📰 On another New Year’s Day: Mahatma Gandhi's 'khorak' a 100 years ago
A century ago, an agenda was spelt out for India — it is as valid today as it was then
•One hundred years ago this day, on January 1, 1918, Mohandas K. Gandhi was in Ahmedabad. And — no surprise here — he addressed a meeting of residents in that city. One would imagine the meeting was about the Great War that was coming to an end or the battle for Swaraj which was just beginning under his leadership. But no, it was about – and again no surprise — something entirely different.
Three necessities
•It was about securing three basic necessities which he spelt out as: “Air, water and grains.” He spoke in Gujarati and his key sentence was: Hava pani ane anaj e khorakna mukhya tattvo chhe (air, water and grains are essential to human nourishment). If Swaraj, he said, means self-rule, then securing these three khorak means securing Swaraj. Explaining himself with typical concision, Gandhi said: “Air is free to all but if it is polluted it harms our health… Next comes water… From now on we must take up the effort to secure water. Councillors are servants of the people and we have a right to question them.” On the subject of grains, he spoke with action, not just words. In a parallel initiative on the same day, he got the Gujarat Sabha, of which he was president, to write to the Bombay government to exempt in some cases and postpone in some others land revenue assessment due to the failure of crops in Kheda district.
•Air, water and grains were the triple khorak of a people in Swaraj. This was the essence of his address.
•On this, the first day of 2018, if we were to take, with great difficulty in Delhi and less so elsewhere, a deep breath and look ahead on where we stand on Gandhi’s first khorak point, namely, clean air, or on atmospheric pollution, we would we find, first, that India today is among the world’s largest carbon emitters, following China, the U.S. and the European Union, is hurting itself by the global rise in extreme climate events and water and food crises. Second, that having ratified the non-binding Paris Agreement on climate change, India has undertaken a huge moral responsibility in terms of reducing the emissions intensity of its GDP by 33-35% by 2030 from 2005 levels, changing over from coal-based generation to renewable energy sources and, increasing the annual target of forest cover. Third, and the most stark, with the U.S. pulling out of the treaty, the financial aid for the follow-up expected from developing countries is in jeopardy. This makes default and deficits in follow-up a distinct possibility. We need to ask and need to know how equipped we are to meet our commitment to the Paris Agreement. The outlook, as we enter 2018, for India’s commitment to the Paris treaty is fraught.
Running dry
•The scene on the second khorak, water, is even more worrisome. For millennia India has lived from monsoon to monsoon. But now, the relentless thirst of 1.3 billion Indians for water — domestic, agricultural, industrial, ‘construction’ — has turned our land into one giant groundwater sieve. Technically renewable, our groundwater as a resource is hopelessly overdrawn. Per capita availability of water in India dropped from 6,042 cubic metres in 1947 to about 1,545 cubic metres in 2011. Today the figure should be much lower, and by 2030, India’s water scarcity will have reached alarming proportions. Are we — the peoplehood of India — who form the stakeholders in our water resources really aware of this? We are not. The rock-hard fact is that the National Water Mission’s efforts notwithstanding, we are dangerously water deficient and deplorably water iniquitous. Water-profligacy by a few contrasts with the water-inadequacy of the many. And water, or the lack of it, is the cruellest of these. Scarce water is also about unsafe water, and it is estimated that 21% of communicable diseases in India are caused by poor and un-overseen water supply. A significant percentage of our waste water, it has been estimated, is discharged raw into rivers, lakes. Will this new year, 2018, see someone, anyone, from government or our polity scream a warning about our water peril? Most unlikely.
•Gandhi’s third 1918 khorak — grain — is in dire distress. Behind the dispossession caused by the real estate mafia and corporates, the corrosive impact of cash-cropping and shrinking of timely credit lines is a deepening gloom over output costs and minimum support prices (MSPs), of which farmer suicides are chilling testimony. The five reports of the National Commission on Farmers that M.S. Swaminathan chaired consolidated his warnings and his recommendations. It has been deeply disturbing to hear him urge implementation of his recommendation on the MSP. In a plangent comment powerfully reminiscent of Gandhi, he has said, “The future will belong to nations with grains, not guns.” P. Sainath has been speaking of the agrarian crisis with unflagging zeal. Aruna Roy’s Mazdoor Kisan Shakti Sangathan and Yogendra Yadav’s Swaraj Abhiyan have done likewise. The Kisan Sabha has remained an inspiration for the cause and the energy brought to the farmers’ agitation in Maharashtra by Yashwant Sinha’s espousal of their demands has been salutary. And yet, looking into just the twelve months ahead of us, I cannot see any helpline to India’s lifeline, agriculture.
