13.01.2014 CA

Published on May 2016 | Categories: Documents | Downloads: 18 | Comments: 0 | Views: 94
of x
Download PDF   Embed   Report

Comments

Content

CURRENT AFFAIRS (13.01.2014)
1. 2011-12 GDP growth revised up India will on January 30 revise its Gross Domestic Product (GDP) growth rate for 2011-12 from 6.2 to about 7 per cent. Faulty data earlier underestimated industrial output by about 7 percentage points, sources in the Prime Minister‘s Economic Advisory Council told The Hindu . ―India has been overstating the slowdown in the economy, this correction will address that.‖ The revision in the data assumes significance in the wake of the severe Opposition criticism of the Manmohan Singh government‘s performance in economic management.GDP data for a fiscal undergoes three rounds of revisions; the process takes three years. The Central Statistics Office is scheduled to release the Second Revised Estimate for 2011-12 on January 30. The First Revised Estimate was 6.2 per cent.The Second Revised Estimate will use the Annual Survey of Industries (ASI) findings in place of the Quick Estimates of the Index of Industrial Production (IIP). The ASI data shows industrial output in 2011-12 grew by 23.6 per cent in nominal and about 15-16 per cent in real terms, the sources said.The IIP data had ―significantly‖ underestimated the real factory out put growth for the year at 2.9 per cent. 2. Knowledge as power Common people, acting collaboratively, are a wonderful source of public good. Regretfully, experts, when assigned a monopolistic role, can abuse public interest My ears perked up during a lively rendition of ―the Lungi Dance‖ by my granddaughters, for the words ran: ‗ Gharpe jaake tum Google kar lo, mere baare me Wikipidia pe padhlo ! So, Wikipedia, which has become such a fantastic source of information and enjoyment for me over the last few years, is now a part of popular culture! This is incredible, because Wikipedia goes against all the tenets of the votaries of market economy who had confidently predicted fourteen years ago that this non-profit, voluntary experiment was bound to fail.The Wiki software that permits building up of information in a collaborative fashion is a remarkable innovation, and its creator, Ward Cunningham, could have made lots of money by patenting it. Instead, he made it freely available, opening up enormous possibilities. Encyclopedias, centuries-old compendia of knowledge, have traditionally been expert-driven and commercially produced. But with the WorldWide-Web flowered concepts such as ‗Creative Commons‘, a platform for people who wish their creations — texts, pictures, music — to be freely and publicly
1

available, not only to enjoy, but to change, augment, improve. This is a process of positive feedback, with creations and creativity growing from strength to strength. According to market devotees, Creative Commons, starved of the waters of private profit, should have forever remained barren. But over the years it has become a lush garden, tended lovingly by people who can see well beyond personal gain. Wikipedia is the great Banyan tree, growing in this public garden. The initial free, public Encyclopedia, Nupedia, composed by experts, failed to take off. Experts are busy people, generally with a strong personal profit motive, and initially failed to take the lead in this public-spirited endeavour. It was then that Wikipedia boldly decided that any lay person too would be welcome to contribute to an article on any topic, provided that the inputs are based on acceptable sources of information. People, especially experts, enjoy nothing more than pointing out other people ‘s mistakes, so an excellent way of arriving at valid information on the Internet is to begin by posting some, possibly erroneous information. Rigorous scrutiny Wikipedia invites all comers to scrutinise every piece of information in every article, eliminate errors and improve its quality. This stimulated experts who now participate enthusiastically in the inclusive, egalitarian enterprise of Wikipedia. In this new culture of the Commonwealth of Knowledge, experts have graduated from the earlier overpowering, monopolistic role to a very constructive one of collaboration and guidance. So, Wikipedia has become a standard source of information even for professional mathematicians, with the material, naturally enough, based on inputs from practising mathematicians. They have gone on to collaboratively develop outstanding mathematical text-books as Wikibooks. The gratifying outcome is that the accuracy of information on Wikipedia, on a par with that in commercial encyclopedias, has been maintained even as its quantity has grown a thousand times over that of commercial ones. Moreover, the information is very much up to date. Within hours of the tsunami hitting the east coast of India, Wikipedia carried authentic pictures and information on the event. Happily, all major Indian languages now have their own Wikipedias, with more than half a lakh articles each in Hindi, Tamil and Telugu.Common people, acting collaboratively, are a wonderful source of public good. Regretfully, experts, when assigned a monopolistic role, can abuse public interest. Goa‘s Mines and Geology Department is expected to regularly inspect mines, maintain proper data and ensure that mining operations do not impose undue environmental and social costs. Yet, the Shah Commission Report on Illegal Mining in Goa records that no inspection
2

was carried out of iron ore mines as required under the Act, resulting in damage to the ecology, environment, agriculture, ground water, ponds, rivers, and biodiversity. The commission squarely puts the blame for such damage on many official experts. My own studies document that experts from private organisations have been guilty of deliberately falsifying information in the Environmental Impact Assessments of mines. Creation of knowledge Wikipedia is an encyclopedia, an exercise of compiling available knowledge. But new knowledge, too, may be created very effectively in the same inclusive culture of collaboration, for common people know a great deal from their experience. I discovered a striking example of this in my field research on ecology and management of bamboos. The Foresters prescribed that the thorny covering at the base of bamboo clumps must be cleared to decongest the clumps and promote better growth of new culms. The villagers told me that this was a mistake; that clearing the thorns exposed new shoots to grazing by cattle as well as wild animals, adversely impacting the bamboo stocks. Three years of careful field studies revealed that the villagers were entirely right. So, systematically recording such detailed location and society specific knowledge can be of immense value. The Australians, for instance, have a Citizens‘ River Watch Programme involving local residents who adopt nearby river stretches for keeping a watch over them. The government arranges two-day training programmes for all those interested, communicating simple techniques of assessing water flow and water quality. The water quality assessments are based on occurrence of animals like damselflies that occur only in clean water or chironomids that frequent highly polluted waters. Numerous volunteer observers upload such data employing user-friendly online data entry forms. This data is open to scrutiny and correction by all concerned. Such citizen scientist data has by now generated an excellent knowledge base of the state of rivers of Australia. Such a rich database could never have been created by experts acting by themselves; there are too few of them, they are expensive, and assigning a monopolistic role to them is dangerous. Moreover, involving all interested citizens in collecting and scrutinising the data ensures that errors, including deliberate falsifications, are quickly noticed and eliminated. The world over, such Citizen Science projects are now taking root. It is such Citizen Science that the people of Kerala should now pioneer, with the stone quarries as the focus, for the official agencies have no proper database on these allegedly largely illegal, environmentally-destructive and socially-abusive activities. After all, it was in Kerala that scientists began to break
3

