- Front Page / NATIONAL
- Aadhaar linkage to school subsidy schemes worries HRD Ministry
- In ISRO’s launch of 104 satellites next week, 88 will be from U.S.
- Delhi, Dhaka push Ganga basin project
- Editorial/OPINION
- Ancient sport, new age protests
- Neither transparent nor accountable
- First among allies?
- ECONOMY
- NPS subscribers can prematurely withdraw 25% of corpus tax-free
- The Triple Agenda
- Indian Express
- The less cash budget
- A moment wasted
- Live Mint
- Union budget and the need for structural reforms
Front Page / NATIONAL
[1]. Aadhaar linkage to school subsidy schemes worries HRD Ministry
Context
The Human Resource Development (HRD) Ministry has expressed concern over the Centre’s push to link the Aadhaar number with subsidy schemes related to school education
What has happened?
In a recent inter-ministerial meeting, the Department of School Education and Literacy (DSEL), under the HRD Ministry, said the decision to use the Aadhaar number as an identification document for receiving benefits under various school-related schemes needs more deliberation as the schemes are huge and impact education of children across the country
Backdrop
Cabinet Secretariat had issued a directive in November 2016, asking all the Ministries to issue notification under Section 7 of the Aadhaar Act, 2016, which makes the use of Aadhaar “an identifier for delivery of various subsidies or benefits or schemes” to beneficiaries.
31 schemes
So far, the Centre has identified 31 schemes where the Aadhaar number can be used as identification for providing various benefits. However, there is uncertainty over the 11 schemes of the HRD Ministry identified to be covered under the Aadhaar Act.Some of the identified 31 schemes include
- Direct cash transfer of food subsidy under the National Food Security Act
- Supplementary nutrition to children below six and pregnant mothers, along with monthly honorarium for anganwadi workers under the Integrated Child Development Services
- Subsidy on housing loans under the Pradhan Mantri Awas Yojana (Grameen)
[2]. In ISRO’s launch of 104 satellites next week, 88 will be from U.S.
Context
The Indian Space Research Organisation (ISRO) is on the cusp of making history when it sends 104 satellites into orbit on its PSLV-C37 rocket on February 15. Only three of them are Indian satellites
News
ISRO will send 104 satellites into the orbit on Feb 15th. 88 are from US
Significance
No space agency has launched such a large number of satellites in a single flight so far. (While ISRO’s PSLV launched 20 satellites last year, Russia’s Dnepr launcher holds the record for lifting 37 satellites to orbit in June 2014)
Satellites to be launched
- The PSLV will carry a main remote-sensing satellite in the Cartosat-2 series and two small spacecraft, all for ISRO, and 101 small foreign commercial satellites.
- Cubesats: The 88 Cubesats are part of Planet’s earth observation constellation of 100 satellites. They weigh around 5 kg each and are called ‘Doves’ or Flock 3p
- The main passenger on PSLV-C37 will be the fourth in the Cartosat-2 series, a very high resolution Earth observation satellite of about 650 kg, and occupies roughly half the space in the launch vehicle. It will carry two more Indian nano satellites, INS-1A and INS-1B, each weighing about 10 kg. They have a short lifespan of six to 12 months
[3]. Delhi, Dhaka push Ganga basin project
Context
Bangladesh and India have held talks on the Ganga basin development project after dialogue on the Teesta water sharing agreement slowed down
Backdrop
The Ganga basin development project was first conceived during the UPA rule and came up for discussion during Prime Minister Dr Manmohan Singh’s Dhaka visit in 2011. Former Bangladeshi ambassador Mohammed Zamir who is a specialist on the issue said Bangladesh needs India’s support to build a new Ganga barrage on its territory to operationalise the scheme
Ganga Basin Project
The main component of the Ganga basin development is the issue of joint development and management. Joint dredging and development activities in the basin area are also part of the project
- Will resolve aridity: Bangladesh needs a new Ganga barrage to hold water released from the Farakka barrage. The proposed barrage would provide a solution to aridity in the Bangladeshi territory that Dhaka blames on the Farakka barrage in India. Once completed, the Ganga barrage can hold water for the lower riparian system in the lean season
- Ganga basin development project will help agriculture and river navigation and revive the river economy
Editorial/OPINION