•While these three essential khorak essential for India to ‘simply live’, as Mr. Sainath has put it, struggling for breath, what are we getting instead, and on a priority? Three other khorak: the hava of intolerance, the pani of polarisation and the anaj of uniformity. And why? Because these distract, they divert attention from the real life-and-death crises. Intolerance, blowing strong since 2014, is likely to blow stronger in 2018. Polarisation, tried and tested in the 2014 election, then fielded formally in Assembly elections in Uttar Pradesh and Gujarat, is likely to be tried with greater impunity in the elections due in 2018. And as for uniformity, the India of many-grained people, all secure in their plurality, is now being dispossessed by an India which believes in codes being uniform rather than civil. To stand in line, sit in postures, speak in chants, sing in tune is to be uniformly patriotic. To make Muslims self-conscious at Eid, Christians nervous at Christmas is to be systematically patriotic. And notwithstanding the lessons of history, to host Israeli Prime Minister Benjamin Netanyahu is to be more than patriotic. It is to be mightily patriotic.
The right to question
•Gandhi spoke of Swaraj’s three basic khorak. But he also gave, in the same 1918 speech, a fourth khorak for Swaraj. And that lay in his words, “we have a right to question.” This fourth khorak extended to political rights, social and economic rights. And very specifically, it led that year, 1918, to the Kheda peasants satyagraha. Looking ahead in 2018, it seems quite clear that after about four years of cowering, the right to question is reviving in India. The democratic opposition is more confident than before of overcoming the fume of fear that had all but choked it. The emphatic improvement in the Congress’s seats share in Gujarat is a sign that the fourth khorak — the right to question — can make our democracy breathe the hava of Swaraj again. I see 2018 confronting the behemoth of majoritarianism with increasing success.
•The PIL (public interest litigation) and RTI (right to information) methods, combining with electoral turnarounds, can well make 2018 lead to 2019 becoming the kind of year 1919 was — a year when India, Hindu and Muslim together, gave the British Raj a taste of India’s Swaraj.
📰 For a wider pool: clinical trials and the burden of volunteering for them
The burden of volunteering for clinical trials must not fall only on the poor and vulnerable
•Clinical trials involving human subjects have long been a flashpoint between bioethicists and clinical research organisations (CROs) in India. Landmark amendments to the Drugs and Cosmetics Act in 2013 led to better protection of vulnerable groups such as illiterate people, but more regulation is needed to ensure truly ethical research. While CROs have argued that more rules will stifle the industry, the truth is that ethical science is often better science. The big problem plaguing clinical research is an over-representation of low-income groups among trial subjects. Sometimes CROs recruit them selectively, exploiting financial need and medical ignorance; at other times people over-volunteer for the money. Such over-volunteering occurs more frequently in bioequivalence studies, which test the metabolism of generics in healthy subjects. Because these subjects are well-paid, and get no therapeutic benefit, their only reward from the trial is financial. This results in an incentive to lie about one’s medical history or enrol in multiple trials to maximise one’s income.
•Such deception is a risk not only to volunteer health but also to society, because it can throw off the trial’s results. In recent years, several Indian CROs were found by European drug regulators and the World Health Organisation to be fudging bioequivalence data. While such duplicity by a CRO is likely to be found out, volunteer deception, which can impact data as greatly, can slip under the radar. Unsafe drugs can make their way into the market as a result, or safe drugs can get rejected. This is why volunteer honesty is paramount. But how can regulators ensure this? One potential solution is a national registry of trial volunteers, which will alert a CRO when someone signs up for two studies simultaneously. But this will need work, because volunteer privacy cannot be compromised. So regulators need to create a system that anonymises each participant’s data. Another option is to pay volunteers less, taking away the financial incentive to fudge their participation history. But this measure, in isolation, would reduce trial participation dramatically: an unacceptable side-effect because clinical trials are essential to drug research. A third, more sustainable solution is to encourage a wider cross-section of society to participate in research on human subjects. Society at large must realise the valuable service that clinical research subjects perform by making drugs safe for the rest of us. It is imperative that this burden not fall completely on the vulnerable groups. Instead, the educated and affluent, who have greater access to the drugs that emerge from clinical research, must grasp the criticality of this research and pull their weight. Selectiveness in recruiting subjects for clinical trials leads not only to human rights violations but also to bad science. Civil society’s vigilance is vital.
