The HINDU Notes – 17th November 2018 - VISION

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Saturday, November 17, 2018

The HINDU Notes – 17th November 2018

πŸ“° A.P., West Bengal withdraw ‘general consent’ for CBI investigations

Agency will need States’ nod for probe

•Andhra Pradesh on Friday withdrew the “general consent” granted to the Central Bureau of Investigation (CBI), effectively curtailing the agency’s powers in the State without prior permission.

•The CBI and all agencies under the Delhi Special Police Establishment (DSPE) Act, 1946, will now have to approach the State government for permission for investigation on a case by case basis.

•Sources in the State Home Ministry said the general consent was routinely given for periods ranging from six months to a year, for several years now. The last such consent was given on August 3, 2018.

Notification issued

•However, the State decided to withdraw this consent through a notification (GOMs no 176, Home Department) issued on November 8, 2018. This notification, which was kept confidential, was made public on Thursday night.

•Deputy Chief Minister N. Chinarajappa, who also holds Home portfolio, said the withdrawal of general consent was in tune with suggestions made by legal experts and intellectuals in the light of serious allegations against the CBI.

Mamata follows suit

•Shortly after Andhra Pradesh’s decision, the Trinamool Congress-led West Bengal government also decided to withdraw the “general consent”, a senior official at the State secretariat said in Kolkata said. The consent had been accorded to the CBI by the then Left Front government in 1989.

•Earlier, on Friday, Chief Minister Mamata Banerjee extended support to A.P. Chief Minister Chandrababu Naidu on the issue.

•Asked if there was a precedent of a State government taking back consent, Mr Chinarajappa cited the example of Karnataka in 1998.

•Apparently, showing red flag to CBI is a political decision, seen in the context of relationship between Telugu Desam government and the BJP-led Centre turning sour and the recent Income Tax raids on prominent TDP MPs and leaders.

•Of late Chief Minister, N. Chandrababu Naidu has been raised the issue of the central governnent misusing the CBI, I-T and Enforcement Directrate to target the BJP’s political rivals, citing the instances of IT raids on his party leaders. The government, TDP sources said, also wondered how the CBI could investigate a corruption case in any State when its two top most officers were trading charges against each other and had lost all its credibility.

•A senior police officer however, said the decision was purely an administrative one taken in the context of law and order being a State subject that necessitated any Central investigation agency taking prior consent. “Earlier the consent was given routinely and now the Government thought instead of a blanket permission, it should be on the merit of each case”.

•He said the State police was studying the feasibility of State’s Anti-Corruption Bureau taking over at least some functions of CBI.

•General consent is the periodic approval by a State government to the CBI and other agencies covered by Delhi Special Police Establishment Act, 1946. The consent is necessary as the jurisdiction of these agencies is confined to Delhi and Union Territories under this Act.

•Withdrawal of general consent may not have any bearing on the existing cases, ongoing investigations and the filing of charge sheets by the CBI in Andhra Pradesh, according to agency officials.

•Although the CBI spokesperson on Friday said the agency was yet to get a certified copy of the order and examine it to determine further course of action, another official cited a Supreme Court judgment in Kazi Lhendup Dorji v. Central Bureau of Investigation & Ors (1994) to stress that it would not impact the already instituted cases.

•In that judgment, the Supreme Court had held that: “An Order revoking an Order giving Consent under Section of the Act [Delhi Special Police Establishment Act], can only have prospective operation and would not affect matters in which action has been initiated prior to the issuance of the Order of Revocation.”

•A retired senior CBI official said: “In the past, State governments have withdrawn their consents. This has happened in Nagaland several times and also in Karnataka for about eight years, due to which most of the CBI officials had to be transferred out and a skeletal staff was maintained there.”

•In Karnataka, the J.H. Patel’s Janata Dal government had withdrawn the consent on December 15, 1998, and not renewed it for several years. Also, in late 70s, the Devaraj Urs government had also recalled the general permission for CBI probes.

•“The withdrawal of general consent means that the CBI officers lose police powers under the Criminal Procedure Code in the State concerned and for registering each case, the agency has to seek a specific consent from the State government. As a result, it stalls registration of new cases,” said another official.

•The Opposition reacted sharply to the TDP government's move. BJP spokesman and Rajya Sabha member G.V.L. Narasimha Rao said the government’s decision amounted to a mala fide exercise of its executive power to extend political patronage to people and organisations involved in corruption and criminality.

•YSRCP Political Advisory Committee (PAC) member Ambati Rambabu said the government was trying to prevent the CBI from entering the State because the TDP leaders are afraid that the truth about the attack on YSR Congress President Y.S.Jagan Mohan Reddy will come out.

