The HINDU Notes – 12th February 2018 - VISION

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Monday, February 12, 2018

The HINDU Notes – 12th February 2018






📰 India, UAE to deepen strategic ties, counter terror

Two countries to hold naval exercise as maritime security becomes a crucial domain of cooperation focussing on Indian Ocean and the Gulf region

•India and the UAE will hold a bilateral naval exercise, the External Affairs Ministry announced on Sunday.

•The declaration came during Prime Minister Narendra Modi’s discussion with the leadership of the Gulf country with both sides agreeing to deepen the strategic partnership and counter terrorism in “all forms”.

•“The two leaders welcomed the decision taken during the latest round of JDCC [Joint Defence Cooperation Committee] held in New Delhi in December 2017 to conduct the first bilateral Naval Exercise during 2018,” a press statement from the Ministry said. It explained that maritime security would be a crucial domain of India-UAE cooperation focussing on the Indian Ocean and the Gulf region.

•The Hindu had earlier reported that the naval exercise, is likely to take place in March off the coast of Abu Dhabi. Apart from the announcement for joint maritime cooperation, Prime Minister Modi and the Crown Prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al Nahyan, expressed joint commitment against tackling terrorism and threats to stability in the region.

Double standards

•Making common cause against international terrorism, a joint statement issued at the end of Mr. Modi’s discussions with the hosts said, “The two sides deplored the adoption of double standards in addressing the menace of international terrorism and agreed to strengthen cooperation in combating terrorism both at the bilateral level and within the multilateral system. The two sides resolved to continue working together towards the adoption of India’s proposed Comprehensive Convention on International Terrorism in the United Nations.”

•Apart from a common intent to fight terrorism, both sides affirmed partnership on the cyber front and declared that joint research and development centres of excellence to fight cyber threats will be expedited.

•Both sides also reviewed contribution from UAE’s sovereign wealth fund ADIA (Abu Dhabi Investment Authority). “Prime Minister Modi welcomed ADIA’s participation in India’s National Infrastructure Investment Fund as an anchor investor and welcomed DP World’s agreement with NIIF to create a joint investment platform for ports, terminals, transportation and logistics businesses in India,” the MEA said in its statement on the visit, which also witnessed a landmark concession to an ONGC-led energy consortium by ADMA-OPCO in lower Zakum oil fields of UAE.

📰 Let the chips fall where they may

New Delhi has very little moral, legal and political locus standi to justify an intervention in the Maldives

•Dealing with the unfolding political drama in the Maldives requires a great deal of craft, patience and diplomacy. Not force. More importantly, restoring democracy and civil liberties in Male, or anywhere else in the region, should not be our business. It’s for the islanders there to do that as they deem fit. And yet, New Delhi must look after its strategic interests in the increasingly chaotic Indian Ocean Region. The success of Indian diplomacy would lie in striking the ‘Goldilocks’ balance in dealing with Male; neither too hot nor too cold.

India’s Male dilemma

•Ever since Abdulla Yameen Abdul Gayoom became the President of the island nation in 2013, the country has grown closer to China, and has consistently used the oldest trick in the playbook of small states: playing big neighbours against each other, to get what it wants. In 2012, for instance, it cancelled an Indian firm’s contract to expand Male airport and awarded it to a Chinese one, in 2014, fraying nerves in New Delhi. There are also fears — so far only fears — that Male might eventually allow Chinese military presence on its soil, thereby providing China with a strategic military base in the Indian Ocean.

•The current events, therefore, have New Delhi worried, and rightly so.

•However, the fact that New Delhi is in touch with the U.S. and China and also pushing for the United Nations to send a fact-finding mission to the Maldives shows that there is a sober recognition that force is not the way to resolve the Maldivian crisis. This is despite enthusiastic calls by several members of the Indian strategic community to adopt harder measures to resolve the crisis.

New Delhi’s limited options

•First, let’s examine India’s real stakes in the Maldives before exploring the various options available and their associated challenges. New Delhi’s fundamental concern is not the suspension of civil liberties or setback to democracy in the Maldives. It’s China: how China would increase its stocks in Male at the expense of India lies at the heart of Indian anxieties about the political impasse in the Maldives. In New Delhi’s mind, then, the game is increasingly zero sum, and winning it would require reinstating India’s lost glory in the Maldives, something the embattled former President, Mohamed Nasheed, is promising to do.

•Let’s put India’s apprehensions in context. India has of late been anxious about its steadily losing stature in the neighbourhood: its inability to act in the Maldives will only further accentuate this reality. India’s carefully constructed identity of being the “successor-state-of-the-British-Raj” strongly informed the early decades of its regional policy. Assertions of India’s Raj tradition in the neighbourhood have been resisted by the smaller countries of the region, often without much success. However, the rise of China has fundamentally changed the equation by giving them an opportunity to demand more respect and negotiate better terms of engagement. South Asia traditionally had one hegemon, India; today it has two, India and China. Small states of the region are indeed the winners in this new balance of power game. The emerging discontents of India’s regional policy need to be viewed in this historical context.

•These new geopolitical realities also necessitate that New Delhi alters its approach to dealing with the region and appreciates the aspirations of the region’s small states, keeping in mind their increased choices. In other words, the sooner India is able to rejig its regional policy to suit the post-hegemonic milieu in South Asia the better it will be able to grapple with the emerging realities therein. In that spirit, then, India should desist from undertaking “civilising missions” to educate its neighbours on civil liberties and democracy. Let the democratic chips in Maldives fall where they may.

