- Front Page / NATIONAL [The Hindu]
- Blending humaneness with healthcare solutions
- Editorial/OPINION [The Hindu]
- A brave new self-help world
- The writing is on the wall
- In India, diverging incomes despite equalising forces
- Economy [The Hindu]
- Centre starts IPO process for rail PSUs
- Indian Express
- Talking To The Taliban
- Live Mint
- Designing the bad bank of India
Front Page / NATIONAL
. Blending humaneness with healthcare solutions
With India’s ongoing demographic shifts, the number of elderly persons in poverty is increasing rapidly, yet many among this group are unable to access basic healthcare
- Service delivery is a challenge: At the country level population studies suggest that 80% of the elderly live in the rural areas, and this makes service delivery a challenge
- Feminization of old Age: Government projections suggest that “feminization of the elderly population” is occurring, with 51% of itlikely to be women by 2016
- Increase in Older-old: there is likely to be a steady increase in the number of the older-old persons, that is, those above 80 years of age
- Poverty: 30% of the elderly are below poverty line
Analysing the NSS data
United States National Institutes of Health (NIH) analysed the data from the 60th round of National Sample Survey in a report. Following are the observations,
- High rates of disease & hospitalization: Prevalence and incidence of diseases as well as hospitalization rates are much higher in older people than the total population
- Self-perception of health status: A good or fair condition of health was reported by 55-63% of people with a sickness: It is possible that many older people take ill health in their stride as a part of ‘usual/normal ageing. This observation was highly significant as self-perceived health status is an important indicator of health service utilization and compliance to treatment interventions
- Non–availability of affordable models of healthcare: While home-based health solutions such as Portea have cropped up to cater to the demand for healthcare services by the elderly within the middle class, much less is available in terms of affordable models of health and social care for the poor, which is inconsistent with the changing needs of this age bracket
- Indigenous model may crumble: Report suggests that in India with increase in older population, the indigenous trend of families being the primary care givers might crumble
Money& cost of healthcare: Not a prime reason for abandonment of elderly
The primary reason is
- The inability and hesitance to take care of elderly, particularly when they suffer ailments like stroke or neck of femur fractures that hamper mobility and make them often dependent on others even to answer nature’s call
Additional problems to elderly from extremely poor background
The elderly from among the destitute population face additional procedural complexities in terms of admitting institutions intimating the local police station and getting an approval from them.
- Untrained police: Even though the Maintenance and Welfare of Parents and Senior Citizens Act gives the police a major role, they are usually overburdened and not sufficiently trained to handle such cases in a compassionate manner.
- Like Childline and District Child Protection Committees, which act as the first point of contact for the children in need, a similar set up is needed in rescuing and providing healthcare to abandoned elders, with participation from NGOs that have trained professionals
- Helpline for elders: There should be a helpline for elders like they have the 1098 helpline for children
- Setting up palliative care centers: Government should adopt Public Private Partnership model to set up palliative care centers in every town, preferably inside hospitals, that can primarily cater to the needs of elderly and terminally ill patients. Today, we have homes for the elderly in many towns. However, they are ill-equipped in taking care of their health needs. That is where palliative care centers with participation of NGOs can help
What is Palliative care?
Palliative care is specialized medical care for people with serious illness. This type of care is focused on providing relief from the symptoms and stress of a serious illness. The goal is to improve quality of life for both the patient and the family
. A brave new self-help world
We may have complained about the post-War order, but the lack of an intellectual replacement is a nightmare
Article provides a brief insight into the unpredictable and uncertain world wherein new geopolitical realities are developing. He goes on to provide the example of Trump presidency as the beginning of a new era, an era of closed borders and protectionism.
Implications for Asia
- Increase in Chinese influence: Chinese influence will increase and its smaller neighbors would have no option but to fall in line
- Impact on entire region:The rise of Russian and Chinese geopolitical influence and their bilateral partnership will impact the entire region, including India
- Increase in military build-up: With China and North Korea in their neighbourhood, both South Korea and Japan will be forced to increase their own military build-up
- Security competition will increase: If America indeed withdraws from its foreign commitments, North Korea will take its chances to strengthen its strategic arsenal leading to a great deal more security competition in the region
- Nuclear option: The demands for exploring the nuclear option may also gather new momentum in Japan. Finally, the ongoing war of words between U.S. and Iran could open yet another front in the region.
. The writing is on the wall
There needs to be greater attention to the issue of identity and security that drove the jallikattu protests
Article talks about the reason behind the mass protests over Jallikattu that included youth to a large scale.
Author states that if we don’t view history as a series of protests but as behaviors exhibited to fulfill basic needs, we get a different perspective. Human beings are not too different from bulls, in a sense, that our needs are the same.
Our fundamental needs are to ensure
- Physical safety, which we experience most strongly in our gut
- Emotional safety, which we experience most strongly in our heart
- Intellectual safety or the need for identity, which we experience most strongly in our head
When these needs are not met, we have corresponding fears. We then try to adopt various strategies to meet these needs and eliminate our fears.