the stranglehold of official agencies through an open, transparent exercise of conducting an environmental and techno-economic assessment of the Silent Valley Project. Now, in the new millennium, a cadre of volunteers can readily put together a quarries database since the easily available GPS instruments pinpoint geographical locations, and satellite images bring out patterns of land use — including quarrying, the watercourse that the quarries affect, the landslides that they trigger, the fields and plantations that they smother. Local residents can involve themselves by speedily collecting pertinent physical data, as well as detailed information on employment generated, other economic, social, health impacts and on matters like whether the concerned gram sabhas support or oppose the enterprises. If organisations like the Kerala Sastra Sahitya Parishat and Vigyan Bharathi make such an effort their mission, a rich reliable information base can be put together in as short a time as a few weeks. Of course, this ought to have been already under way. The Biological Diversity Act, 2002, mandates all Panchayat Bodies to develop People‘s Biodiversity Registers that would include many of the elements sketched above. Noting that first-hand observations on environmental parameters would be an excellent educational tool, the Central Advisory Board on Education had strongly endorsed a programme of using student Environmental Education projects throughout the country to develop such databases as early as 2005, as did the Approach Paper for the Eleventh Five Year Plan. But these formal provisions have been of no avail for our rulers believe in what Tao Te Ching, the Chinese manual of Statecraft preached two thousand four hundred years ago: ―The ancients who practised the way did not enlighten people with it; they used it, rather to stupefy them; the people are hard to rule when they have too much knowledge. Therefore, ruling a state through knowledge is to rock the state. Ruling a state through ignorance brings stability to the state.‖The citizens of the world are now ready to rock many of the thoroughly mismanaged boats of our nation-states. People‘s taking charge of the knowledge enterprise should be one of the steps in such a revolution. So, let Kerala pioneer the Citizen Science approach, focusing on a significant issue of the day — the stone quarries disfiguring the mountains of God‘s own country. 3. Upbeat global sentiment At the start of the New Year, global economic sentiment appears to be more upbeat than at any time after the financial crisis of 2008. Even taking note of the pitfalls of a hasty generalisation, it is possible to discern a mood of optimism among policymakers and financial markets around the world. Policymakers in the
4

advanced economies of the U.S., the European Union and Japan — though these countries are in varying stages of recovery — have special reasons for cheer. In the early days after the crisis, they lagged behind the developing economies led by China, India and others, in what the Ineternational Monetary Fund called a multispeed global recovery. The roles are now reversed, with the developed countries providing the momentum. Leading the pack is the U.S., which is once again driving global economic growth. In a recent major policy speech — possibly the last before he hands over the reins of the Federal Reserve at the end of this month — outgoing Chairman Ben Bernanke examined recent U.S. economic performance from the perspective of global economic growth and found enough reasons to be ―cautiously optimistic‖ about both the developed and emerging market economies. In the last reporting quarter, U.S. economic growth has been higher than expected. Improved economic prospects have induced the Fed to reduce, or taper, the scale of asset purchases it has used to prop up the U.S. economy. That decision has had varied meanings for the rest of the world. India and certain other countries feared an imminent withdrawal of capital flows which have helped bridge the deficit in its current account. However, they have come to realise that the decision to gradually reverse its ultra-soft monetary stance has been based on an improving domestic economy, and what is good for the U.S. will be good for other economies as well. For instance, more spending by American firms and households will in turn buoy demand for goods and services from across the world. That development has already benefited India, whose exports have picked up smartly since May. To be sure, the U.S. still has its share of problems. Unemployment remains high. But the risks to the world‘s largest economy emanating from other areas such as a housing market slump, fiscal dysfunction and the eurozone crisis have clearly abated. One potential area of concern, however, has been the unbridled growth of its financial sector and the failure of regulators to put in place checks and balances. In India the stock markets are running ahead of the real economy, which after a dismal run might have bottomed out and can now only move up. 4. When the burden falls on the poor Policies being pursued in India are based on the growth-at-any-cost model. The poor and the enviroment suffer while the corporates and organised sectors reap the benefits The Aam Aadmi Party, having won the trust vote, is now in the saddle in Delhi. By announcing several measures to benefit Delhiites, it had already impacted the
5

political discourse in the nation. The established political parties are trying to follow suit. Why did the previous Delhi government not take some of these steps given that the financial implications are not large while the benefits to the citizens are substantial? The steps initiated by the Aam Aadmi Party in Delhi have come under severe attack on various grounds. First, that subsidies will increase with adverse fiscal implications. Second, that this would set in motion competitive politics of giving freebies adversely affecting the budgets of other State governments and the Centre. Third, that the benefits would mostly accrue to the middle classes as opposed to the really needy and the poor. Fourth, the steps were initiated when the government had not yet won the vote of confidence and, therefore, did not have the mandate to take such important and far-reaching decisions. Lastly, the tax payers will subsidise others and this is like robbing Peter to pay Paul. This last implies that the measures undertaken by the AAP will benefit some at the expense of others — a zero sum game. The question then is who is the aam aadmi and who will benefit from the steps initiated? A deeper analysis of the processes set in motion by the AAP can help clarify that. Giving free water of up to 667 litres a day to a family will definitely involve increased subsidy. It is also correct that those who do not get piped water from Delhi Jal Board will not benefit from the announcement and steps would have to be taken to supply them water. The AAP‘s contention is that both these are feasible given better governance of DJB, which would reduce wastage of water leading to increased availability of water and higher revenues for the board.Further, given the surplus in the Delhi Budget, more tankers can be purchased soon and additional water pipelines installed in the coming years. Checking of the tanker mafia in Delhi which operated with the connivance of the officialdom and the politicians would help augment water resources of the DJB. Of course, nothing would change unless corruption is checked. This would be feasible if the Mohalla committees begin to function as proposed by the AAP. Regarding the reduction in electricity tariffs for the consumption of the first 400 units per month, a subsidy will be borne till Delhi Electricity Regulatory Commission (if convinced) lowers the rates. But, the AAP will also check malpractices by the electricity companies which were yielding them undue profits at the expense of the citizens of Delhi. Earlier, some citizens and businesses were found to be stealing power, causing losses to Delhi Electric Supply Board, but after privatisation, it is the electricity companies who have been stealing from the citizens. It is well-known that regulation is hamstrung by the famous Averch6