Intervention is costly

•There are several reasons why direct/overt military or political intervention in the Maldives to correct the democratic process there is a bad idea and could damage India’s interests in the long term. Those who argue that Washington and the western powers expect India to resolve the crisis in the Maldives seem to forget that there is increasing recognition today that humanitarian intervention often leads to more chaos than order. And the crisis in the Maldives is not even humanitarian in nature.

•From a purely instrumental point of view, the costs of an Indian intervention gone wrong (which it is likely to) would far outweigh any potential benefits from a successful intervention, even if we hypothetically accept that an intervention might be successful. Given the fact that Mr. Gayoom does enjoy some domestic political support, Indian intervention would certainly make one faction in the country unhappy which would accuse India of undermining its sovereignty. Moreover, if Mr. Gayoom prolongs the emergency and does not restore normalcy in the country, he is likely to lose support domestically. On the other hand, if New Delhi intervenes, he will use it to drum up popular support.

•If so, anything short of a full-fledged intervention that forcibly removes him from power may indeed be counter-productive. But if New Delhi uses force to dethrone him, the question is what next? Is India willing to brave its aftermath, the nature of which is presently unpredictable? Recall how the American calculation about Iraqis stepping up to support democracy once it intervened to dethrone Saddam Hussein went horribly wrong.

•Second, an Indian intervention, especially by an overtly Hindu-right wing government, will push the Maldives towards more Islamist politics, something the Gayoom regime will use to its advantage.

•If it’s the growing relationship between Male and Beijing that New Delhi is concerned about, there is no guarantee that a military or some other overt form of intervention in the Maldives would ensure a rift between China and the Maldives. In fact, it may even have the reverse effect.

•Indian intervention could also complicate life for over 25,000 Indian expatriates who live and work in the Maldives. Then there is the legal challenge: an intervention could constitute a clear violation of the UN Charter and international law. Finally, sermons about civil liberties and democracy are a double-edged sword that could easily come back to haunt us.

•In short, New Delhi has very little moral, legal and political locus standi to justify an intervention in the Maldives. It’s at best an interested party whose best bet is diplomacy and persuasion.

India’s track record

•Intervening in what is strictly a domestic political issue of the Maldives would also be in breach of India’s traditional approach to dealing with crises in its neighbourhood. The 1971 intervention in the then East Pakistan was primarily the result of a 10-million-heavy refugee burden on India. Both Operation Cactus of 1988 and the Indian Peace Keeping Force in the late 1980s were undertaken when India was explicitly invited to do so. In the early 2000s, when the Sri Lankan government requested India to intervene to help defeat the Liberation Tigers of Tamil Eelam, New Delhi declined the offer. This is not to say that New Delhi has not covertly intervened in the domestic affairs of its neighbours or applied pressure on the smaller ones. The recent Indian involvement in Sri Lanka is an example of the former and India’s 2015 blockade against Nepal, the latter. In any case, New Delhi’s interventions on invitation as well as its covert interventions have only produced mixed results. Carrying out a military operation in Maldives today, in full public view, would not sit well with this tradition, nor will it achieve India’s strategic objectives.

📰 Endgame in Bangladesh

The days of the BNP as a credible challenger to the Awami League appear to be all but finished

•With the sentencing of former Bangladesh Prime Minister and chairperson of the opposition Bangladesh Nationalist Party (BNP) Begum Khaleda Zia to five years rigorous imprisonment in a corruption case, the country enters into uncharted waters.

•For as long as most Bangladeshis have been alive, political power in the country has been more or less evenly divided between the Awami League (AL) and the BNP. But now, for the first time, it looks as though one of the parties is within striking distance of a blow that will take the other party out of contention permanently, thereby ushering in a new era in domestic politics.

A brief political history

•BNP and AL traded terms in office from 1991, when the BNP came to power following the first elections after nearly a decade of military rule, with the AL coming to power in 1996 and the BNP returning in 2001.

•But one could argue that the BNP sowed the seeds of its current political disenfranchisement with its misbegotten rule from 2001 to 2006. Not only did the BNP-led alliance government set new standards for corruption, which would see Bangladesh ranked the most corrupt country in the world for five years in a row by the anti-corruption watchdog Transparency International, but it presided over a time of unprecedented violence against the country’s minority community and the political opposition. This included the assassination of two senior AL leaders and a grenade attack on an AL public meeting that killed 24 people and injured over 300, narrowly missing then opposition leader and current Prime Minister Sheikh Hasina. For this, the son of Ms. Zia, Tarique Rahman, and then home minister Lutfozzaman Babar, among others, are currently on trial for murder.

•The BNP’s misrule came to an end when a military-backed caretaker government seized power on January 11, 2007. The party has spent the 11 years since then in the political wilderness. Eleven years is a long time to be out of power in politics.

•Initially, the BNP was in no worse position than the AL, both of which were targeted by the military-backed regime. But when elections were held in December 2008, in which the AL saw a landslide victory, the BNP began its downward slide to political oblivion, as the AL was able to leverage the perquisites of office to rebuild itself into the dominant political force in the country. BNP then suffered the usual indignities and routine repression of a party in opposition in Bangladesh, but nothing out of the ordinary, and opinion polls and local elections in advance of the 2014 national elections showed that it was in a strong position, with every chance of returning to power.

