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9 PM Daily NEWS Brief

9 PM Daily Current Affairs Brief – 01 February 2017



Front Page / NATIONAL

[1]. Note ban a radical measure: CEA

[2]. SC rejects plea to stay Jallikattu law

[3]. Kathmandu meet to finalise SAARC budget, agenda

Editorial/OPINION

[1]. Demonetisation’s long shadow

[2]. Drawing up a diet plan

[3]. This land is their land

ECONOMY[The Hindu]

[1]. Reward States’ good fiscal show

[2]. CSO revises GDP growth for 2015-16 upwards to 7.9%

[3]. Economic Survey wants modification of FRBM Act

Indian Express

[1]. Demonetisation 2.0

[2]. Surveying ideas for India

Live Mint

[1]. The building blocks of economic policy

[2]. The right priorities for healthcare spending


Front Page / NATIONAL


[1]. Note ban a radical measure: CEA


Note ban a radical measure: CEA


The Hindu

Context

Demonetisation will have an impact on economic growth

Article contains views of Chief Economic Adviser and mentions pointers from Economic Survey itself.

Main points of Economic Survey shall be dealt with in a separate post.

Give it a go-through once


 


[2]. SC rejects plea to stay Jallikattu law


SC rejects plea to stay Jallikattu law


The Hindu

Context

A few hours after the President gave his assent on Tuesday to the Tamil Nadu amendments in the Prevention of Cruelty Act of 1960 to allow Jallikattu, the Supreme Court refused to stay the new State law

Petition declined

Allowing the Central government to withdraw its January 7, 2016 notification permitting jallikattu, the Bench declined the plea of NGO Compassion Unlimited Plus Action for an interim stay on the operation of the Prevention of Cruelty to Animals (Tamil Nadu Amendment) Act, 2017

Bench’s position

Basis of the challenge: It asked the organisation and other animal rights activists the ‘basis’ of their challenge to the new State law

  • Preservation of culture: Referring to the amendments made by the Tamil Nadu Assembly to the 1960 Central Act, Bench pointed out that the declared object of the new legislation is the preservation of a particular breed of bulls
  • Within the ambit of culture or not?: Court will decide on whether Jallikattu comes within the ambit of ‘culture’ meant in Article 29 (1) and whether this kind of a sport or event or activity is safe. Conservation of a culture should not involve inflicting unnecessary pain [on] or suffering to animals

Article 29 (1)

Center’s arguments

  • Article 29 (1) of the Constitution mandates that citizens have the right to take measures to “conserve their culture.”
  • Article 48: If Jallikattu is cruelty, what about slaughtering of animals? Slaughtering is done not only for food but also in the name of religion like halaal and sacrifices of goats, etc. Section 11 (3) (e) of the 1960 Act, which is a Special Act, exempts slaughter for food despite the fact that Article 48 prohibits slaughter”
  • Bench’s counter: Slaughtering for food comes within the purview of Doctrine of Necessity. Section 11 (3) (e) permits slaughter for food but also mandates that the animal should be killed without inflicting upon it unnecessary pain and suffering

 


[3]. Kathmandu meet to finalise SAARC budget, agenda


Kathmandu meet to finalise SAARC budget, agenda


The Hindu

Context

Diplomats say the meeting is critical as it will require consensus among members

 What has happened?

Indian and Pakistani officials will meet to finalise the budget and agenda of the SAARC during the February 1-2 meeting in Kathmandu.

  • Significance:
  1. The meeting will mark the beginning of the annual calendar of events of the organisation which failed to meet in Islamabad for a summit and is in focus as it is the first time high officials of member-countries will meet since the cancellation of the summit
  2. The meeting in Kathmandu will be critical as it will require consensus among members for finalizing budget of the organisation

 


Editorial/OPINION


[1]. Demonetisation’s long shadow


Demonetisation’s long shadow


The Hindu

Context

The Economic Survey presented on the eve of the Union Budget has been dominated by a singular action of the government

Economic survey’s view on Demonetization and its impact

  • Difficult to predict: Economic survey acknowledges the complexities in assessing its potential impact as well as the lack of historical precedent to make reliable predictions
  • Short-term costs and long-term benefits: Survey asserts that although there have been short term costs to economy, there will be long term benefits
  • Reduction in GDP: Real GDP growth in the current fiscal, the Survey projects, will see a likely reduction by one quarter to half a percentage point relative to the baseline of about 7% as a result of the demand shock (a sudden event that increases or decreasesdemandfor goods or services temporarily) triggered by demonetisation

 Recommendations of the survey

Devoting a whole chapter to demonetisation, the Survey recommends

  • Fast, demand-driven remonetisation
  • Further tax reforms, including bringing land and real estate under the ambit of the Goods and Services Tax
  • Reducing tax rates and stamp duties

 


[2]. Drawing up a diet plan


Drawing up a diet plan


The Hindu

Context

The welfare challenge lies in providing assistance to needy households to ensure adequate diets without creating conditions in which they opt for inferior diets that are too heavy on cereals

 A disconnect

In the first few paragraphs, author has depicted an apparent disconnect between an improvement in the proportion of households receiving PDS subsidies and corresponding improvement that should be witnessed in malnutrition

  • Source of the data: State-wise data has been taken from Annual Health Survey/District Level Health Surveys of 2012-14 as well as National Family Health Survey IV of 2015-16
  • Rajasthan: Proportion of households receiving PDS subsidies in Rajasthan increased by about 15 percentage points, underweight declined by 3 percentage points
  • Madhya Pradesh experienced increase in the PDS but a sharper decline underweight (17 percentage points)
  • Gujarat shows a drop in PDS use but records a modest improvement in underweight statistics (5 percentage points)
  • Andhra Pradesh: The number of people receiving PDS rose to76 % in 2011-12 but underweight rate seems to be stuck around 32% with hardly any improvement

This is the apparent disconnect which the author is trying to expose here in this article

 A more complex relation

Author states that a recently released report based on India Human Development Survey of 2004-05 and 2011-12 suggests that the relationship between the PDS and nutrition may be more complex

  • Survey organised by: Jointly by researchers from National Council of Applied Economic Research and University of Maryland
  • USP: It is the first nationwide survey to interview the same households at two points in time
  • What has survey done? Households with similar income, family size, land ownership and place of residence have been compared
    • One group is with Below Poverty Line (BPL) or Antyodaya Anna Yojana (AAY) card and the other group is without these cards
  • What do results suggest?