Johnson effect. It implies that the private regulated companies show higher capital and other expenditures to get a higher price from the regulator for the product/service they provide. The regulator does not have an independent source of determining the cost of production and depends on the private companies to supply them with data and this is manipulated to show higher costs. This is achieved by showing higher capital costs, higher overhead costs, and so on. Past examples of such manipulation are Enron and fertilizer subsidy. Cross-subsidisation How can profiteering by the private companies be checked? The accounts of the companies need to be checked by independent auditors and that is what the AAP hopes to do with the help of the CAG. But, what if the CAG, under political pressure, does not play ball? Can the private auditors be used? No, because they are usually in cahoots with the companies.Thus, at the end of the day, lowering power tariffs may only be possible if the government is willing to increase subsidies. The same may be the case for water. Those who are well-off in society often pay for others on the principle of ‗Ability to Pay‘ or ‗cross-subsidisation‘. The issue is whether this is fair. Subsidies are typically a result of economic processes that create economic hardships for those being subsidised. The poor who face under employment and low incomes need state support to afford even a minimal existence. Typically, the low incomes of the poor lead to the higher profits of the businesses and the high living standards of the well-off Indians. In this sense, cross-subsidisation of the poor by the well-off is a way of paying back what was due to the poor in terms of the basics of life.So, who is Peter and who is Paul in India? As the issue is posed, it is implied that there is a zero sum game, that is, Paul gains at the expense of Peter. Can there not be a positive sum game in which both gain together? Policies being pursued in India for more than two decades have been based on the principle of ‗growth at any cost‘ with all costs falling on the poor and the environment while the corporates and the organised sectors benefit. This has led to massive environmental degradation, displacement of the poor and increased disparities. Consequently, at a very low level of per capita income, India has one of the highest number of billionaires and the largest number of extremely poor in the world and has some of the most polluted rivers, air in the cities and habitats in the world. The growth of the black economy has led to a rapid increase in corruption all around. The top three per cent of the income ladder benefit from this since the underground economy is concentrated in their hands. This worsens the disparity
7

beyond what the official data reveals, leads to price rise, waste of resources and loss of production due to inefficiency.The black economy also leads to expensive and poor quality services. Take the case of water supply in Delhi. The tanker mafia has corrupted the bureaucracy, the police and the politicians (the Triad). Often, the politician and the businessman are the same person. The Triad makes money at the expense of the citizens. They disrupt the water supply and allow wastage to take place. The loss of DJB and the citizens becomes the profit of the water mafia. Thus, checking the black economy will immediately increase water supply, lower the cost of water to the citizens and increase the profits of DJB. The same is the case with electricity or speculation in vegetable prices (traders prefer that vegetables rot so that the prices shoot up). Thus, the issue is not robbing Peter to pay Paul but the returning of what was robbed by Peter from Paul. In other words, checking the growing black economy and corruption is a positive sum game for every citizen except the corrupt. This is what the AAP‘s agenda is. The black economy is now over 50% of GDP and if brought into the white economy or checked, it would lead to a rise in the tax-GDP ratio by about 20 per cent. This would be adequate to finance the proposed subsidies nationally, lead to lowering of prices for all, result in higher profits for the honest due to increased production in the economy because of the efficiency gains and increased demand. As income generation becomes buoyant, most subsidies can be eliminated. The issue is macro and not micro as the opponents make it out to be. In brief, the honest Paul and Peter would gain together while only the dishonest Peter would lose. It is the latter who is shedding crocodile tears at the actions of AAP. 5. Hasina to head 49-member Cabinet Prime Minister Sheikh Hasina began her second successive innings in government leading a 49-member Cabinet which was sworn-in on Sunday.This is Ms. Hasina‘s third stint as Prime Minister since 1996 when she became the head of government for the first time after Bangladesh returned to democracy from a prolonged military rule.The new Cabinet has 29 Ministers, 17 State Ministers, and two Deputy Ministers.The members of the new Cabinet, including the Prime Minister, were sworn in by President Abdul Hamid at a ceremony in the Bangabhaban, the President‘s House. The President had earlier invited Ms. Hasina, who was elected the leader of the party‘s Parliamentary Party to form government as the Awami League won two 8