[1]. Ancient sport, new age protests
Context
Almost everybody appeared to miss the siren song of ‘unsynchronised awakenings’ of an ‘under class’ in the Jallikattu protests. It is these segments that are leading the global revolt against the so-called ‘elite’
Relevant points
- Author questions as to whether Jallikattu movement was spontaneous. He states that many theories have been attributed to such huge scale uprising against Jallikattu ban but everyone seem to have missed the awakening of the underclass (the lowest social strata in a country or community, consisting of the poor and unemployed)
- Author points out at the intellectual vacuum that has prevailed in Tamil Nadu in the recent past, referring to the response of the political class which reflected a lack of understanding on their part wrt Jallikattu protests
- Reemergence of anti-national elements: Author states that there has been a gradual rise in the anti-national and anti-social forces in Tamil Nadu. Sizeable segments in Tamil Nadu feel even more estranged from New Delhi than before due to the Centre’s policies over issues such as the Cauvery water dispute
Intolerance
Growing intolerance is a special feature across societies and populations today. As the spontaneous nature of protests begins to decline, they are increasingly taken over by vociferous and intolerant groups. These elements are thereafter able, in most cases, to hold the state to ransom
- This is especially true in situations where the establishment is perceived to be weak. In Tamil Nadu, the perception of a “diffusion of power” gives the impression of it being a weak state
New wave protests
The trend in “new wave” protests — which are occurring with greater frequency today — is towards creating a spectacle and mobilizing large crowds to heighten the intensity of the initial cause
- Nirbhaya protests of 2012 are a case in point
[2]. Targeting old scourges
Context
The reference in the Union Budget to new elimination targets for some major communicable diseases barely hints at the enormous burden carried by millions in India with tuberculosis, kala-azar (leishmaniasis), filariasis, leprosy and measles
Issue: Health targets of the Budget
Elimination targets
Government has prepared an action plan to eliminate
- Kala-azar (black fever) and filariasis by 2017
- Leprosy by 2018
- Measles by 2020
- Tuberculosis by 2025
Other Health Targets
Similarly, action plan has been prepared to
- Reduce IMR from 39 in 2014 to 28 by 2019
- MMR from 167 in 2011-13 to 100 by 2018-2020
Few pointers on successful implementation:-
TB Challenge
Author states that a steady progress towards the new elimination deadline of 2025 will depend on improved capabilities in the health system to meet the daily drugs requirement and a feeling of ownership at the State level
Issues: Following issues pointed by the World Health Organisation need to be sorted out
- Lack of integration of private practitioners with the national mission on tuberculosis for guaranteed access to drugs
- Lack of continuous monitoring of such patients
Leprosy campaign
Author states that India’s leprosy campaign is in a ‘post-elimination’ struggle due to the ensuing complacency after India had declared at the end of 2005 that it had eliminated leprosy as a public health problem, based on a rate of less than one person in 10,000 having it.
- Leprosy still prevails: There were 102178 leprosy cases on record as of September 2016
- Complete removal is difficult: Detecting new cases early and preventing them from progressing to disability-inducing grade two level is crucial, although complete removal by 2018 as envisaged in the Budget may prove difficult
Kala-Azar & Filariasis
Kala-azar, though underreported and mainly confined to Bihar and Jharkhand, is a promising candidate for elimination in 2017
- Control of vector is the key: Since the few thousand cases of Kala-Azar are caused by a protozoal parasite with no animal reservoir; control of the vector, the sand fly, holds the key
- Filariasis can be removed: If good medical protocol is pursued, pockets of filariasis in many States can be removed
- Proper rehabilitation: Rehabilitation programmes for these diseases require more resources and policy support
[3]. Return to a dangerous normal
Context
The hurry to declare the clean-up operation complete raises questions that go beyond just the specifics of the oil spill on the Chennai coast
Poromboke
Poromboke is an ancient Tamil revenue term describing areas reserved for communal use such as the seashore, grazing grounds, and the margins of wetlands
What has happened?