For households with BPL or AAY card:-

  • Access to PDS subsidy changes allocation behavior: When items like rice, wheat and other cereals are available cheaply households try to get more of their required calories from cereals and less from milk, fruits and vegetables
    • Cereal consumption is high: Results show that households with BPL/AAY cards consume a monthly per capita average of 11.87 kg of cereals, but only 2.77 litres of milk
    • Food consumption forms 56% of household budget

For households without BPL or AAY card:-

  • Lesser consumption of cereals: Households without BPL/AAY cards but at the same income level, consume somewhat less cereals (11.22 kg) but more milk (3.21 litres)
  • Food consumption forms 58% of household budget

Why money saved from buying cereals in families with BPL or AAY card is not being used to buy fruits, vegetables and nuts?

Because school and medical costs are rising and households face many other demands on their purse, these savings seem to be spent on non-food items

Previous study

Author states that a previous study done in a similar manner and published in joint NCAER/Brookings journal, India Policy Forumfound that

  • No effect of subsidy access to child nutrition: Households with a BPL/AAY card were no better than households without PDS subsidies when it came to child nutrition

Reason: Dietary diversity (eating different kinds of foods) is important for balanced nutrition. Access to cheap PDS cereals reduces this habit and people consume more and more of cereals on a daily basis leading to nutritional deficiencies which ultimately results in no visible improvements in child nutrition.

Q: So, should food subsidies be discontinued?

A: No because as per the NCAER report,

  • Access to PDS is vital in maintaining dietary diversity: For very poor households or households that experience income declines of 20% or more between the two surveys, access to the PDS is very important for preserving food intake and dietary diversity

Survey findings:

  • Households with BPL/AAY card: When faced with a sharp income decline, households with BPL/AAY cards reduce their cereal intake by 770 g per capita per month, and maintain their milk intake
  • Households without BPL/AAY card: In contrast, households who can’t avail of food subsidies reduced their monthly per capita cereal intake by 930 g and milk intake by 280 milliliters

The Challenge

Author states that the challenge lies in providing assistance to needy households without creating conditions that force them towards inferior eating habits

Author suggests

  • Cash transfers: Cash transfers may be one way of dealing with this challenge. They would allow households to invest in better diets without restricting what they consume. Currently they are given rice, and other cereals which limits their choice
    • However, success of cash transfers would depend on the ability to effectively administer transfers and reduce leakages

Conclusion

Author concludes by stating thatifthe mechanisms for effective administration of the UBI are in place, it is possible to make a case for replacing PDS by cash transfers on nutritional grounds

 


[3]. This land is their land


This land is their land


The Hindu

Context

In the light of recent Bhangar violence in Kolkata WB, the article states that despite the new land acquisition law, questions of resettlement and rehabilitation persist

What happened?

On 18th January 2017 hundreds of angry locals blocked major roads in Bhangar, 40 km from the state capital Kolkata, demanding an assurance from Chief Minister Mamata Banerjee that their land will not be forcibly acquired by the government for a power sub-station

  • Agitations have left two dead, several arrested and many injured since November 2016

 The Bhangar story

In the violence in Bhangar, the Trinamool Congress that agitated against the high-handedness of the Communist Party of India (Marxist) in Nandigram and Singur claims the people first agreed to part with 14 acres of land and then outsiders created unrest.

  • No knowledge about full extent of the project: The local residents claim that they had no knowledge of the full extent of the project. In negotiations with the government and the Power Grid Corporation of India Limited, they were informed only of a power sub-station that would improve the power supply of the area. They discovered belatedly that on completion, the Bhangar sub-station would receive power from the Sagardighi thermal power plant and the Farakka unit that would then be transmitted via high-tension wires to Kolkata, the northeastern States and Purnea in Bihar
  • Demand for an EIA:They demand an environmental impact assessment to ascertain the adverse impacts of the high-transmission lines on the local population, agriculture and ecology
  • Land acquired fairly: State representatives claim that land was acquired with consent, compensation was negotiated with the residents, and outsiders are instigating violent agitations.

Author’s contention

Author contends that if the new land acquisition law was improvement over the previous one and was enacted to comprehensively address opposition to land acquisition, why do governments still get land acquisition wrong?

Issues plaguing new land acquisition law

  • Access to information: Author states that the information regarding projects is seldom accessible and those affected discover it by accident or by exercising their RTI
  • Prior informed consent is a farce: There are no clear procedures for establishing consent in the case of private sector involvement and there is complete exemption for state-led projects
  • Meagre compensation: Compensation offered is very little to offset the loss of livelihood and biodiversity. Small and marginal farmers are provided with too little a compensation and once that is finished, they are left to fend for themselves

State intervention

Author states that wherever there is an agitation towards land acquisition by locals, it is termed as being under influence of outsiders by the state.

  • Local infrastructure devalued: The idea of infrastructure as understood by state is such that it benefits only the capitalist side of the puzzle.Existing agrarian and local infrastructure is devalued, rendered backward, and considered in need of improvement for achieving greater economic growth

 Examples:

Author cites example of Narmada BachaoAndolan (NBA), Protest over Dholera Smart City project wherein the water that was promised to peasants in Gujarat by the construction of the SSP is now to be officially diverted to supply real estate and infrastructure projects for a city& the POSCO agitation, to demonstrate that those protesting against such infrastructure projects backed by the state, are locals and not outsiders

In the ensuing paragraphs, author presents us with the following questions,

Q: Who pays for the losses of life, livelihood, peace and well-being of the local residents during months and years, sometimes decades, of agitation?

Q: What of the loss to the exchequer, and ultimately the Indian public, for all the effort made to suppress agitations and democratic principles by the state’s sovereign assertions over the greater common good?

Q: Where does the state source its sovereign power over citizens in a democracy?

