Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
- GS PAPER 2
- Cure for high medicine bills: A generics prescription law {Health}
- A desperate situation {Judiciary}
- Sensitise States, don’t intimidate them {Centre-State relations}
- Raja-Mandala: Aligning with the far to balance the near {International affairs}
- How to measure poverty { Poverty}
- True Panchayati Raj { Panchayats}
- UK exit could be good for Europe {International Affairs}
- GS PAPER 3
- RBI to ease registration process for NBFCs {Banking}
- Centre steps in to expedite patent approvals {IPR}
- The neglected impact of a rate cut { Monetary Policy}
- Ratifying trade facilitation agreement could prove costly for India { Trade Facilitation}
GS PAPER 2
[1] Cure for high medicine bills: A generics prescription law
Context
- The central government is considering the introduction of a law to make it mandatory for the doctors to prescribe generic drugs
Why
- So that everyone can access affordable medicines
- from state-run Jan Aushadhi stores.
What is Jan Aushadhi stores?
- ‘Jan Aushadhi’ is a campaign launched by the Department of Pharmaceuticals in association with Central Pharma Public Sector Undertakings, to provide quality medicines at affordable prices to the masses.
- Jan Aushadhi stores have been set up to provide generic drugs, which are available at lesser prices but are equivalent in quality and efficacy as expensive branded drugs.
- Generic medicines are unbranded medicines which are equally safe and having the same efficacy as that of branded medicines in terms of their therapeutic value.
- The prices of generic medicines are much cheaper than their branded equivalent.
What is the future plan?
- To set up 3,000 Jan Aushadhi stores across the country this year, current Union Budget promise.
Main issue.
- A good chunk of Indian population is not able to afford the branded medicines which are priced very high.
- Doctors doe not prescribe generic medicines and instead refer the branded counterparts.
Government proposed an ordinance or Act of Parliament
- To ensure that doctors prescribe generic drugs or include a clause ‘or equivalent generic drug,’ when doctors prescribe a branded drug
The BPPI is responsible for implementing the Jan Aushadhi programme which was launched in 2008.
What is BPPI?
- BPPI (Bureau of Pharma Public Sector Undertakings of India) has been established under the Department of Pharmaceuticals, Govt. of India, with the support of all the CPSUs for co-coordinating procurement, supply and marketing of generic drugs through the Jan Aushadhi Stores.
Main focus is accessibility, affordability and availability.
But if doctors will not prescribe generic drugs sales won’t take place.
Pharmacists should have the option to give the generic substitute
Reason for building jan Aushadhi stores?
- Ex-factory cost of medicines are low
- People get the drugs which are marked up multiple times owing to supply chain costs and incentives for medical representatives.
- The Jan Aushadhi stores will be able to provide drugs at Rs. 19, if the ex-factory cost is Rs. 10. For which people are giving 100 rupees.
Solutions
- Remembering a generic drug for combination drugs like PCM gets a little tricky.
- create an IT-enabled prescription system that automatically includes the formulation of such drugs when a doctor prescribes a branded drug out of habit or because they don’t know the exact formulation
- A law will be more effective than directives from the Medical Council of India asking doctors to write generic drug names.
- State governments should asked to focus on buying generics drugs rather than expensive branded alternatives
Current position
- Jan Aushadhi stores had opened in 16 States, and there are 283 stores in 22 States and Union Territories at present.
- BPPI will set up ten times the existing number of stores this year.
- Over 100 private pharma firms have enlisted to supply generic drugs.
Additional Points
Other initiatives taken by BPPI (Bureau of Pharma Public Sector Undertakings of India) to control the drug pricing are:
- Price control of Scheduled Drugs through the National Pharmaceutical pricing authority (NPPA):Under the Drug Price Control Order, 1995, NPPA): Under the Drug Price Control Order, 1995, NPPA has been given the mandate to control and fix the maximum retail prices of a number of scheduled/listed bulk drugs and their formulations, in accordance with well defined criteria and methods of accounting, relating to costs of production and marketing .Notably therefore, the prices of these medicines have remained quite stable and affordable.
- Price regulation of Non-Scheduled Drugs: Apart from the scheduled medicines under DPCO, 1995, the NPPA monitors the prices of other medicines not listed in the DPCO schedule, such that they do not have a price variation of more than 10% per annum. This has further helped in keeping the prices of most of the non-scheduled medicines stable and affordable.
[2]A desperate situation + Waiting for Justice
Issue
- A lot of cases are pending in Indian courts. Judiciary is overburdened.
- Understaffed judiciary.