Two ships, one a tanker carrying petrol and lube oil, and the other carrying LPG, collided outside the Kamarajar Port early morning of 4th Feb 2017
Questions galore
Author states that the consequent oil spill, the disaster that is unfolding in the name of containment and remediation, and the hurry to declare the clean-up operation complete raise questions
- No clarity: More than a week after the accident, there is no clarity on the quantity and nature of the material that spilled on January 28
- No advisories on the toxicity of the spilled material have been issued by the Ministry of Environment Forest & Climate Change (MoEFCC) & Tamil Nadu pollution control board
- No prosecution has been launched for violation of environmental laws by various agents
Casual attitude
Author states that despite a visible oil-coated coastline, state authorities have sought to downplay the incident by terming it as a minor spill and have employed untrained individuals like student volunteers at clearing the spill despite obvious health effects
Dangers of the spill
Petroleum oils are complex mixtures of chemicals that are toxic, bio-accumulative and persistent in the environment
- Carcinogens: Some, like benzene, are known human carcinogens. They enter the body through inhalation, ingestion and the skin
Clean-up operation: A farce
Coast Guard had been employed to clean-up the spill but it has threatened to complete the operation in a couple of days
Estimate by INCOIS
The Indian National Centre for Ocean Information Services’ computer model on the first day of the spill estimated that for a 20-tonne spill at this time of the year at Ennore, more than 60% would be beached by the end of the ninth day
- What has been removed is the weathered oil and sludge from the Nearshore Sea and the accessible parts of the intertidal area
- What more needs to be done: The rocks remain covered with oil, and the gaps between rocks filled with toxic oily residues
- Standard practice is to use warm high-pressure water and foams to remove oil from such terrain. Given that only buckets were in use, it is safe to assume that spill has not been cleaned as it should have been
Conclusion
Author concludes by stating that a return to a normal where environmental norms are constantly flouted thereby damaging the surroundings, is not going to benefit. Governance structure needs to be modified in order to ensure strict compliance with the rules
Read More: Ennore Creek in dire straits, How oil spills harm animals & plants in marine environment
ECONOMY
[1]. An Indian sub-prime crisis in the making?
Context
The share of debt of firms with failing financial health has been going up every year since 2011, leading to mounting NPAs
Issue: Mounting NPAs in banking system
Understanding debt crisis
There are two statistics for a corporate house, which need to be looked at to understand the nature of the debt crisis
- The amount of bank loans taken in a particular year
- Whether the firms were financially healthy enough to take the loan in the first place.
Two parts of the loan
Author states that any loan that is taken has two parts,
- The principal (total loan amount)
- The interest accrued on it
A financially healthy firm vs an unhealthy firm
- Healthy firm: For a firm to be financially healthy, just as a family taking a loan, it should make enough profits to cover for both (in financial terms, these are called hedged firms)
- Ponzi firm: An unhealthy firm is one which does not even cover its interest payments (the Ponzi firm). This type of firm should not be given more loans
A Sub-prime crisis in the making?
At the heart of the U.S. sub-prime crisis was the fact that loans were given out increasingly to Ponzi households. That’s where the similarity lies. What was true for the household sector could be true for the corporate sector in India
Measuring the health of a firm: Interest Coverage Ratio (ICR)
Author states that in financial terminology, the health of a firm is measured by what is called the Interest Coverage Ratio
ICR: It is a ratio of net profits to interest payments due on past debt
- It being less than 1 is a danger sign for the lender because it means that the firm is not even making enough profits to pay for its past interest payment commitments let alone the principal amount
Note: The Article talks about the ICR from the period 2011-2015
Is ICR the best metric to measure the health of a firm?
Author states that one might raise doubt as to whether ICR is the best measure of financial health especially for companies which take longer to generate profits resulting from time lags that assets take to build. Hence, author presents three other variables to present a comprehensive picture of corporate debt.