Eminent Domain

State acquisition of land is done under the doctrine of Eminent Domain. It implies the right of a government or its agent to expropriate private property for public use, with payment of compensation

 Conclusion

Author concludes by stating that the Eminent Domain is a colonial era legacy that should be done away with


ECONOMY[The Hindu]


[1]. Reward States’ good fiscal show


Reward States’ good fiscal show


The Hindu

Context

The Economic Survey recommended the Centre to incentivize good fiscal work by States to keep the overall fiscal performance on track

Improvementsin financial position of the states

The Economic Survey pointed out that there has been an improvement in the financial position of the States over the last few years.

  • “The average revenue deficit has been eliminated, while the average fiscal deficit was curbed to less than 3% of GSDP. The average debt to GSDP ratio has also fallen
  • Exogenous (External) factors: Survey states that the cause of the progress is mostly due to external factors most notably assistance from the Centre in the form of increased revenue transfers, the assumption of state debt, and the introduction of centrally sponsored schemes.

Increase in fiscal challenges

Survey pointed out that Pay Commission recommendations, and mounting payments from the UDAY bonds will lead to increase in fiscal challenges for the States. Hence, there is a need “to review how fiscal performance can be kept on track.”

Redistributive Resource Transfer (RRT)

What is RRT?

Redistributive Resource Transfer or RRT to a state (from the Centre) is defined as gross devolution to the state adjusted for the respective state’s share in aggregate GDP.

  • The Survey has further suggested that Redistributive Resource Transfers should be significantly linked to fiscal and governance efforts on the part of the States
  • Negative relationship b/w RRT & various economic outcomes: Survey has pointed out that there is no evidence of a positive relationship between these transfers and various economic outcomes, including per capita consumption, GSDP growth, development of manufacturing, own tax revenue effort, and institutional quality. Instead, there is a suggestive evidence of a negative relationship. For example, larger RRT flows seem to negatively affect fiscal effort
  • Recommendation: Use a part of the RRTs or redistribute the gains from resource use, as a Universal Basic Income directly to households in relevant states which receive large RRT flows and are more reliant on natural resource revenues
  • Top ten recipients of RRT: Sikkim, Arunachal Pradesh, Mizoram, Nagaland, Manipur, Meghalaya, Tripura, Jammu and Kashmir, Himachal Pradesh and Assam.

 


[2]. CSO revises GDP growth for 2015-16 upwards to 7.9%


CSO revises GDP growth for 2015-16 upwards to 7.9%


The Hindu

Context
Revision of GDP estimates

What has happened?

Government has marginally revised upwards GDP growth for 2015-16 to 7.9 per cent from the earlier estimate of 7.6 per cent after factoring in latest data on agriculture and industrial production

Give the rest of the article a go-through


 

 


[3]. Economic Survey wants modification of FRBM Act


Economic Survey wants modification of FRBM Act


The Hindu

Context

India has “changed utterly” over the last 13 years since the Fiscal Responsibility and Budget Management (FRBM) was enshrined in law for prudent fiscal management and therefore, the FRBM operational framework designed in 2003 “needs to be modified to reflect the India of today and even more importantly, the India of tomorrow,” according to the Economic Survey

Significance of the recommendation

The recommendation of the survey assumes significance in the wake of N.K. Singh panel;sreport on revising the FRBM Act

A lower fiscal deficit target

The government has set a target for fiscal deficit (the gap between expenditure and revenue for the financial year) of 3.5% of GDP for FY’17, a lower target than the 3.9% set for 2015-16 which was achieved. In value terms, the 3.5% is Rs. 5.33 lakh crore.

 


Indian Express


[1]. Demonetisation 2.0


Demonetisation 2.0


Indian Express

Context

In the present article, author has tried to prove his contention that demonetization move by the government was a completely political move with no economic rationale. Read on to find out how he does that.

 Three reasons for demonetization

Author states that economic theory and historical precedents provide us with 3 reasons for which demonetization can be done

  1. Hyperinflation: A period of rapid inflation usually caused by rapid increase in money. People do not want to hold on to money because its value changes by the minute. For eg: If eggs cost 10rs now, they might cost 100rs a minute or hour later. The value of money has degraded and it continues to do so. Hence, people no longer want to keep cash with them. Monetary system as a whole begins to collapse and under such circumstances demonetization can be a legitimate move

 Read More: Hyperinflation has been explained quite beautifully here

  1. Counterfeit currency: If most part of the currency in circulation is counterfeit it makes sense to demonetise. It restores integrity to the monetary system
  1. Attacking organised crime: Rarely used in routine transactions of citizenry, high-value notes primarily help the operations of smugglers and criminals. As an attack on organised crime, such high-denomination notes can be decommissioned without hurting law-abiding citizens.

 Author’s contention

None of the above conditions prevailed in India on November 8.

  • Low inflation rate: India’s inflation rate is low
  • Low size of counterfeit currency: The estimated size of counterfeit currency is small
  • Large-value notes issued again: The crime-fighting purpose of large-value notes was undermined by the issuance of new Rs 2,000 notes

 Moreover, if only an estimated 6-8 per cent of the black economy was in cash, it is unclear how an overnight decommissioning of high-value notes meaningfully attacked the problem of corruption.

Rest of the article presents the economic views and political motivations of our PM that might have been the reason for demonetization as per the author.