There are 50,000 requirement for judges in India But there are only 18,000 judges to serve lakhs of cases.
In supreme court strength of judges are only 31 but the cases are 60,260.
Chief justice of India, T S thakur was drawing attention on some issue’s like:
- Delays on the part of the executive in clearing appointments to the higher judiciary
- Absence of any significant initiative to increase the strength of the subordinate judiciary
- Judiciary, itself, has not given sufficient attention to the small systemic interventions that could increase the efficiency of justice delivery.
- Lack of empathy for poor litigants and undertrial prisoners, who suffer the most because of judicial delay.
- He also asked “How could Make in India possibly work, he asked, if foreign investors are put off by the tardiness of dispute resolution?”
- Ease of adjournments is a well-known cause of delay in civil cases.
Some solutions to speed up the trials and to make judiciary functions smoothly.
- The current situation demands an ambitious infusion of manpower and financial resources.
- Ideal modern society need 50 judges per million population.
- 125th Law commission suggested a ‘rate of disposal’ method by which the number of judges required at each level to dispose of a particular number of cases could be computed based on analysis.
So both Government and judiciary should find more practical solutions:
- Government responsibility
- appointing more judges
- including retired judges as ad hoc judicial officers, based on periodic needs assessments
- increasing their retirement age
- Judiciary responsibility
- Deploying judicial resources efficiently–judiciary side
- Reasonable use of instruments like adjournment–judiciary
- Simplification of certain laws such as tax law would sharply reduce the volume of litigation in the higher courts.
Conclusion
- Chief justice of India has pointed the finger in the right direction
- The Government and Judiciary must find a middle path to solve this problem before it results in a crisis.
[3] Sensitise States, don’t intimidate them
Context
In the budget, Government mooted the idea of a Centre-State investment agreement to be signed between the Centre and various State governments to ensure effective implementation of BITs or bilateral investment treaties.
What is BIT?
- BITs protect investments made by an investor of one country into another by regulating the host nation’s treatment of the investment.
Objective of BIT
- The motivation behind the proposal is “to facilitate ease of doing business for foreign investors and their domestic recipients” .
Will it be mandatory?
- It is believed that the Centre will not make it mandatory for States to sign the agreement, but if any State chooses not to, this will be informed to India’s BIT partner.
However, there are two key issues that emerge from this which require a more detailed discussion.
Obligations under international law
- Once the Central government has acceded to the terms of a treaty on behalf of the republic, the international obligations assumed thereunder, generally speaking, bind the entire country, including its constituent States, at least externally.
- This is irrespective of whether the Central government has entered into an agreement with the State governments regarding the implementation of the said treaty.
- Internally, the Centre does not bind India (courts, State governments, etc.) till the treaty has been incorporated — usually through enabling legislation — into domestic law.
- However, as far as India’s international law obligations are concerned, the Central government cannot justify the non-compliance of its BIT obligations by invoking “provisions of its municipal law (domestic law), or because of any special features of its governmental organisation or its constitutional system.”
- The Centre’s proposal to warn their counter parties about non-compliant States before they make their investment in the State, unless framed as a reservation to the BITs, does not carry much legal significance.
Cooperative federalism
- The Centre and State governments are often politically non-aligned. In this context, a proposal by the Centre to enter into investment agreements with States as an optional arrangement may further sour the fragile Centre-State relations for two reasons.
- First, the State governments will not like the shifting of the blame for violation of a BIT from New Delhi to State capitals.
- Second, the State governments will also not like the Centre informing India’s BIT partner country that a particular State government has not signed the agreement and thus, by implication, is not a safe destination for foreign investment.
Road ahead
- One of the objectives of the proposal could be to sensitise State governments about India’s BIT obligations given the fact that many regulations of State governments directly impact foreign investors.
- However, this objective would be better served by institutionalising the involvement of State governments in the process of treaty-making. A forum such as the NITI Aayog, which has all the Chief Ministers as members of the governing council, could be used to create a Centre-State consultative process on treaty-making.
- Also, this sensitisation should not be restricted to BITs but also extend to other international agreements like the World Trade Organisation treaty, numerous Free Trade Agreements, and Double Taxation Avoidance Agreements.
- The trade treaties are especially important because they cover many issues such as agriculture, which fall under the State list in our Constitution, and thus directly impact State governments.
- Cooperative federalism requires that Centre and States work together, which in turn would ensure better implementation of international treaties.
[4]Raja-Mandala: Aligning with the far to balance the near
Issue
How India should calibrate its relationship with US and China
Expert Analysis
Policymakers in the foreign policy believe that expanding the military partnership with the United States might have huge negative consequences for Delhi’s engagement with Beijing. Thus they form US policy on the basis that, what China would think of it.