Three other variables
- Profitability e. whether the firms were making positive post-tax profits
- Ratio of current assets to current liabilities to measure what part of the liabilities they can pay off if they were to sell their assets
- Debt to equity (own capital) ratio to measure how much have they stuck their own neck out compared to other people’s money in the risky adventure they are undertaking
Accepted Thresholds
The well-accepted thresholds for these measures are 0, 0.5 and 5 i.e. firms which are making negative profits, can honor at least half their liabilities by selling off the assets, while debt is five times as large as own capital respectively
Observations from the graph
It can be seen from the figure that the share of debt of firms with failing financial health has been going up since 2011
- The dotted line represents how the share of bad debt has increased in those firms which could not even honor their interest commitments to the lenders and it has increased significantly since 2012These are the Ponzi firms discussed above
- Able to get fresh loans despite being Ponzi firms: What is significant here is that most of these firms were able to not only extract fresh borrowing from the banks but actually increaseit even as their status continued to be Ponzi! Author states that it is for this reason that he calls it a potential sub-prime crisis building up
- Ponzi state for at least 2 years: It can be seen from the 3rd graph that other than Vedanta Ltd., all companies have had at least two years of being in a Ponzi state (ICR<1) and yet their borrowings, for most, have increased every year
- Very high debt-equity ratios in the table also corroborates their bad health condition
Non-Performing Assets (NPAs)
- Most of the burden borne by PSBs: As can be seen from above figure, most of the burden of bad loans since 2011 has been borne by public sector banks as opposed to the foreign banks or privately-owned banks
- Share of stressed loans mounting: The share of stressed loans, which is the sum of non-performing loans and restructured loans, as a percentage of total advances made has been skyrocketing for public sector banks
Conclusion
In conclusion, while the banks have knowingly put themselves in the current position, the real culprits are the big borrowers and promoters who are not paying up as promised and the government, instead of being strict on the defaulters, is expecting the central bank to inject liquidity into the banking system to write off these bad loans
[2]. Borrowers struggle in deep sea as banks deflate life jackets
Context
While MCLR was reduced by 90 basis points, base rate cut was limited to 10 bps
Give the article a go-through once
[3]. Will Budget help double farmers’ income?
Context
Most of the earnings of the average farm household were spent in meeting consumption expenditures
Measures announced to boost agriculture
Government has announced a slew of measures in the Union Budget 2017 to boost the agriculture sector.
- Higher agricultural credit
- Higher allocation for irrigation projects
- A crop insurance scheme and increased allocations for MGNREGA to dig farm ponds were among the measures announced on February 1
Author’s contention
Will these help attain the goal of doubling the farmer’s income by 2022?
- Further questions: The goal of doubling incomes lacks clarity as to whether it is nominal incomes or real incomes that are being chased. It is also unclear whether it is income from agriculture or that of agricultural households being targeted
Situation of farm households
- Average monthly income: The average monthly income of the Indian farm household was estimated to be about ₹6,426 by the Situation Assessment Survey of Agricultural Households in its NSS 70th round. This included net receipts from cultivation, farming of animals, non-farm business and income from wages
- Average monthly consumption expenditure: During the same period, the average monthly consumption expenditure per agricultural household was ₹6223
What this shows is that
- Most of the earnings of the average farm household were spent in meeting consumption expenditures
- Dependence on loans: For cultivation-related expenses, the farmer is mostly dependent on loans and the NSSO survey revealed that half of the farm households were neck-deep in debt
What needs to be done?
For any real increase in income, farmers require higher returns for their produce. Following measures need to be taken
- The recommendations of the National Commission on Farmers – to provide the minimum price of the total cost of production plus 50% – are implemented. For eg: In the case of rubber, for instance, a price stabilisation fund was established which helped farmers get better prices for their produce
- Recognition of ownership of women farmers: Nearly 50% of farmers are women, who often do not benefit from credit policies as they do have land titles in their name. Unless land titling recognises female ownership of land for cultivation, half of India’s farmers cannot claim institutional credit
Problems
- Economic viability: Rising input prices such as for fertilizers, pesticides and seeds and stagnating output prices as MSP raise questions about the feasibility of agricultural activity
- Agriculture will have to grow at 12 or 14% to realise such rise in earnings. At present, the growth rates stand at a poor 1.2%, according to World Bank data.