thirds majority in the January 5 parliament election held amid massive violence and boycott by the opposition parties. In the new parliament, Jatiya Party is going to play a dual role as its leader Raushan Ershad will be Leader of the Opposition while several partymen were inducted as ministers. Mr. Ershad‘s wife, Raushan Ershad, has replaced Begum Khaleda Zia, who was the Leader of the Opposition in the last parliament. None from the former parliamentary opposition, Bangladesh Nationalist Party and its allies attended the swearing-in ceremony. But H.M. Ershad, who had earlier refused to join the election announing a dramatic U –turn even after he and his men submitted nomination papers to contest the polls, attended the ceremony as a guest. Mr. Ershad took oath on Saturday as he was elected a member of parliament .Most of the Ministers are seen as experienced since they are not only party veterans but also held various portfolios previously. While the majority in the new Cabinet are from Awami League, the rest are from Jatiya Party, Workers Party, Jatiya Samajtantrik Dal, and Jatiya Party (Manju). The Ministers who were inducted from the previous cabinet are A M Abdul Muhith, Matia Chowdhury, Syed Ashraful Islam, Obaidul Quader, Nurul Islam Nahid, Shahjahan Khan and Abdul Latif Siddiqui, while the new entrant party veterans are Amir Hossain Amu, Tofail Ahmed, Mohammad Nasim, Mofazzal Hossain Chowdhury Maya and Assaduzzaman Noor of the Awami League. Ministers from the Jatiya Party are Anisul Islam Mahmud, Mujibul Haque and Rashed Khan Menon from Workers Party, Hasanul Huq Inu from Jatiya Samajtanktrik Dal and Anwar Hossain Manju from JP-Manju.The notable drop from Ms. Hasina‘s previous Cabinet are Dr Dipu Moni, Dr Mohiuddin Khan Alamgir, Air-Vice Marshal (retd) AK Khandaker, Suranjit Sengupta, Ruhul Haque, Shafique Ahmed, Hassan Mahmud, Ramesh Chandra Sen, Shamsul Haque Tuku and Jahangir Kabir Nanak.Hours before the swearing-in, an appeal was filed in the High Court by a lawyer on Sunday challenging the move to form a new Cabinet before dissolving the existing 9th parliament.The petition also sought a stay on the swearing-in ceremony of the Ministers. 6. Gobal economy, moving forward but on different engines Is the air of optimism that seems to permeate the global economic outlook justified? Leading commentators around the world are more optimistic at the start of the New Year than they have ever been since the global recession of 2008. Even conceding that a certain amount of cheer and expressions of glad tidings are common on every new year‘s eve, the year 2014 seems exceptional — in the opinion of many experts, things look much better than they did in the recent past.
9

Subjectivity rules A few points are relevant here. The positive view of the world economy is mostly confined to the U.S. and other developed countries but, emerging market countries are not doing too badly either. But in a significant change, it is the advanced countries and not the emerging market economies that are in the forefront of global recovery. Earlier, the developed economies were trailing the emerging market economies in what the IMF likes to call, a multi-paced recovery of the world economy.In popular discussions such as this, most experts tend to equate the advanced economies with the U.S. and to a lesser extent the European Union (EU) and Japan. Discussions on emerging market economies are invariably confined to China. India out of sight At this juncture, India seems to have dropped out of sight. Slowing economic growth amidst well-entrenched inflation is surely responsible. While the attainment of a gross domestic product (GDP) growth of just above 5 per cent for the current year 2013-14 would appear to be creditable, not so long ago India could boast of much higher growth rates. Being included in BRICS and other groupings would suggest that India‘s potential was recognised. That was then. One might have to wait until after the elections and many concrete examples of robust reforms and governance to ―re-rate‖ India as it were. It may be argued that a 5 per cent annual growth rate, while being sub-optimal for India, compares favourably with the growth rates of many other countries, both developed and developing. Yet, the perception of India is rooted in the belief that it lags behind in economic reforms, and, more relevantly, in terms of various social indices such as health, education and sanitation. A very different illustration of subjectivity is in the ways the opinions on the Europe have changed. Not long ago, the crisis-hit countries were forced to adopt a socially disruptive austerity package. If Europe has bounced back (in the experts‘ opinions), it is simply because the y have not broken up and are staying together. U.S. the growth engine A very important speech on the current global economy was delivered by the outgoing chairman of the U.S. Federal Reserve, Ben Bernanke. At a recent policy speech in the U.S., which most people think will be his last before he leaves office later this month, he said there were grounds for ―cautious optimism‖ for both
10

advanced and emerging economies around the world. The U.S. is clearly driving the global economy with a better-than-expected growth rate in the last quarter. Its stock markets are buoyant. The S&P index is at a record high, after rising 30 per cent in 2013, the biggest annual gain in almost two decades. Higher consumption by U.S. households will drive demand for these products from across the world. Yet, Mr. Bernanke, in whose tenure the Fed embarked on a massive and unprecedented quantitative easing (QE) to spur economic revival in the U.S., feels that the U.S. economy needs to traverse some more ground. For instance, unemployment still remains at 7 per cent. However, the threats from the effects of the financial crisis, the woes of the housing market, low productivity growth, the eurozone crisis and the fiscal dysfunction in the U.S. seem to be receding. Improved economic circumstances have induced the Fed to reduce or taper the asset purchase programme.According to Mr. Bernanke, reforms in the U.K. and Japan are still in their early stages, but all indications point to better growth prospects. Emerging market economies too have grown more quickly in the second-half of 2013, after slowing down in the first-half. The Fed Chairman‘s ‗signing-off‘ speech is generally upbeat on the world economy, which is, however, moving on different engines. 7. BHAG Inclusion BHAG In their book Built to Last: Successful Habits of Visionary Companies (1994), James Collins and Jerry Porras postulated that an important characteristic of such companies was their articulation of their Big Hairy Audacious Goal, or BHAG. In contrast to the operational goals that company managements usually specify to measure their performance against, BHAG is a long-term aspiration and inspiration that they saw as an energising and motivating force for the entire organisation. The goal of the Committee on Comprehensive Financial Services for Small Businesses and Low-Income Households, a panel chaired by Nachiket Mor that submitted its report to the Reserve Bank of India (RBI) last week, is truly a BHAG. It visualises meaningful financial access for all adult residents of India by January 2016. The building block for this is the universal electronic bank account (UEBA). This objective has to be viewed against the backdrop of the record so far. Millions of accounts have indeed been opened over the past five years, but true access in the form of practical deposit,credit, insurance and pension products is far from being realised. So, a massively disruptive strategy is absolutely necessary. Speaking of strategy, the key to success of visionary organisations is the matching of BHAG
11