Not relevant as per exam but can be given a light read


 

 


[2]. Surveying ideas for India


Surveying ideas for India


Indian Express

Context

Economic reforms are not, or not just, about overcoming vested interests; they are increasingly about shared narratives on problems and solutions. Economic Survey builds on this idea

A brief commentary on what 2017 Economic Survey is all about, by none other than the Chief Economic Advisor (CEA) Arvind Subramanian himself

Give it a go-through once


 

 


Live Mint


[1]. The building blocks of economic policy


The building blocks of economic policy


Live Mint

Context

Article reflects on themes that should guide the economic policy

Guiding themes

  1. Focus on Market failures: The policy should focus on market failures. Free markets work in enhancing prosperity but there are areas where state intervention is needed. However, in India, the state is dominant in sectors where it is not required and lacks capacity in areas where the intervention is actually desired. It often intervenes with no evidence of market failure, which affects resource allocation. This needs to change
  2. Policy intervention should be seen from a long-term perspective. Often, policy changes are made with narrow objectives, focusing on one sector or area. Government should avoid such ideas
  3. Efficient government spending: The government should spend more efficiently. There are demands for increasing spending in various sectors of the economy and they are often legitimate as India needs improvement in a number of areas
  • Cost of public spending: Public spending has a cost. Kelkar and others have calculated that the marginal cost of one rupee of public spending to society is around Rs3. Therefore, the government should spend carefully as the cost to society is much higher than what gets recorded in the books
  1. Factoring in the change of behavior: Individuals, including politicians, are driven by incentives. Policy changes should factor in the possibility that people can change their behaviour. Insights from public choice theory (a body of theory developed by James Buchanan and Gordon Tullock to try to explain how public decisions are made. It involves the interaction of the voting public, the politicians, the bureaucracy and political action committees) show that politicians and bureaucrats also work in self-interest
  • Reducing fiscal profligacy: Fiscal profligacy is termed as a fiscal policy characterized by higher government spending in short-term which results in higher growth but is unsustainable in the long run. What is needed is an agency like the US Congressional Budget Office which independently reviews government finances so that the public in general is better informed. This will help reduce fiscal profligacy.
  1. Policy should promote competition. A high level of competition is desirable in a market economy as it leads to efficient allocation of capital (i.e. a competitor who yields best returns will receive the capital)
  • The government has done well by getting the bankruptcy code passed as it will facilitate the closing of firms and the shifting of capital to more productive sectors of the economy

Conclusion

Author concludes his article by stating that following these broad principles in policymaking will help build credibility and lead to better economic outcomes in the medium to long run.


 


[2]. The right priorities for healthcare spending


The right priorities for healthcare spending


Live Mint

Context

The only sustainable solution is robust infrastructure and sufficient manpower, not controlling the prices of drugs

Author asks

Author presents us with following question at the start of the article itself and states that they need to be pondered upon before deciding any policy measure directed at health sector

Q: What do patients actually want? Will they settle for compromised, sub-standard healthcare as long as prices are affordable? Or does the vast majority prefer the best quality possible at rational cost?

Dramatic transition: What needs to be done?

Author states that India is witnessing a dramatic transition in disease burden, with non-communicable diseases taking centre stage.The only sustainable solution lies in

  • Robust infrastructure
  • Effective resource mobilization
  • Capacity-building within our states

 Author’s contention

Author contends that we need to improve the quality of doctors and nurses, healthcare delivery systems, better hygiene and sanitation levels, and not just focus on controlling the prices of drugs

Barriers to access

Author points out that the access to healthcare for India’s vast population remains an enormous challenge. The real barriers to access are

  • Deficient infrastructure: A study by IMS Health found that, while a majority of our population resides in rural and tier-II/III/IV towns, healthcare infrastructure, including hospitals, hospital beds per patient, path labs, diagnostic centers and trained doctors, is severely limited. This needs to be addressed on an urgent basis
  • Manpower constraints

Biggest issue: Low healthcare spending

The biggest issue is our low spending on healthcare. India stands right at the bottom of the list when it comes to budget allocation for healthcare

  • A small health budget: In the World Health Statistics 2015, WHO ranked India 187th among 194 countries and yet our health budget is abysmally low.  From being a meagre 0.9% of GDP (gross domestic product) in 2005, (according to the Economic Survey 2015-16), government expenditure (Central and state governments combined) on health as a percentage of GDP has gone up by a whisker to about 1.3% while other developing nations, such as Thailand and some African countries, spend over 5% of their GDP on health

Other problems

  • Low health insurance coverage: The prevalence of health insurance coverage is very low in the country. The number covered under health insurance policies during the financial year 2015-16 was 358.9 million, which is approximately 30% of India’s population
  • IRDA Obligations 2015:The Insurance Regulatory and Development Authority of India (IRDA) has notified IRDA (Rural and Social Sector) Obligations, 2015 that mandates for every insurance company to offer insurance coverage to the rural and defined social sector population. This is a step in the right direction

Some positives

Not all is lost, though. Some promising steps have been taken recently

  • National Health Mission: Under the National Health Mission, support is being provided to states and union territories to strengthen their healthcare systems and provide accessible, affordable and quality healthcare to all citizens
  • Universal Health Coverage: Universal health coverage wherein people will be able to access the quality health services that they need, without suffering financial hardship, is a key goal of the 12th Plan

Read More: Universal Health Coverage (UHC)

  • Rashtriya SwasthyaBima Yojana (RSBY): The government of India has been implementing the Rashtriya SwasthyaBima Yojana (RSBY) since 2008
    • Centrally Sponsored Scheme: This is a centrally sponsored health insurance scheme which covers our below poverty line population and 11 other defined categories (Mahatma Gandhi National Rural Employment Guarantee Scheme workers, construction workers, domestic workers, sanitation workers, mine workers, licensed railway porters, street vendors, beedi workers, rickshaw pullers, ragpickers and auto/taxi drivers) that are enrolled under the RSBY
    • Health insurance:This population is entitled to cashless health insurance coverage of up to Rs30000 per annum per family
    • Out-of-pocket expenditure, up to Rs30000 per family each year, is provided under the RSBY

Way forward

Author states that India needs a health policy which encompasses views from all the stake holders including patients & patient groups


 


 

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Mains Marathon

Answered: Mains Marathon – UPSC Mains Current Affairs Questions – January 26

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9 PM Daily NEWS Brief

9 PM Daily Current Affairs brief – 24 January 2017



  • Front Page / NATIONAL [The Hindu]
  1. Budget before polls gets green light from SC
  2. Private schools need govt nod before hiking fees: SC
  3. SC for daily drug dosage regimen for TB patients
  4. UAE signals a ‘Look East’ policy
  5. What mackerel and a volcano can tell us about climate change
  • Editorial/OPINION [The Hindu]
  1. The price of fiscal folly
  2. Our democratic deficit
  • ECONOMY [The Hindu]
  1. N.K. Singh panel submits report on FRBM Act
  2. India rejects attempts by EU, Canada for global investment agreement
  3. ‘Use Aadhaar e-KYC to verify mobile users’
  • Indian Express
  1. Reclaiming the Gulf
  • Live Mint
  1. The right processes for a good budget

Click here to Download 9 PM Daily Current Affairs Brief PDF (24th Jan. 2017)

Front Page / NATIONAL [The Hindu]


[1] Budget before polls gets green light from SC


Why in News?

