Front Page / NATIONAL [The Hindu]
India, Rwanda sign aviation, visa deals
Editorial/OPINION [The Hindu]
The Saeed test
Economy [The Hindu]
Private sector gratuity to soar:
India, Japan ink pact on rail safety:
Withdrawal of funds from EPF to get easier
No half measures
Decoding the direction of monetary policy
Quest to widen direct tax net
Technology’s benefits for crop insurance
Front Page / NATIONAL
. India, Rwanda sign aviation, visa deals
What has happened?
India & Rwanda have signed a bilateral air services agreementenabling direct flights between the two countries. Rwandan Airways will begin direct flights between Kigali and Mumbai in April
Vice President of India is on a 3-day visit to Rwanda. A total of 3 MoUs have been signed
Other two MoUs
The other two MoUs pertained to the,
- Setting up of an entrepreneurial development centre in Rwanda
- Exemption of visa for entry of diplomatic and official passports
Rwanda wants Bollywood
The Rwandan government wants to encourage tourism. With the air services agreement, that should happen. But they also want Bollywood films to be shot here, because they have noticed how tourism to New Zealand picked up after Bollywood started shooting films there
Lessons which India can learn from Rwanda
- The reconciliation of various groups
- To be conscious of a colonial policy of divide and rule and to try and overcome it
- How Rwanda is overcoming ethnic majoritiarianism by concentrating on a shared linguistic and cultural heritage
. The Saeed test
The flurry of actions by the Pakistan government on Lashkar-e-Taiba chief Hafiz Saeed gives the impression of movement on an issue that has been a point of contention between India and Pakistan
Issue: Pakistan’s recent set of actions against Haifz Saeed
Author’s contention: Why Pakistan is acting against Hafiz Saeed?
The recent action against Saeed is not anything new or something to cheer about
- Non-serious Pakistan: If Pakistan were indeed serious about the UN list, these actions should have been carried out in 2008, when Saeed and the JuD were put on the list
- Timing of action to suit its own need: It is more than likely that Pakistan’s action is actually timed for the Financial Action Task Force’s officials meeting in Paris this week where a report on Pakistan’s terror funding record is being presented
- It might be an attempt to show ‘good faith’ to both U.S. President Donald Trump and India
. Necessary limit
Price control for cardiac stents is inevitable to promote access to treatments
What has happened?
Government has cut the prices of life—saving coronary stents by up to 85 per cent. The maximum retail price of stents, inclusive of VAT and other local taxes will be,
- Bare metal stents (BMS) = Rs 7,623 (Earlier Rs 45,000)
- Drug eluting stents (DES) = Rs 31,080 (Earlier Rs 1.21 Lakhs)
The new prices are applicable with immediate effect
What is a coronary stent?
A coronary stent is a tube-shaped device placed in the arteries that supply blood to the heart. It keeps the arteries open in the treatment of coronary heart diseases. Stents are normally used in cardiac operations like Angioplasty
Angioplasty using a Stent Source: turmeric.com
Stents in NLEM
The government had included coronary stents in the national list of essential medicines (NLEM), 2015, in July 2016 and in the first Schedule of the Drug Prices Control Order (DPCO), 2013, in December 2016
The Need to regulate prices
Author states that the need to regulate the prices can be gauged by a research published in The Lancet in December 2015:
- High out-of-pocket expenditure on Drugs: Nearly two-thirds of the high out-of-pocket expenditure on health incurred by Indians went towards drugs
- Irrational use: There was irrational use of medical technologies, including cardiac stents and knee implants
Author notes that there are health concerns that mandated a price regulation,
- There are over 60 million diagnosed diabetics in the country, and the average age at which the first heart attack strikes Indians is 50, a decade earlier than people in developed nations. So, it is necessary to provide access to stents and other treatments at reasonable price
Benefits of regulation
- Increased accessibility: Regulated prices can be expected to make stents more accessible to patients who really need them, helping them avoid using up the weak insurance cover available, while also reducing the incentive for unethical hospitals to use them needlessly
- Incentive to innovate: When expensive treatment technologies hit the market, they remain inaccessible to a large segment of the population. Price regulation can therefore open up a large market for such drugs incentivizing innovation with a proper reward.