But the reality is otherwise. In Foreign Policy the nations have no permanent friends or allies but only permanent interests and every country calibrate its relationship with others with time. There are various instances when Chinese did that. Some of them are as follows:
- If military cooperation with the US was the defining factor in China’s relations with other countries, Beijing should be utterly hostile to Islamabad. Instead they are all weather friends inspite of Pakistan being a longstanding military partner for the US.
- In 1950 China signed military alliance with USSR and a decade later China criticised Russia as a “social imperialist” and began to make advances to America. China, which denounced America’s military presence in Asia during the 1950s, was quite happy to justify it in the 1970s and 1980s as a useful counter to Soviet power.
- Beijing mounts solid political pressure on Japan, America’s “unsinkable aircraft carrier”, while maintaining close economic relations.
- China woos South Korea that hosts nearly 28,000 US troops on its soil. Beijing deploys a carrot and stick policy towards Vietnam that is getting closer to America.
For China, this is about careful tailoring of its policies to specific contexts and not judging everyone by their ties with Washington. Ironically Some Chinese analysts seems to have better appreciation of Delhi’s changing policies than India’s own strategic community. They think Delhi today is playing a sophisticated game like Mao’s China that “aligned with the far” (America) to “balance the near” (the Soviet Union).
Neither Delhi nor Beijing, then, are innocent to geopolitical jousting. In the end, America is by no means the main problem between India and China. That lies elsewhere in their contestation of each other’s sovereignties across the Himalayas — in Kashmir, Tibet and Arunachal Pradesh.
Delhi should focus instead on managing, if not resolving, the territorial issues and expanding economic partnership with Beijing. When India and China are not a political threat to each other and can make money from the markets of the other, they will have less reason to worry about their relations with third parties.
[5] How to measure poverty
Context
The task force headed by Arvind Panagariya in the NITI Aayog has to make sound poverty line that would actually have benefits
What Panagariya suggested
- Tendulkar committee’s report should be accepted for poverty estimation for estimation of economic performance
- Socio-economic indicators should be used for determining the entitlement for benefits
Tendulkar Committee
- Tendulkar committee was based on calorie consumption(based on Alagh poverty line)
- It suggested that the expenditure required to meet this goal should be the poverty line for both rural and, of course, urban areas
- Tendulkar report shifted the emphasis from calories to food demand, but Alagh report focused on on foodgrains, with price elasticities calculated separately for the rich and the poor, leading to dual pricing
- Tendulkar committee report assumed that basic needs will be provided by the states (basic needs such as social services of health and education)
Previous committees:
Y K Alagh Committee
- Till 1979, the approach to estimate poverty was traditional i.e. lack of income.
- It was later decided to measure poverty precisely as starvation i.e. in terms of how much people eat.
- This approach was first of all adopted by the YK Alagh Committee’s recommendation in 1979 whereby, the people consuming less than 2100 calories in the urban areas or less than 2400 calories in the rural areas are poor.
- The logic behind the discrimination between rural and urban areas was that the rural people do more physical work. Moreover, an implicit assumption was that the states would take care of the health and education of the people.
- Thus, YK Alagh eventually defined the first poverty line in India.
Lakdawala Formula
- Till as recently as 2011, the official poverty lines were based entirely on the recommendations of the Lakdawala Committee of 1993.
- This poverty line was set such that anyone above them would be able to afford 2400 and 2100 calories worth of consumption in rural and urban areas respectively in addition to clothing and shelter.
- These calorie consumptions were derived from YK Alagh committee only.
- According to the Lakdawala Committee, a poor is one who cannot meet these average energy requirements. However, Lakdawala formula was different in the following respects in comparison to the previous models:
- In the earlier estimates, both health and education were excluded because they were expected to be provided by the states. This committee defined poverty line on the basis of household per capita consumption expenditure. The committee used CPI-IL (Consumer Price Index for Industrial Laborers) and CPI- AL (Consumer Price Index for Agricultural Laborers) for estimation of the poverty line.
- The method of calculating poverty included first estimating the per capita household expenditure at which the average energy norm is met, and then, with that expenditure as the poverty line, defining as poor as all persons who live in households with per capita expenditures below the estimated value.
- The fallout of the Lakdawala formula was that number of people below the poverty line got almost double. The number of people below the poverty line was 16 per cent of the population in 1993-94. Under the Lakdawala calculation, it became 36.3 per cent.