  • Because of assembly election in states like Punjab, Uttarakhand, Uttar Pradesh, Goa and Manipur, a PIL has been filed in Supreme Court demanding to postpone the date of union budget presentation.

Supreme Court’s view:

  • Supreme Court has rejected the petition saying that Presentation of the Central budget has nothing to do with state assembly elections.
  • SC observed that there is no illustration to support that the presentation of Union Budget would influence voters mind in state election.

Election Commission’s view:

  • Meanwhile, the Election Commission also cleared the way for the government to present the budget.
  • However, it gave few directives such as:
    • Government should not announce any schemes specific to the poll-bound states, which may have the effect of influencing the voters.
    • Government should not highlight the government’s achievements in respect of the five states in the Budget speech, that would disturb the level-playing field.

Impact:

  • This will pave the way for budget presentation on February 1.
  • It will also pave the way for free and fair elections in five states.

[2] Private schools need govt nod before hiking fees: SC


Why in News?

  • A committee of private unaided schools filed an appeal in Supreme Court against a Delhi High Court order that schools located on land allotted by the Delhi Development Authority (DDA) should take prior permission from the government before raising their fee structure.

 

Supreme Court Directive:

  • Supreme Court bench refused to interfere with the order of the Delhi High Court.

Background:

  • The Delhi High Court had passed the order on a petition filed by an NGO, Justice for All.
  • Delhi high court directed that those schools which were granted subsidized land by the Delhi Development Authority (DDA) in the national capital would not be able to hike fees without approval from the government.

Impact:

  • This will help in regulating the growing fees in private schools.
  • This will help in curbing the commercialization of education.

[3] SC for daily drug dosage regimen for TB patients


Context:

  • Supreme Court has ordered the Government to change the dosage of Tuberculosis drugs from thrice a week to daily
  • The Court has given 9 months time to Government to comply with it

Why SC has ordered it?

  • A PIL has been filed by a TB specialist doctor, Raman Kakkar to change the protocol for TB treatment
  • The doctor argued that the current treatment regime of thrice a week to be ‘unscientific’ and ‘improper’
  • The current form of treatment is also responsible for relapses (TB occurring again) and development of a drug resistant strain of TB
  • The relapse cases are harder to treat than first time infections

Also Notable:

The daily dosage treatment for TB has been approved by WHO recently to stop relapse and deaths during treatment


[4] UAE signals a ‘Look East’ policy


Context:

  • United Arab Emirates (UAE) is going to participate in India’s Republic Day celebrations
  • Crown Prince of Abu Dhabi will be the chief guest at the Republic Day parade
  • UAE’s troops will march in India’s Republic day parade
  • It is likely that UAE will highlight its Look East Policy on this day

Why It is Significant?

  • Participation of a contingent of UAE’s military in the celebrations would indicate its willingness to play a more active role in the region
  • It is also an indicator of the UAE’s growing power in the Indian Ocean
  • It also signifies the UAE and GCC’s (Gulf Cooperation Council) new ‘Look East’ policy of engaging Asia as a counterbalance to the West.”
  • It is also an indicator of GCC’s effort to exercise regional influence after the Arab Spring has left a power vacuum and to counter similar efforts by Iran, which UAE regards as a threat
  • It also indicates UAE has been carrying out military modernization in recent years. According to SIPRI, UAE was one five biggest arms importer in the world between 2011 and 2015.

Strategic Partnership between India and UAE?

  • UAE and India are likely to conclude a comprehensive strategic partnership

The Diaspora Perspective:

  • The Strategic partnership can be recognition of the unique role of India’s immigrant population in the UAE’s development story
  • There has been continuous Indian presence in the UAE from around 18th century
  • In the present day, Indians make up 30% of the country’s population — the single largest expatriate community in the UAE.

[5] What mackerel and a volcano can tell us about climate change


What is mackerel?

  • It is a predatory marine fish with a greenish-blue back.

Issue

  • According to a research, an Indonesian volcanic eruption, a 200-year-old climate disaster and a surge in the consumption of mackerel tell us lot about today’s era of global warming.
  • Scientists have made this assessment while conducting research about a long-ago calamity in New England that was caused by the eruption of Mount Tambora half a world away i.e in Indonesia in 1815.

Assessment

  • A cooled climate led to deaths of livestock and changed fish patterns in New England, leaving many people dependent on the mackerel, an edible fish that was less affected than many animals.
  • The researchers assert that bit of history gives clues about what food security could be like in the modern era of climate change.
  • According to scientists how we respond to these events is going to be critically important for how we come out of this in the long term and can learn from the past how people dealt with the unanticipated.
  • The study states there is a parallel between the need for immediate adaptation after Tambora and the challenges in coping with the climate-driven devastation caused by storms, floods and droughts today.

About Tambora Eruption

  • The Tambora eruption was one of the most powerful in recorded history, and was followed by a short time of climate change specifically, global cooling and severe weather.
  • Its impact on weather, food availability and human and animals deaths worldwide has been studied extensively.
  • The year that followed the eruption, 1816, is often described as the “Year Without a Summer.”
  • Researchers found that alewives, a fish used for everything from fertilizer to food by 19th-Century New Englanders, did not fare well. But mackerel had better survival rates and became a critical source of protein and jobs.
  • As crops failed and famine began to spread, the little fish emerged as a staff of life. It’s a scenario similar to what parts of the developing world are experiencing today as climate change affects food security.

Importance of this finding

  • Understanding how adaptive responses to extreme events can trigger unintended consequences may advance long-term planning for in an uncertain future.
  • The report illustrates how abrupt changes in climate can have unexpected consequences long after conditions moderate.
  • Good stewardship of our natural resources can help buffer against some climate impacts. Unlike the people in 1815, we have an idea of what’s coming, and we need to make sure we are prepared.