Drought-proof farming
Author states that the measure of creating five lakh more farm ponds that will work as a drought-proofing measure in gram panchayats
Negatives of the Budget
- Issues with the schemes: While the crop insurance scheme aims to rightly protect farmers from the vagaries of the weather, allocations for which have been increased in the 2017 Budget, the terms of the Pradhan Mantri Krishi Bima Yojana spell out that the amount of insurance cover depends on the premium paid and extent of cover, so a farmer may not necessarily recover all losses sustained from crop damage in case of an eventuality
- Low allocation to NAFCC (National Adaptation Fund for Climate Change): The government made only a paltry allocation of ₹130 crore to this Fund in the 2017-18 budget. This is disturbing in the wake of the fact that the country faced unprecedented drought affecting 330 million people last year
- Tamil Nadu Farmers disappointed: Farmers in Tamil Nadu were disappointed that their demand to write-off farm debts for households witnessing suicides in the aftermath of cyclone and drought in the State had not been addressed in the Union budget
- No incentive to go Organic: Farmers needed an incentive to go organic as high input costs of fertilizers had raised farm debts. Organic farming did not get any attention in the Budget
- Focussing on drip irrigation will not be sufficient, and though more funds were allocated for irrigation, no expansion of specific projects for irrigation were made during the Budget.
Positives of the Budget
- The expansion in coverage of National Agriculture Markets (e-NAM), an online agriculture market, from 250 to 585 APMCs in the Budget, as it will “help fertilisers companies in the medium term through higher demand
- Fertilizer subsidy hike: The subsidy hike of 6% for the phosphatic and potassic segment was also seen as a positive thrust for the manufacturers and traders of these fertilizers
- Hike in the corpus of the long-term irrigation fund by another ₹20,000 crore, taking the total fund size to ₹40,000 crore
- Proposal to set up adairy processing and infrastructure development fund at NABARD, with a corpus of ₹8,000 crore over three years
Who will reap the benefit?
Indian farmers do not constitute a homogenous community. There are rich, land-owning farmers and then there are poor, landless farmers
- A new nexus was now emerging comprising farm contractors and big traders combined with rich landowners in rural India, which was replacing the feudal landowning structures of the past
- It is this new class of rural landlords that will largely benefit from the Budget announcements of higher loan allocation and online trading of farm produce
Indian Express
[1]. Health Budget: Reality Check
Context
Its traditional approach to public investment is out of step with changing needs
Issue: Focussing on the non-communicable disease burden
Health targets
Author states that in the Union Budget 2017-18 following special provisions have been made vis-à-vis health sector,
- Elimination of 5 infectious diseases
- Strengthening of rural sub-centers
- Recruitment of specialist doctors in government hospitals
- Increased allocation for programmes for women and children
- Free treatment for the elderly poor
Author’s contention
Budget should have included the following,
- Increased budgetary support for the prevention, control and care for non-communicable diseases like cancer, diabetes, hypertension and heart diseases
Further, author contends that,
- Debatable policy: The intention to eliminate five infectious diseases can be debated, especially as disease elimination is an unpredictable public health investment. For eg: India declared itself leprosy free at the end of 2005 but new cases have been reported
- Author’s view here is that, why keep an elimination target for a disease, the conditions for whose genesis and proliferation continue to persist. For eg: The unhealthy, over-crowded and impoverished living conditions of urban slums provide the ideal environment for proliferation of infectious diseases, and could easily undo targets of eliminating tuberculosis and leprosy
Author suggests
- Re-examine the priorities: It is time to re-examine the increased prioritisation of care for pregnant women. For over a decade now, institutional deliveries and immunisation have been incentivized. Why? Read on to find out
- With reducing fertility, women experience two to three pregnancies. Maternal deaths have reduced significantly across the country and are now the 10th largest cause of death among women. At this time, investing in the creation of clean, accessible, and supportive mother and child clinics might be more cost effective
- Innovative allocations like Budgetary provision for the elderly poor are required
Conclusion
Author concludes by stating that a health budget that is in sync with the changing health status and demographic of the country, reflects the intent of the government to prepare for the future
Live Mint
[1]. Focusing on domestic growth
Context
Author talks about the emphasis of the recent Union Budget on rural economy, why it is a right move and how it can be achieved
Issue: Export-oriented growth to domestic-consumption-based growth
Terms:-
Protectionist: A policy of shielding a country’s domestic industries from foreign competition by taxing imports
Export-driven growth model: A model based on manufacturing and export of goods in which a country has comparative advantage
Domestic consumption led growth model: This model is based on the concept of increased consumption in an economy. For increased consumption there should be an increased income (in hand so that people can spend. This increased consumption leads to a higher demand for goods and services thus propelling the growth engine forward
Domestic consumption led growth
Why India should shift to a domestic consumption led growth model?
