Modi, Merkel nudge FTA, sign a dozen agreements
Both leaders press for easing of bilateral trade, investment
•India and Germany agreed on the need to resume free trade talks between India and the European Union soon, and signed a dozen wide-ranging but low-profile MoUs on the subjects of education, health, skill development and sustainability after a meeting between Prime Minister Narendra Modi and German Chancellor Angel Merkel on Tuesday.
•“Prime Minister Modi and Federal Chancellor Merkel underlined their determination to ease bilateral trade and investment…They also reaffirmed their strong commitment to the EU-India Broad Based Trade and Investment Agreement (as the FTA is called) and their commitment to bring about a resumption of the negotiations at the earliest possible date. This would, inter alia, allow to establish provisions for the mutual protection of new foreign investments,” a joint statement issued in Berlin said, addressing an issue that has been raised repeatedly by businessmen in the European Union.
Talks in July
•MEA officials said Indian and EU negotiators would meet in July this year and then in October for the EU-India summit in Delhi, in an effort to “take FTA talks forward.”
Investor protection
•FTA talks had stalled after 16 rounds of negotiations in 2013. Since then bilateral investment treaties with Germany and other European countries have also lapsed. German CEOs, who met with Mr. Modi at a business lunch, said this had caused much “uncertainty” in the business relationship, as they were particularly worried about investor protection.
•At €17.42 billion in bilateral trade (2016), India ranks 24th among countries doing business with Germany, a figure that grew very marginally from €17.33 billion in 2015. German FDI in India is also low, at just under a billion Euros in 2016.
•“We clearly see the progress under your term…. But the cancellation of the India-German investment treaty makes it very difficult for investment especially by small companies from Germany, and we urge that you work on the conclusion of the EU-India FTA,” Hubert Leinhard, president and CEO of hydropower company Voith Gmbh, and president of the German business chamber APA, said, speaking in the presence of Mr. Modi and Ms. Merkel.
•The Prime Minister, who spent several hours on Monday evening speaking to Chancellor Merkel at the official retreat of Schloss Meserberg outside Berlin, was accorded a ceremonial guard of honour at the German Chancery in Berlin on Tuesday morning.
•After an hour of talks in the Inter-Governmental consultations, where he was accompanied by MoS (External Affairs) M.J. Akbar, Energy minister Piyush Goyal, Commerce Minister Nirmala Seetharaman, and Science, Technology and Environment Minister Harsh Vardhan, the two sides announced agreements on cyber policy, railway safety, and the training of Indian Skill Development Officers and Cluster Managers.
•Mr. Modi said Germany has prime place in skilling India’s youth, adding that the two countries are “made for each other”.
•“We are a country of 1.2 billion, with 800 million youth. Germany has the right expertise in engineering, manufacturing, and is excellent in innovations,” he said. Mr. Modi however, sidestepped questions on India’s “protectionist” economic policy and on whether India would maintain its Paris accord commitments if U.S. President Donald Trump pulled out of the climate change agreement. “The question is hypothetical at present,” the MEA spokesperson said.
Vibrant Gujarat summit forced silence on Zika?
Even health workers on prevention operations were not informed of incidence; WHO official expresses disappointment over Ministry response
•For a week, the Union Health Ministry has maintained that the decision to not make cases of Zika public was to avoid panic. However, an investigation by The Hindu reveals that the Vibrant Gujarat Summit “was a factor” in the decision to keep the Zika incidence under wraps.
•The cases in Ahmedabad district were confirmed by January 4, 2017. In just about a week, Prime Minister Narendra Modi’s flagship project to attract foreign investors, Vibrant Gujarat, was scheduled to take place. A travel advisory at this time could have ruined the summit. Two independent sources, one of whom is highly placed in the Health Ministry, confirmed that the investment summit was the reason for covering up the Zika cases.