•However, this was when it all started to come undone for the party. The AL had amended the constitution to do away with the caretaker government provision for holding elections, fearful that this could be used as cover for another military takeover such as what happened in 2007. Instead of taking its chances with an election held under the AL, in which it may have triumphed, the BNP dug in its heels and refused to participate unless the caretaker government was reinstated. A solid majority of the country agreed with the BNP position, but the party was unable to muster the street power to force the government to capitulate or the army to step in.

•Nor did the BNP help its cause by unleashing a series of bus burnings across the country to try to force the hand of the government, which not only did not work but also dramatically decreased its popularity with the public, and raised serious questions as to its own fitness for office.

The turning point

•The unsuccessful BNP boycott of the 2014 elections, which returned the AL to power in a massive landslide victory, was the real turning point in Bangladeshi politics. Ever since 2014, as the AL has gone from strength to strength, the BNP has withered to a shadow of its former self under the weight of severe government repression but also its own intrinsic shortcomings and contradictions.

•The repression has been serious. Many senior BNP leaders have spent months incarcerated, decimating the party’s organisational capacity. And with BNP cadres and local leaders often on the run or underground, the party’s ability to mobilise has dwindled to almost zero.

•However, the BNP needs little help from anyone else in its rush towards irrelevance, being unable to perform even the most basic functions of an opposition party. For all the ruling party’s oppressiveness and authoritarianism, the BNP’s record does not suggest that it would be any better.

•The AL is coming to the end of its term in office in January 2019 and must hold new elections before then. It would dearly love to goad the BNP into boycotting the elections again, ensuring a second walkover in a row and also resulting in the party having its registration cancelled as per the election law. However, the international community, most significantly India, Bangladesh’s most important neighbour and the AL’s principal ally, has signalled a second election in a row without BNP would be harder to accept as legitimate.

•The best-case scenario for the AL therefore is the participation of a weakened BNP in the election. BNP at full strength commanded by the former Prime Minister could still be dangerous, despite the party’s diminished capability. BNP with Ms. Zia sidelined is a far less alarming prospect.

•If Ms. Zia is not granted leave to appeal or her conviction is made final, she will find herself barred from taking part in the upcoming election, and the demolition of the BNP will be complete. However, if she is able to appeal her conviction and get out of jail on bail, she will still be able to contest in the upcoming election.

•But the AL is betting that her conviction and incarceration will encourage her partypersons to jump ship and make deals, thus weakening the BNP, if not persuade them to ditch Ms. Zia for good. Putting her behind bars, even temporarily, sends a strong signal as to where power resides, and can be expected to discourage BNP cadres and hasten the eventual collapse of the party as an effective opposition force.

•Either way, it does not look likely that BNP will be in much of a position to mount a credible election challenge. While it might be too early to write the BNP’s political obituary, it is difficult to see how it can come back from this.

•The endgame in the decades-long struggle for supremacy between the AL and BNP is finally upon Bangladesh, and while the BNP may limp along until the end of the year, its days as a credible challenger to the AL appear to be all but finished.

📰 Govt. ignoring the plight of children: SC

The apex court’s judgment came on a PIL seeking implementation of the Juvenile Justice Act and its rules.

•The Supreme Court slammed the government for the “tardy if not virtual non-implementation” of juvenile justice laws and turning a deaf ear to the plight of “voiceless if not silenced” children of the nation.

•In a 62-page judgment, the Social Justice Bench of the apex court of Justices Madan B. Lokur and Deepak Gupta described the negligent attitude shown by the country’s power and authority circles to children, including pendency of cases of orphaned, abandoned and surrendered children , the “uncomfortable” conditions of life of children in observation and care homes, the increasing number of vacancies in juvenile justice institutions and the lack of initiative by legal services authorities despite the Juvenile Justice (Care and Protection of Children) Act, 2000 and its new and improved version passed in 2015.

•“No one has any doubt that it is time for the State to strongly and proactively acknowledge that even children in our country have fundamental rights and human rights and they need to be enforced equally strongly,” Justice Lokur, who authored the judgment, observed.

•The apex court quotes from South African leader Nelson Mandela’s speech in 1997 when he said “our children are our greatest treasure. They are our future. Those who abuse them tear at the fabric of our society and weaken our nation”.

•Justice Lokur lashed out at the government, saying “our policy and decision makers need to heed this advice and warning (of Mandela) and appreciate that they are not doing any favour to the children of our country by caring for them — it is their constitutional obligation and the social justice laws enacted by Parliament need to be effectively and meaningfully enforced”.

•The implementation of laws meant to protect the fundamental rights of our children has so far been met with “continuing callousness” because children have “no voice in the affairs of the State”.

•In a slew of directions, the court directed the Ministry of Women and Child Development and all state governments to ensure that positions in the national and state commissions for protection of child rights, Juvenile Justice Boards and Child Welfare Committees) are filled up expeditiously.

•The court requested chief justices of all high courts to register proceedings on their own for effective implementation of the 2015 Act.

•"Finally, we request and urge the chief justice of each high court to seriously consider establishing child friendly courts and vulnerable witness courts in each district," the bench said.

•It said inquiries under the JJ Act and trials under other statutes like the Protection of Children from Sexual Offences Act, Prohibition of Child Marriage Act, trials in sexual offences cases were required to be conducted with a "high degree of sensitivity, care and empathy for the victim" by establishing dedicated child-friendly and vulnerable witness courts.

•The apex court’s judgment came on a PIL seeking implementation of the Juvenile Justice Act and its rules.

