peddling, gun running, etc.) that follow this pattern, they collectively account for a very small fraction of “black money”. Really big contributions come from two other activities—corruption and tax evasion.
- Cash moves along: Author further states that in both of the above cases, the cash doesn’t stay with a person as it is either further invested or invested for future consumption. The money moves along constantly
- When the illegality happens?
The illegality, if any, happens only to the extent that tax is evaded on the income from these secondary and tertiary transactions. For example, if a jeweller accepts cash in payment for gold or an ornament, he is committing no illegality (indeed, by law, it would be illegal for him to refuse to accept legal tender). If he conceals this income, however, then, and only then, it remains “black” (this, by the way, is also true of real-estate transactions)
Where this cash goes?
Author states that this cash finds its way into the informal sector of the economy.
Cost of the demonetization
- Cost to informal sector: Considering the fact that the informal sector in India accounts for about 45% of gross domestic product (GDP) and nearly 80% of employment, disruption of this liquidity can be very costly indeed
- Human cost: Some of this cash is held by hundreds of millions of the poor as savings and for meeting contingencies, and they have little else to fall back upon
Factors on which cost of demonetization depends
The magnitude of the cost obviously depends upon,
- The speed at which the currency replacement happens
- On the processes that are used for the replacement
Official estimate is worrisome
Author points out that the official estimate of currency replacement in rural and semi-rural areas is 3 weeks, which is a lifetime for the poor. Moreover, those who have no id proof are left clueless.
Informal financial sector
Author states that there is, however, one component of the economy that may actually experience a permanent effect—the informal financial sector
What is informal financial sector?
The informal financial sector provides savings and credit facilities for small farmers in rural areas, and for lower-scale enterprises in favour of a larger-scale, income households and small-scale enterprises in urban areas
Examples: moneylenders, hundis, nidhis, chit funds etc.
- Author states that this sector will see a permanent effect in terms of reduction of lending capacity as most of the money stock held under this sector is black money as taxes are seldom paid
- Further, the reduction of lending capacity of this sector will harm those whose livelihood depends on the capital provided by this sector because the formal financial sector hasn’t reached them yet
So, what has this demonetization move achieved?
- Elimination of terrorist funding: It has certainly eliminated terrorist funding through counterfeit currency
- Punishing the black money hoarders: It has imposed a punitive cost on those who held their black assets as cash, and completely missed those who had converted their cash into real assets and foreign holdings
- Restraining criminal activities: It has subdued certain kinds of criminal activity
- Impact on Informal sector: It has penalized virtually the entire informal sector, and perhaps damaged it permanently
- No effect on corruption or tax evasion: It has done absolutely nothing to curb either corruption or tax evasion. And all this at the cost of Rs12000 crore in printing new notes and logistics of exchanging the currency
Author concludes by terming this move as a gross overreaction on the part of the government which shall only harm the economy in the long run
. The air we breathe: If not now, then when?
Governments should use the air pollution crisis as a justification to push for sweeping reforms.
Author suggest measures which we must take in the light of the recent smog witnessed in Delhi,
- Record stats: Medical institutions must get statistics of the increase in respiratory disorders and deaths/sickness attributed to this smog
- Media coverage: There is a need for intense media coverage. It must capture the imagination of Bollywood, artists and documentary makers.
- Research: Scholars must be funded and encouraged to research on the apportioned contribution of pollution sources in Delhi. Such examinations are crucial for informed policy analysis
- Sweeping reforms: Author says that this is an opportunity wherein sweeping reforms to curb pollution can be undertaken without political parties having to care for their vote-banks like de-registering old diesel vehicles, keeping trucks out, prohibiting firecrackers in weddings and banning of fires etc.
- Opportunity to courts: Author states that it is an opportune moment for the judiciary also wherein it can set policy guidelines around which measures to curb pollution can be taken up by the government
Author lists three famous global smog incidents& its subsequent impact,
- The ‘Black Tuesday’ of 28 November 1939 when a dense cloud of black smog engulfed St Louis, Missouri, due to a meteorological inversion, hanging over the town for more than a week. The city had been experiencing heavy burning of coal for heating purposes, but Black Tuesday smog pushed an otherwise indifferent city council not only to initiate cleaner supplies of coal but to issue new smoke ordinances
- Donora smog: In October 1948, a small mill town in Pennsylvania called Donora suffered from what many still regard as America’s worst air pollution disaster. The resulting asthma and other respiratory disorders killed 20 people and made 7,000 sick. Industry didn’t take responsibility but the government had to give in. The event triggered massive campaigns against air pollution, leading to the Clean Air Act of 1970.Donora today has around 5,000 people residing there. They have a museum called Donora Smog Museum which bears the slogan—Clean Air Started Here.
- The Great Smog of 1952 in London: In this case also, windless conditions with airborne pollutants in the cold weather gave rise to a thick fog. This was a result of the indiscriminate post-war use of low coal and the coal-powered thermal stations. The Great Smog was responsible for around 4,000 deaths of very young, elderly, and those with pre-existing respiratory disorders. The event led to new regulations like the Clean Air Acts of 1956 and 1968 and a host of other directives restricting polluting activities in the city.