Brief of newspaper articles for the day bearing
relevance to Civil Services preparation
- GS PAPER 2
- Gays, bisexuals not third gender: SC {Polity}
- GS PAPER 3
- Don’t merge loss-making banks, privatise them {Economy}
- Is FDI really a gift horse? {Economy}
- WB offers $1 billion aid for solar projects {Infrastructure}
- Corporate balance sheets: from the ICU to the general ward? {Economy}
- How can we enable smart and sustainable cities? {Infrastructure}
GS PAPER 2
[1]Gays, bisexuals not third gender: SC
What happened?
- In April 2014, Supreme Court had given its landmark judgement in which it recognised transgender people as a “third gender”.
- Now, the SC has clarified to the Centre that its verdict did not include lesbians, gays and bisexual persons under the category of ‘transgenders’.
Observations by SC
- The Centre has still not implemented the 2014 judgment, which directs the government to treat transgender people or eunuchs as a socially and educationally backward class.
- The court had directed the government to provide them with incentives and benefits in education and jobs in order to help them gain dignity, ability to fight for their constitutional rights and get accepted into mainstream society.
GS PAPER 3
[1]Don’t merge loss-making banks, privatise them
Context
- Even in the fiscal year 2015-16, Public Sector Banks (PSBs) have fared poorly. They have incurred huge losses and the balance sheets are downright disappointing.
- To rectify this situation the Union govt has taken many steps including the merger of the banks. But merger is just one alternative. Privatization of such banks should also be considered.
Why have PSBs performed poorly?
- Since PSBs have been more exposed to stressed sectors, their NPAs have risen a lot.
- Global economy is recovering at a slower pace and even India’s growth, though better is still less than its potential
What has govt done to help PSBs
- Govt. has spent a lot of funds already to recapitalize the banks.
- It has taken major policy decision to set up Bank Boards Bureau, Bankruptcy codes and recovery tribunals to cater to issues like efficient appointments of top management, timely loan recovery etc.
- It has announced the merger of banks i.e merger of SBI with its associates
How Merger can help the situation?
- Recent step by the govt to merge SBI with its associates is definitely a good step. In the past also merger of PSBs has been recommended by various committees.
- Merging the PSBs means there will be better economies of scale which would lead to cost savings, revenue increase, diversification of assets and customers etc. Also merger would lead to bigger banks which would lead to international recognition.
- Merger might sound simple but it is a complex process. Each PSB has its own strengths and weaknesses which have to be considered while merging them with each other.
However, merger only is not the alternative to the state of PSBs today. Gov., of the day must also consider privatisation of PSBs.
Why Privatisation?
Privatisation means that the maximum shares are held by a private player and not the government.
- A plethora of nationalized banks is no more the need of the hour. Banks were nationalized so that they could have more rural penetration and poor could access them.
- Today, with the success of schemes like Jan Dhan Yojana, advancement of technology where banking can be done through mobile phones and small and payment banks which can penetrate rural settings,we do not need physical banks per se in rural areas.
- This is an opportunity to move towards privatisation of some loss making PSBs. Privatisation would bring in market discipline and competition among the banks which will force them to be aggressive and competitive, thus making them take the path of growth.
- Also privatisation would mean that the staff and employees are more answerable and do not have the “sarkari-babu” tendency.
Conclusion
The time has come to revise the old policy of social control on the banks and move towards privatisation. This along with other steps would ensure that banks make more profits and govt. does not spend the money from the public exchequer on their bailouts.
[2]Is FDI really a gift horse?
Issue
- According to official statistics, India has seen a steep increase in FDI inflows totalling over $55 billion in 2015-16. What is the “Cost” of this Foreign Direct Investment (FDI)?
FDI in India
- In India all investments other than those through the stock market are reported as FDI.
- India, therefore, does not make any distinction between the “controlling share” and the others as far as FDI is concerned.
- This implies that data on FDI for India do not allow us to make the distinction between long-term investments and portfolio investments.
Costs that host countries have to bear with regard to FDI
Direct Cost:-
- The first is the direct cost stemming from outflows on account of operation of foreign companies.
- The RBI has reported that between 2009-10 and 2014-15, outflows due to repatriations, dividends and payments for technology have together constituted a major foreign exchange drain — nearly one-half of the equity inflows during this period.
- During the same period, subsidiaries of foreign companies operating in India ran negative trade balances in almost all manufacturing sub-sectors.
- Together with remittances and other payments, foreign subsidiaries in most sectors regularly drew out surpluses which look quite large when compared with the capital that the foreign companies were bringing in.
Indirect Benefits:-
- Foreign investors are able to extract indirect benefits from their host economies by using bilateral investment promotion and protection agreements (BIPA).
- In recent years, India has faced a number of disputes with foreign investors, which arose because the latter was able to invoke the investor-state dispute settlement (ISDS) mechanism included in the BIPAs that allows disputes to be taken to private international arbitration panels.
- Most of the cases have arisen as the foreign investors have challenged the tax liabilities imposed by the government.
What the Government has done?
- The government has amended the model BIPA ostensibly to blunt the ISDS mechanism.
- The new model BIPA includes a strong stricture to foreign investors to make timely payment of their tax liabilities in accordance with India’s laws.