πŸ“° Maternity leave: govt. for incentive scheme

Bid to reach out to private sector

•In a bid to encourage employers, especially in the private sector, to implement the extended 26-week maternity leave law, the Labour Ministry plans to refund them for seven weeks’ worth of wages for women workers with a wage ceiling up to ₹ 15,000 per month. The Ministry is in the process of getting budgetary approvals for the ₹400 crore incentive scheme, according to an official statement.

Poor implementation

•In March 2017, the Centre amended the Maternity Benefit Act to increase paid maternity leave from 12 to 26 weeks for all women employees in establishments employing ten or more people. However, the Ministry statement noted that while implementation of the provision was good in the public sector, it was poor for those with private sector or contract jobs.

•“There is also a wide perception that private entities are not encouraging women employees because if they are employed, they may have to provide maternity benefit to them, particularly 26 weeks of paid holiday,” said the statement, adding that the extended maternity leave has become a deterrent for female employees who are asked to quit or retrenched on flimsy grounds before they go on maternity leave.

•The Ministry of Labour and Employment is therefore working on an incentive scheme whereby the government would bear the cost of maternity leave wages for seven weeks, subject to certain conditions. The financial implication to the Centre is estimated to be ₹ 400 crore, and the Ministry is in the process of obtaining budgetary approvals.

•The scheme would “ensure the women equal access to employment and other approved benefits along with adequate safety and secure environment…,” said the statement.

πŸ“° Unnecessary, destabilising and expensive

The pursuit of nuclear-armed submarines reflects a security assessment that is becoming increasingly irrelevant

•On November 5, Prime Minister Narendra Modi announced that India’s first indigenous ballistic-missile armed nuclear submarine (SSBN), Arihant, had “successfully completed its first deterrence patrol” and claimed that this “accomplishment” would “always be remembered in our history”. However, he failed to address some fundamental questions: why does India need such a submarine? And, are the enormous resources spent on the nuclear-submarine programme justified?

•A nuclear submarine is fuelled by an onboard nuclear reactor, which allows it to operate underwater for long periods of time. In contrast, a conventional diesel submarine uses batteries to operate underwater, but is forced to surface periodically to recharge its batteries using diesel-combustion engines that require oxygen. SSBNs were first deployed during the Cold War and justified as a tool of last resort. If an adversary were to launch a devastating first-strike on a country, destroying its land-based missiles and paralysing its air force, the submarine — undetected at sea — could still deliver a counter-strike, assuring the “mutual destruction” of both countries.

Indian context

•However, this strategic function makes little sense in the modern Indian context. There is no realistic threat, which the Arihant could counter, that could wipe out India’s existing nuclear deterrent. The range of the missiles carried by the Arihant is about 750 km, and so it can only target Pakistan and perhaps China.

•The Pakistan government has threatened to use “tactical nuclear weapons” to counter India’s cold-start doctrine that envisions a limited invasion of Pakistan. However, these are relatively small nuclear weapons that could devastate a battlefield but would not affect the Indian military’s ability to launch a counter-strike using its existing land or air-based forces.

•China has consistently pledged, for more than 50 years, that it will never be the first to use nuclear weapons in a conflict. Even if China were to suddenly change its policy, any attempt to disable India’s nuclear weapons would be fraught with unacceptable risks regardless of whether India possesses SSBNs. Even the United States, which maintains such a large nuclear stockpile, is unwilling to militarily engage a limited nuclear power such as North Korea since it understands that it cannot reliably disable Pyongyang’s land-based deterrent.

•Much of the rest of the world has moved to outlaw nuclear weapons. Last year, 122 nations voted in favour of the “Treaty on the Prohibition of Nuclear Weapons”. The Indian government skipped these negotiations claiming, nevertheless, that it was “committed to universal... nuclear disarmament”. So the government’s active pursuit of nuclear-armed submarines undermines India’s stated international position and reflects a security assessment that is becoming increasingly irrelevant.

Some risks

•In fact, nuclear-armed submarines increase the risks of an accidental conflict. Traditionally, nuclear weapons in India have been kept under civilian control, and separate from their delivery systems. However, the crew of a nuclear-armed submarine will have both the custody of nuclear weapons and the ability to launch them at short notice. Even though reports suggest that nuclear weapons on Indian SSBNs will be safeguarded by electronic switches, called “permissive action links”, such a setup can dangerously weaken the civilian command-and-control structure, as declassified documents from the Cuban missile crisis show.