Increased spending on public procurement to improve access
It was estimated in 2012 by the Planning Commission’s expert group on universal health coverage that,
- Raising spending on public procurement of medicines to 0.5% of GDP (from 0.1%) would provide all essential medicines to everyone
Author suggests that,
- The Centre should monitor expenditures jointly in partnership with the community, use regulation where needed, and raise public spending on health
. Private sector gratuity to soar
Workers in private firms could see maximum payout double to Rs. 20 lakh
What has happened?
The labour ministry has called a meeting with trade unions, industry and State governments on Thursday to discuss the proposal to increase the gratuity ceiling by amending the Payment of Gratuity Act, 1972
Proposal is to increase the present gratuity ceiling from Rs 10 lakh to Rs 20 lakh
- Presently employees are eligible to get gratuity after leaving an organisation after five years of continuous service
Why the move?
The move is aimed at bringing parity between public and private sector workers after the gratuity limit was raised for central government employees from ₹10 lakh to ₹20 lakh as part of the Seventh Pay Commission recommendations accepted by the Centre in July 2016
The gratuity ceiling was last revised from ₹3.5 lakh to ₹10 lakh in 2010 after the Sixth Pay Commission recommendation had raised the limit for central government employees
. India, Japan ink pact on rail safety
Indo-Japan agreement on rail safety
What has happened?
India signed an agreement with Japan, on 17th Feb 17, on enhancing railway safety in the Indian Railways with focus on railway track and rolling stock safety
Major Aim: Aim is to prevent major rail accidents
Areas of cooperation under the agreement
The areas of cooperation include
- Rail inspection
- Rail wielding
- Providing automatic railway track safety inspection
- Maintenance of rolling stock
- Any other relevant railway safety matters jointly determined by both sides
The agreement with Japan comes at a time when the train derailments are on the rise. In 2016-17, the number of consequential train accidents remained the same level as last year at 95 while derailments rose from 56 to 74. Unmanned level crossing accidents fell
. Withdrawal of funds from EPF to get easier
Banking on your provident fund savings for critical contingencies will now become far simpler with the Employees’ Provident Fund Organisation (EPFO) introducing a single page composite form for such withdrawals before retirement age
What has happened?
Over eight crore Employees’ Provident Fund account holders will no longer be required to submit evidential documents for withdrawing PF for availing housing loans, grant of advances in case of factory closure, marriage, higher education of children, among other things
- A single page composite form for such withdrawals before retirement age will now be sufficient
Till now, employees were required to fill and submit three different forms to EPFO for withdrawing provident fund for various purposes
Two categories of forms
The EPFO has introduced forms in two categories –
- For those whose Aadhaar number is seeded with Universal Account Number (UAN): Employees whose Aadhaar number is seeded will not be required to get employer’s attestation for withdrawing PF
- Without an Aadhaar number: Employees without the seeded Aadhaar number will need the employer’s approval on their forms before submitting it to the EPFO
. No half measures
To address rising NPAs, consider divesting government holdings in state-owned banks, including by strategic sales
Issue: Problem of Non-performing Assets (NPAs)
Latest data on NPA
Gross Non-Performing Assets (NPAs) or bad loans of state-owned banks have surged by 56.4 per cent to Rs 614872 crore for the 12-month period ended December 2016
Author suggests: Solutions to NPA problem
- Time for disinvestment: Author states that time may have come for the government to look at divesting the government’s holdings in state-owned banks, except a handful such as the SBI, to below 51 per cent, including through strategic sales.
Author concludes by stating that, the longer the delay in addressing this crisis, the greater will be the challenge — not just in terms of ensuring a well-functioning banking system which supports the needs of businesses and individuals but also on the front of financial stability
. Decoding the direction of monetary policy
The committee is now aiming to reach a position where it is able to maintain inflation close to 4%
What’s the backdrop?