📰 The liberation of Goa
How Nehru defied the U.S. and used force against the Portuguese
•While Jawaharlal Nehru advised the U.S., the then Soviet Union, and other big powers to abjure force and work towards disarmament, he was himself faced with a dilemma in 1961: whether or not to use force to liberate Goa. It was an agonising decision for a person who adopted the Gandhian approach in international affairs.
•After Britain and France left India, it was expected that Portugal would leave too. But Portugal refused. Emphasising that it had been in Goa for centuries, Portugal said that the Goan Catholics would not be safe if it left. Portugal conveniently overlooked the fact over 60% of Goans were Hindus, and many Goan Christians, like the editor Frank Moraes, had a place of honour in Indian public life. Compared to only two lakh Catholics in Goa, there were five million Catholics living peacefully in secular India. Geography, language and nationality bound the people of India with the people of Goa. It was natural that Goa, which had seen a long indigenous freedom movement, should be a part of India.
•In the rest of India, people began demanding that Goa be liberated forcibly. In 1955, a satyagraha was launched by the communist and socialist parties for the freedom of Goa. When the satyagrahis entered Goa, the Portuguese opened fire, killing 20 Indians. Nehru imposed an economic blockade, but was not prepared to go further. He hoped that the popular movement in Goa and the pressure of world public opinion would force the hands of the Goan authorities.
•It was in 1957, in a letter to Vinoba Bhave, that Nehru first hinted at the possibility of military action. The Goan question came alive when Portugal paid no heed to a UN resolution of December 1960 asking it to indicate when it would grant independence to its colonies in Asia and Africa. In December 1961, Portuguese soldiers in Goa fired at villagers.
•Finding that his policy of patience and adherence to international ethics had not yielded results, Nehru decided to free Goa by force. Though advised by American President John F. Kennedy, British Prime Minister Harold Macmillan and UN Secretary-General U Thant to postpone action, Nehru made up his mind. On December 18, after a long-drawn fight against Indian troops, the Portuguese gave up resistance. The Governor General of Goa, Vassalo e Silva, signed a document of unconditional surrender.
•The Western media assailed the action as a display of “Indian hypocrisy”, which represented a breach of international law by a nation that professed non-violence. Though the liberation of Goa by force raised the prestige of the government in India, it adversely affected Nehru’s international image, but only briefly. Kennedy told B.K. Nehru, India’s ambassador to the U.S., that after taking military action in Goa, Nehru may not be able to talk of non-violence as he did before. But Kennedy came to India’s rescue in India’s 1962 conflict with China.
📰 Reality bites Britain: the Brexit question
With phase one of negotiations over, the most crucial questions of Brexit will have to be addressed in 2018
•If 2016 was the year of hubris for Brexiteers, and despair and anger for those who voted to remain, 2017 was a year of reality checks. In the past year, it became clear that many of the lavish promises of the Leave camp could never be fulfilled, such as the suggestion that health-care funding would rise dramatically (one of the now infamous pledges of the Leave campaign was that £350 million a week would go towards the National Health Service instead of the European Union). Initial hopes that Brexit could be thwarted, or fundamentally altered, after the government was required to gain approval from Parliament following a legal challenge in the Supreme Court have dwindled somewhat. The government was able to plough ahead with pursuing its vision of a post-Brexit Britain — out of the single market and out of the customs union — despite strong and spirited opposition in Parliament and beyond. To date, both the Conservatives and Labour remain committed to delivering Brexit, in one form or another.
The end of a crucial phase
•It would be hard to say who came out on top of the debate by the end of the year: the Brexiteers or their critics. The government made much of the fact that it technically made it through the first phase of Brexit negotiations, on Britain’s exit terms, before the year ended. Europe had all along said that talks on the future trade relationship could not begin until this crucial phase was over. However, it is far from a comfortable victory for Britain. Promises were made with ease, only to be unfulfilled. Foreign Secretary Boris Johnson’s contention that Europe could “go whistle” when it came to the “divorce bill” proved to be the bravado that most had suspected it was: Britain will pay €40-60 billion to leave the EU.