📰 Why the fuss about fiscal deficit?

Answer lies in the fragile state of the Centre’s finances and its level of control over interest, pension and subsidy expenses

•To any layman watching India’s annual Budget jamboree, the entire exercise must seem very puzzling. After the Finance Minister has read out a long list of giveaways to farmers, small businesses, low-income earners and senior citizens in his speech, none of the beneficiaries seems entirely happy with their gifts.

•Commentators, after cursory compliments, quickly turn their attention to the deficit numbers. It is also quite difficult to comprehend why all hell must break loose, if the fiscal deficit turns out to be 3.5% for the year, instead of 3.2%.

•All this fuss would be quite easily explained if only one were aware of the precarious state of government finances.

•Think of India’s central government as one sprawling household with the Ministries, State governments and citizens making up its family members. If you took stock of this family’s finances, you’d at once conclude that this is one profligate household.

Expenses overshoot

•In FY18, the Centre’s total income (as per the revised estimates) from taxes, non-tax revenues and capital items is estimated at Rs. 16.23 lakh crore.

•But it expects to incur a total expenditure of Rs. 22.17 lakh crore. Expenditure will thus overshoot income by about 36.5%, leaving a shortfall of Rs. 5.94 lakh crore.

•This Rs. 5.94 lakh crore shortfall is euphemistically termed as the fiscal deficit. When it is expressed as a percentage of India’s nominal GDP (Rs. 167 lakh crore as per latest CSO estimates), it appears modest at 3.5%. But this tells you why even a minor slippage in the fiscal deficit is so keenly watched. A 30-basis point overshoot in the deficit means a Rs. 50,000 crore hole in the Budget.

•The fiscal deficit in fact paints a more complimentary picture of government finances than necessary, because it counts both one-off receipts (from asset sales, recovery of loans etc) and recurring items (taxes) as part of the government’s ‘income’.

•This mixing of capital and revenue items would be frowned upon in commercial accounting. Therefore, if one excludes capital items and takes stock of revenue items alone, the Centre is still spending more than it earns, with a revenue deficit of Rs. 4.39 lakh crore in FY18 (revised estimates).

•But the fiscal or revenue deficits for FY18 are by no means standout numbers. India’s fiscal deficit in the past ten years (based on actuals) has hovered between 3.5% and 6.4% of nominal GDP.

Borrowings mount

•Like your typical householder, when the Centre ends up spending more than it earns, it takes recourse to market borrowings to bridge the gap. The borrowing target for the year is closely watched by the bond market because the larger the government’s loan-taking, the less room for other borrowers — companies, small businesses, individuals — to raise funds from India’s relatively shallow bond market.

•Many years of such profligacy had led to the Indian government sitting on a significant stockpile of debt. By end-March 2018, the outstanding loans of the Central government are estimated to hit Rs. 82.32 lakh crore. That’s up from Rs. 57 lakh crore five years ago and amounts to 49.3% of the nominal GDP. The saving grace is that the bulk of those loans are from domestic sources, with just Rs. 2.4 lakh crore owed to foreign lenders.

Unproductive spends

•If the government’s expenditure routinely overshoots its receipts and budgeted estimates, why is there so much angst about the under-allocation to welfare schemes?

•The answer lies in the extremely limited elbow room that the Centre enjoys in deciding on its Budget allocations.

•While allocations to pet schemes may take up a lot of time in the Budget speech, the reality is that the bulk of the expenditure each year is absorbed by just three recurring items — interest payments, pensions and subsidies. In the FY18 revised estimates, for instance, interest payments (by far the largest item of expense) were expected to absorb Rs. 5.3 lakh crore, pensions Rs. 1.5 lakh crore and subsidies Rs. 2.3 lakh crore.

•In short, servicing interest payouts alone will take up 32% of the Centre’s earnings this year, while pensions and subsidies absorb another 23%.

•With 23% allocated to State grants and 16% to defence expenditure, these repetitive expenses will effectively mop up 95% of the total Budget receipts.

•This makes it evident why there’s so little room in the annual Budget for allocations to new ideas or schemes.

•The other long-lamented problem with the expenditure pattern is that the bulk of the Budget spending goes into consumption or maintenance expenses, with very little spent on creating new assets.

•In FY18, just 12% of the budget was defrayed in capital spending.

•It is important to emphasise here that while we have cited FY18 numbers in the above analysis, all of the above problems have been long-standing ones for the fisc.

•This is indeed why there’s a Fiscal Responsibility and Budget Management (FRBM) Act which enjoins the government to steadily tighten its fiscal and revenue deficits over the years, while reining in its debt-GDP ratio.

•What the analysis tells us is that, for India’s government to be really able to launch bold new schemes or make a difference to citizens’ welfare, it needs to clean up its finances first — pare down debt, save on interest payouts, reduce pensions and subsidies and raise asset creation.

•It must also ensure that its receipts grow at a far faster pace than expenses in future, so that the debt can be paid down.

•Therefore, the success or failure of the annual Budget exercise really has to be measured on the progress in these parameters over the years.

Progress since FY14

•So what has been the progress on fiscal consolidation post-FY14, when the current NDA regime was voted into power? On this score, there’s good news to impart.