Intense surveillance
•Soon after a positive case was reported, a team of 250 health workers and entomologists (people who study insects) were summoned to Bapunagar, in the east of Ahmedabad, where the patient lived. The healthcare workers were divided into clusters of 20 to carry out intensified intra domestic (ID) work that involves identifying mosquito-breeding spots and symptomatic patients. The week-long exercise, however, did not mention the word Zika.
•“We were told it was a special campaign for vector-borne diseases like malaria and dengue. The ID activities are carried out throughout the year so we simply followed the orders,” said Dr. Harish Sandariya, medical officer of the Bapunagar Urban Health Centre that was at the epicentre of the action.
•“Even now, I have no idea who the Zika virus patients are. I am only told that two of them fall under my medical boundary,” he said, adding that the secrecy was probably to avoid spreading panic.
•The health officials were not the only people in the dark. The entire district, with population of close to six lakh people, was told that the screenings were for malaria. “The health workers keep coming to put medication in the water tanks to prevent malaria and dengue. But we are not aware about any new disease spread by the mosquitoes,” said Gulshan Bano, 40, a resident of Garib Nagar inside Bapunagar.
•Asked about how the government handled the news about the Zika cases, Dr. Soumya Swaminathan, Director General of the Indian Council of Medical Research (ICMR), said: “In general, for public health interventions, it is best to take the community into confidence. We need to educate people about the risks and present a factual and balanced view.”
Answer in Parliament
•The Health Ministry had submitted in Parliament that, “representative[s] of the State Governments/UTs have been briefed on the action plan. Advisories have been issued to the States for intensification of vector control measures. Travel advisory has been issued,” after confirming one of the three cases reported.
•However, last week, J.N. Singh, Chief Secretary of Gujarat, informed the media that the government, “Consciously did not go public with the cases” as the numbers did not rise.
•Further, the Health Ministry delayed giving data on the Zika cases in Gujarat to WHO’s South East Asia Office (SEARO) for nearly two months. WHO’s SEARO had reached out to the Ministry in March whereas the data was given to them on May 15, and eventually published last Saturday.
•“Going in, the government could not have known that the cases won’t rise. We reached out to the Health Ministry the day that question was raised in Parliament. It took two months to get the data from the government,” said a senior official in WHO SEARO.
•The WHO official added that when the ICMR eventually handed over the information, the facts were out of place. “Their document said that one case each was reported in February 2016, November 2016 and then January 2017. When we published this information last week, the Ministry informed us that the first case in February 2016 was a typo. The handling of information by the Ministry has been disappointing,” the official said.
Precautions ignored
•According to notification requirements of WHO’s International Health Regulations (2005), member states are to brief the international organisation within 24 hours of identifying a case. “The four decision criteria to be used... in assessment of a public health event are: (1) the seriousness of the event’s public health impact; (2) the unusual or unexpected nature of the event; (3) the risk of international disease spread; and (4) or the risk that travel or trade restrictions will be imposed by other countries.”
•We now know that none of these precautions was taken by the Health Ministry as the State-level health officials were also kept out of the loop.
Tissue-matched transplants offer hope to thalassemics
95% success in stem cell transplants from unrelated donors
•Transplantation of a special kind of stem cells found in the bone marrow has been the only curative option for patients with thalassemia major (genetic inability to produce normal, adult haemoglobin leading to severe anaemia). Since only 30-35% of such patients have a suitable tissue-matched donor in the family, a majority of them rely on regular blood transfusions .
•A study at Chennai’s Apollo Speciality Cancer Hospital now gives hope to children who have no related donors. Of the 25 thalassemia major patients, who underwent stem cell transplantation (from December 2012 to November 2016) from tissue-matched unrelated donors, none rejected the donated cells.
•The median age of the patients was five years (between one to 14.5 years). The results of the study were published in Pediatric Hematology Oncology Journal.
•Even when there is perfect tissue match between a donor and recipient, there is a 5-10% risk of rejection of the donated stem cells by the patient’s immune system. Thalassemia patients undergo several blood transfusions and antibodies from several donors remain in the patient’s body and are responsible for rejection.
