- Front Page / NATIONAL [The Hindu]
- SC schedules day-to-day hearings on Cauvery appeals from Feb 7
- Pollution problem: rules tough but implementation weak
- Citizens’ interest best served when public money is not wasted: HC
- Ken-Betwa river-linking project faces new hurdle
- J.S. Khehar sworn in as Chief Justice
- INTERNATIONAL [The Hindu]
- Editorial/OPINION [The Hindu]
- ECONOMY [The Hindu]
- Indian Express
- Live Mint
Click here to Download 9 PM Daily Current Affairs Brief PDF (5th Jan. 2017)
Front Page / NATIONAL [The Hindu]
[1] SC schedules day-to-day hearings on Cauvery appeals from Feb 7
Context
The Supreme Court asked Karnataka to continue releasing 2000 cusecs of Cauvery water to neighbouring State of Tamil Nadu while posting appeals filed by Tamil Nadu, Karnataka and Kerala against the Cauvery Water Dispute Tribunal‘s decision on water-sharing for day-to-day hearing.
What has happened?
SC has decided that the appeals related to Cauvery water dispute would be heard on a back to back basis for a period of three weeks starting from February 7th, in order to resolve the dispute at the earliest
Tamil Nadu’s stand
Tamil Nadu submitted that the north-east monsoon had failed completely and it was suffering from a 67 per cent deficit of water. However, the Bench refused to deliberate this issue, saying it has already spent “considerable time” on it.
Backdrop
On December 9, the Supreme Court, in a judgment, had refused the Centre’s stand that the apex court lacked jurisdiction to hear the Cauvery river dispute. It had upheld the constitutional power of the court to hear the appeals filed by the three States against the tribunal award.
Centre’s argument: The Centre had argued that the parliamentary law of Inter-State Water Disputes Act of 1956 coupled with Article 262 (2) of the Indian Constitution excluded the Supreme Court from hearing or deciding any appeals against the Cauvery Tribunal’s decision. The Centre had claimed the tribunal award was final.
Bench’s stand: The Bench however held that the remedy under Article 136 was a constitutional right and it cannot be taken away by a legislation. It observed that,
• “The jurisdiction exercised by this court under Article 136 is an extraordinary jurisdiction which empowers this court to grant leave to appeal from any judgment, decree or determination in any cause or matter passed or made by any court or tribunal and the scope of this Article has been settled in numerous decisions”
• It was settled law that the Supreme Court could not take cognisance of an original inter-State water dispute, and this alone was the original intent of the Constitution under Article 262. The court held that once a water dispute, as defined under Article 262(1) read with provisions of the 1956 Act, is adjudicated by the tribunal, it loses the nature of ‘original dispute’
[2] Pollution problem: rules tough but implementation weak
Context
Experts say the issue must be tackled in a comprehensive and concerted manner with tailor-made solutions for every source of pollution.
Issue: Rising air pollution
Author state that two things are paramount if we want to understand this issue,
- Different sources of pollution: there are several different sources of pollution, each of which needs a separate solution
- Pollution doesn’t know borders: pollutants are carried for hundreds of kms which means that not all of Delhi’s pollution originates in the capital. And likewise, it also contributes to pollution in nearby regions
Problems in containing air pollution
Weak state capacity: Experts say that one of the critical constraints that plague pollution control in India is its weak State capacity, defined as the ability of the government to administer and its capacity to design and implement rules or policies. Environmental laws are pretty strong but it does not necessarily lead to enforcement and implementation. Institutions and mechanism of implementation are weak or have not matured.
Example: Author cites example of road dust which as per a study from IIT Kanpur accounts for 38 per cent of Delhi’s pollution. In order to reduce the dust, municipal corporations will have to manage their construction activities a lot better and contractors will be required to spray water to eliminate dust, cordon off construction areas, complete projects in a time-bound manner, use drilling instead of digging among other things.