•For starters, in the four fiscal years between FY14 (the last Budget by the UPA government) and FY18, the Centre’s receipts have grown at a faster pace than its expenditure. Using revised estimates for both years, the Centre’s total receipts (excluding borrowings) have shot up by 50% between FY14 and FY18. Total expenditure in the same period registered a slower 39% increase. Even better, spending on interest, pensions and subsidies rose by a much lower 30%, thus freeing up room for other expenditure.

•Two, the brisk pace of growth in receipts vis-a-vis expenses helped the Centre avoid a big bloat in the fiscal deficit over these four years. With the number edging up from Rs. 5.2 lakh crore in FY14 (RE) to Rs. 5.9 lakh crore by FY18 (RE), fiscal deficit as a percentage of GDP has declined from 4.5% to 3.5%. In fact, it would be even lower but for the spike in FY18.

•Three, the reined-in deficit has meant lower recourse to borrowings in order to bankroll spending. In FY14, as much as 32% of annual Budget spending came from borrowings, but by FY18 it was down to 27%.

•But all this frugality has made only a mild dent in the Centre’s stockpile of debt, which has dipped only from 50.4% to 49.3% of GDP over four years.

•Now, pessimists will point out that even the progress achieved so far is glacial and that there’s a long way to go before India’s government finances are in the pink of health.

•This is why it is so critical for this government to stick to its path of fiscal consolidation in the last year of its five-year term and not give in to populist temptations.

📰 Hardly a gamechanger

Neither the Budget nor the National Health Policy 2017 shows a clear health sector road map

•The National Health Protection Scheme announced in this year’s Budget has generated a lot of debate. The government has committed itself to “providing coverage up to Rs. 5 lakh per family per year for secondary and tertiary care hospitalisation” for 10 crore poor families, with approximately 50 crore people as beneficiaries. As only Rs. 2,000 crore in 2018-19 has been allotted to finance this scheme, various government functionaries have come up with estimates between Rs. 10,000 to Rs. 12,000 crore as its actual cost. We wish to take the debate beyond the money required and look at other crucial issues.

The target group

•First, the government’s target group seems to be the bottom 40% (50 crore) of the population. A good starting point would be to look at the insurance coverage that this section already has.

•An analysis of the National Sample Survey (NSS) 71st round (2014) unit record data for “Social Consumption in India: Health” shows that only 11.3% of the bottom 40% (10.5% covered by government insurance) population has any insurance coverage as against 17.9% for the top 60% (14.3% covered by government insurance). In other words, just to bring the entire 40% of the population under health insurance is a huge task, with fiscal implications. As latest official data for 15 States show, starting from 2008, only 66% of the target below poverty line population has come under coverage of the Rashtriya Swasthya Bima Yojana (RSBY), the government-run health insurance programme for the poor In 2017-18, the government allocated only Rs. 1,000 crore for RSBY, covering roughly 10% of the bottom 40% of the population.

•We estimate, on the basis of National Sample Survey data, that the total cost of medical expenditure (including reimbursements) for hospitalisations incurred by the bottom 40% was Rs. 14,286.82 crore in 2014, with the average cost of hospitalisation being only Rs. 8,081 in the same year. With Rs. 5 lakh coverage (if we assume that most of the hospitalisation cost will be reimbursed) then the premium which needs to be paid would be much higher than the government’s estimate.

Rate and reimbursement

•The problem, however, is in terms of the rate of hospitalisation and reimbursement of expenses that insurance companies pay, as seen in the table.

•Three observations are crucial in reading the table. First, the rate of hospitalisation for those covered under some kind of health expenditure support is higher than those without any cover, for the bottom 40% as well as the entire population. If the new health scheme announced in the Budget brings more people under insurance, then the rate of hospitalisation will show significant improvement.

•Therefore, over and above the money needed for insurance premium, adequate medical infrastructure needs to be created for the scheme to work; given that there has not been much allocation for it in the Budget. In the absence of such allocation, private health-care demand will rise, possibly leading to an increase in the cost of private health care. Second, reimbursement as a percentage of medical cost of hospitalisation in government schemes is abysmally low, especially for the bottom 40% of the population. Only 4.5% of total hospitalisation expenses are reimbursed to the bottom 40% and 11.9% for the entire population.

•This raises questions about the efficacy of government schemes. Even with the meagre coverage of Rs. 30,000 (RSBY), the proportion of hospitalisation cost reimbursed is low. There is no guarantee that increasing coverage will improve this.

•Third, the proportion of hospitalisation cost reimbursed is much higher for insurance schemes directly bought by households than government ones. In the case of insurance being paid by the government, insurance companies are most often unwilling to pay the reimbursement as compared to when a household pays. This could be a result of low premiums paid by the government or a general apathy towards honouring the insurer’s commitment when the payers are not the actual patients but the government.

More for private players

•The percentage of hospitalisation cost reimbursed is low for health insurance schemes and most of them only cover hospitalised treatment. Generally, a majority of health insurance schemes do not cover the cost of a non-hospitalised outpatient visit. For health insurance schemes, what essentially happens is that the government pays the premium to insurers which in turn pay the hospitalisation expenses.

•Given the state of government medical care in India, a significant proportion (more than 50%) of the population opt for private facilities. Thus, health insurance creates a larger market for private players. A sudden expansion of the government-funded insurance market may aggravate the problem of hospital-induced demand for medical care such as an unnecessary hospital stay, diagnostic tests and surgeries unless supply-side conditions are improved and the entire health sector brought under regulation. The Budget declaration is quite silent about these complementary steps.