Editorial/OPINION [The Hindu]


[1] The price of fiscal folly


Two main concerns of union budget:

  • Controlling borrowing by the government.
  • Proposal on how best the government should allocate its expenditure.

RBI governor’s view:

  • The RBI governor has cautioned the government against increasing its borrowing.
  • General perception is that government borrowing tends to crowd out private investment. This article tries to analyze the above arguments. Analysis of this is as follows:

 

Analysis:

  • Directly or indirectly, every expenditure will serve as a draught on today’s resources, i.e., labour and capital equipment.
  • This is equally true of public and private expenditure, the only difference being that in the case of the public expenditure it is its very rationale that resources are drawn into production thus pre-empting their remaining idle.
  • Unlike natural capital, these resources are man-made, and expenditure can actually create more of them.
  • Furthermore, these newly-minted resources are inherited by future generations who far from being short-changed are left with more income-earning assets than they would have had were the government to desist from borrowing to spend today.
  • Future generations would have to pay more taxes to retire the government’s debt, but so long as the returns are greater than the interest burden, future generations are unambiguously better off.
  • This is reflected in the fact that at least some sections of India better off now that in the 1950s because the Government of India had borrowed to build housing for public servants and the Indian Institutes of Technology and Management.
  • Presumably, it is the possibility of a rise in the interest rate that unleashes the challenge in the form of the argument of crowding out, whereby a rise in public spending raises the interest rate faced by the private sector.
  • ‘Quantitative easing’ in the United States was precisely such a mechanism whereby the central bank ensured that an expansionary fiscal policy following the financial crisis did not result in a rise in the interest rate.
  • Far from government spending via borrowing crowding out private expenditure, it leads to a ‘crowding in’ whereby the demand generated by government spending expands the market for private investors, raising the level of economic activity today and even in the future.
  • Of course, this requires the existence of unemployed resources, which is mostly the case in a large part of the economy. So, the assertion that greater public spending would crowd out private investment is based jointly on a refusal to accept accommodating monetary policy as valid and the assumption that the economy is at full employment.

 

Idea of the universal basic income:

 

  • Recently, the case has been made for the provision by government of a universal basic income (UBI).
  • This idea has been floating around the capitals of the western world for a while.
  • The economist Vijay Joshi has in his book, India’s Long Road, proposed that every citizen be given an income transfer equivalent to what is needed to raise those currently deemed poor to above the official poverty line.
  • He shows that this would involve a transfer of rupees 3,500 per capita per annum.
  • It is claimed, is that it would eliminate poverty and yet leave some over to actually raise public investment.
  • Generally, it is imagined that the idea of UBI is based on the social democratic imagination, but the welfarism that it implies is neither socialist nor democratic.
  • However, it is distinctly at odds with Karl Marx’s vision of a decent society as one which draws from “each according to their abilities to each according to their needs”.
  • Enthusiasts of the UBI would need to account for a scheme in which the able-bodied receive as much as the infirm and infants receive as much as their mothers. There appears to be a mismatch between rights and responsibilities here.
  • The usefulness of the accounting reproduced above is mainly to show us how much subsidies cost in terms of a potential benefit foregone by households. It attains some salience when we recognize that certain subsidies in India are regressive and others do not even entail a transfer, such as when food grain rots in the godowns of the Food Corporation of India while getting accounted as food subsidy in the books.
  • For close to thirty years since 1947 the Central government’s subsidy bill had been meager. It is only recently that it has burgeoned, both in response to vote-bank politics and as political parties compete to showcase their compassion.
  • But the answer to the accumulating subsidy bill lies less in moving to the distribution of its cash equivalent as much as to transferring the potential saving from their elimination into public investment.
  • Not only does public investment have a greater impact on growth than subsidies in their present form but, to return to the issue of inter-generational equity, the capital formation that it entails benefits future generations by enhancing the productive capacity of the economy.
  • And, also in our present state of development and given the current state of the public finances, the UBI would leave India bereft of public goods and services.
  • Once everyone has been given a certain amount of income under the auspices of the state, it gets absolved of all responsibility for providing these goods and services which the private sector has no incentive to provide.

Importance of public goods:

  • During the Second World War the national debt in the U.S. rose sharply to enable the government to engage in combat. The U.S. economy was immediately energized and after the War there followed unparalleled prosperity for the next generation, enabling the government to repay the public debt with ease.
  • Public borrowing is not necessarily bad but borrowing to distribute for consumption is to be guarded against. As monies are fungible, when, the Government of India has debt outstanding, launching the UBI would amount precisely to that.
  • The idea that the nascent Indian state should showily distribute public revenues in the manner of its erstwhile maharajahs had made the rounds soon after the country gained independence. It is very likely the clamour that had led Jawaharlal Nehru to remark in Parliament, in response to a no-confidence motion against his government,
    • “We have always to choose between benefits accruing today, or tomorrow, or the day after. From the country’s point of view, if we spend the money we now have for some petty immediate benefits, there will not be any permanent benefit.”

[2] Our democratic deficit


Why in News?

  • Recently, Oxfam has published its report: “An economy for the 99 percent’”.
  • Report finds that eight rich people own as much wealth as half the world’s population in 2016.
  • In India, the richest 1% of Indians holds as much wealth as that held by 58% of the Indian population.