•Then there was the “Irish problem” — how to resolve having no hard border between the European nation of Ireland and Britain’s Northern Ireland while still leaving the customs union, and not having any major legislative differences across the U.K. The contentions of Brexiteers that the warning of the scale of this problem was mere scaremongering also proved inaccurate. In their statement setting out the agreement in the first phase, European leaders warned that though progress had been made on this issue, much remained unresolved. The extent of the power wielded by the Democratic Unionist Party of Northern Ireland, which is propping up the Theresa May government, became clear after it initially torpedoed an agreement on the Irish issue, over plans for different rules for Northern Ireland and the British mainland. It has insisted on constitutional, legislative and regulatory uniformity across the U.K.
•Until recently, leading members of the Leave movement within the government had been insisting that Brexit in its key aspects — including the end of the freedom of movement, despised by many in that camp — would end in March 2019, two years after Britain triggered Article 50. However, British industry cannot manage without a transition period, and Europe is insistent that a transition phase can only exist if Britain continues to meet its EU membership obligations, including around freedom of movement and the remit of the European Court of Justice and European regulations. These regulations include laws brought in after Britain left the union. In addition, Europe’s chief negotiator Michel Barnier ruled out earlier this month something that many had been holding out for: special terms for Britain’s financial services sector, including so-called passporting rights that would have given Britain the ability to continue business unhindered within the union.
•All in all, the negotiations are a far cry from what one Cabinet Minister described this summer as the “easiest in history”. While Brexiteers continue to maintain their optimistic stance, a certain level of caution has begun to imbue the negotiations at a formal level. According to the agreement with the European Commission, if a final deal with the EU is not reached, Britain will maintain “full alignment” with the rules of the European internal market and customs union. This would prevent a hard border in Northern Ireland, potentially leaving the door open for effectively remaining in the customs union and single market. The commitment has raised the hackles of many in the Leave camp, who have warned that such a move could effectively make Britain a rule-taker.
A crucial year ahead
•While Britain has progressed along the path to Brexit, 2018 will be the year when the most crucial questions will finally have to be addressed, away from rhetoric and bravado. What does “taking back control” mean, particularly when one option would leave Britain effectively following European rules without having a say? Other critics have pointed to the timidity with which Britain has broached controversial governments — from the U.S. under Donald Trump to Saudi Arabia — arguing that in its eagerness to establish post-Brexit trade deals, it is willing to put fundamental values on hold, and forgo the global leadership role it had once touted.
•Britain in 2018 will also have to address one of the most contentious issues: immigration from within and outside the EU. Ending free movement is one of the issues on which the government has been most stubborn, arguing that it was one of the main takeaways of the referendum. But its stance has sparked fear in many industries — from the creative to agriculture, from banking to construction. There are also concerns for the National Health Service — Britain has seen an exodus of European nurses and midwives since the Brexit vote. Finding a solution that satisfies both industries as well as the “hard” wing of the Leave camp will prove a major challenge for the government.
Context of CHOGM
•The Commonwealth Heads of Government Meeting (CHOGM), which is scheduled to take place in London in April, and which will bring together leaders from across the world, including Prime Minister Narendra Modi, will also force Britain to further confront reality and spell out what it really wants from Brexit. It has posited the Commonwealth as one of the routes for its future trading ambitions. But without concessions on immigration — in particular, the movement of professionals, especially in the IT sector — it’s hard to see how such a plan can counterbalance the inevitable losses to trade that will follow Brexit. Prime Minister May’s visit to India in 2016 highlighted the difficulties of its approach, but it was possible for Britain to brush aside the issue to a certain extent. With Brexit looming less than a year after the CHOGM meeting, this will be much harder this time round.
📰 Israel-Palestine issue: We can count on India for support to two-state solution, says Jordanian Foreign Minister
•The Jordanian Minister of Foreign Affairs Ayman Safadi was in Delhi for bilateral talks ahead of a planned visit by Jordanian King Abdullah II, his first since 2006. In an exclusive interview to The Hindu during his visit, Mr. Safadi says India can play an important role in the Middle East (Israel-Palestine) peace process.
There is a sense that India-Jordanian ties have not kept their promise from a decade ago. Would you agree?