- Competent PWD required: Regulating all this would require a PWD that is a lot less corrupt and a lot more competent. In order to get there, the government would have to start by imposing regulations and raising penalties for non-compliance and disciplining engineers who did not enforce the rules.
Responsibility of the government
It should not be the duty of governments onlyto protect the environment, but classical economics predicts that only governments are in a position to do so. This is because citizens can’t coordinate their actions.
Judicial interventions
Judicial intervention through the National Green Tribunal seems to be the only way we are intervening to protect the environment but judiciary only acts when people approach to it.
Environment vs Economics
It is important to consider the political costs of cleaning the air. While economic activity leads to pollution, it pulls people out of poverty in the short term, Mr. Roy explains, adding that “democratic organisations prefer short term gains which have long term losses (associated with the gains).” This means we have a trade-off between economic growth and environment protection
Federal problem
Another characteristic of the air quality problem is its federal nature, which requires various State governments and the Centre to work together.
- Crop burning in Punjab & Haryana: This is best demonstrated by the crop-burning issue in Punjab and Haryana. The potential political costs of preventing farmers to burn crops, which requires strict enforcement of law and incentives for alternatives, won’t be borne out by the ruling party in Delhi, but controlling that is necessary to have clean air in the Capital.
[3] Citizens’ interest best served when public money is not wasted: HC
Context
Public interest is best served when public money is not unnecessarily expended, the High Court said.
The whole issue
- E-tender invited by DoE: In the present case, the Delhi government’s Directorate of Education (DoE) had invited e-tenders from firms that could provide trained security staff at government schools and field offices of the DoE for two years
- Bidder quoted lowest agency charge: Petitioner Orion Security Solutions Pvt. Ltd. was one of the bidders and had quoted the lowest agency charges of Re.1. The DoE asked for clarifications to ensure feasibility and viability of the petitioner in carrying out the work on such low charges
- Delhi govt rejects the bid:Despite explaining the “hybrid business model”, which involves redirecting funds received by the firm under various government-sponsored deployment linked skill development programmes for security work, and the fact that the company maintained an elaborate infrastructure in Delhi, its bid was rejected on the ground of non-feasibility of carrying out the tender requirements at the price
- Rejection challenged in HC: The company challenged the rejection before the High Court while the Delhi government said the court can intervene only if the decision affects public interest
Court’s observation
“As far as public interest in this matter is concerned, it would primarily be referable to the public money, which would be spent for the contract for safety of the persons for whom security is to be provided. Public interest is best served when public money is not unnecessarily expended,”
“The petitioner submitted its annual statement showing its financial worth and explained the source of funding. There is no reason to doubt that the petitioner will be able to provide security as per the terms,”
[4] Ken-Betwa river-linking project faces new hurdle
Context
New problem in the Ken-Betwa inter-state river linking project
The problem
The NITI Aayog (National Institution for Transforming India) has recommended that
- Madhya Pradesh contribute 40 per cent of the project cost, with the Centre contributing 60 per cent. The Ministry of Water Resources (MoWR) has opposed this and requested that 90 per cent of the funds be routed through the Centre
What could this mean for the project?
A lack of clarity on the funding pattern could mean more delays to the Rs. 10,000-crore project that would be the first ever inter-State river interlinking project
Clearance timeline
- The project was given a go-ahead by the National Board for Wildlife (NBWL) at a meeting chaired by Minister of State for Environment and Forest in August 2016.
- An environment clearance panel has, according to officials in the water ministry, also cleared the project on 30th December.
- A separate committee that determines forest clearance to such projects, is yet to take a call.
USP
This will be the first time that a river project will be located within a tiger reserve.