•While 60% of the children suffered from acute graft versus host disease (a complication that arises when the transplanted tissue is genetically different from the host’s) only two patients died due to this; none suffered from chronic, extensive graft versus host disease.
•“The two patients who died did not have a perfect tissue match,” says Dr. Revathy Raj, Senior Consultant at Apollo Speciality Cancer Hospital and one of the authors of the paper.
•The probability of surviving nearly three years after stem cell transplantation was 95%. The study found that as long as high tissue compatibility between a donor and the recipient is maintained, stem cells from unrelated donors can be used for curing thalassemia major.
Survival rate
•“Our study found that children who underwent tissue matched unrelated stem cell transplantation had the same survival rate as children with a family-matched donor,” says Dr. Raj.
•“Stem cell transplantations from perfectly tissue matched, unrelated donors are done in multiple centres in the country. Results from tissue matched, unrelated donor transplantations are steadily improving and becoming comparable to tissue matched related donors,” says Dr. Vikram Mathews, Professor and Head at the Department of Haematology, CMC Vellore.
•Talking about the caveats, Dr. Mathews says: “These results have to be kept with the risk profile of the patients in mind. Good results can be anticipated in the case of young and good-risk patients and should not be generalised to all patients.”
Cyclone Mora batters Bangladesh coastline
Six killed; millions evacuated and country’s main port shut
•Cyclone Mora that lashed Bangladesh's coastlines, forcing the evacuation of millions of people and shutting the country’s main port and river transport, killed at least six people in Cox’s Bazar and Rangamati before moving to India’s north-east.
•The cyclone, which lashed the coastal belt with a wind speed of 128 kmph and made landfall at around 6:00 am on Tuesday, cut off Kutubdia, Moheshkhali and Teknaf from other parts of the country. Road transportation was affected, phone lines were disrupted, more than 20,000 houses destroyed and hundreds of trees were uprooted.
•The Disaster Management Ministry said that it moved to safety more than 2.5 million people in 10 coastal districts which were most vulnerable to the tropical storm as the Met Office upgraded the cyclone warning to Great Danger No. 10, the highest level. About 18 million people live in 19 coastal districts, 10 of them located in high-risk areas.
Flights cancelled
•The country's main seaport, Chittagong, suspended container handling. All flights from Chittagong’s Shah Amanat International Airport were cancelled from Tuesday morning to this afternoon. The Bangladesh Inland Water Transport Authority or BIWTA has suspended the operations of all river transports.
•Over 15,000 homes were damaged in Cox’s Bazar alone, said local administration officials.
•Nearly 70% homes have been damaged on the Saint Martin’s island, some 9 km south of the tip of the Cox's Bazar-Teknaf peninsula and the southernmost part of Bangladesh. However, no casualty has been reported so far in the area, as residents have already been moved to shelters.
•The government has ordered two navy ships to move to the St. Martin Island with relief materials.
•The Cox’s Bazar district's disaster management office said that more than 200,000 people were moved to the 538 cyclone shelters. The local administration said 88 medical units, 6,010 local volunteers and 15,000 Red Crescent volunteers were kept on standby.
Rohingya camps ravaged
•The cyclone has also ravaged nearly 10,000 thatched huts in Balukhali and Kutupalong camps in Cox’s Bazar district, which were used as camps for the Rohingya refugees from Myanmar. Cox’s Bazar provides shelter for an estimated 200,000 Rohingyas, who fled Myanmar to escape persecution.
•Shamsul Alam, a Rohingya community leader, said almost all the 10,000 thatched huts in the Balukhali and Kutupalong camps had been destroyed in the storm. Omar Farukh, another community leader in Kutapalong camp, said conditions were dire: “Now we are in the open air.”
•An estimated 75,000 Muslim Rohingyas are believed to have fled to Bangladesh since the Burmese army launched an operation in response to insurgent attacks in October last year. When contacted, a UN official working with Rohingya refugees said the damage in the camps could not be assessed instantly.