•The moot point is actually an old one. If the government is serious about providing health care to even the bottom 40% of the population, it should not only increase its current budgetary allocation substantially but also strengthen the health infrastructure at all levels which includes a strong regulatory mechanism. Neither the Budget nor the National Health Policy 2017 shows any clear and convincing direction of heading in this path.

📰 ‘Inflation to moderate to 5% for Jan.’

•Retail inflation is expected to moderate and print at 5% after rising consecutively for five months, helped largely by the seasonal dip in vegetable prices, while the trade deficit is also likely to have improved in January, said a foreign brokerage in a report.

•Official data for consumer price inflation (CPI) for January, which stood at 5.2% in December last, would be released by the government on Monday.





•Interestingly, while Morgan Stanley, the brokerage which released the report, sees improvement in both inflation and trade deficit numbers for January, it flagged concern that “moderate risks to macro stability are emerging on account of the wider-than-targeted fiscal deficits.”

📰 New rubber policy soon: Alphons

Blames former UPA government for crisis in the rubber sector

•The Central government will soon come out with a new Rubber Policy which will ensure remunerative prices for natural rubber, Union Minister of State for Tourism K.J. Alphons has said.

•Speaking to media persons on the sidelines of an interactive session with stakeholders at the Indian Rubber Research Institute (IRRI), Puthuppally, Mr. Alphons said all issues, including minimum support price for natural rubber, possibility of introducing Minimum Import Price for the produce, and concerns over introduction of BIS for cup lump as a precursor to its import, would be looked into before formulating the policy.

•Putting the responsibility for the present crisis on the previous UPA government which had concluded the WTO negotiations, the Minister said it was the UPA government that agreed to list natural rubber as an industrial raw material instead of as an agriculture product. “This was against the fact that cotton was listed as an agriculture product,” he said.

•He said this was the second round of talks and in the third and final round, Union Commerce Minister Suresh Prabhu would come to Kottayam and interact with the stakeholders before giving final touches to the proposed Rubber Policy. “The Minister will visit Kottayam at the earliest. Parliament session is expected to begin in March, so most probably it will be after the conclusion of the session,” he said.

•Speaking at the interactive session, Jose K. Mani, MP, called for steps to ensure a minimum support price of Rs. 200 for natural rubber.

•He also wanted safeguard measures for rubber against import and pointed out that the Central government had brought in anti-dumping duty for tyre imports from China.

•Mr. Mani wanted the Central government to pass on the huge accruals in the form of import duty on rubber to the farmer.

📰 Cryptocurrency: ‘trustless’ nature irks regulators

Authorities worldwide highlight risk around investments

•Last October, the Board of the International Organization of Securities Commissions (IOSCO) discussed the growing usage of Initial Coin Offerings (ICOs) to raise capital as an area of concern.

•“There are clear risks associated with these offerings,” IOSCO had warned all nations in a statement after the discussions. The world body also said that ICOs are highly speculative investments in which investors were putting their entire invested capital at risk.

•To be fair, some operators provide legitimate investment opportunities to fund projects or businesses. But, the increased targeting of retail investors through online distribution channels by parties often located outside an investor’s home jurisdiction — which may not be subject to regulation or may violate laws — “raises investor protection concerns.”

•In Budget 2018, Finance Minister Arun Jaitley said the government did not consider cryptocurrencies legal tender and would aim to eliminate their use in financing illegitimate activities.

•Many regulatory and self-regulatory authorities globally have cautioned investors on ICOs. ICOs, also known as token sales or coin sales, typically involve the creation of digital tokens — using distributed ledger technology — and their sale to investors in return for a cryptocurrency such as bitcoin or ether.

•A survey by the North American Securities Administrators Association (NASAA) of state and provincial securities regulators showed 94% believed there was a “high risk of fraud” involving cryptocurrencies. Regulators also were unanimous in their view that more regulation was needed for cryptocurrency to provide greater investor protection.

‘Not for faint of heart’

•“Cryptocurrencies and investments tied to them are high-risk products with an unproven track record and high price volatility. Combined with a high risk of fraud, investing in cryptocurrencies is not for the faint of heart,” it added.

•“Investors should go beyond the headlines and hype to understand the risks associated with investments in cryptocurrencies, as well as cryptocurrency futures contracts and other financial products where these virtual currencies are linked in some way to the underlying investment,” said Joseph P. Borg, NASAA President in a statement last month.

•German regulator Federal Financial Supervisory Authority said the acquisition of cryptocurrency coins may result in substantial risks for investors. As ICOs are a highly speculative form of investment, investors should be prepared for the possibility of losing their investment completely. It also said that the term ICO, stems from “initial public offering” (IPO), i.e. a floatation on a stock exchange. The apparent similarity of the terms gives the impression that ICOs are comparable to the issuance of shares. This is not the case, either technically or legally.

•In a recent interview published by the Federal Reserve Bank of New York, its economists Michael Lee and Antoine Martin raised the issue of the trustworthiness of such currencies. They highlighted the “trustless” nature as virtual currencies are “not backed by anything real” such as gold. “Trust is implicit for practically any means of payment,” they added.

📰 15 months on, RBI still processing returned notes

‘Central bank is using sophisticated verification machines to count demonetised currency’

•The RBI has said that Rs. 500 and Rs. 1,000 notes, returned to banks when the government demonetised high value currency 15-months ago, are still being “processed for their arithmetical accuracy and genuineness.”