- The main feature of the project is a 230-km long canal and a series of barrages and dams connecting the Ken and Betwa rivers that will irrigate 3.5 lakh hectares in Madhya Pradesh and 14,000 hectares of Uttar Pradesh in Bundelkhand
- The key projects are the Makodia and Dhaudhan dams, the latter expected to be 77 metres high and responsible for submerging 5,803 hectares of tiger habitat in the Panna Tiger Reserve
- When, and if, the proposed reservoir is filled to the brim, 6,221 hectares will be inundated — of this, 4,141 hectares is core forest and located inside the reserve
Submerging Panna
The Rs. 10,000-crore Ken-Betwa project will irrigate the drought-prone Bundelkhand region but, in the process, also submerge about 10 per cent of the Panna Tiger Reserve in Madhya Pradesh, feted as a model tiger conservation reserve.
Contention
A key point of contention between wildlife experts associated with the impact assessment and dam proponents in the MoWR was
- Whether the height of the Daudhan dam could be reduced to limit the water overflow
- MoWR’s stand: The MoWR had refused to agree to this, saying it would compromise the economic viability of the project. The records of the August meeting suggest wildlife experts were convinced.
Read More: Ken-Betwa link Project
[5] J.S. Khehar sworn in as Chief Justice
The Hindu
Context
Justice Jagdish Singh Khehar, the senior-most judge of the Supreme Court, was sworn in as the 44th Chief Justice of India by President Pranab Mukherjee
Note: Appointment of Justice Khehar as CJI has already been covered in detail in the brief dated 20th December 2016
Give the article a brief go-through
INTERNATIONAL [The Hindu]
[1] China’s stance on terror self-defeating, says India
The Hindu
Context
India has said that China is following “double standard” on terrorism and asked Beijing to support its campaign to blacklist Pakistan-based terror mastermind Masood Azhar
A pretty straightforward article which reiterates India’s stand on terror
Give it a go-through once
Editorial/OPINION [The Hindu]
[1] Running into the Chinese wall
Context
The Masood Azhar case is a piece in the fragmenting jigsaw of global terror consensus
Issue: Chinese veto of India’s proposal to ban Jaish-e-Mohammed (JeM) chief Masood Azhar at the UN
Similar instances
Author cites past instances wherein China has blocked similar proposals from India
- In the past, Beijing blocked India’s proposals at the UN to designate HizbulMujahideen chief Syed Salahuddin and Abdul RehmanMakki and Azam Cheema of the Lashkar-e-Taiba as terrorists, and blocked questions on how designated terrorists Hafiz Saeed and Zaki-ur-RehmanLakhvi accessed funds in Pakistan despite UN sanctions
JeM designated a terror group
Despite all the evidence, it took two years and the 9/11 attacks for the JeM to be designated as a terror group by UNSC 1267 sanctions committee in 2001. It seems unbelievable that 15 years later, despite his complicity in everything from the Parliament attack to the Pathankot attack and everything in between, Azhar hasn’t yet been added to that list
Larger issue
Author states that it would be mistake if India sees China’s move purely from a bilateral perspective and ignores the larger trend it represents: of a fragmenting global consensus on terrorism
Changing Narrative
A common enemy: After the 9/11 attacks, the global consensus to fight the Taliban, Al-Qaeda and all allied groups was formed by the UNSC resolution on terrorism (UNSCR 1373) in 2001.
- Already, in 1999, the UN had set up an al-Qaeda/Taliban sanctions committee (UNSCR 1267) to impose strictures on anyone dealing with the Taliban and Osama bin Laden. While the implementation of these resolutions has been questionable, there was little doubt that all member states essentially believed that the Taliban, al-Qaeda and their allies formed a common global enemy.
The Change
Author states that the above narrative has changed.
- In January 2010, at an international conference hosted by the U.K., the UN and the U.S. openly backed efforts to talk peace with the Taliban
- In 2011, the UNSC made it simply the al-Qaeda sanctions committee, separating the Taliban committee so as to facilitate talks by delisting Taliban leaders being engaged
- In December 2015, the UNSC made a further shift by renaming it “ISIL (Da’esh) and Al-Qaida Sanctions Committee” (UNSCR/2253). This renaming prompted Pakistan to ask recently, albeit mistakenly, how the banning of Azhar was even connected to the committee’s work
Impact of US Russia ties
Apart from the UN, shifting U.S.-Russia ties have also made a great impact on the global terror consensus.