The current trend towards centralization of power, for example within the ruling party, between districts and Chennai, and even between States and the Centre is alien to Tamil culture, if we use a 1,000-year-old past as a reference point
- This has robbed people of their need for an identity and security, especially youth, searching for jobs in a State that has seen little government-driven employment. This is what resulted in the ripple that became a wave
. In India, diverging incomes despite equalising forces
Disparities have been strengthening, not weakening, over time. The less developed States are falling behind the richer ones instead of catching up
Need for convergence
Author states that if India is to develop as a whole, then its laggard states need to catch up with the fast developing states. Economists call this process of narrowing down as convergence
It occurs when a State that starts off with a lower level of per capita GDP sees faster growth of per capita GDP in the future so that it catches up with better-performing States
Article refers to an observation made in Economic Survey,
- Presence of divergence: In the 2000s, while standards of living (measured in terms of Gross State Domestic Product or consumption) per capita increased in all the States, the disparities among them also increased. In other words, there was divergence across the States instead of convergence
Above observation gives rise to two puzzles,
- International comparison: Across countries disparities are declining in contrast to India
- Interstate comparison: The tendency towards disparities within India has been strengthening, not weakening, over time
Source: The Hindu
Source: The Hindu
If we plot per capita GDP growth on the y-axis and the initial level of per capita GDP growth, convergence would show up in the form of States being distributed around a downward sloping line. This is done in figure 3 for the period 2004-2014,
Figure 3: Displays divergence
The line for India is upward sloping while those for the Chinese provinces and countries in the world are downward sloping.
Further observations from figure 3
- Interstate disparity increasing in India: Poorer countries are catching up with richer countries, the poorer Chinese provinces are catching up with the richer ones, but in India the less developed States are not catching up; instead they are, on average, falling behind the richer States
- Migration of people to coasts: The driving force behind the Chinese convergence has been the migration of people from farms in the interior to factories on the coast, raising productivity and wages in the poorer regions faster than in richer regions
- Reversal of trend internationally: Globally since the 1820s, poorer countries grew slower than richer countries, leading to the basic divide between advanced and developing countries characterized as “Divergence, Big Time” by Prof. Lant Pritchett of Harvard University. However, since 1980 this long-term trend was reversed and poorer countries started catching up with richer ones
Figure 2: Initial convergence & divergence
- China and the world has initial weak convergence as graphs are tilted downward
- India shows a weak divergence displayed by a slight upward tilt of the graph
Thus, the opposing results in China & in India remains a puzzle.
How convergence happens?
Convergence happens essentially through trade and through mobility of factors of production.
- High return to the capital due to cheap labor: If a State/country is poor, the returns to capital must be high and should be able to attract capital and labour, thereby raising its productivity and enabling catch-up with richer States/countries
- A less developed country that has abundant labour and scarce capital will export labour-intensive goods (ie exporting unskilled labour) and import capital-intensive goods (ie attracting capital)
Why convergence has failed in India?
- Governance deficit: One possible hypothesis is that convergence fails to occur due to governance or institutional traps. Poor governance makes the returns on a capital very low
- India’s pattern of development: A second hypothesis relates to India’s pattern of development. India, unlike most growth successes in Asia, has relied on growth of skill-intensive sectors rather than low-skill ones. So, unless the less developed regions are able to generate skills (in addition to providing good governance), convergence may not occur.
The above two hypothesis do not answer the following question,
Why isn’t there pressure on the less developed States to reform their governance in ways that would be competitively attractive?
Article concludes by mentioning that the shift towards economic divergence across India in the face of the equalizing forces of trade and migration is a deep puzzle that remains to be solved
. Centre starts IPO process for rail PSUs
Regarding listing of Rail PSUs as announced in the Union Budget
What has happened?
Within three weeks of the Budget announcement, the Finance Ministry has started the process of listing three rail PSUs — IRCTC, IRFC and IRCON. The government currently holds 100% stake in these three companies.
The government intends to raise ₹72,500 crore through disinvestment of PSUs in the next fiscal.
. Talking To the Taliban
It is in India’s strategic interest to engage Afghan insurgents
Issue: Hosting of Afghanistan Peace conference by Russia on 15th Feb 17
Why Russia is bent on including Taliban vis-à-vis peace in Afghanistan?
Russia is asserting that the Islamic State (IS) is gaining significant ground in Afghanistan and will pose a grave threat to the Central Asian Republics and its own security.
- Counter IS: To counter the IS, Russia wants to confer international legitimacy on the Taliban; it has acknowledged its own contacts with the group and wants it to be accommodated in Afghanistan’s power structures. In pursuit of this, it has warmed up to Pakistan
IS is not as potent a threat as Russia is making it out to be. It largely consists of Tehreek-e-Taliban-e-Pakistan (TTP), renegade Afghan Taliban and criminals. Its focus is Pakistan and Afghanistan, not entire Central Asia or Russia
A reversal of the situation
Author states that the situation now is almost the exact opposite of that of the 1980s.