Thought for food
We need to hasten efforts to prevent food waste, at the consumer household level and in the supply chain
•One of the unfortunate paradoxes of our lives today is that despite adequate food production and unimaginable advances in technology, one in three persons worldwide is not getting enough of the right food to eat and approximately 800 million of seven billion sleep hungry every night. Not surprisingly, this makes poor diet the No. 1 risk factor by far, for the global burden of disease. Poor diets globally are more responsible for ill health as compared with the combined effect of drugs, tobacco and alcohol. Women and children continue to be the most vulnerable, with 156 million stunted children in the world and 40% women anaemic. Add to this the fact that the world adds 200,000 new people to its population every day, of which India adds 58,000. This translates to the need to feed two billion more people by 2050 and to support a higher demand for major crops, estimated to increase by 50%, from 2.5 to 3.5 billion tonnes.
Staying on target
•It is therefore with compelling reason that Target 3 for the Sustainable Development Goal (SDG) 12 is to “halve per capita global food waste at the retail and consumer level, and reduce food losses along production and supply chains including post-harvest losses”. Food loss is valued at $1 trillion globally by the Food and Agriculture Organisation, enough to feed the 800 million who sleep hungry every night. Of this, over 200 million are in India, a country that grows sufficient food to feed its burgeoning population of 1.3 billion.
•The SDGs have clearly put the spotlight on food loss and waste, and we are beginning to see more attentive discussion on the subject. At the recently held Food Congress in Dusseldorf in early May 2017, the focus was on identifying possible solutions for both — through better farming practices, use of technology, better information, change in consumer behaviour, etc. Estimates of “food waste and food loss” range between 30 and 50% for both developed and emerging countries.
•In developed countries “food waste” happens more at the consumer household level, where more is purchased than consumed; and in emerging economies, it is the supply chain that leads to “food loss” during harvest, storage or in transit, largely due to poor infrastructure and inadequately aligned processes. As an example, India’s cold storage requirement is 66 million tonnes, and the national storage capacity currently available is approximately 30 million tonnes. Investment in creating adequate cold storage capacity alone will stem food loss substantially. With increasing wealth, India is, ironically, home to both food waste and food loss.
•In either scenario, food that is produced (using depleting and critical resources such as water) but not consumed is a colossal waste which we cannot afford to ignore. Food loss is also nutrition loss, productivity loss and therefore GDP loss. The 40% food loss in India translates to approximately $7.5 billion, and for a country where agriculture contributes 15% to GDP and employs 53% of the workforce, this is clearly unaffordable.
•These are serious statistics, and unless there is an effort to address food loss factors systemically, the state of health and nutrition of our people will continue to be inadequate, as food loss means loss of macronutrients such as calories, fats, proteins; but even more alarming, it means loss of micronutrients because foods that are rich in micronutrients are also perishable — fruits, vegetables, poultry, fish, dairy, etc. Additionally, with urbanisation and rising incomes, the length of the food value chain also increases, as what people eat becomes less and less connected to where they live.
•The Global Nutrition Report 2016 has highlighted India’s overall tardy progress in addressing chronic undernutrition, manifest in stunting (low weight for age), wasting (low weight for height) and micronutrient deficiency or “hidden hunger”.
•With 17% of the world’s population, India remains home to a quarter of the world’s undernourished people, a third of the world’s underweight children and a quarter of the world’s hungry. This demographic cannot possibly result in a productive and efficient workforce, or be converted into any meaningful economic dividend. The World Happiness Report 2017, which looks at quality of people’s life beyond GDP and per capita income and includes economic variables, social factors and health indicators, has ranked India at 122 of 155 countries. India’s decline in 2014-16, compared with 2005-07, is on account of poor and slow progress on social factors and health indicators.
•Agriculture has to be one of the drivers of India’s growth, and even though we are the world’s third largest producer of food, our agriculture growth has fallen well below the targeted 4% over the last 15 years. According to the International Food Policy Research Institute, India needs to at least double its investment in agricultural research to double farmers’ incomes by 2022. This will not happen only with a focus on rice and wheat — more diversity is needed, with the addition of vegetables, fruits and dairy farming.