- Initial solidarity: In 2001, Russian President Vladimir Putin was one of the first foreign leaders to speak to President George W. Bush, expressing full support for the U.S. fight against al-Qaeda, which would in turn help Russia with its Islamist threat as well. Not only that, Mr. Putin reversed Russian policy of decades, allowing the U.S. to set up bases across Central Asia and virtually take over Afghanistan’s security command
- The above relationship no longer exists& Russia is questioning US presence in its backyard again. It now sees U.S.’s bases in Afghanistan as akin to having Russian bases in Mexico.
Increasing closeness with China & Pakistan
The third factor impacting global consensus on terrorism is the
- Russia’s closeness with China and Pakistan: A trilateral meeting of the three countries in December in Moscow called for a “flexible approach” to remove some Taliban figures from the UN sanctions list as part of efforts to “foster a peaceful dialogue between Kabul and the Taliban movement”
US’s efforts
The U.S. has been pushing for the removal of other groups in Afghanistan from sanctions, like the Hizb-e-Islami’sGulbuddinHekmatyar (a former Central Intelligence Agency-funded fighter), a move that Russia blocked at the UN
Picking teams
Above mentioned facts clearly state one thing,
- Global leaders are picking sides
- Neither side has yet pushed for the banning of the new Taliban chief, HaibatullahAkhundzada, a reminder of how far away we have come on that global consensus. Also lying in the dust is India’s decades-old proposal for a Comprehensive Convention on International Terrorism
Russian concern
Russia’s growing closeness to Pakistan cannot be disconnected from India
- Russia did nothing at all: It is significant that among the P5, the U.S., U.K. and France co-sponsored India’s resolution against Azhar, China vetoed it, but Russia, India’s traditional backer, did nothing at all
- At the BRICS summit in October and the Heart of Asia conference in December, it was the Russia-China combine that kept India’s desire for tough statements on “cross-border terrorism” from Pakistan at bay, and it was the Russian envoy who told India not to use “multilateral forums for bilateral issues”
Conclusion
Author concludes by saying that the Azhar ban is only a piece of the much larger global jigsaw puzzle. India must build strong ties with all the nations involved.
Read More: Chinese veto
[2] Arms and the region
The Hindu
Context
It is time to look ahead at the challenges that India’s security planners face in 2017
Issue: Security challenges before India in 2017
Trump Card
Author points at the opinions expressed by Donald Trump on Iran nuclear deal, TTIP & Israel. He then presents us with the following questions,
Q: Is a reversal of President Barack Obama’s “Pivot to Asia” policy around the corner?
Q: Will Mr. Trump’s views change once he becomes the president?
Q: What does this scenario portend for India?
China rising
India has to factor in the enhanced aggressiveness of China
- Mobilization of weapons: Its recent moves, of positioning air defence weapons on a reclaimed island in the South China Sea, forays by fighters and bombers over the East China Sea, and even sending its aircraft carrier Liaoning to Hainan via the Bashi Channel between Taiwan and Philippines, have sent an unwelcome message to its neighbors
- Power projection: It may not be long before Liaoning makes its foray into the Indian Ocean. If not for power projection (which is still some time away), it may be to just announce to the world that a new “world” power has arrived
- Ensuring India’s interests: If Mr. Trump gets on with its current stance with China, then it (the U.S.) would require India to be firmly with it. With its placing of India as a major defence partner and the Defense Technology and Trade Initiative (DTTI) in place, Indian planners would have to tread a narrow path between getting close to the U.S. and being classified as a major cog in the American scheme of things. The key idea to follow would be to ensure that India’s interests are insured against reversals in power politics
The Pakistan factor
Author states that Pakistan’s support to terror activities in India is likely to continue so India’s guard cannot be lowered and eternal vigil is the need of the times.