with the instruments that will be used to pursue it. Do the committee's recommendations offer this match? Let me focus on three components of the strategy. The first relates to the institutional structure that needs to be put in place. Clearly, relying on the existing banking system to achieve BHAG is unfeasible; new mechanisms need to be created. The committee essentially recommends a number of specialised intermediary institutions to be set up. Of course, this immediately raises doubts about the two-year time frame, but that should not be the main basis of critique. The real question is whether these new institutions can do what the old ones haven't and still make reasonable money in the process. The key new institutions are payment banks and wholesale banks. The payment banks are intended to provide very basic services - deposit taking and payout. With no credit risk being assumed, these can function with relatively low capital, allowing them to build large networks at low cost, which can be brought down further with effective use of technology. The wholesale bank concept reflects the development of a continuum across the range of financial intermediaries. These institutions will have a more pointed focus on the target segments of the inclusion strategy and will essentially provide a second tier of intermediation between the existing banking system and these segments. Whether this will work or not is going to depend critically on two things. One, will the cost structures of these institutions be compatible with the business environment in which they operate? One obvious barrier to banks' collective difficulties in pushing inclusion is that they find it unremunerative. Profitability over the medium-to-long term is absolutely necessary. The committee's recommendations help this along by suggesting lower capital and prudential requirements, in keeping with lower risk profiles. But, beyond that, operating costs, particularly human resource costs, need to be dramatically lower than those in the traditional banking model. Two, combining low human resource costs with high technology will yield the best returns. But making this combination work is always a challenge and there clearly will be an experimental phase during which at least some of these new institutions will fail. The second component that I want to examine is the redefinition of the priority sector lendingmandate. Raising the limit from the current 40 per cent to 50 per cent may seem like an unnecessary dose of populism, but this is perhaps more than offset by three significant recommendations. One, loans to priority sector borrowers are to be completely free of price restrictions, with any subsidy that the
12

government wants to give them being paid directly to the borrowers. Lenders can, therefore, price their loans based entirely on their risk assessments of individual borrowers. The second is to differentiate sectors and geographies by difficulties in lending. By giving more weight to loans made to the more challenging ones, more equitable lending can be hoped for. Third, reinforcing a measure that has been suggested before, the introduction of tradable certificates based on priority sector exposure will facilitate the lowest cost achievement of a system-wide priority sector target of 50 per cent. The risk here, of course, is that the 50 per cent limit will be gleefully accepted, while efforts on the others will lag. Merely more lending, without any of the flexibilities and efficiencies that the other recommendations provide both old and new intermediaries, will do very little for inclusion, particularly in terms of bringing relatively deprived sectors and regions more firmly into the financial fold. The third component of the strategy that I think needs to be looked at carefully is the role of technology. At one level, there is a clear recognition of the central role that it will play in the entire process. Linking customers to institutions, one institution to another and all institutions to regulatory and credit monitoring databases in a completely seamless and real-time fashion is clearly within the realm of possibility today. This requires policy and regulatory co-ordination between the financial and telecom regulators and, perhaps, others as well, which, if effectively done, will be good for BHAG. However, there are low-hanging fruits that the current state of technology provides access to and will allow for the building block UEBA to be achieved even without the whole intermediary framework being put into place. For example, the Aadhaar number could be linked to an e-wallet, stored on the cloud, into which all government payments could be paid. This would give an immediate start to the payment banks, allowing existing and new providers of e-wallet and m-wallet and related services to bring a huge number of currently unbanked people into the financial system in a relatively short time frame. Taken as a whole, the committee's recommendations offer a substantial and feasible strategy to achieve meaningful inclusion. Two years may be enough or not, but the first steps down the road should be taken as quickly as possible. Also, it should be emphasised that inclusion is as much a technological as a financial challenge. This will also require discontinuous change in the policymaking and regulatory framework.
13

8.Breaking the impasse of 2013 The year 2013 was a wasted one. How can 2014 be different? When I look back on the year, I think of a cacophony. There was huge dissent about the way we mismanage coal reserves; the Supreme Court shut down iron ore mining in Goa; later in the year, there was outcry about rampant and rapacious sand mining and the havoc it was wreaking on rivers. There were equally loud calls for the need for green clearance to all projects, from hydropower projects in the Himalayas to mines in dense forests of central India. One side wanted to shut everything down; the other side wanted to open up everything.The polarisation was absolute. In my view, this has not benefited the environment's cause. It has certainly not changed the way we will manage our natural resources for sustainable and inclusive growth. This impasse will help nobody.Take, for instance, the issue of building hydroelectric projects in the Himalayas. The dam builder-engineer lobby wants no restraint on construction of projects in this fragile ecosystem. In the Ganga basin alone, some 70 projects were on the cards to generate 9,000 megawatts of power. These projects together would "affect" - humanly re-engineer - some 60 to 90 per cent of the river's length and would dry up stretches completely. There was no method in this madness. On the other side, there were equally strong views against construction of hydroelectric projects. The arguments ranged from religious beliefs - for instance, that construction would harm the Ganga's purity - to environmental concerns about the vulnerability of the Himalayas. The disaster that shook the mighty Himalayas, which killed more than 10,000 people and brought down buildings like a pack of cards, rightly reinforced their view. The ministry of environment and forests stepped in and declared the region ecologically sensitive. Under this notification, no hydroelectric projects would be allowed and construction of any other building would require permission from the ministry in Delhi. But this is not tenable. Firstly, the ministry has no capacity to take environmentally sound decisions while awarding clearances for projects. It has absolutely no ability to ensure that the conditions it imposes on the cleared projects are adhered to. It has run its own internal systems to the ground, and twisted each issue, only to cause bureaucratic delays. With its current capacity, the ministry cannot implement
14

the eco-sensitive zone notification.Secondly, the notification in its current form will only lead to more corruption during clearances, as well as more resentment against the environment since genuine needs of the poor people will get affected. Meanwhile, over time, all the dams will be back. The Himalayas will become even more vulnerable and damaged. Local communities will suffer. So in 2014, we need a different and more nuanced approach. In this case, it would mean accepting the fact that producing energy from flowing rivers is both a clean and renewable source of power as well as an important resource for the Himalayan states. It cannot be argued that no dam should be constructed, but projects that kill the river or damage the ecosystem should not be allowed. This is non-negotiable. And this can be done. For instance, at the Centre for Science and Environment, we have done exhaustive calculations that show rivers can sustain the generation of hydropower, provided there is agreement to set aside 50 per cent of the total flow for six months of the lean season and 30 per cent during the high-discharge monsoon season. Hydropower projects would need to be re-engineered so that they utilise water that the river can afford to part with - and not take all it has. Our estimation is that this will mean a reduction in the number of projects, but it will still mean the region will generate substantial power. In addition, we advocated that small hydroelectric projects - defined as those with a capacity of up to 25 MW - could not be considered green unless their construction was strictly regulated. Small is not necessarily right and green. In all this, the first right to energy should be given to people who live in the Himalayas. But any change we desire in 2014 and beyond is not possible if the institutions for regulation, monitoring and enforcement are not substantially revamped and strengthened. At the start of 2014, the Supreme Court directed the setting up of a new national green regulator. But the fact is that in the current state of affairs, this will only add to convoluted and delayed decisions - not to those that secure environmental integrity. We need to be serious about the intent and the mechanism of this institutional reform. We need a three-pronged approach. One, we need to make clearance assessments more coherent and comprehensive by simply linking assessments of the environmental, forest, coastal and wildlife impact of each project. Two, we should introduce much greater transparency to the decision-making process by
15