On 8 February, the rate-setting committee changed the policy stance from accommodative to neutral (means RBI is now open for a rate increase) in order to give itself more flexibility
Policy direction pointers
In terms of policy direction, there are at least two important points worth noting.
- A change in stance from accommodative to neutral does not necessarily mean that rates cannot be reduced from the present level. If inflation continues to be below the target, the committee may decide to cut rates at a later date
- The committee is now aiming to reach a position where it is able to maintain inflation close to 4%, which should be seen as a big positive for the economy
No other relevant points.
You can give the article a quick read
. Quest to widen direct tax net
There is need to drastically reduce the income tax exemption slab; say, down to Rs1 lakh from the current minimum threshold of Rs2.5 lakh
- Political democracy: It simply means the freedom to choose own leaders through free and fair elections. Through political democracy people can hold their leaders accountable for their actions. Power flows from people to the leaders.
- Fiscal democracy: It refers to the control and utilization of fiscal assets of a nation by the people either directly or indirectly through their representatives.
Read More: You can read more about above terms here
Author begins the article with a question,
Is there a wide gap between India’s political democracy and fiscal democracy?
A shocking observation
This year’s economic survey has the following to say regarding above question,
- In Norway, for every 100 voters, there are 100 taxpayers. In India for every 100 voters, we have seven taxpayers
As per the above fact highlighted by Economic Survey, it seems that the burden of taxes is shared by a miniscule population. It answers the question asked in the beginning in negative meaning that in India, Political democracy exceeds fiscal democracy
The increasing burden of Indirect tax
Author points out that,
- Indirect taxes in the form of excise taxes have risen by almost 50% for two consecutive years. Tax on petrol itself is up by 150% since July 2014. This adds to the misery of the poor as the indirect taxes do not depend on the paying capacity of the poor and affect them disproportionately
Example: A packet of Biscuits costs around Rs 10 (inclusive of taxes). Say, an indirect tax of Rs 1 or Rs 2 is included in the item’s price. This price is paid equally by the poor and the rich as it does not take into account the paying capacity of the buyer, which, in this case, might be anyone
Author contends that we need to,
- Widen the net to cover more direct tax payers
India: The most generous exemptor
As per a recent piece by Praveen Chakravarty titled, “Decoding India’s Low Tax Base Conundrum”, in Bloomberg Quint, India is the most generous exemptor when it comes to direct tax.
- The minimum threshold below which no income tax is paid is Rs2.5 lakh. This is 250% of India’s per capita gross domestic product (GDP)
- In most countries, income tax becomes payable when your income is about one-half or one-fourth of the average income in your country
Need of the hour
Author suggests that a drastic reduction in the exemption slab; say, down to Rs1 lakh is what we need at this juncture
Author states that the two major & misguided arguments put forward by existing tax payers in favor of tax reduction are,
- Tax-free agricultural income: One is that they say, why are you letting agriculture income go tax-free?
Why above argument is flawed?
Meagre agricultural income: Almost 95% of the farmers who own land have barely 2-hectare holdings. Even with very high productivity, they can make only a modest income, which if all taxed, will add possibly 1% of gross domestic product (GDP) to tax collections, which is very less to have any effect on total tax collections
- Steep nature of indirect taxes: When everyone is paying such steep taxes in the form of value-added taxes (VAT), excise and service taxes, why do you want to hike income taxes?
Why the above argument is flawed?
Mixing cause & effect: Author states that we have high incidence of indirect taxes because we do so poorly on direct taxes. The former would reduce automatically, if direct tax collection improved substantially
- Catch those who misrepresent: What is actually needed is to catch the crooks who go scot-free misrepresenting their income as coming from agriculture
- Increase direct tax net
India’s ratio of direct to indirect taxes is 1:2, which is exactly the opposite of most advanced economies. We need to urgently correct this gap, for the sake of efficiency, fairness and reducing inequality. That’s the way of reducing the wide gap between our political and fiscal democracy
. Technology’s benefits for crop insurance
It can provide a more detailed picture of risk at a farm level without the costs of collecting data manually
Issue: Agricultural Insurance
Index-based insurance: Insurance payouts that are stacked against easily measured environmental conditions, or an “index,” that is closely related to agricultural production losses. Possible indices include rainfall, yields, or vegetation levels measured by satellites.