Author states that as several governments in developed countries become more protectionist, the export-driven growth modelsfollowed by China in manufacturing and India in IT and IT-enabled services will produce diminishing returns (less and less profit for high investment)
Why only large nations can shift to a domestic consumption led growth?
Because size of the smaller nations is not enough to sustain a consumption led growth. A sizeable population with increased disposable income is a key element for a domestic consumption led growth model
Why a shift to consumption led model cannot happen at this moment for India?
Due to high level of inequality that is prevalent in our country, an immediate shift to a consumption led model cannot happen.
- High levels and High rate of increase in inequality: India not only has one of the highest levels of inequality in the region, it also shows very large increases in inequality since 1990
- Rise in Gini Index: Its net Gini index of inequality (based on income net of taxes and transfers) rose from 45.18 in 1990 to 51.36 in 2013
- View: See this short clip to understand Gini Index
Progress in reducing poverty: Not enough
India has made great strides in reducing poverty
- Reduction in rural poor population: While 80% of the rural population was poor in 1990 this percentage was noted at less than 30% in 2011
- Reduction in Urban poor population: about 40% of the urban population was poor in 1990, this percentage was less than 20% in 2011
- Discouraging figures when compared with other countries: Yet, these impressive figures look discouraging when compared to even Vietnam and Indonesia, which all started with higher poverty levels than India in 1990 and have been able to do better than India in reducing poverty
What is required?
- Balanced distribution: A more equitable distribution in the gains from growth is required to boost the consumption capacity of the Indian economy
- Creation of jobs: Author states that, worldwide, the profits of the capital owners through interest payments, dividends, or retained profits are increasing while workers are left in the lurch. Tax avoidance by the owners of capital has only served to exacerbate this cleavage between the returns to capital and to labour. To balance the disparity in the returns to capital versus the returns to labour, creating jobs in the economy is absolutely paramount.
Emphasis on rural economy
Author justifies government’s increased attention to rural economy in the budget by citing above conditions of inequity and the fact that,
- Economic shocks affect the poor significantly more than the rich or the middle classes. The ability to bounce back from economic shocks is important if the overall economic status of the poor has to improve
Improving economic status of the poor
Government has tried to push the agenda of improving economic condition of the poor,
- Proposal to raise coverage under the Pradhan Mantri FasalBima Yojana scheme to 40% in FY18 and 50% in FY19. So far the progress on this front is encouraging, with 39 million hectares or 26.5% of all farmers covered as of December 2016. The target for agriculture and allied credit has been set at Rs10 trillion, which is quite substantial
- The allocation to the Pradhan Mantri Krishi Sinchayee Yojana is up 71% when compared with the FY17 estimate
- The doubling of the total corpus of the National Bank for Agriculture and Rural Development’s (Nabard) Long-Term Irrigation Fund and a new micro-irrigation fund are also important steps in this direction
- Increased allocation for construction activities such as roads and affordable housing: Both are highly labour-intensive and employ low-skill workers
- Affordable housing under the Pradhan Mantri Awas Yojana has received an increased allocation of 38.7% over FY17.
- Facilitating higher investment in affordable housing: Providing infrastructure status to affordable housing will facilitate higher investments in this sector and, thereby, create low-skilled jobs. The income-tax exemption for developers of affordable housing with a carpet area of 30 and 60 sq. m in the four metros and non-metros, respectively, instead of built-up area of 30 and 60 sq. m will bring a larger number of projects under the ambit and, thereby, foster higher investments in this sector
- Allocation for road transport has increased 11% in fiscal 2018
- Increased allocation to rural housing: The 44% increase in allocation to rural housing will also help push job creation and create demand in the rural economy
- Affordable housing under the Pradhan Mantri Awas Yojana has received an increased allocation of 38.7% over FY17.
Way forward: Careful monitoring
Author suggests that the outcomes in the key areas of rural development must be carefully monitored to ensure success of the initiatives. Such success would pave the way for the economy to substitute away from the focus on export-oriented growth to domestic-consumption-based growth.
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