[6] True Panchayati Raj
Context
Government wants meaningful self-governance at the grassroots level
How the government intends to do it
Strengthening gram panchayats and a belief in 3D’s – decentralisation, devolution and development
Issue
States are asking for more powers which is rightly so, but the states are less interested in giving powers to the local bodies along with Funds, Functions and Functionaries
Who is to blame for panchayats not fully empowered
- Granting financial powers and authority to panchayats, reserving seats for backward classes fall in the voluntary domain of the states.
- Majority of states are showing little interest in devolving power and funds to local bodies and are taking only half-hearted measures.
- Democracy would be more meaningful and robust when people participate in running their own affairs.
- Fully empower rural local bodies in terms of devolution of funds, decentralisation of powers, and allow people to have a greater say in local area development.
What is the government’s plan
- Grants of Rs.2,00,292 crore to gram panchayats directly which has been released this year( this action was in sync with the recommendations of 14th finance commission)
- The fund availability at the GP level would now be Rs 2,404 per capita over five years and Rs 17 lakh a year (Rs 85 lakh for five years) for the average GP
- Lakhs of engineers are being trained to help gram panchayats prepare plans
- Based on the plans prepared by panchayats, the grant has to be spent on basic services, such as sanitation, drinking water and maintenance of community assets.
- Reservation of women to 50% from 33%
Panchayati Raj
- Panchayats got constitutional recognition, system formalised in India in 1992
- 73rd constitutional amendment transferred 29 items to local bodies
- Setting up state election commissions and finance commissions to conduct elections and enhance resources for local bodies, reserving one-third seats for women and, in proportion to their population, for SCs and STs in all three tiers, apart from forming gram sabhas with people’s participation.
- April 24 is National Panchayati Raj day
[7] UK exit could be good for Europe
Context
Brexit(Britain’s exit) from the European Union(EU)
What is the European Union?
The European Union – often known as the EU – is an economic and political partnership involving 28 European countries. It began after World War Two to foster economic co-operation, with the idea that countries which trade together are more likely to avoid going to war with each other. It has since grown to become a “single market” allowing goods and people to move around, basically as if the member states were one country. It has its own currency, the euro, which is used by 19 of the member countries, its own parliament and it now sets rules in a wide range of areas – including on the environment, transport, consumer rights and even things like mobile phone charges.
What is happening?
A referendum is being held on Thursday, 23 June to decide whether Britain should leave or remain in the European Union.
Why is a referendum being held?
Prime Minister David Cameron promised to hold one if he won the 2015 general election, in response to growing calls from his own Conservative MPs and the UK Independence Party (UKIP), who argued that Britain had not had a say since 1975, when it voted to stay in the EU in a referendum. The EU has changed a lot since then, gaining more control over our daily lives, they argued. Mr Cameron said: “It is time for the British people to have their say. It is time to settle this European question in British politics.”
UK Treasury’s paper
- It has published a paper which weighs in 3 alternatives after Brexit from EU in long term
- The alternatives are based on different degrees of access to EU and non EU markets
The paper does not exhaust all possibilities even if only “trade policy” is taken into consideration
Methodology followed
The paper depends mainly on domestic policy and many other things, and these factors are independent of the choice on Brexit
Euro zone’s future isn’t bright also
- Many member suffer from unemployment and persistent slow growth
- It is just monetary union(no political or fiscal union)
- No structural reforms in sight, the euro system is weak
- It goes from a crisis to crisis and improvising as it goes
EU after Brexit
- Preventing any further defection(any other member leaving)
- EU should provide greater support for its weakest members
- Having lost Britain(most aggressively defiant member) the balance of opinion would shift in favour of closer cooperation
- It might be good for EU with less unemployment, greater economic resilience
- EU neighbours would prosper too and it would be good for Britain.
Britain after Brexit
The exit might have consequences on the political structure of the parliament, which would in turn have effect on its policies after Brexit, thus there is no knowing with certainty that the exit will have a bad effect on the UK economy.
GS PAPER 3
[1] RBI to ease registration process for NBFCs
What happened?
Reserve Bank of India (RBI) has decided to simplify the registration process for non-banking finance companies (NBFCs).
What is a Non-Banking Financial Company (NBFC)?
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).
NBFCs are doing functions similar to banks. What is difference between banks & NBFCs?
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:
- NBFC cannot accept demand deposits;
- NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
- deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
Objective of this move
The new application forms will be simpler and the number of documents required to be submitted will be reduced. The entire process could be made online for ease, speed and transparency.
Additional points
- The NBFC sector cannot be on a par with the banking sector and the central bank’s stance is to harmonise and not equalise.