making public hearings and prior informed content processes open and visible, and by ensuring that committees assessing projects are accountable. Three, we need a sharp and total focus on monitoring compliance and enforcement - and we must build capacity to do this. This would require state pollution control boards to be substantially revamped and strengthened. It would also need investment in monitoring systems that allow people to know about the state of their forests, river or air.In 2014, it is time we took the crucial next step on environmental management - in other words, build the institutions that can bring the discourse to fruition. This is the agenda for the future. 9. Keep divestment simple Every year, the approach of the fiscal year-end is the cue for the government to hastily kick-start its public sector divestment programme. This year, the action is even more frenzied than usual with the exchequer already hitting 94 per cent of the fiscal deficit target. So far, the divestment programme has not contributed much to the cause, raising less than Rs 5,000 crore against the lofty annual target of Rs 40,000 crore. A sluggish economy and market conditions that were somewhat unfriendly to ‗core sector‘ companies forced the government to kick the can down the road for most of this year. However, this is no excuse for the outlandish ideas that are now being floated in lieu of straightforward stake sales in PSUs (public sector undertakings). One suggestion is that public sector banks and cash-rich PSUs be made to buy the government‘s stake in peers such as BHEL. Given that the primary purpose of divestment is to reduce the government‘s role in business, transferring equit y stakes in PSUs from one State entity to another is an exercise in obfuscation. It is also not clear why capital-starved public sector banks, who have enough risks on their balance sheet today, should be made to play the markets with further equity bets. Another dubious suggestion is that PSUs issue bonus (free) debentures to the government. Such debentures add to the debt burden of enterprises without any cash inflows, hardly desirable at a time when they need capital for expansion projects. The government is only shooting itself in the foot by undermining public enterprises through such shortcuts as it may lead to their de-rating in the markets. At today‘s prices, the aggregate government wealth invested in leading (non -bank) PSUs is Rs 7 lakh crore. Even a 5 per cent dip in their stock prices wipes out Rs 35,000 crore of this wealth. Where the government has tried to take the more direct
16

route, the candidates chosen have been sub-optimal. A recent proposal to divest Indian Oil met with strenuous objections from the Oil Ministry given that lack of policy clarity on subsidies, under-recoveries and pricing have battered the firm‘s valuations. Yet, the successful divestment of PowerGrid Corporation shows that State-owned firms without such policy uncertainty stand a good chance of raising the required sums for the exchequer. In this milieu, two other solutions that can help salvage the divestment programme this year could be the sale of the government holdings in Axis Bank, L&T and ITC, acquired from the erstwhile UTI. These are worth over Rs 50,000 crore after the recent market rally. The proposal to float an exchange traded fund (ETF) to house part of the government stake in PSUs is also sound. The ETF may not immediately raise large sums of money given the muted investor appetite for many PSU stocks. But given that the public sector space does feature some quality stocks with sound fundamentals, the ETF may turn out to be an attractive vehicle for foreign and domestic institutions to buy into these firms over the long term. 10. Public sector firms are no milch cows By expecting listed PSUs to sell products below cost, foot subsidy bills and cough up cash whenever the exchequer needs it, the government is trampling over the rights of public shareholders. January 12, 2014: Can you imagine the promoter of a listed private sector company arm-twisting it to sell its products below cost to his favourite charity? Or asking it to buy shares in a group firm or demanding big dividends whenever he was short of cash?You probably can‘t, because this would have investors coming down on him like a tonne of bricks and regulators hauling him up for bad corporate governance. Yet, such promoter behaviour is par for the course in listed public sector companies in India. Just consider the following facts. What commercial interest? Ever heard of a monopolistic business that sells its produce below market price and enters into contracts that are loaded against it? Well, meet the 90 per cent Indian government-owned Coal India.

17

First, in order to keep fuel costs low for power generation companies (many of which are for-profit private players), the government insists that Coal India sell its output far below market price and not hike its selling prices, even when costs escalate. This earned the ire of UK-based Children‘s Investment Fund, one of the few institutional investors in Coal India. Last year, the fund dragged Coal India to court for riding roughshod over shareholder interests by under-pricing its output. It alleged that government interference was costing Coal India shareholders a whopping $20 billion in annual profits. Then the mining major was forced to sign Fuel Supply Agreements (FSAs) with power producers, where it committed to heavy penalties if it didn‘t meet these commitments. But the only problem is, Coal India says it simply won‘t be able to produce the committed quantities of coal.In a recent interview with this newspaper, Coal India‘s chairman lamented: ―Did we sign the FSAs at our free will? We can drive at 60 kmph. But you are forcing us to drive at 120 kmph and then penalising us for the eventual failure. What kind of business proposal is this?‖ Don‘t dismiss this as typical public sector inertia. Coal India can‘t increase coal production at will because, with multiple statutory clearances required for developing each mine, securing the necessary permissions does take several years. Neither private sector miners nor power producers who have been allocated captive coal blocks have managed to ramp up output either.The irony is that after taking flak from the UK fund for sacrificing commercial interests to favour its customers, Coal India was also recently slapped with a Rs 1,770-crore penalty by the Competition Commission of India (CCI) for signing FSAs without consulting its customers! Tangled web of subsidy But Coal India is still a profitable enterprise and its woes actually pale in comparison with the travails of the public sector oil companies.First, amid spiralling import costs for crude oil, oil marketers are required by the government to sell their products below cost, to keep prices low for the aam aadmi. Then, after co-opting listed PSUs into this charitable endeavour, the government takes its own sweet time reimbursing the deficit. It also haggles over the sums, with a complicated debate about whether the oil companies should be compensated based on import parity prices or export parity prices. These delays result in oil marketing companies using up huge amounts of working capital and running up gigantic losses quarter after quarter.