 

Impact – Analysis:

  • Evidence from human history shows that, this kind of inequality was the norm and the real challenge was how to fashion a stable government.
  • Wealth is a good proxy for the ability to influence politics via legislation or campaign contributions.
  • According to Aristotle, in a democracy, the poor were equal to the rich along one dimension (the freedom to vote), they would always vote to make everybody equal on all dimensions. Thus, confiscation of wealth and redistribution is the natural tendency of democracies, in response to which the rich would plunge the system into chaos.
  • In an oligarchy (rule by the rich), the problem was that since the rich were unequal to the poor on one dimension (wealth), they would always vote to make everyone unequal on all dimensions. Thus, the oligarchs would vote to confiscate wealth and accumulate it, seeing which the poor would understandably revolt.
  • To address this problem, societies devised ‘class warfare constitutions’. This type of constitution thinks of societies as comprising conflicting, groups with different end goals. These constitutions devise a tiered system of representation which ensures that a majority of the population have a part in their daily governance. Thus, we saw guilds, communities, caste, and class-based representation in royal courts.
  • After the rise of the republican system of government, specific houses for specific classes came into fashion. The state could only be stable if the constitutional arrangement reflected the fragmentary nature of society itself.
  • This was the reason that the U.S. needed two houses of government, one for the rich, the well-born, and the able and the other for the common people of the country.
  • Even the Romans considered this constitutive tension of classes while designing their government.
  • However, these conditions were changed in the era after American constitution was drafted in 1787 and the radical aspirations of the French Revolution began to permeate across the North Atlantic.
  • Hence, the American framers decided to change this trend by designing a “Middle Class Constitution”.
  • In this arrangement, there are no specific restrictions on who can belong to which part of the government. The poor could enter the Upper House, while the rich could be part of the Lower House.
  • The American Constitution was not “a design premised on the inevitability of class conflict”.
  • The ‘middle class constitution’ was possible in the 1770s because America was a relatively egalitarian place blessed with a wide open space in its west and the absence of any feudal or aristocratic class that was historically entrenched.
  • The entire voting population of the newly born country was the middle class. The prototypical tensions between the rich and the poor that Aristotle wrote about didn’t figure in this calculus.
  • Since then this premise of radical equality of man across income or class levels has informed most constitutional arrangements, including India’s – even if material conditions that birthed such a framework have rarely existed since the 1770s.
  • A well-functioning “middle class” constitution relies on relative equality in income and accessibility to resources for self-improvement.
  • This allows for a homogeneity in end goals and policies. Failing which, what studies like the Oxfam report tell us is not just that there is inequality of income, but that the inequality of power puts our democratic frameworks in peril.
  • The strategically extremist positions that result in constitutional gridlocks will not just be commonplace, but also corrode the efficacy of a ‘middle class’ constitution – the dignity of man.

ECONOMY [The Hindu]


[1] N.K. Singh panel submits report on FRBM Act


Context:

  • K. Singh panel submitted its report on revising the Fiscal Responsibility and Budget Management Act to our Finance Minister.
  • This assumes importance because we have only around one week left for the budget to be presented.

The Committee:

  • The five-member committee was constituted in May 2016 by our Finance Minister during the previous budget
  • The committee was asked to review the Fiscal Responsibility and Budget Management Act

Why it is Important?

  • India has a high debt to GDP ratio. When fiscal discipline is enforced this ratio can be expected to fall
  • Fiscal management assumes more importance in the post-demonetisation era because of the decrease in consumption expenditure, the government could be tempted to increase public spending to boost consumption

Government’s Action?

  • The government has set a fiscal deficit target of 3.5% of GDP for FY17, a lower target than the 3.9 per cent set for 2015-16, which was achieved.
  • The Government will examine this report and take appropriate action

[2] India rejects attempts by EU, Canada for global investment agreement


Issue:

  • An informal attempt has been made by the European Union (EU) and Canada to work towards a global investment agreement at the World Trade Organization (WTO) level
  • The agreement would incorporate a contentious Investor-State Dispute Settlement (ISDS) mechanism
  • India along with Brazil, Argentina and some other nations, has rejected this

Where?

  • At the meeting of trade ministers of select countries held on the sidelines of the recently held World Economic Forum in Switzerland

Why it is Contentious?

  • The ISDS mechanism permits companies to drag governments to international arbitration without exhausting the local remedies and claim huge amounts as compensation citing losses they suffered due to reasons, including policy changes
  • India summarily rejected such an idea. Japan also opposed the idea on the grounds of the costs involved in international arbitration

Nirmala Sitharaman’s Views:

  • “Only after all local options have been exhausted for settling disputes between a corporate and a government, we want to permit issues to be taken up in international arbitration tribunals”
  • “Such provisions could be a part of bilateral agreements but they can’t be allowed in a multilateral agreement”

Other Issues Discussed:

  • In the same trade ministers’ meeting, India also pushed for discussions on its proposal for a Trade Facilitation in Services (TFS) Agreement at the WTO-level
  • TFS primarily aims to facilitate easier movement of skilled workers and professionals across borders for short-term work

[3] ‘Use Aadhaar e-KYC to verify mobile users’


Context:

  • The Telecom Regulatory Authority of India (TRAI) has recommended the use of Aadhaar-based e-KYC for verification of existing mobile subscribers
  • TRAI has also recommended that the use of Aadhaar-based e-KYC be permitted for outstation customers

Why it is important?

  • Aadhaar linked e-KYC service provides a mechanism to verify the identity of a person electronically and instantaneously from the source itself, based on the biometrics of a person
  • Thus, it takes care of the issues relating to fake or forged identity proof and manual entry into the system etc

Why TRAI wants this?

  • TRAI has received several cases from state police departments on forged SIM cards. These forged cards pose a security challenge

Will it be Mandatory?

  • TRAI said the process should be optional to the service providers as well as mobile subscribers and could not be made mandatory
  • TRAI is of the view that a scheme could be formulated to encourage the existing subscribers to undergo the e-KYC process.

Indian Express


[1] Reclaiming the Gulf


Issue

  • Crown prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al Nahyan, will be the chief guest at the Republic Day celebrations of 2017.
  • He will only be the third leader in 70 years from the Middle East to grace the occasion. The other two leaders were the president of Iran, Mohammed Khatami (2003), and King Abdullah of Saudi Arabia (2006).

Importance of Gulf for India

  • No other region outside of the subcontinent is so critical for India’s security and prosperity than the Middle East. Yet, the region never gets sustained high-level political attention in Delhi.