•Harnessing technology to increase agricultural productivity, where we lag both our potential and competitive benchmarks will be critical to our overall well-being. As an example, since the 1960s India’s groundwater irrigation has increased dramatically, and since the 1980s groundwater levels have been dropping, thus stressing the system. Groundwater recharge therefore becomes a critical variable to augment agricultural productivity. Further, imports of agricultural commodities have increased from 4% of GDP in 2008-09 to 5.5% of GDP in 2013-14, according to the Economic Survey. Edible oil imports alone in the last year cost us Rs. 65,000 crore ($10 billion). This need not be the case in future.
Dignified quality of life
•To provide even a baseline and dignified quality of life to its people, India has to address enhancing agricultural productivity, crop diversification and eliminating food loss and waste with a firm resolve, backed with the right and timely action. The last must be done on priority as it deals with food already available. So the key question is, how do we minimise food loss given that the government wants this, businesses want this, and people want this?
•There is clearly a structural and behavioural component to this, and the door is open for investment in food system infrastructure: storage, transportation, processing, etc; investment in information systems that help identify loss by crop and region so solutions can be specifically tailored to the problem; use of technology to better connect supply and demand; public-private partnerships with companies to reduce spoilage and loss; creation of food banking networks that work with civil society and development agencies on getting food already available to those that need it. Among the several priorities we have, minimising food loss has the potential to be transformative in multiple ways.
Don’t tax the tiller
Even the net benefit of taxing agriculture isn’t worth the cost of monitoring and rolling out such a system
•For peasants, the Mughal Empire was fundamentally an extractive state; a protection racket run riot. Typically, the land revenue share of a crop varied between 33% and 50%, depending on fertility, with a further 10-25% paid to the zamindar for his efforts. Its replacement by the East India Company and later the British government provided little respite. Zamindars were now granted hereditary and proprietary rights, with the rate of assessment fixed in perpetuity. The Company’s share was often fixed at 2/3rd of the gross produce received by the zamindars from the ryots. The consequences of such land revenue systems were stark — agricultural output grew at just 0.37% per annum between 1891 and 1947, with foodgrains at just 0.11% per annum, while commercial crop output rose by 1.31% annually; meanwhile the population rose at 0.67% annually. The colonial government pushed farmers into heavy debts and eventual pauperisation.
•Post-Independence, the national and State governments sought to redress this. The Agrarian Reforms Committee of 1949 sought a programme of land reforms that would transform the actual tillers into owner-cultivators by a large scale. Instead, a step-by-step approach was adopted to abolish intermediaries, which encouraged zamindars to evict existing tenants instead, pauperising them further. The Central government did its part by seeking to not tax agricultural income, with most States following suit.
Pitfalls in the tax demand
•However, with growth in agriculture rising, a demand for taxing agriculture income has arisen. Agricultural income declared by taxpayers, in returns filed till end 2014, for exemption was at Rs. 9,338 crore, with over 2,746 income tax cases declaring Rs. 1 crore agricultural income in the 2014-15 assessment year.
•The estimated total annual agricultural income from cultivation and livestock, as estimated by the National Sample Survey Office, is at Rs. 4,16,092.5 crore, with the total income of the top bracket at Rs. 16,084 crore and that of the first two brackets, including households with over four hectares, at Rs. 83,433 crore.
•Taxing 9,73,000 large farm holdings having greater than 10 hectares of land earning an average of approx. Rs. 5 lakh annually shall yield about Rs. 1,200 crore of agricultural income tax on varying crop conditions, consequent incomes and applicable tax rules.
•We’ve tried this before. The K.N. Raj Committee on Taxation of Agricultural Wealth and Income (1972) sought to institute a progressive agriculture tax on agricultural income in a norm-based manner, with regional average crop yields defining levy rates in a universal manner. The recommendations were not accepted, given limited political and grassroots support.