•The potential is enormous, and we have not lived up to it. Yes, trade is more than $2 billion, but most of that comes from trade in a few items like potash and phosphate and we would like to diversify. Jordan could be a market and would welcome investment from Indian companies, including in ICT, infrastructure and energy. His Majesty is looking forward to his visit in early 2018, as soon as possible, and we hope to create momentum to put us on a fast track of ties.
You spoke of opportunities, but equally Jordan is in a region in turmoil. Jordan itself houses millions of refugees from Palestine and Syria. How will this change in 2018?
•For us, the core issue remains the Palestinian-Israeli conflict and there cannot be peace and stability in the region without a resolution to the conflict on the basis of a two-state solution that would allow an independent sovereign Palestinian state with Occupied (East) Jerusalem as its capital, on the lines of the 1967 situation, and that would allow a peaceful Israel as well. We want every country to support this. India has always had a very clear position in favour of a just, lasting peace, and we encourage India to be more engaged and would like to see more of an Indian role [in the peace process].
During Prime Minister Narendra Modi’s visit to Israel, the government said it was now de-hyphenating its relations with Palestine and Israel. Do you think it can still pay the role, you mentioned, in the peace process?
•India has always stood on the side of justice, and that has always helped us in the peace process. The vote at the UN General Assembly [on Jerusalem] was a reaffirmation that India stands by the principles it has held through all these years of conflict. We value India’s role. It is not for us to judge its foreign policy, and India is a great and sovereign country, which will make decisions in the interests of its people. But we know we can count on India’s support for peace and the two-state solution, which is the only path to peace.
At the beginning of the Syrian crisis, Jordan was among the countries that provided shelter, and even training and funding to the ‘moderate opposition’ to the Assad regime. Over time, Daesh(Islamic State) drew its fighters from these very groups. Do you think, at hindsight, it was a mistake to arm and train them?
•None of the Daesh fighters was trained in Jordan. Yes, Jordanian fighters did join Daesh, but that is a phenomenon across the world, and especially the Arab and Muslim world. Ultimately Daesh was able to exploit the suffering of the Syrian people and exploit their pain to further its own agenda of hate. It has been seven years now, and all of the need to pause and ask whether we dealt with the crisis in the right manner. Ignorance is Daesh’s best ally, and that is why we need to provide better education, to cleanse our textbooks and public discourse of hate speech. We cannot have double standards. We all must fight a narrative that seeks to create divide on race, religion and gender.
Does that extend to where India sees its threat, i.e. on terror groups based in Pakistan? In striking a balance in the region, would you in Jordan have difficulties bettering ties with India given close ties with Pakistan?
•When it comes to terror, we are unequivocal, and we have rejected terror in all its forms. Jordan has also been consistent in calling for all states to resolve their differences and stand up to terrorism, which is the enemy of us all. In terms of India-Pakistan relations, Jordan has good relations with both countries, and what we would like to see is the two countries being able to resolve their differences and build a peace that Indian people and Pakistani people deserve.
Two years ago, India objected to the U.S. decision to sell F-16s to Pakistan, citing its support to terror groups that target India. Subsequently, Pakistan sought second-hand F-16s from Jordan. Has India raised this with you?
•I am not aware of this, and I have no comment on the issue. We have good ties with both countries [India and Pakistan] and we would like to build on those ties.
📰 Incidents of Maoist violence reduce in 2017, govt. data show
Officials say the decline could be due to attrition of cadres or Maoists' strategy to lie low
•For the first time in more than a decade, in 2017 the incidents in left-wing extremism (LWE) affected States remained below the 1,000 mark.
•A senior official of the Union Home Ministry attributed the decline to “attrition of various level cadres of Maoists” and the other to the possibility of Maoists “deliberately lying low.”
•According to Home Ministry data, 851 incidents were reported till December 15 in 2017, compared to 1016 incidents during the corresponding period last year. The total number of incidents in 2016 was 1048.
•The violent incidents in the 10 LWE-affected States have always been above the 1,000 mark, with 2,258 the maximum number of incidents reported in 2009. The most incidents were reported from Chhattisgarh (353) and Jharkhand (240).
‘Not attracting recruits’
•K. Vijay Kumar, Senior Security Adviser, MHA said, “First of all, youths are no more enamoured to join the Maoists which has led to the attrition in cadres at all levels. They are not getting even 50% of the recruits they got earlier. The other reason could be strategic: to lie low.”