- Overhaul of army leadership: The recent overhaul of the top army brass in Pakistan points at a new scenario where civilian leadership might be exacting a greater say in the scheme of things but concluding anything at this stage would be a folly
India’s relationship with its neighbors
Author points at the fact that global influence in world affairs works on the principle of actionable measures and not on the basis of claims of “historical cultural relations”. Hence,
- Developing Chabahar: The commitment to develop the Chabahar port in Iran gains importance, even as a new relationship develops between Russia, China and Pakistan.
- Aiding Afghanistan:Similarly, economic and military commitments to Afghanistan have to be met
Budgetary support before 2019
- Greater Budgetary allocation: History has proven that a strong military is the foundation for resolute action in the economic and diplomatic fields. Hence, a greater allocation for the defence sector is needed in the 2017 budget to enable the services to overcome the neglect of the past decade and enhance their capability to support government aims at influence-building in the neighbourhood.
- Building a defence industrial base: In parallel, the building up of a defence industrial base should gather greater momentum from the snail’s pace it is now. Getting a firm footing in the “near abroad”, to use a Russian term, is a sine qua non for aspirational India’s ambitions in the coming years; 2017 would be decisive in more ways than one.
ECONOMY [The Hindu]
[1] TRAI issues paper on net-neutrality
The Hindu
Context
The Telecom Regulatory Authority of India has issued a consultation paper on the issue of net-neutrality as it looked to formulate “final views on policy or regulatory interventions” on the subject
Read More: Net neutrality: What you need to know
Backdrop
The regulator had decided to undertake a two-stage consultation process on the issue.
- 1st stage: The earlier issued pre-consultation, released in May 2016, was an attempt to identify the relevant issues in all the areas on which the Department of Telecom had sought TRAI’s recommendations
- 2nd Stage:In this next stage, the Authority has considered all the relevant issues identified during the pre-consultation process and the preliminary inputs gathered from stakeholders on those issues. The purpose of this second stage of consultation is to proceed towards the formulation of final views on policy or regulatory interventions, where required, on the subject of net neutrality
TRAI seeks comments
TRAI has sought comments on
- What the principles for ensuring non-discriminatory access to content on the Internet could be in the Indian context;
- How Internet traffic and providers of Internet services should be understood in the context of net neutrality
- the issue of traffic management practices, seeking comments on approaches that would be preferable, defining what constitutes reasonable traffic management practices or identifying a negative list of non-reasonable practices
- Traffic management service: It refers to techniques used by the service providers to manage the safety, security and efficiency of their networks.
Emergency situations
The consultation paper also questioned if certain services such as emergency situations and restrictions on unlawful content be treated as exceptions to any regulation on traffic management practice
Legal and policy front
On the legal and policy front, the paper has sought opinion on issues such as which body should be responsible for monitoring and supervision and what actions should such body be empowered to take in case of any detected violation, among others
Indian Express
[1] Despite history, geography
Context
India and Bangladesh have wasted opportunities for shared advantages. The mistake need not be repeated.
Author, editor of a Bangladeshi newspaper, presents us with following question,
Q: Why have we failed to build a model bilateral relationship?
He answers it quite bluntly,
Simply put, we have never given our heart and soul to it. Every time “breakthrough opportunities” come, we fail to seize them and allow our “business as usual” habit to destroy them by failing to think “outside the box”.