•During the crisis, U.S. warships recklessly attacked a Soviet submarine with practice depth charges to force it to surface. The captain of the submarine, which had been sailing under difficult conditions and was out of radio contact with the Soviet leadership, thought that war had broken out and decided to respond with nuclear torpedoes. It was only the sober intervention of another senior officer on the submarine, Vasili Arkhipov, that prevented the outbreak of large-scale nuclear hostilities. For his actions, which averted a civilisation-threatening event, Arkhipov was posthumously awarded the “Future of Life” award last year.

Prohibitive costs

•Given its uncertain, and even adverse, impact on the country’s security, it is especially important to examine the costs of the SSBN programme. Media reports suggest that the Indian Navy would eventually like about four SSBNs. The government has not released precise figures, but the international experience can be used to estimate the costs of such a fleet.

•The British government recently estimated that the cost of four new SSBNs would be £31 billion, or about ₹70,000 crore per submarine. This is similar to the U.S. Navy’s estimate of the cost of a new “Columbia-class” SSBN. The lifetime costs of operating such submarines are even larger than these initial costs; British and American estimates suggest that each SSBN requires between ₹2,000 crore and ₹5,000 crore in annual operational costs.

•The Indian submarines will be smaller, and perhaps cheaper. However, even if their costs are only half as large as the lower end of the British and American estimates, the total cost of maintaining a fleet of four SSBNs, over a 40-year life cycle, will be at least ₹3 lakh crore.

•It is senseless to spend this money on nuclear submarines when thousands of lives are lost each year because the state pleads that it lacks resources for basic health care and nutrition. It seems appropriate to revisit the words of Sardar Patel, who is held in high esteem by the current dispensation. Patel was hardly a pacifist but he was alive to the issue of wasteful military expenditure. “We must not... be frightened by the bogey of foreign designs upon India,” Patel explained in his presidential address to the 1931 Karachi Congress, or allow it to be used to turn the army into an “octopus we are daily bleeding to support”.

πŸ“° A crippling shortage: on vacancies in courts

Lower courts, performing critical functions, must not be bogged down by vacancies

•The burgeoning docket burden that weighs down the judiciary is not because of its lumbering judicial processes alone, as it is often made out. The chronic shortage of judges and severe understaffing of the courts they preside over are significant reasons. More than a decade after the Supreme Court laid down guidelines in 2007 for making appointments in the lower judiciary within a set time frame, a similar issue is back before the highest court. The immediate context is the existence of more than 5,000 vacancies in the subordinate courts. A Bench headed by Chief Justice of India Ranjan Gogoi has pulled up State governments and the administration of various High Courts for the delay in filling these vacancies. Answers provided in the Rajya Sabha reveal that as on March 31, 2018, nearly a quarter of the total number of posts in the subordinate courts remained vacant. The court has put the actual figure at 5,133 out 22,036 sanctioned posts. The State-wise figures are quite alarming, with Uttar Pradesh having a vacancy percentage of 42.18 and Bihar 37.23. Among the smaller States, Meghalaya has a vacancy level of 59.79%. The reasons are not difficult to guess: utter tardiness in the process of calling for applications, holding recruitment examinations and declaring the results, and, more significantly, finding the funds to pay and accommodate the newly appointed judges and magistrates. Besides, Public Service Commissions should recruit the staff to assist these judges, while State governments build courts or identify space for them.

•According to the Constitution, district judges are appointed by the Governor in consultation with the High Court. Other subordinate judicial officers are appointed as per rules framed by the Governor in consultation with the High Court and the State Public Service Commission. In effect, the High Courts have a significant role to play. A smooth and time-bound process of making appointments would, therefore, require close coordination between the High Courts and the State Public Service Commissions. A study released last year by the Vidhi Centre for Legal Policy revealed that the recruitment cycle in most States far exceeded the time limit prescribed by the Supreme Court. This time limit is 153 days for a two-tier recruitment process and 273 days for a three-tier process. Most States took longer to appoint junior civil judges as well as district judges by direct recruitment. This situation demands a massive infusion of both manpower and resources. Subordinate courts perform the most critical judicial functions that affect the life of the common man: conducting trials, settling civil disputes, and implementing the bare bones of the law. Any failure to allocate the required human and financial resources may lead to the crippling of judicial work in the subordinate courts. It will also amount to letting down poor litigants and undertrials, who stand to suffer the most due to judicial delay.

πŸ“° India’s Act East policy can meet OBOR: Chinese envoy

Makes pitch for India to join China’s mega corridor project

•India’s Act East policy and China’s Belt and Road Initiative (One Belt One Road or OBOR) are a “natural” area of cooperation between the two countries, said China’s Ambassador to India Luo Zhaohui on Thursday, making another pitch for India to join China’s mega-infrastructure corridor, which New Delhi has rejected thus far.