•Mr. Kumar said several instances of top Maoist leadership siphoning off money and running extortion rackets has also attributed to their decline.
•“Nothing happened in a year’s time. In 2004 when all Maoist organisations merged, for two years they planned many attacks. By 2010, maximum attrition took place and from there on there has been a steady decline,” said Mr. Kumar.
•The Border Security Force (BSF) deployed for anti-Maoist operations apart from the Central Reserve Police Force (CRPF) established base at four new locations in Odisha and Chhattisgarh.
•The BSF established a camp at Kartanpalli in Malkangiri in Odisha and at Charre-Marre, Kanhargaon and Jaal Top in Kanker district of Chhattisgarh.
‘Leaders ailing’
•A senior Home Ministry official said the top Maoist leadership was ageing and many suffered from ailments.
•The recruitments were also at an all-time low as security forces had penetrated many territories in the past decade. The earlier reports of Muppala Lakshman Rao alias Ganapathi, the elusive head of the banned CPI (Maoist) making way for his second-in-command and chief of the Central Military Commission (CMC) Nambala Keshav Rao alias Basavraj were not found to be correct.
📰 Mission to ‘touch’ sun on NASA’s 2018 list
Parker Solar Probe to be launched
•NASA is turning 60 in 2018 and the agency is looking forward to launching a slew of important missions in the coming year, including one to “touch” the sun.
•NASA’s Parker Solar Probe is scheduled for launch in 2018 to explore the sun’s outer atmosphere.
•The probe will use Venus’ gravity during seven flybys over nearly seven years to gradually bring its orbit closer to the sun.
•The Parker Solar Probe will perform its scientific investigations in a hazardous region of intense heat and solar radiation.
•The primary goals for the mission are to trace how energy and heat move through the solar corona and to explore what accelerates the solar wind as well as solar energetic particles.
Mars fleet
•In 2018, NASA will also add to its existing robotic fleet on Mars with the InSight lander designed to study the interior and subsurface of the red planet.
•The U.S. space agency’s first asteroid sample return mission, OSIRIS-REx, is scheduled to arrive at the near-Earth asteroid Bennu in August 2018, and will return a sample for study in 2023. A survey satellite to search for planets outside the solar system is also to be launched.
📰 Finance Ministry asks PSBs to consider selling, swapping loan assets
‘Exhortation aimed at strengthening balance sheets weakened by NPAs’
•The Finance Ministry has asked public sector banks (PSBs) to explore options for selling and swapping of loan assets with other lenders with a view to strengthen their balance sheets.
•Depending on their competencies, banks can look at opportunities to buy or swap loan assets, sources said, adding this was one of the issues discussed during PSB Manthan last month.
•Swapping and selling assets will help banks focus on their core competencies and trim their burden.
•For example, if a bank has expertise in lending to small and medium-sized firms, it can swap its retail loan portfolio with another bank that is good in the sector, sources said. In order to increase credit availability to small businesses, the Finance Ministry has also asked PSBs to open micro, small and medium enterprises (MSMEs) intensive branches.
•MSMEs, which are a huge employment generator in the country, contribute 40% of India’s manufacturing. Besides, banks were also advised to strengthen cluster-based lending, people aware of the development said, adding that branches would help in channelising loans to the sector which is an engine of growth.
Cluster focus
•As many as 50 clusters have been identified for enhanced access to financing, sources added. Small Industries Development Bank of India has revamped the udyamimitra.in portal, so that banks compete for financing MSME projects.
📰 ‘Participation of wilful defaulters may weaken IBC’
Right of a defaulting firm’s promoter to bid is a moot point
•The Lok Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2017 last Friday. However, we are likely to witness a wave of demands seeking to allow failed promoters to participate in the bidding and resolution process of their respective firms.
•The Corporate Affairs Ministry has asked stakeholders to share their views on these issues by January 10. The IBC was enacted in 2016 to find a time-bound resolution for ailing and sick firms, while protecting the interests all stakeholders, including creditors. A successful completion of the resolution process was expected to help stem the rise of bad loans in the banking system. The new amendments are a part of the ordinance that was brought in last month.
•The Bill prohibits wilful defaulters, promoters or management of the company, if it has an outstanding non-performing debt for over a year, and disqualified directors from submitting a resolution plan in case of defaults. It also bars the sale of property of a defaulting firm to such persons during liquidation.