•This is being done in an “expedited manner,” the central bank said. “Specific bank notes are being processed for their arithmetical accuracy and genuineness and the reconciliation for the same is ongoing. This information can, therefore, be shared on completion of the process and reconciliation,” the RBI said in reply to an RTI application.

•To a query on the number of demonetised notes, it said, “..subject to future corrections if any, arising in the course of verification process, the estimated value of specified bank notes received as on June 30, 2017 is Rs. 15.28 trillion (lakh crore).” Asked to provide the details of the deadline for finishing the counting of demonetised notes, the RBI said “specified bank notes are being processed in an expedited manner.” As on date, 59 sophisticated currency verification and processing (CVPS) machines are in operation in RBI for the purpose, it said. The reply did not specify the location of the machines.

•The RBI will also soon have greater flexibility in terms of managing its liquidity operations with the addition of one more tool ‘Standing Deposit Facility Scheme’ to its kit. Finance Minister Arun Jaitley, in his Budget, had proposed to amend the RBI Act to empower the central bank to come up with an additional instrument for liquidity management. The proposal forms part of the Finance Bill 2018 which is scheduled to be approved by Parliament by March 31.

•“That is to provide one more tool for liquidity management. There is no more MSS (market stabilisation scheme),” Economic Affairs Secretary S. C. Garg told PTI.

•The RBI proposed in November 2015 the introduction of the SDF by suitably amending the RBI Act. This would provide the RBI a new tool for liquidity management, particularly in times when the money market liquidity is in excess to deal with post-demonetisation like scenario.

CRR hike

•Post-demonetisation, the RBI ran out of securities to offer as collateral and had to temporarily hike its cash reserve ratio (CRR) to force banks to park extra deposits with it. The CRR is the portion of deposits that banks have to compulsorily park with the RBI. Currently, the CRR is pegged at 4%.

•When the liquidity position under the Liquidity Adjustment Facility (LAF) is outside comfort zone, the RBI uses an array of instruments to absorb/inject durable liquidity from/into the financial system.

📰 States of health: On NITI Aayog’s first Health Index

The NITI Aayog Health Index should trigger a wider public debate

•Unsurprisingly, States with a record of investment in literacy, nutrition and primary health care have achieved high scores in NITI Aayog’s first Health Index. Kerala, Punjab, and Tamil Nadu are the best-performing large States, while Uttar Pradesh, Rajasthan, Bihar, Odisha and Madhya Pradesh bring up the rear. Health-care delivery is the responsibility of States; the Centre provides financial and policy support. Being able to meet the Sustainable Development Goals over the coming decade depends crucially on the States’ performance. Yet, health care is not a mainstream political issue in India, and hardly influences electoral results. The Index, with all its limitations given uneven data availability, hopes to make a difference here by encouraging a competitive approach for potentially better outcomes. For instance, with political will, it should be possible for Odisha to bring down its neonatal mortality rate, estimated to be the highest at 35 per thousand live births — worse than Uttar Pradesh. A dozen States with shameful under-five mortality rates of over 35 per 1,000 live births may feel the need for remedial programmes. What the Index shows for the better-performing States such as Kerala and Tamil Nadu is that their continuous improvements have, overall, left little room to notch up high incremental scores, but intra-State inequalities need to be addressed.

•Coming soon after the announcement of a National Health Protection Scheme in the Union Budget, the Index uses metrics such as institutional deliveries, systematic reporting of tuberculosis, access to drugs for people with HIV/AIDS, immunisation levels and out-of-pocket expenditure. The twin imperatives are to improve access to facilities and treatments on these and other parameters, and raise the quality of data, including from the private sector, to enable rigorous assessments. At the same time, as NITI Aayog points out, data on other key aspects such as non-communicable diseases, mental health, governance systems and financial risk protection lack the integrity to form part of a good composite index. Both the Centre and the States have the responsibility to scale up their investment on health as a percentage of their budgets, to be more ambitious in interventions. While the NHPS may be able to address some of the financial risk associated with ill-health, it will take systematic improvements to preventive and primary care to achieve higher scores in the Index. As the experience from countries in the West and now even other developing economies shows, socialisation of medicine with a reliance on taxation to fund basic programmes is the bedrock of a good health system. If the NITI Aayog Health Index leads to a mainstreaming of health on these lines, that would be a positive outcome.

📰 Turf war

Address structural problems that have caused trading in Indian derivatives to move offshore

•India’s stock exchanges are not too keen on the idea of competing with their global peers. Instead, they are happy to guard the home turf against foreign exchanges that do a better job of finding new clients. On Friday, the National Stock Exchange, the Bombay Stock Exchange and the Metropolitan Stock Exchange of India announced their decision to stop providing data feed and other support to overseas exchanges that list derivatives linked to Indian stocks and indices. Any existing agreement allowing data-sharing with foreign bourses, except that which is related to exchange-traded funds, will expire in six months. Explaining the reason, the statement said offshore derivatives could be causing “migration of liquidity from India, which is not in the best interest of Indian markets”. Given that the volume of derivatives linked to Indian stocks trading in the offshore market is higher than volumes in the domestic bourses, Indian exchanges have enough reason to fear their foreign counterparts. Ambitious endeavours such as the International Financial Services Centre in Gujarat, although yet to gain the patronage of foreign investors, may also benefit from the crackdown on offshore derivative markets. Foreign bourses, however, will likely find other ways to list derivatives linked to Indian stocks and indices without any help from Indian exchanges soon. The present move, thus, is unlikely to rein in the vast offshore market for Indian derivatives. It also leaves a lot to be desired.