•However, there remain significant pitfalls with this demand. Given the level of informal occupation prevalent in agriculture, implementing an agricultural tax will not be easy. Any agricultural tax system would have to evolve crop-specific norms of return to the land, while accommodating external shocks like droughts, floods or pests. Furthermore, for imposing tax on value of goods produced, the mechanism would fail to take individual farm economics into account, thereby presenting a case wherein a farmer would be taxed even if he makes a loss on sale. It shall require administration to ensure exact estimate of crop productivity and realised sale price per crop harvested — a seemingly humongous task for all farmers. Lack of clarity on land titles and cropping patterns based on lease/share-cropping shall further introduce randomness to the system.
•Further complications arise if farmers suffer from multiple crop failures followed by one successful crop, for the income in that period may be subjected for tax payment. Taxing agricultural incomes is an idea devoid of knowledge of farming practices as well.
•Many farmers save seeds from one harvest for the next and the practice remains critical to running Indian agriculture — proposals based on value of goods produced would end up taxing such sustainable practices as well. For tax based on sales, it shall disincentivise farmers to sell through organised formal channels, thereby increasing risk to farmer’s income. Instead of raising agricultural income, we would trend back to age-old farmer pauperisation.
Not worth the effort
•In addition, any crop-specific taxation would have to be traded-off against input subsidies, which are nationally uniform for fertilisers and vary on a State-wise basis for water and electricity. Should input subsidies, assumed to be high at the institution of the crop tax rate, fall in the future, the farmer would effectively lose out on both ends of the value chain. Any crop-specific taxation would have been locally based, with a national crop register not necessarily linked to which crops would be taxed in specific regions or States. The tax rates for the same crop in different regions could be different, inequitably ensuring arbitrage for some farmers.
•Amidst all this, it is hard to determine if there would be net benefit to taxing agricultural revenues, even for rich farmers (defined on local thresholds), compared to cost of monitoring and rolling out such a system. Even a progressively structured taxation system would encourage fictitious ownership splits amongst rich farmers and their relatives. Even assuming a net take of approx. Rs. 1,200 crore, the potential increase in the Central government’s taxation revenues would be increased by about 0.1%, while input subsidies, currently totalling Rs. 35,784 crore in 2016-17, would face significant upward pressure. Is this truly worth the effort?
•Agricultural taxation has historically been considered the third rail of Indian politics. While we harken about improving economies of scale in agriculture, such efforts send discouraging signals to large and medium farmers who seek to increase their produce through utilisation of better techniques, differing crop patterns and more judicious use of agricultural inputs. A nation-state where a farmer can be moderately rich one year and marginally poor the other cannot in good conscience tax their income.
Sino-Pakistan line-up against India
•Using language which appeared to be pregnant with hidden and secret meaning known only to themselves, the Vice-Chairman of the Chinese National Defence Council, Mr. Yeh Chien-ying and visiting Pakistani Defence Minister, Mr. Afzal Rahman Khan, yesterday [May 30] spoke highly of the “significant talks” which had been held between the two sides and the further co-operation which had resulted from Mr. Rahman Khan’s current visit to China. The nature of Mr. Rahman Khan’s present mission is not known but there have been reports that he is in Peking to negotiate an arms deal. Whatever the mission, the indications are that he is having a very successful visit. Speaking at a dinner given by Mr. Rahman Khan in Peking last night [May 30] Mr. Yeh revealed that the Pakistani Defence Chief in meetings with Chinese State and Army leaders had “very friendly and significant talks on questions of interest to both parties thus making contributions to furthering the relations of friendly co-operation between China and Pakistan.” He declared that “no force whatsoever” could disrupt Sino-Pakistani friendship.”