•Under the Code, initially, existing promoters could also bid and participate in the resolution process. However, through the said ordinance, the government banned them from participating in the process. This particular clause aims to prevent a backdoor entry for errant promoters to retain control of the company and reduce their debt at the same time.
•Recently, several interested parties represented to the government seeking a removal of this ban. There is a view that by having a blanket restriction on promoters participating in the bidding process, the valuation of the company may be affected as the promoter knows the business and the company’s potential the best. While restrictions were imposed to avoid misuse, they feel it should not be a blanket ban but should have safeguards.
Price discovery
•“The amendment was a little harsh,” said Dhanraj Bhagat, partner, Grant Thornton India, adding it did not distinguish between genuine promoters with no intention to default and wilful defaulters. According to him, “there is a strong case for promoters to bid for these assets to ensure maximum price discovery that only benefits all stakeholders.”
•Not everyone agrees. “Corporate defaulters got ample opportunity to resolve their debt issues under several schemes announced by the RBI,” said Thomas Jacob, director, South Indian Bank. “However, they failed to settle it. Why should we give them another opportunity?” he asked.
•The role of the IBC in the present scenario is to remove delays in the resolution process. However, even if proceedings for such cases are completed within the stipulated 180 days, the recovered amount will only be a fraction of the original value of assets. So, the ‘haircut’ will be quite substantial. The silver lining is, banks can recognise profits out of collections made through IBC in cases where a large portion has already been provided for.
•Also, a vigil is still required, said Mr. Jacob, to prevent ‘unscrupulous promoters misusing the provisions of the IBC to retain control of their company through benami transactions’, even as substantial sacrifices will be made by banks.
•“Bankruptcy laws are an essential part of protecting creditors’ rights. They also help the markets flush away inefficient businesses and reallocate capital to efficient businesses,” according to K.M. Jayarao, executive VC, Ambit ARC.
📰 Why is the fiscal deficit widening?
•The government’s fiscal deficit up to November came in at 112% of the amount budgeted for the entire financial year ending in March, prompting a number of commentators to predict that the government would miss its target for the year.
What does it mean?
•The government missing its fiscal deficit target for the year means that either the revenue it collected fell short of projections, or that its expenditure was higher than planned. The data from the Controller General of Accounts shows that the government’s expenditure seems to be on track. That is, it has spent 68.9% of the amount budgeted for the year, with four months remaining. In other words, it has 31% of its budgeted expenditure left for the remaining 25% of the year.
•The revenue side, however, seems to be where the issue is, at only 53% of the full-year target. Looking deeper, the data shows that the government’s non-tax revenue, at only 36.5% of the year’s target, is lagging behind last year’s performance, where it had earned 54.2% of that year’s non-tax revenue target by November.
Are there any other factors at play?
•A few days ago, the government announced that it would be borrowing an additional ₹50,000 crore during the remaining part of the financial year. While it was assumed that this would lead to a slippage in the fiscal deficit, the government was quick to explain that this would not happen. In its statement, it explained that the additional borrowing would be offset by trimming down the collections from its Treasury Bills.
So, what was the actual effect?
•While the effect of this extra borrowing on the fiscal deficit is yet to be determined, the news certainly had an effect on the bond market. According to news reports, the benchmark 10-year bond price fell to a nearly 17-month low, pushing its yield up by as much as 17 basis points. According to analysts, the bond market is still uncertain about the quantum of borrowing the government will do by the end of the financial year.
What is the government’s view on this?
•Following the release of the October data, which showed the fiscal deficit at 96% of the full year’s target, the Chief Statistician of India, TCA Anant, had said that there was no need to worry and that the fiscal deficit was bound to go up during the year before coming down again towards the end. The main reason for this, he said, was the fact that the government had brought forward the date for the presentation of the Budget. Because of this, the government has been able to smoothen out its expenditure across the year, with more being spent in the first half of the year than was previously possible. At the same time, the revenue profile of the government in terms of direct tax has remained more or less the same.
Is a slippage such a bad thing?
•According to former Chief Statistician Pronab Sen, even a 0.5% slippage in the fiscal deficit would be okay as long as it is being driven by an increase in expenditure on developmental activities such as rural roads, irrigation, and low-cost housing.
•Even though ratings agency Moody’s recently upgraded India, it did say that it would be tracking the fiscal situation, so any significant slippages could result in a downgrade in the future.