18

However, what really adds insult to injury is the government‘s bright idea of asking upstream oil companies such as ONGC, Oil India and GAIL, who actually have nothing to do with all this, to ‗share‘ the losses by selling their output at a discount. The proportion of losses that oil producers bear changes every year, making it impossible for investors to take a call on the earnings or prospects of any of these companies.Is it any wonder that the market has made mincemeat of the oil PSU stocks? Today, after the stock market rally has pushed up the market‘s price earnings multiple to over 18 times, the giant oil PSUs languish at pathetic multiples of 3-5 times their earnings. However, it is not just the oil PSUs, but also the public sector banks which are often called upon to support the government‘s social endeavours. Remember how they had to offer agricultural loans to farmers at a discounted interest rate after a bad monsoon, with the government promising to foot the bill later? Or how they were recently ‗urged‘ to give the economy a helping hand by offering loans to two wheeler and consumer durable buyers at low rates?Neither move may make commercial sense for banks, but with their majority owner insisting, do they have any choice? With top-level appointments at the PSUs at the discretion of the ruling government, the firms‘ Boards usually offer little protest at such interference. Deposit cash here, please While oil and bank PSUs probably accept irrational diktats from the government as an everyday occurrence, those in other sectors have reason to fear the end of each fiscal year. For, this is the time of the year when the Centre usually realises that it could do with some quick cash to balance the budget. It usually turns to the PSUs.All would be well if it were to simply raise cash by divesting its equity stakes to public investors. But sometimes, if market conditions aren‘t right, investors may fail to take the bait. This is the cue for policymakers to come up with a host of unusual ideas to make the larger listed PSUs part with their cash. This year, these efforts have taken many forms. First, PSUs were asked to consider buybacks, no matter if they needed the capital for their own expansion projects. Then, it was suggested that state-owned firms buy stakes in each other. Recently, pressure is mounting on public sector banks to consider interim dividends. This is relatively harmless, given that dividends will have to be equally distributed to all shareholders. But the only problem is, most public sector banks also need capital infusion from the government. Therefore, it makes little sense for them to first pay out hefty dividends to the government (with an additional dividend distribution tax), only to later request a return of that capital.
19

The challenges faced by PSUs have not gone unnoticed by the markets and the PSU pack has been ruthlessly de-rated and languishes at big discounts to private peers. Institutional investors are willing to assign hardly any value to their rocksolid assets or their large cash pile.That is why it is time the Centre made up its mind about the future of listed PSUs. If it is keen to reduce its role in business by divesting its stakes in PSUs, it needs to allow these firms to pursue their commercial interests and maximise shareholder wealth. But if it wants PSUs to act as vehicles for delivering social good, it is best that it shelves its divestment programme and takes these firms fully private. Then no one will object if a PSU is always dancing to its promoter‘s tunes. 11. Ariel Sharon’s violent legacy Israel‘s ―tough guy‖ and its former prime minister, Ariel Sharon, died on Saturday. His legacy is hugely controversial.His admirers claim he took some ―brave‖ decisions for peace between the Israelis and the Arabs — Sharon‘s decision to withdraw troops and settlers from Gaza in 2005 and the plan to dismantle some settlement areas in the West Bank.His critics say, and not without basis, he has left the region more divided and violent. He fanned rightwing elements in Israel and the occupied territories. So, was Sharon more a chauvinist than a pragmatist? TRACK RECORD When Israeli troops attacked Lebanon in 1982, defence minister Sharon told Prime Minister Menachem Begin‘s Cabinet that the attack would last two days a nd Israeli forces would advance only about 25 miles into the country, which had been the base of the Palestinian Liberation Organisation (PLO) for years. The war‘s declared goal was to crush the PLO. But Israel‘s real strategic ambition was to reshape the political landscape of Lebanon, its northern neighbour, as well as the region — to end the Sunni rule in Beirut, reinstate Christians in power and dismantle Palestinian nationalism.One of the most dreadful moments of the occupation was the massacre at the Sabra and Shatila refugee camps in West Beirut. The city was under the control of Sharon‘s troops after the PLO‘s withdrawal. InFrom Beirut to Jerusalem, Thomas Friedman writes that the refugee camps were one of the targets of Sharon as they backed the PLO. Sharon claimed the PLO had left guerrillas in the camps. The Phalangist Christians of Lebanon were Sharon‘s most trusted allies in the war. Their leader Bashir Gemayel had welcomed the invasion, and Sharon's real plan was to make Gemayel the next head of Lebanon. But Gemayel‘s assassination had
20

destabilised Israel‘s plan.After the assassination, when Phalangist terrorists entered the Sabra and Shatila camps on September 16 and continued the killing of Palestinians until September 18 morning, Israeli troops ignored it. Red Cross put the number of dead at 800 to 1,000, while others say up to 2,000, many of them women and children.Since then, Sharon‘s name has been clubbed with Sabra and Shatila. In 1983, the Yitzhak Kahan Commission held him responsible ―for ignoring the danger of bloodshed and revenge‖ and ―not taking appropriate measures to prevent bloodshed.‖ Sharon had to resign as the defence minister.Despite the huge international outcry over human rights violations, Sharon remained unapologetic; he knew these were short-term troubles in political waters, especially for a general of his stature who cut his teeth in the 1948 war with the Arabs. Peacemaker? If one looks at the rise of Sharon to Israel‘s premiership in 2001 and his policies thereafter, it‘s not difficult to see he had carefully cultivated the image of a ―tough guy‖. Sharon‘s admirers say ‗Arik‘ (as he was known among supporters) was a changed man after he became prime minister. They cite Sharon‘s decision to withdraw troops and settlers from Gaza in 2005 and the plan to dismantle some settlement areas in West Bank. But not many buy the argument. The Gaza withdrawal was more of a military move than a step to make peace. It was a unilateral decision. There were no talks with the Palestinians. Israeli troops were actually fed up with their prolonged fight with Hamas guerrillas in Gaza.Sharon realised that holding on to Gaza would not serve any of his strategic purposes other than draining Israeli military‘s resources. He did not give Gazans the freedom they wanted. He just withdrew troops to the border, turning Gaza into a large prison of human suffering. On the other side, Sharon‘s rise to power triggered a new wave of violent Palestinian intifada (uprising) in West Bank, which was brutally crushed. In September 2000, while campaigning for the premiership, Sharon visited the Temple Mount complex, site of the Dome of the Rock and al-Aqsa Mosque, holy place for the Jews and the Muslims, respectively. He said the complex would remain under perpetual Israel control, which his critics say was a deliberate attempt to flare up emotions ahead of the elections.Within days, clashes erupted between Palestinians and Israeli police, which led to the intifada. Later, when The New Yorker’s Jeffrey Goldberg asked him if he had any regrets about going to the Mount, Sharon said: ―I am really sorry for every casualty, Jewish and Arab. But the only one who is responsible for that is Arafat.‖
21