•However, instead of the more contentious part of the Belt and Road Initiative, the China-Pakistan-Economic-Corridor that he has spoken of in the past, Mr. Luo suggested that the cooperation could come through the “China-India-Myanmar” BCIM corridor to India’s North-East.

•In a written message for the Youth event, Prime Minister Narendra Modi said he hoped it would “provide a platform for the youth of both nations to build a ‘Great Wall of Trust and Cooperation’ between the two countries.”

Finding synergy

•“Act East and OBOR are quite natural…. And [we must see] how to synergise these two strategies together between the two countries and between the two leaders and benefit from cooperation and development. That is the right direction... and I am quite optimistic,” Mr. Luo said, speaking to delegates at a “China-India Youth Dialogue” seminar.

πŸ“° SBI sells over ₹400 cr. electoral bonds

Ten-day Oct. window saw a spike from the ₹32-cr. worth bonds sold in July tranche, reveals RTI reply

•More than ₹400 crore worth of electoral bonds were sold by the State Bank of India (SBI) in the 10-day window of October, a sharp rise from the ₹32 crore worth of bonds sold in the July tranche, according to data the bank released under the Right to Information.

Assembly poll backdrop

•The electoral bond data assumes significance against the backdrop of the Assembly elections in Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram.

•The RTI data, released in response to queries by Factly, also shows that there is next-to-no demand for electoral bonds of smaller denominations and the majority of the bonds sold were in the highest denomination of ₹1 crore.

•The data shows that ₹401.73 crore worth of bonds were sold by SBI in the October 1-10 window, the fifth tranche in which the bonds were available for sale. Within this, about 37.5% of the bonds (₹150.7 crore worth) were sold in Mumbai, the highest share among the 11 cities where the bonds were for sale. The city with the second highest sales was Kolkata (₹62.6 crore worth).

•The first four tranches saw a huge variation in the value of electoral bonds sold by SBI. In March, for example, SBI sold bonds worth ₹222 crore. In April, ₹114.9 crore worth of bonds were sold, which fell to ₹101 crore in May, and just ₹32 crore in July.

•The data from all five tranches shows that barely any electoral bonds were sold in the smaller denominations of ₹1,000, ₹10,000, and ₹1 lakh. For example, in the March and April tranches, a total of just 17 bonds (2.2% of the total) were sold in the ₹1,000 denomination, and none was sold in the ₹10,000 denomination. In contrast, 450 bonds were sold in the ₹10 lakh denomination (58.6% of the total) and 291 in the ₹1 crore denomination (37.9% of the total).

•These trends were largely similar in the October tranche as well.

•The ₹1,000 denomination made up 0.6% of the total bonds sold in October, the ₹10,000 denomination made up 2.6%, the ₹1 lakh denomination 5.7%, the ₹10 lakh denomination made up 41.6%, and the ₹1 crore denomination made up 49.3%.

πŸ“° Getting the economy back on track

It is important to understand the myth and reality of the current economic situation in order to map the road ahead

•Economics is a technical subject of interdependent variables and parameters, that allows for objective mathematical and statistical analysis. It is no more a single commodity demand-supply subject. Those in responsible positions who are ignorant of this fact end up trying to put a spin and gloss on reality, and thus get exposed soon as ridiculous, as we can see today in media debates.

•Is it true then that the Indian economy is headed for a serious crisis? Yes, that is a reality. It is, however, a myth that any or every crisis necessarily means an imminent collapse of the economy. The Indian economy is not near a collapse yet.

•The situation today in the Indian economy is therefore still retrievable and a turnaround can be commenced within three months if the government initiates “real” economic policy changes, as was done in 1991-96 during the tenures of Chandra Shekhar and P.V. Narasimha Rao as Prime Ministers.

•Hence, no amount of quoting foreign agencies such as the International Monetary Fund, or international events in explanations will help address the crisis that is looming unless we initiate major economic reforms that are credible and incentive-driven for the people. We therefore need a reality check today.

A few basic facts

•The reality of today can be assessed from the following facts. One, the growth rate of the economy with proper index number-based GDP has declined over the last two financial years. The annual rate for 2018-19 is for obvious reason not available, but my guess is the trend has not changed.

•Two, household savings, which are the bulk of India’s national investment, dropped from a high of 34% of GDP to about 24% of GDP in 2017. Non-household savings are about 5% of GDP. This decline happened even before demonetisation and the decline continues because of intrusive and sometime obnoxious tax measures. I consider the Goods and Services Tax (GST) a flop borrowed from the United Progressive Alliance (UPA) government. Despite my protest, it was introduced much as a carnival in Parliament, with gongs reverberating.