The Kumble factor
A decision on retaining him as head coach must not be muddied with personal agendas
•The Indian cricket team should have been exuding confidence as it begins its title defence in the ICC Champions Trophy in England from June 1 to 18. It comes off a long and successful season at home, and in the normal course of things the buzz would be about India’s match against Pakistan at Birmingham on June 4, given how rarely the traditional rivals play each other these days. However, all is not right in the dressing room, and there is distracting speculation about an imminent change in leadership. It started with the Board of Control for Cricket in India calling for fresh applications for the head coach’s post since the incumbent, Anil Kumble’s one-year contract will end after the Champions Trophy. The BCCI clarified that Kumble would have a direct entry for the process, but the last-minute scramble, just as Virat Kohli’s men landed in England, raised questions. There had been enough time for the Board to take a call on the head coach, whether it meant retaining Kumble or opting for a new candidate. It did not come as a surprise, therefore, when leaks surfaced about Kumble seeking a higher pay package for the Indian players and support staff. Disgruntled BCCI officials painted Kumble as a man extracting his pound of flesh, and the anti-Kumble campaign was sharpened with suggestions that Kohli is not comfortable with his “overbearing” ways.
•Such talk about differences between coach and skipper does nobody any good. Whatever be the nature of their alleged differences, the Kumble-Kohli combination has delivered excellent results. While there could be the odd difference of opinion, on the field it is entirely the captain’s call on how to guide the team. Last year in the West Indies, when Kohli preferred Rohit Sharma over Murali Vijay in the third Test at Gros Islet, Kumble backed his decision. Victory in the West Indies and a golden run at home against New Zealand, England, Bangladesh and Australia are a testament to Kumble’s and Kohli’s man-management skills and a validation of the talent within the ranks. The unsavoury tidbits planted in the media about Kumble are a terrible contrast to the can-do spirit with which he took charge as coach in June 2016. Now, the Cricket Advisory Committee comprising Kumble’s former team-mates Sachin Tendulkar, Sourav Ganguly and V.V.S. Laxman has an unenviable task. They have to sift through fresh applications, besides having to assess Kumble’s performance, and then take a call on who should be the head coach. Positions of authority in cricket teams usually have a four-year cycle coinciding with the World Cup. Ideally, the next head coach, be it Kumble or somebody else, should be given a contract till the 2019 World Cup in England. The focus must be on the demands of cricket.
Indian banks’ bad loans may rise to 15% by March 2018: S&P
Lenders may need to take large ‘haircuts’ on loans to unviable stressed projects
•Indian banks’ stressed assets are likely to increase to 15% of total loans by March 2018 even as their regulatory capital requirements will continue to rise till 2019, S&P Global Ratings said on Tuesday.
•Indian banks’ credit profiles are unlikely to improve over the next 12 months, said S&P Global Ratings in a report titled ‘No Quick Cure for India’s Banking Blues’.
•The banking sector’s total stressed assets will increase to 13-15% of the total by the end of March 2018 with PSU banks accounting for most of those loans, S&P Global Ratings’ credit analyst Deepali Seth Chhabria said.
•“The performance of the S&P-rated public sector banks that we rate was dismal in the March quarter of the last fiscal. Year-over-year increase in non-performing loans (NPLs) led to higher provisions and lower profits and the capital available to absorb unexpected losses remained thin,” S&P Global Ratings said.
•Besides, loan growth was among the lowest in a decade. “India’s public sector banks will have to continue to rely on external capital infusion to meet the Basel III capital requirements, or sell off their non-core assets or investments,” Ms. Chhabria said.
•The report said PSU banks operate with a thin capital cushion.
•In addition, they may be required to take large “haircuts” on loans to unviable stressed projects, the regulatory capital requirement will continue to rise till 2019 and profitability will remain subdued.
•Capital shortfall
•The government has promised to infuse Rs. 70,000 crore into its PSU banks over 2016-2019 with Rs. 10,000 crore allocated for fiscals 2018 and 2019 each. “In our view, these amounts will not be sufficient to fully resolve the public sector banks’ looming capital shortfall,” S&P said.
•It said capital shortfall and asset quality problems could pave the way for consolidation among the government-owned banks.