Reviving agricultural economy
Author states that Union budget 2017-18 has taken a slew of measures to revive the agricultural economy in India,
- Higher allocations to boost credit flow: The emphasis on agricultural insurance through higher allocation for the Pradhan Mantri FasalBima Yojana (PMFBY), and other major allocations for the sector, are expected to boost credit flow to farmers apart from expanding crop insurance and irrigation coverage
- Digital revolution in agriculture: The budget allocation of Rs10000 crore to the BharatNet Project and the set target of reaching nearly 150,000 gram panchayats with high-speed Internet will also lay the foundation for a digital revolution in agriculture in India
- Digitization will ensure that penetration of PMFBY increases and that each farmer having access to credit is protected
- Easy Internet access will allow farmers to learn and implement the latest technologies available in the field of agriculture
- Integrating PACS with cooperative banks: To ensure flow of credit to small farmers, all functional primary agriculture credit societies (PACS) will be integrated with the core banking system of district cooperative banks
- Linking e-NAM to commodities market: There is a proposal to link e-NAM (the National Agriculture Market) to the commodities market to allow farmers to access better prices for their produce
Importance of agricultural insurance
- Financial stability: Agriculture is risky business and is susceptible to volatility in production and commodity prices. Insurance helps the farmers to mitigate post-harvest risk
The Change begins in 2005
Author states that agricultural insurance, about a decade ago developed mainly outside Asia
- This started to change after 2005, when India and China began expanding their own agriculture insurance plans
Still there is a low penetration of agricultural insurance in India
Reasons of low penetration
Agricultural insurance in India faces following challenges,
- Insufficient risk coverage
- Delayed and inaccurate claim assessment
Author states that government through the PMFBY, is trying to bring more farmers (targeting 50% by 2018) under the scheme’s fold but several key challenges need to be addressed to achieve this goal
- Making forecasts with highest accuracy: It is important that forecasts for seasonal crop productions are made with the highest possible accuracy, and field warnings detected early so that an action plan may be implemented
- Equipping the stakeholders with necessary technical know-how: Stakeholders such as the government, insurers and agricultural research agencies need to be adequately equipped with the necessary technological know-how to deal with some of the farming issues
What should be done?
Author suggests that,
- Move beyond bancassurance: Banks continue to distribute the insurance products linked to agriculture but as per author there is a need to move beyond this existing model
- Introduce technology:The introduction of new technology services into agriculture can provide a more detailed picture of risk at the farm level without the costs of collecting data manually
- Present situation: Government officials in India conduct random-sample crop-cutting experiments (CCEs) to arrive at estimations of yield at the sub-district level or at even finer granularity. The process is resource-heavy, and prone to sampling and non-sampling errors and manual subjectivities
- Utilizing Internet of Things (IoT): The IoT promises increased yields, reduced costs and other efficiencies, with the deployment of sensors, connectivity and analytics
- Broadcast of real-time info: Soil sensors as an IoT technology can also be used to broadcast real-time information on the state of the soil. This can be combined with other data to forecast crop yields
- Utilizing satellite imagery: Satellite images can be used to
- Map the crop types
- Identify potential yield categories
- Calculate the area under each potential yield category
- Find locations with the maximum area and then select the number of samples for CCEs
- Complementing satellite imagery with handheld devices: Satellite imagery can be complemented with hand-held devices and smartphones to procure multiple images, which capture the varied field conditions in a village
- Usage of drones: Drones can also be used to
- Take images, Recreate and analyse individual leaves from close-enough heights
- Assist in pest control
- Monitor mid-season crop health
- Assess the soil-water-holding capacity
- Create weed maps or frost damage maps