Phases of India- Middle East relationship

First Phase

  • In the first phase, India’s emphasis was on anti-Western and anti-Israel solidarity with the Middle East. This was driven in part by the presumed need to prevent Pakistan from scoring a march over India by playing up its religious affinity with the region.
  • But it also prevented India from coming to terms with the many other contradictions of the region — between republics and monarchies, conservative regimes and radical Islamists, Shia and Sunni, to name a few. Despite expansive goodwill for India in the region, Delhi seemed to have little to offer beyond rhetorical support.
  • Delhi’s emphasis on self-reliance saw the dismantlement of the strong economic links that emerged between the undivided subcontinent and the Middle East through the 19th century.
  • The oil boom in the Gulf saw the dramatic expansion of India’s interdependence region — through labour exports and energy imports. Delhi, however, was ill-equipped in building on this interdependence in the first phase. As it emphasised non-alignment and opposed military alliances, independent India discarded the legacy of providing security to many regimes in the Gulf and the greater Middle East.

2nd phase

  • The second phase, which began at the turn of the 1990s, saw a more pragmatic Indian approach to the region.
  • Delhi normalised diplomatic relations with Israel without having to sacrifice its expansive interests in the rest of the Middle East.
  • As the scale of India’s economic interdependence on the Gulf grew rapidly in the reform era, Delhi began to move away from mercantilism to deepening trade and investment links with the region.
  • The second phase also saw the renewal of military exchanges and security cooperation with the countries of the region. But the profound convulsions affecting the region seemed to prevent bolder Indian military partnerships in the Gulf.
  • That the region does not figure high on Delhi’s political radar was marked by the fact that Prime Minister Manmohan Singh travelled to the region only four times during his decade-long tenure — two of those trips were to attend the non-aligned summits.
  • Also the first months of the NDA government seemed to suggest Prime Minister Narendra Modi might be more interested in Israel than the rest of the region.

Present senario

  • There was a solid corrective in the last two years. Even though government has brought the Israel partnership into the open, but it has also devoted much energy to engaging the Gulf states. As pointed out by PM at the Raisina Dialogue in Delhi, “we have redefined, in a short span of time, and despite uncertainty and conflict, our partnerships with Gulf and West Asia, including Saudi Arabia, UAE, Qatar and Iran”.
  • The prime minister added that Delhi’s intensive engagement has helped “protect and promote our security interests, nurture strong economic and energy ties and advance the material and social welfare of around eight million Indians”

India- UAE

  • India’s current intensive engagement with the UAE is a test case for India’s credibility in the region.
  • Amidst the shifting external and internal balance of power in the Middle East, the region is eager to see India return to its traditional role as a major economic and security partner.
  • On its part, the UAE has laid out a bold agenda for bilateral cooperation in areas ranging from investments in civilian infrastructure to defence production. It is ready for deeper collaboration on counter-terrorism and regional security.

Way Forward

  • A small military contingent from the UAE will join the military march on Republic Day is a powerful reminder of India’s historic role as a security provider in the region and the opportunity today for reclaiming that role.
  • For this Delhi has to overcome its bureaucratic inertia that has so consistently limited the nation’s international prospects and repeatedly frustrated India’s putative partners.

Live Mint


[1] The right processes for a good budget


Issue

  • Decision making is a difficult ask, especially when the decision is going to affect millions.
  • The presentation of the annual budget is one such important occasion wherein the Union finance minister is expected to lay out difficult choices while explaining the rationale in a manner which soothes those likely to be hurt.

Challenges before finance Minister

  • Economy is still grappling with the impact of demonetisation, while simultaneously being force-fed digital payments despite inadequate infrastructure.
  • Protectionist voices are globally gaining political mileage and threatening to disrupt the movement of people, capital, goods and services that we have grown accustomed to.

Recommendation for Budget making

  • A transparent policymaking process is recommended like several governments.
  • For instance, the UK publishes Tax Information and Impact Notes on proposed tax policy changes to provide a clear explanation of the policy objective together with the details of the tax impact on the exchequer, economy, individuals, businesses, civil society organizations—as well as any other specific area of impact.
  • In addition, at least three months prior to the introduction of the Finance Bill, it publishes consolidated draft clauses for inclusion in the Finance Bill, for public comments. This provides taxpayers with more certainty, and a window for pre-legislative scrutiny. Details of public consultation along with government responses to suggestions are available for review in the public domain.
  • With every budget, the UK also publishes a comprehensive document on “Policy Costs” which sets out the assumptions and methodologies underlying costing for tax and annual expenditure of policy decisions having a fiscally significant impact on public finances.
  • The document also explains the general methodology used to calculate the cost or yield of each government policy.
  • A comprehensive document on “Data Sources” is also published to facilitate transparency, public scrutiny and accountability.
  • Taking into account the concerns of the common man, another dedicated document the UK publishes relates to distributional analysis of the “Impact on Households” of the government’s tax, welfare and spending decisions.
  • The UK has also introduced several organization-level reforms to complement its process reforms. It has set up an Office of Tax Simplification (OTS) to provide advice on simplifying the UK tax system with the objective of reducing the compliance burden on both businesses and individual taxpayers.
  • In addition, it has in place an Office for Budget Responsibility (OBR) to examine and report on the sustainability of public finances. While the OTS aids in the assessment of impact of policy proposals on households, the policy costs estimated by the government are reviewed and certified by the OBR.

Way forward

  • To adopt reforms as comprehensive as the UK will require significant preparation and resources, it is time the Indian government at least made a beginning.
  • In almost all the pre-budget consultations with the finance minister over the past few years, economist have argued for competition reforms, which includes the adoption of a Regulatory Impact Assessment (RIA)—similar to one of the ex-ante impact assessment process reforms adopted by the UK. Unfortunately, they have met with limited success.
  • Also Since 2011, almost every other high-level expert committee has made this suggestion. These include the Planning Commission’s working group on business regulatory framework, the Financial Sector Legislative Reforms Commission, the Damodaran committee and the Ajay Shankar committee, among others.
  • Even the recently executed memorandum of understanding (MoU) between the UK and India on ease of doing business includes cooperation on RIA.

Conclusion

  • It is time that a structured ex-ante assessment framework is integrated in the government decision-making process to ensure that right policy choices are made, to the extent possible.
  • Through this the knee-jerk reactions originating from the sub-optimal wisdom of a close coterie of government advisers can be avoided.