Unused transit potential
India has been insisting on it for decades; now that it has come about, progress is slow, piecemeal and held back by pathetically low levels of investment
- Instead of a comprehensive, multi-model, transit accord or treaty, what we have are fragmented deals, totally lacking global vision. On both sides, river transit is being handled by one ministry, railway by another and road by yet another, with the attending inter-ministerial mismatch and bureaucratic delays
- Author suggests: Bring all the transit opportunities under one master plan with one vision of improving trade, commerce and connectivity in regional, sub-regional and trans-Asian and Trans-continental aspects
Water sharing
- Comprehensive water management accord: Author suggests that in this area also, a comprehensive water management accord is required, which will deal with all our common rivers and not one by one, as we have been doing so far
Rampal Power plant
A new irritant is also the Rampal power plant whose location, near the Sundarbans, is a very serious concern for the environmentalists of Bangladesh, their fears shared by Indian counterparts. So far, such concerns have fallen on deaf ears
Steps taken by both sides
Bangladesh
- Elimination of terror camps: Author states that the biggest step forward for Bangladesh was responding to India’s security concern and removing all terrorist camps within its borders
India
- Duty-free access: As per author the duty-free access to Bangladeshi goods was the biggest positive move from Indian side
- Exporting electricity to Bangladesh
Indian Media’s indifference
Author states that Indian media has never highlighted Bangladesh’s issues in the mainstream except for cases of communal violence and rise of terrorism. He cites the example of Farrakka Barrage issue, which was the first major cause of the rise of grassroots-level anti-Indianism in the late eighties
- This barrage devastated the ecosystem of northwest Bangladesh, destroying thousands of acres of arable land, resulting in the rise of salinity in river and underground water.
- Teesta issue: The failure to even talk about Teesta, when a deal was ready to be signed in September, 2011, has greatly disappointed us in Bangladesh. The rationale for Bangladesh’s position on this crucial water sharing issue has almost never found adequate space in the Indian media.
Conclusion
Author concludes by saying that there are many lost opportunities in the history of India-Bangladesh relationship. Let us not repeat them
Read More: Teesta issue, Farakka issue
[2] An unfortunate legacy
Indian Express
Context
The colonial category of “criminal tribes” may have been “denotified” but many communities remain unclassified
In the first paragraph author quotes from the Criminal Tribes Act (CTA) of 1871
What was the Criminal Tribes Act (CTA)?
The term Criminal Tribes Act (CTA) refers to various pieces of legislation enforced in India during British rule;
- The first was the Criminal Tribes Act, 1871. It was applied mostly in North India. The Act was extended to Bengal Presidency and other areas in 1876, and, finally, with the Criminal Tribes Act, 1911, it was extended to Madras Presidency as well. The Act went through several amendments in the next decade and, finally, the Criminal Tribes Act, 1924 incorporated all of them
Enquiry committees
Author states that subsequently after India’s independence, there were some enquiry committees which looked at the way the CTA had worked throughout India
- Region-specific inquiry committees: Bombay (1939), United Provinces (Agra and Oudh, 1947)
- The AnanthsayanamAyyangar Committee (1949-50) report was more comprehensive: It had a list of 116 criminal tribes in British territories and more than 200 in the Princely States
Ayyangar committee
- Repeal of CTA: The recommendations of this committee led to repeal of CTA in August 1952
- Replace CTA by a central legislation: The Ayyangar Committee also recommended that, “The Criminal Tribes Act, 1924, should be replaced by a Central legislation applicable to all habitual offenders without any distinction based on caste, creed or birth.”
Report of UN Committee on the Elimination of Racial Discrimination on India
InMarch 2007, the UN Committee on the Elimination of Racial Discrimination did a report on India and stated,
“The Committee is concerned that the so-called denotified and nomadic tribes, which were listed for their alleged “criminal tendencies” under the former Criminal Tribes Act (1871), continue to be stigmatised under the Habitual Offenders Act (1952). (art. 2 (1) (c)). The Committee recommends that the State party repeal the Habitual Offenders Act and effectively rehabilitate the denotified and nomadic tribes concerned.”