As prime minister, Sharon also stepped up the construction of the ―security‖ w all that runs along and through the West Bank and divides the Jews and the Arabs. Critics call it the ―apartheid wall‖.During Sharon‘s tenure, the world also saw several targeted killings by the Israeli troops. Hamas leaders Sheikh Ahmed Yassin and Abdel Aziz al-Rantissi were among many of those were killed by Israel. These records enfeeble the claims about ‗Sharon the peace-maker‘. Whither Israel? Did Sharon make Israel stronger? Debatable. Perhaps the most important developments during his eventful career were the settler movement in West Bank and the Lebanon invasion. Both are now a liability for any Israeli leader who wants to make peace with neighbours.While the settlements in West Bank are now represented by strong settler lobbies and rightwing parties who cannot be overlooked in any peace efforts, the Lebanon war spawned serious security challenges for Israel. It led to the formation of Hezbollah, the radical Shiite outfit, which forced Israel to end its 18-year-long occupation of Lebanon in 2000 and effectively resisted Israel‘s deadly bombings in 2006.Not many world leaders would like to talk about this darker side of Sharon‘s legacy in their condolence messages. That said, international NGO Human Rights Watch bluntly summarised it all. It said, ―Sharon died without facing justice for his role in the massacres of hundreds and perhaps thousands of civilians…‖Sharon may rest in peace, but it looks like his country may take a long while to find peace. 12. Vaccines can change children’s future A single medical discovery has changed the future of children. Vaccination is a powerful and cost-effective weapon against disabling and life-threatening diseases. In India, nearly two million children still die from preventable diseases such as pneumonia, diarrhoea, malnutrition and birth complications. Haemophilus influenzae type b (Hib) is a major cause of bacterial meningitis while pneumonia caused by Hib and Streptococcus pneumoniae (S. pneumoniae or pneumococcus) is also a threat to children‘s health worldwide. Rotavirus-related diarrhoea sends thousands of children to the hospital and kills a large number too. New vaccines are available to protect against these pathogens and India is now gradually moving towards including these latest vaccines in the immunisation programme.In fact, 2011-20 has been declared the ‗Decade of Vaccines‘ by the global community. Awareness about the benefits of vaccines and
22

advocacy for the introduction of new lifesaving vaccines must increase during this period. The health and well-being of millions of children will improve only when the importance of vaccines is acknowledged. Vaccines provided under the Universal Immunisation Programme (UIP) in India offer children protection from just a handful of infections — tuberculosis, diphtheria, pertussis (whooping cough), tetanus, polio, measles and Hepatitis B across the country and Japanese encephalitis in some areas.New vaccines against Hib and rotavirus have gained popularity in many countries. The benefits of these vaccines are yet to be maximised in India.The three new vaccines that will benefit children the most in the country are the pentavalent vaccine that confers protection against Hib; the rotavirus vaccine and the pneumococcus conjugate vaccine. Other countries have readily embraced these vaccines, and are deriving their benefits. Hib vaccine has been a part of routine immunisation programmes in several countries after WHO‘s Strategic Advisory Group of Experts (SAGE), recommended in 2006 that this be included in national immunisation programmes. Of the 194 WHO Member States, 185 have adopted the pentavalent vaccine that protects against Hib.And the benefits have been huge, since Hib diseases have almost disappeared in these parts of the world.India too would derive massive benefits: 72,000 child deaths and nearly three million hospitalisations in India will be prevented each year once the Hib programme is established across the country. In India, the pentavalent vaccine that contains Hib (and also protects against diphtheria, pertussis, tetanus, hepatitis B) has been popular for a decade in the private sector, and was included in the National Immunisation Programme more recently.The vaccine was introduced in Tamil Nadu and Kerala in 2011 after endorsement by India‘s National Technical Advisory Group on immunisation and a detailed review of vaccine safety coordinated by the Indian Council of Medical Research (ICMR).Since then, the pentavalent vaccine has also been introduced in six additional states. PENTAVALENT safety The introduction of the pentavalent vaccine in some Asian countries has been associated with safety concerns.This included reports of deaths shortly after vaccination in Sri Lanka, Bhutan, India, Pakistan, Nepal and Vietnam.Because of these concerns, Sri Lanka, Bhutan and Vietnam temporarily suspended pentavalent vaccine use as a precautionary measure. In all countries, investigations by local governments, WHO and international experts have not demonstrated a causal link
23

between vaccination and infant death.As a result, Sri Lanka, Bhutan and Vietnam have resumed the use of pentavalent vaccine. Faith in the safety of this vaccine was further reinforced after WHO‘s Global Advisory Committee on Vaccine Safety reviewed the pentavalent vaccine safety data from four countries (Sri Lanka, Bhutan, India and Vietnam) and concluded that it was safe.The Indian Academy of Paediatrics (IAP) has expressed concern about the misinformation being spread about the vaccine, and has denounced attempts to distort facts.IAP maintains that pentavalent is safe and endorses the government‘s decision to introduce the vaccine in six states. While efforts should continue to ensure the safety of vaccines, the drive to introduce immunisation that reduces childhood illnesses and saves lives should not be compromised.The WHO remains committed to working with the national government to enhance the benefits of safe and efficacious vaccines to India‘s population.

24

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close