- Then, the Soviets had troops in Afghanistan, supported the Kabul government and combated jihadist groups, backed by the US
- Now, the US is supporting the Kabul government
- The difference: The fundamental difference though between the 1980s and now lies in the rise of global terrorism. Pakistan-Afghanistan is a major centre of international terrorism. The US cannot allow Afghanistan to become a staging post for terror
Controlling Afghan choices
Author points out that one thing will always remain constant,
- Pakistan’s desire to control Afghanistan’s choices vis-à-vis India
Pakistan hopes an Islamist government in Afghanistan, like the Taliban from 1996-2001, will keep India out: However, some Taliban elements seem keen to open a channel with India
India should maintain quiet contacts with Taliban. The key for India is to maintain contacts with all groups in the Afghan political process
. Designing the bad bank of India
The most efficient approach would be to design solutions tailor-made for different parts of India’s bad loan problem.
Issue: Resolving NPA problem via Bad Bank
Schemes to resolve NPA problem
Author states that to solve the problem of bad loans in India, the Reserve Bank of India (RBI) has introduced multiple schemes over the last few years:
- Flexible Refinancing of Infrastructure (5/25 scheme)
- Asset Reconstruction (ARC)
- Strategic Debt Restructuring (SDR)
- Asset Quality Review (AQR)
- Sustainable Structuring of Stressed Assets (S4A)
Present situation: Problems persist
Banking sector is facing following problems as of now,
- The “twin balance sheet problem” persists
- Stressed Assets: On the banking side, stressed assets now stand at over 12% of the total loans in the banking system
- High Stressed-Loan ratio: Public sector banks, which own almost 70% of banking assets, have a stressed-loan ratio of almost 16%
- Unwilling to issue fresh credit: Banks are unwilling to take on fresh risks, which has led to negative growth of real credit, the lowest in over two decades
Author states that a new solution which is being propounded is that of a “Bad Bank”
- The concept is simple: Divide a bank’s assets into two categories, good and bad but the implementation can be quite complicated
So, how to design the bad bank of India?
Designing the Bad Bank
A report by McKinsey & Co., “Understanding The Bad Bank”, proposes four organizational models for a bad bank based on two decision factors, viz.,
- Decide whether or not to keep the bad assets on the bank’s balance sheet. Moving assets off the balance sheet is better for investors and counterparties and provides more transparency into the bank’s core operations. But it is more complex and expensive
- Decide whether the bad-bank assets will be housed and managed in a banking entity or a special purpose vehicle (SPV)
Four Bad Bank Models
Depending on the choices, there are 4 bad Bank models,
- On-balance-sheet guarantee
- internal restructuring unit
- special-purpose entity
- bad-bank spin-off
In the on-balance-sheet guarantee structure,
- Loss-guarantee: The bank gets a loss-guarantee from the government for a part of its portfolio
- Pros:The model is simple, less expensive and can be implemented quickly
- Cons:However, the transfer of risk is limited and bad assets continue to remain on the bank’s balance sheet, clouding its core performance
- Can be used where:This approach is useful for stabilizing a bank in trouble
Internal restructuring Unit: An internal Bad Bank
An internal restructuring unit is like setting up an internal bad bank.
- Separate internal unit for bad assets: The bank places bad assets in a separate internal unit, assigns a separate management team and gives them clear incentives. This model relies on the existing management team to restructure assets.
- Pros:This works well as a signalling mechanism to the market and increases the bank’s transparency, if the results are reported separately
- Cons:However, if the existing management is looking to kick the can down the road (meaning trying to put away confronting the problem), as is the case for many banks in India, this is not an effective solution
In a special-purpose entity structure,
- Bad assets are shifted into a SPV, securitized and sold to a diverse set of investors.
- Can be used where: The model works best for a small, homogeneous set of assets
- An effective solution:The bad loan problem in India is concentrated in a few sectors like infrastructure and basic metals. An effective solution would be to transfer bad loans from these distressed sectors into sector-specific SPVs, securitize them and sell them in an auction. If the pricing is determined by the market, PSU bankers will receive less blame for losses to the exchequer
A bad-bank spin-off is the most familiar, thorough and effective bad-bank model. In a spin-off,
- Separate entity: The bank shifts bad assets into a separate banking entity, which ensures maximum risk transfer
- Complex & Expensive model: The model is complex and expensive because it requires setting up a separate organization, equipped with a skilled management team, IT systems and a regulatory compliance set-up
- The problem related to asset valuation and pricing will be the most severe in this model
Given the complexity and cost of the model, it is recommended to be used as a last resort, after all other initiatives fail
PARA is a Bad-Bank spin-off
The Public Sector Asset Rehabilitation Agency (PARA) proposed by the Economic Survey 2016-17 falls in this category
Just setting up one PARA will not be enough to get the banking sector back on track. The most efficient approach would be to design solutions tailor-made for different parts of India’s bad loan problem.