NCNDT report
In 2008, the National Commission for Denotified, Nomadic and Semi-Nomadic Tribes (NCDNT) produced a report. In continuation of a discussion on CTA repeal, it added, “But, to keep effective control over the so-called hardened criminals, the Habitual Offenders Act was placed in the statute book.”
Thus, the provisions were meant to be similar to the CTA, but identification shifted to the individual, rather than the collective category
Concurrent list
Entry 15 in the Concurrent List (seventh schedule) mentions “vagrancy; nomadic and migratory tribes” implying that both state and centre can legislate on it but contrary to popular perception there never was a Union-level law or statute on this issue. Central government, after CTA repeal, had prepared a model bill. States used this as a template for creating state-level laws on habitual offenders.
- The earliest is Punjab/Haryana (1918), followed by Madras/Tamil Nadu (1948). Others followed in 1950s/1960s.
2016 Report of NCDNT
A quote from a 2016 Report of the NCDNT sums it up:
Classification
“After Independence, the erstwhile aborigines were classified as scheduled tribes, the untouchables were classified as scheduled castes and others included in the backward classes. Although, many of the denotified, nomadic and semi-nomadic tribes are spread among SC/ST/OBC, many are still not classified anywhere and have no access to socio-economic benefits, whether education, health, housing or otherwise… Except a few states like Maharashtra, Gujarat, etc, some of these communities figure in various classifications in the states such as Backward Tribe (Puducherry), Most Backward Classes (Tamil Nadu), Extremely Backward Classes (Bihar), “original settlers” in Arunachal Pradesh, Primitive Tribes (Jharkhand/ Odisha), Hill Tribes (Assam) etc. In some states they are called “tribal settlers”. In some states they are called “hidden tribes” etc… There are many anomalies in terms of identification of these communities, from state to state.
Creation of a district level Grievance redressal committee
“Many people also do not know what a denotified tribe is and which authority is looking after their grievances. Recently, this Commission made a recommendation to the Government of India to write to all state governments to form a district-level Grievances Redressal Committee under the District Collector to hear the grievances of these communities/groups/tribes.”
Number game
“These communities/tribes account for nearly 10 per cent of community’s population as has been mentioned in some writings and there are nearly 820 communities and tribes in India, although some of the community leaders assess that their number would be more with 198 denotified tribes and nearly 1,500 nomadic tribes and their population may be even more than 10 per cent.”
This is partly a positive affirmation/ reservation issue. But if one goes through the annexures in the 2016 NCDNT report, some communities want to be recognised as SCs, STs or OBCs. But there are also those who want recognition as DNTs/NTs
Read More: Issues around DNTs in India, Criminal Tribe Act (CTA)
Live Mint
[1] The deleveraging risk in emerging markets
Context
Corporate leverage has increased in recent years because of easy availability of money.
Give the article a go-through once
[2] Transforming the digital payment infrastructure
Context
Implementing a new payment infrastructure will require careful planning, patience and flexibility
In the aftermath of demonetization millions of Indians have switched to digital mode of payments and to encourage it government has announced a host of measures.
Authors state that in order to capitalise on the benefits of demonetization, government will have to acquire a systematic, evidence-driven approach.
M-Pesa
Kenya’s M-Pesa, a mobile money service which allows users with or without bank accounts to transfer and make payments through a basic mobile phone, is often heralded as the exemplary digital financial inclusion success story. Since its launch in 2007, M-Pesa has become an integral part of Kenya’s economy:
- M-Pesa transactions account for 20% of gross domestic product (GDP) and it is used frequently (by at least one individual in 96% of Kenyan households and by 75% of the unbanked population)
- Results from a recent, large-scale multi-round panel surveysuggests that access to mobile money (defined as proximity to M-Pesa agents) improved per capita consumption and lifted 194,000—or 2% of Kenyan households—out of poverty. These effects were more pronounced for women and driven by increased savings and greater occupational mobility—185,000 women made the shift from agriculture to business
Read More: You can find the panel survey here
M-Pesa is an exception
Authors state that out of 271 different mobile money services 93 countries worldwide, very fewhave achieved similar levels of growth, particularly among the poor and unbanked.