•Index derivatives such as the SGX Nifty that is linked to stocks that form Nifty, have gained the patronage of large foreign investors for many reasons. These instruments are traded for longer hours in offshore exchanges, including hours when Indian exchanges are closed for business, making them more investor-friendly. Places like Singapore and Dubai, where these derivatives are traded, are low-tax jurisdictions that offer investors the chance to lower their transaction costs as well. The fact that offshore derivatives are denominated in dollars adds to their allure. In India, in contrast, the securities transaction tax and the capital gains tax discourage foreign investment in financial assets. The proposal to extend trading hours in order to attract investors too has failed to take off. The statement by Indian bourses withdrawing support for offshore derivatives comes after an earlier decision by Singapore’s stock exchange, the Singapore Exchange Limited (SGX), to introduce in February futures on individual stocks that are part of Nifty. Incidentally, the SGX’s decision to introduce futures specific to stocks listed in the NSE was spurred by the Securities and Exchange Board of India’s decision last year to restrict foreign investment in domestic futures. Offshore markets are thus simply catering to the unmet demands of foreign investors. India’s policymakers should thus first of all address the structural problems that have caused trading in Indian derivatives to move offshore. This would be a far better response than any knee-jerk response favouring domestic exchanges.

📰 Cyberspace shouldn’t help trigger terror: PM

Technology should be harnessed for progress, says Modi

•Prime Minister Narendra Modi on Sunday cautioned the world against the misuse of cyberspace to ensure it did not become a source of radicalisation, asserting that technology should be harnessed as a tool for development, not destruction.

•The comments by Mr. Modi at the World Government Summit in his plenary address comes at a time when the world community is engaged in efforts to address the misuse of cyberspace by terrorists and hackers.

An ally to growth

•During the course of his address, Mr. Modi highlighted the importance of assimilating technology with governance to ensure equitable growth and prosperity for all.

•He emphasised the role technology was playing in India’s development.

•The Prime Minister told the audience that India is aspiring to assume leadership position in Artificial Intelligence, Nano, cybersecurity and cloud computing.

•He received loud cheers when he referred to what he called the 5Es and the 6Rs while talking about governance and technology.

•Mr. Modi said that even after all the development, poverty and malnutrition have not been eliminated.

•“On the other side we are investing a large portion of money, time and resources on missiles and bombs. We must use technology as a means to development, not destruction,” he told the gathering that included Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of UAE and the ruler of Dubai.

•He expressed concern over attempts by some people to radicalise cyberspace with the use of technology, referring to its use by jihadists to recruit cadres online.

•India is the ‘Guest Country’ at the sixth edition of the World Government Summit, which is being attended by more than 4,000 participants from 140 countries.

•“It is a matter of pride for not only me but also the 125 crore people of India that I have been called as the Chief Guest at the World Government Summit,” Mr. Modi said.

Desert transformed

•He hailed the use of technology by the Dubai government, saying a desert has been transformed.

•“It’s a miracle,” he said, describing the Gulf emirate as an example for the world. Noting that 9.5% of the world’s population lives below the poverty line, he said, “Today there are great challenges... Poverty, unemployment, education, housing and human catastrophes.”

•“We can all overcome them through development. This is what my Government is working on using technology,” he said.

•Stating that his government’s mantra is “sabke saath, sabka vikas”, he said India has focused on the key sectors to empower its 125 crore people i.e one-sixth of humanity, contributing to the development of mankind as a whole.

📰 Poachers kill rhino, escape with horn

Take all measures to prevent poaching of rhinos, Assam Governor Mukhi directs authorities

•Poachers killed an adult rhino and escaped with its horn from the Western Range of Kaziranga National Park in Biswanath district, a senior forest official said on Sunday.

•According to Kaziranga National Park divisional forest officer Rohini Ballav Saikia, the incident took place around midnight at Polokata near the Sitamari area -- a sandbar island in the Brahmaputra -- south of the Baghmari powergrid station under the Lahorijan forest camp.

•“Poachers took its horn and fled the spot, which is an open area of about 200 metres from the forest camp. We have also found five rounds of empty cartridges of .303 rifle from the spot,” Mr. Saikia said.

•Mr. Saikia, along with other senior forest officials, reached the spot this morning and a joint team of forest and police personnel launched an operation to nab the poachers, he added.

•This is the second rhino poaching incident in Kaziranga this year.

•On January 14, a female rhino was killed at Daflang camp area of Bagori range, but the poachers could not take its horn.

•During the ongoing budget session of the Assam Assembly, Forest Minister Pramila Rani Brahma said that altogether 74 rhinos have been killed by poachers in Assam since 2015 and 316 poachers were arrested during 2015-17.

•As many as 21 rhinos were killed in 2015, 22 the next year and nine in 2017, the Minister had informed the House on February 8.

•The killing of the rhino took place within hours of Assam Governor Jagdish Mukhi directing law enforcing agencies to take all measures to prevent cases of poaching of rhinos in the Kaziranga National Park.

‘Pride of the State’

•“Assam has earned its name and fame worldwide because of the Kaziranga National Park and its precious one-horned rhinoceros. Indiscriminate killing of the rhinos by the poachers is not only an attack on the creature, it is an attack on the pride of the State,” the Governor said.

•Incidents of poaching over the months have reduced drastically but security agencies must be on their toes to foil any nefarious design to harm the rhinos, he added.




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