- It will be well worth watching as to how this instrument gels with the investor-friendly regime that has now been put in place.
[3]WB offers $1 billion aid for solar projects
News
- The World Bank has announced $ 1 billion in support of India’s ambitious solar generation plans.
Key Points
- This is the largest financing of solar projects by WB for any country in the world.
- The projects now under preparation include solar rooftop technology, infrastructure for solar parks, bringing innovative solar and hybrid technologies to the market, and transmission lines for solar-rich States.
- India plans to virtually triple the share of renewable energy by 2030.
- It will both transform the country’s energy supply and have far-reaching global implications in the fight against climate change.
[4]Corporate balance sheets: from the ICU to the general ward? + Calling attention
Issue
- Good news from The Reserve Bank of India’s (RBI) latest financial stability report (FSR).
- For background, refer to earlier article Bank NPAs may hit 8.5 % by March.
What is the good news?
- One of the findings of the FSR was that the subset of companies that fall into the “leveraged” category has declined in the past six months.
- These are companies that either have a negative net worth or have debt that is more than two times their equity base.
- The second important takeaway from the report is that the proportion of debt that is held by firms that are either leveraged or highly leveraged has come down.
- This means that a lesser amount of bank loans and other forms of debt is now held by companies with precarious financials, and that is good news.
- What both these indicators show is that companies are slowly starting to bring their debt levels to more manageable levels.
- The overall assessment then is: “India’s financial system remains stable, even though the banking sector is facing significant challenges.”
Road ahead
- A slow recovery in corporate balance sheets will continue to keep private investments in check. It will mean that banks, despite a rigorous clean-up of their balance sheets in fiscal 2016, will need to stay on guard for further slippages.
- Now, the government needs to propel growth by raising capital expenditure because the private sector is still too weak to take the lead in investments.
- And the government must focus on removing any administrative and policy hurdles that have led to stalled projects and, in turn, to gross non-performing advances (or GNPAs).
[5]How can we enable smart and sustainable cities?
Issue
- Smart cities mission and Digital India Mission should be interlinked for better administration of our cities and to achieve Sustainable Development Goals.
What exactly is a Smart City?
- Smart city governance implies putting the citizen at the heart of the process of change, reforming and strengthening city and state government institutions and re-imagining local finances and decentralisation.
Why transnational corporations are interested for partnership with our Smart Cities Mission?
- They are seeking state support and possibly subsidies to expand market opportunities, in an era of uncertain growth in economies belonging to the Organisation for Economic Development and Cooperation (OECD).
Can we afford to adopt this model of development?
- The challenge is that India is far from being a high-income country with well-established infrastructure, markets and responsive public institutions
- Most Indian cities continue to struggle with poverty; weak infrastructure and poor services; dysfunctional land and informal labour markets; fragmented governance; and feeble public participation in everyday governance, in what is otherwise an active, vigorous and contested democracy.
- If we will keep our focus limited to certain areas, as smart cities mission currently proposes to focus on pocket areas development rather than holistic development, then we will leave a large number of people behind.
Link between SDG and Smart cities
- The SDGs provide a wide and holistic development framework to encompass India’s urban challenges.
- This ranges from ending poverty and hunger, to the provision of universal health care and education, housing and basic services, jobs and industrialisation.
- All within local and global ecological limits and the strong commitment to reduce inequality and enable gender equality.
- Taken together, they are what we need.
- Instead of picking up priorities between SDG and Smart Cities Mission, we should go for a complementary narrative, where one strengthens the other.
Development for all
- SDGs are universal, targeted at all people, everywhere.
- They also include a strong commitment to not leave anybody behind.
- This implies placing the poor and vulnerable at the forefront of development and investment priorities.
- So, this builds a strong case to have a complementary relationship between the Smart Cities and SDGs.
The missing link between SDGs and Smart Cities Mission
- The Digital India mission is a missing link that could help connect the Smart Cities mission to these high-level SDG outcomes, especially the Sustainable Cities goal to “make cities inclusive, safe, resilient and sustainable”.
How can we use the Digital India platform to connect the dots between smart cities and the SDGs?
- Access to universal public services, using digital platforms and citizen awareness to improve infrastructure planning, management and services, leading to improved quality of urban life.
- More buoyant informal and formal labour markets by better digital matching of skills with work opportunities, wages and social protection; leading to more opportunities for decent work and in time, lower poverty.
- Enable sweeping digital reforms around land records and management that cut across rural, peri-urban and urban areas. This should lead to greater access to land, reduced speculation, increased tenure security and, hence, more affordable housing.
- Universal coverage of JAM (Jan Dhan-Aadhaar-Mobile) and moving to digital cash, lowering transaction costs and greater productivity of informal and formal enterprises.
Conclusion
- All of these above mentioned ideas are being implemented at one place or another on pilot basis.
- But, as multiple examples from high-income countries demonstrate, not all smart cities will be sustainable, unless they embrace the SDGs, including those on inequality, participatory governance and climate change.
- We should also ensure that we should not end up creating gated communities as it is demanded by the middle class.
- And interests of political class and real estate developers should not hijack our smart cities mission.
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