Read More: Annual State of Mobile money in 2015
Factors that allowed M-Pesa to become a success in Kenya
A unique set of circumstances allowed M-Pesa to become ubiquitous in Kenya. Crucial among them was,
- High mobile phone penetration (83% of the adult population had access to basic mobile phones)
- A widespread agent network (approximately one agent for every 1,000 Kenyans)
- An enabling regulatory environment
Conditions vis-à-vis India
- Mobile penetration in India: 61% of Indians own a basic mobile phone and there is significant disparity in access and usage across geography and gender
- Smartphone ownership:In addition, only 17% of Indians own a smartphone—a major hurdle since, unlike in Kenya where M-Pesa’s USSD technology is independent of phones, most Indian payment wallets are only accessible on smartphones
- Business Correspondent (BC) Model:Finally, India’s business correspondent (BC) model—the equivalent to the agent network in Kenya—remains relatively underdeveloped. Recent research by the Helix Institute of Digital Finance revealed that in the BC model Indian agents earn a median income of $52 per month compared to agents in Kenya who earn $192 per month
For a digital payment system to thrive, all these issues need to be addressed.
Read More: Smartphone ownership rates, Research by Helix
Benefit of digital payment systems
Authors state that besides overcoming financial inclusion barriers, digital payment systems can streamline the
- Public service delivery mechanisms like plugging leakages in MGNREGS
- Government to person payments like through Jan Dhan, Aadhaar and Mobile (JAM) wherein payments to the poor are being made directly to their accounts by verifying their identities through biometric identification. Evidence from Andhra Pradesh suggests that shifting to an electronic-payment infrastructure along these lines can improve programme delivery by reducing leakages
Andhra example
In 2006, the government of Andhra Pradesh launched a smart-card programme for MGNREGS and social security pensions where payments were delivered to bank accounts linked with biometric smart cards
A randomized evaluation of the intervention by affiliates from the Abdul Latif Jameel Poverty Action Lab (J-PAL) revealed that biometrically authenticated transfers resulted in a faster, less corrupt payment process.
Success in Niger
Similarly, in an unconditional cash transfer programme in Niger, researchers affiliated to J-PAL found that mobile transfers were the most cost-effective delivery mechanism and led to improved household and child-diet diversity.
Why such results?
The study done above attributes these results to the
- Time-saving associated with cashing out mobile transfers
- Shifts in intra-household bargaining power for women
Bihar example
In Bihar, a J-PAL evaluation of a fund-flow reform which allowed panchayats to bypass the district and pull MGNREGS wage payments directly from the state account, found that this reduced programme expenditure without a detectable decline in programme performance
Transition can be difficult
Authors state that despite obvious benefits, the transition to a new government-to-person digital payment infrastructure can be challenging
- Significant infrastructure required: In Niger, the positive impact of mobile transfers relied on significant investments in establishing the mobile payments infrastructure, including access to mobile phones and agents responsible for “cashing-out” transfers
- Logistical, technical and political difficulties: In Andhra Pradesh, despite high-level government support and investment, only half of all MGNREGS payments in the intervention districts were smart-card-enabled after two years—a reflection of the significant logistical, technical and political challenges in establishing new payment
Systems
Authors suggest
Authors suggest that change can be disruptive as it upset the status-quo. So, one way of implementation is through gradual steps, incentives and evaluation.
Example: In Andhra Pradesh, the programme was rolled out while retaining the status quo system, with banks incentivized for every transaction made on the new system—this allowed programme evaluation, course correction and posed minimal risk of excluding deserving beneficiaries.
Conclusion
Concluding the article, author states that, implementing any new payments infrastructure will require careful planning, patience and flexibility. The government of India should keep this in mind as it seeks to transform the nation’s economy.
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