- Totally exempting small NBFCs from regulations may not be feasible from the customer service point of view.
- ‘Make in India’ and ‘Start Up’ businesses could offer fresh opportunities to NBFCs for growth.
[2] Centre steps in to expedite patent approvals
Context
Department of Industrial Policy and Promotion (DIPP) has taken some measures in view of pending patents
Issues
- Pending Patent applications were 2.37 lakh on February 1, 2016
- Pending Trademark registrations were 5.44 lakh
- Shortage of manpower has piled up the cases
Why patent approval time should be reduced
- Businesses can make timely decisions
- Business can raise benefits early and get a boost for innovation
- The product should not get obsolete before the time the patent is granted
Department of Industrial Policy and Promotion
Department of Industrial Policy & Promotion was established in the year 1995, and in the year 2000 Department of Industrial Development was merged with it. It is working under the Ministry of Commerce and Industry, Government of India.
DIPP responsibilities
- Formulation and implementation of promotional and developmental measures for growth of the industrial sector
- Also responsible for intellectual property rights relating to patents, designs, trademarks, and Geographical indication of goods and oversees the initiative relating to their promotion and protection.
Measures taken by the DIPP
- First examination time is 5-7 years, it will be brought down to 18 months(a target set which is to be achieved by March 2018)
- For Patents and Design 458 examiners have been hired(in addition to 130 already working)
- 263 will be recruited on contract basis
- For Trademarks 100 examiners have been hired
- Examination time has been reduced from 13 months to 8 months(which will be brought down to 1 month by March 2017)
- On patentability of computer-related inventions, a panel will give its report on it after April 30
- 80 lawyers have been appointed to give consultation to startups
- Patent rules are being amended to for quick examination for patents
[3] The neglected impact of a rate cut
Issue
Impact of a rate cut on the exchange rate
Problems before the Indian economy
- A gloomy world economic scenario
- Over-leveraged corporate balance sheets
- An extremely weak rural demand.
How could rate cut depreciate the exchange rate?
- Ninety-five per cent of India’s investment comes from domestic sources. Further, a significant portion of foreign direct investment (FDI) into India is believed to be domestic capital round-tripping via tax havens like Mauritius.
- Hence, even a doubling of FDI may not suffice to bring about the stimulus needed.
- The government is limited in its ability to inject a fiscal stimulus because of the threat of inflation.
- In this situation, foreign markets offer a thin sliver of hope for Indian business.
- Hence, the efficacy of the rate cut should be seen not in terms of its impact on domestic investment but on foreign demand, through the channel of its impact on the exchange rate.
- Lower foreign demand for Indian assets following the rate cut would be the channel through which the rate cut would depreciate the currency.
Is Rupee overvalued?
RBI governor Raghuram Rajan has argued that if the growth of India’s productivity is factored in, the rupee ceases to be overvalued.
Impact of rate cut on Foreign Investment and Foreign Markets :-
| Foreign Investment | Foreign Markets |
|
|
Author’s View
The argument that the rupee is already sufficiently weak in real terms, and does not require further depreciation may not hold water. The rupee should be left to depreciate further, as it will boost up our exports.
[4] Ratifying trade facilitation agreement could prove costly for India
What happened?
Recently, India submitted the instrument of ratification of the trade facilitation agreement (TFA) to the World Trade Organization.
Trade Facilitation Agreement (TFA)
- In December 2013, WTO members concluded negotiations on a Trade Facilitation Agreement at the Bali Ministerial Conference, as part of a wider “Bali Package”.
- TFA will enter into force once two-thirds of members have completed their domestic ratification process.
- It contains provisions for expediting the movement, release and clearance of goods, including goods in transit.
- It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues.
- It further contains provisions for technical assistance and capacity building in this area.
Arguments in favour of TFA
- Implementing the WTO’s TFA will cut global trade costs by up to 15%.
- This is a bigger impact than eliminating every remaining tariff around the world, and it could deliver a trillion-dollar boost for global trade.
Response of India towards TFA since its inception
- Since 1996 when it was first introduced as part of the four Singapore issues (investment, competition policy, government procurement and trade facilitation) at the WTO’s first ministerial, developing countries including India opposed it.
- In 2001, India took a stand that the four controversial issues will be negotiated only after there is an “explicit” consensus among members at the Doha meeting.
Illogical move
- Mercantilist logic is premised on “you lower your barriers in return for me lowering mine”.
- But India has accepted the TFA without securing cast-iron guarantees for a permanent solution for public stockholding programmes or special safeguard mechanism for its farmers.
1. The lead article of the day is covered under Editorial Today. Click here to read.
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