•Three, non-performing assets of the public sector banks (PSBs) have also risen sharply, in fact at a rate of growth much higher than the rate of new advances of these banks, making many large PSBs financially unviable and likely to collapse. This could cause financial contagion in 2019 in all sectors.

•Four, the Ministry of Finance has brutally cut allocations of the investments in infrastructure despite the urgent need for such infrastructure. The economy needs about $1 trillion investment in infrastructure to render “Make in India” a reality, but the actual investment in sanctioned projects is valued even less in real terms than the amount invested in the pre-2014 years.

•Five, the manufacturing sector, especially MSMEs (micro, small and medium enterprises) which provide the bulk of the employment for the skilled and semi-skilled in the labour force, has been growing at abysmally low rates of between 2% and 5%.

•Six, India’s agricultural products are among the cheapest in the world, and despite a low yield per hectare, we are not able to increase the yield to its potential maximum and at least double the production and export the agricultural products abroad commensurately. Consequently, agriculture, as the sector that is the largest employer of India’s manpower, is grossly under-performing.

•Seven, when crude oil prices had steeply fallen over the four years since 2014, and despite the dollar value of the rupee till mid-2018 having been steady at around Rs.65 per dollar, nevertheless both exports and imports simultaneously declined over 2014-17.

The current adversity

•Now today in 2018, the Indian economy is facing a 180-degree adverse situation: a rise in the rupee-dollar rate to 75, and crude oil prices rising to $85 per barrel, although they are lower now. This is causing a massive crunch for our foreign exchange reserves.

•Thus the present possibility of an economic crash should galvanise us to review honestly the way we have governed and done the business of governing, and then rise to new heights with an appropriate change in policy, and thereafter achieve higher growth rates of 10%-plus annual growth in GDP, with structural changes.

•The Union government also needs to give an alternative ideological thrust to economic policy rather than try to improve on the failed economic policies of the UPA, as is currently being done. In particular, first, the individual has to be persuaded by the government by incentives — for example, by abolishing the income tax — and not by coercion, such as harsh levies and taxes. Of course, the state should make no promise to the people without specifying the sacrifice required to be made by them to make it happen.

•Second, India can make rapid economic progress to become a developed country only through a globally competitive economy, which requires assured access to the markets and technological innovations of the U.S. and some of its allies such as Israel. This has concomitant political obligations which must be accepted as essential.

•Since the growth rate in the GDP is calculated as equal to the rate of total investment (investment as a ratio of GDP) divided by the productivity coefficient of capital (called “capital-output” ratio which decreases with increasing productivity and vice versa), a fall in the rate of investment and/or a rise in capital output ratio means a decline in the growth rate in GDP.

•Thus if the rate of investment is 39% and the productivity ratio is 3.9, then the GDP growth rate is 39 divided by 3.9, which equals 10%. Thus higher the productivity in the use of capital (same as lower capital output ratio), higher is the GDP growth for the same level of investment — and vice versa.

•The decline in the level of household savings thus had caused a sharp decline in the GDP growth rate. It is imperative therefore that to accelerate the GDP growth rate, government policy should be to incentivise the saving habit to increase the savings rate to 35% of the GDP.

•To seriously address these priority problems, it is essential to implement a new menu of measures: (a) dramatic incentives for the household expectation and sentiment to save; and (b) lowering the cost of capital via reducing the prime lending interest rates of banks to 9%, by shifting to a fixed exchange rate regime of Rs.50 per dollar for the financial year 2019 and then gradually lowering the exchange rate for subsequent years.

Cause for optimism

•On a positive note, we should bear in mind that in the last 71 years, India has always come out successfully in all crises — once this is acknowledged as such by policy makers, it can then be dealt with squarely with reforms that incentivise the people. On each occasion, such as the food crisis of 1965, the foreign exchange crisis of 1990-91, thereafter growth renewed on to a higher accelerating path.

•A recent biography of Narasimha Rao by Vinay Sitapati shows how as Prime Minister, Rao relied on my blueprints prepared for reform led to economic reforms moving away from Soviet socialism to the market system and led to doubling the GDP growth rate rising from the socialist 3.5% annual rate of four decades (1950 to 1990) to the market fuelled 8.5% annual rate.

•The Indian economy, however, needs to grow at 10%-plus per year for the next 10 years to achieve full employment and for India’s GDP to overtake China’s GDP and pave the way to form a global economic triumvirate with the U.S. and China.

•We can no more be satisfied with 7-9% growth rate if we want to become an economically developed country by 2040.