The HINDU Notes – 09th August 2019 - VISION

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Friday, August 09, 2019

The HINDU Notes – 09th August 2019

πŸ“° A leaf out of the Chinese playbook

India’s actions in Kashmir increasingly show an authoritarian muscularity, reminiscent of its northern neighbour

•It has been possible to argue that comparing Asia’s two largest countries, China and India, is akin to holding up an apple to an orange. This is not because the challenges facing them are so very different. Neither China’s authoritarian polity, nor India’s democratic one have prevented large-scale corruption, environmental degradation, yawning inequalities or food contamination scandals from raising their ugly heads on both sides of the border. But what has kept the two from being Himalayan birds of a feather thus far is their markedly divergent temperament and foundational culture.

•The potency of this divergence however, is being increasingly diluted, with the Indian state beginning to sound and act like the country it has long had a schizophrenic relationship with. (Modern day India wants to both be China and not-China: a six lane highway-filled, manufacturing powerhouse that is praised for its political openness and liked for its yoga.)

•The abrogation of the special status that gave autonomy to Jammu and Kashmir and more crucially, the style in which this was achieved — relying on secrecy, troops, arrests, curfew and a communications shutdown — has brought India closer than ever before to the ‘results oriented,’ actions, unhindered by political debate and democratic niceties, of authoritarian China.

Pacifying restive regions

•One obvious commonality between New Delhi and Beijing has been their need to grapple with, and pacify, the restive regions on their peripheries: Kashmir and the Northeast in India, Tibet and Xinjiang in China. All of these regions are home to peoples of a religion that is different from that of the country’s majority: Muslim (Kashmir/Xinjiang), Lama Buddhist (Tibet), Christian (Northeast India). All are home to ethno-nationalist movements demanding independence or greater autonomy.

•Both China and India have declared these border areas as “integral” parts of their territory and refuse to countenance the possibility that they might be disputed. (China claims that Tibet has been part of the country for over 700 years.)

•People with dissenting interpretations are labelled “splitists” or “separatists”. The periphery is seen as crucial to national security, while being described as backward, in need of development assistance.

•In China, the ruling Communist Party of China portrays itself as having ‘liberated’ the people of Tibet and Xinjiang from the backward norms of their religions, ending the feudal dominance of religious leaders, bringing equality to women and economic development to the regions. In fact, many Han Chinese believe that Beijing excessively panders to these provinces by giving them special sops. For example, Tibetans were always excluded from the notorious One Child Policy that restricted most Han families to a single child.

•Equality before law, economic development, the empowerment of women: these are all arguments being touted today in favour of ending Jammu and Kashmir’s special status; for anyone familiar with China, they render a strong feeling of dΓ©jΓ  vu.

•Yet, all this rhetoric skirts the reality of egregious human rights abuses that both countries have used in their nation-building endeavours. Torture, rape, illegal detentions, extra-judicial killings and a militarised environment have ensured that hearts and minds have not been won. A common identity has failed to develop, and as the China case demonstrates, this is not because of too much autonomy.

•Dibyesh Anand, Professor of International Relations at the University of Westminster, has argued that both India and China are ‘postcolonial informal empires’, whose anti-imperialist rhetoric disguises their imperialistic attempts to “consolidate and discipline their borderlands.”

•But what used to distinguish India from the more common charges of colonialism faced by China was the fact that the people of Jammu and Kashmir had been provided guarantees under Articles 370 and 35A of the Indian Constitution, along with a strong foundation to build a system of local governance. The ban on non-locals buying land, and permanently settling in the State, also prevented demographic engineering like the large-scale Han migration into Tibet and Xinjiang.

•Independent India’s crowning achievement to date has been the development of institutional mechanisms for negotiating large-scale diversity and accommodating frequent, aggressive disagreements. This is an achievement that deserves as much awe and respect as China’s economic miracle. It might be less shiny and more chaotic, but it is, in its own way, quite spectacular.

•Debate and contestation are not a discardable option for India but an existential necessity. Historically, India has been a civilisational rather than territorial entity, more metaphysical than geographic. It is a nation held together not by language, religion or geography, but by an idea. Multiplicity is foundational to this idea. It is what has allowed India to persist and flourish as a political unit, despite the once widespread belief in the West that an independent India would inevitably Balkanise.

•The new choices that the Indian government is making may well help cover up some of the cracks that its relatively liberal history was unable to weld. It may also fail to do so and lead to complete rupture. But the risk of India forsaking its own sources of strength — pluralism and debate — to emerge as a second rate copy of its muscular, nationalist neighbour to the north is clear.

πŸ“° Knee-jerk: On Pakistan expelling Indian envoy

Pakistan must reconsider its decision to downgrade diplomatic ties with India

•Pakistan’s decision to expel India’s High Commissioner, snap trade relations and observe August 15 as a black day in supposed solidarity with the people of Jammu & Kashmir is a serious setback for diplomatic relations. Wednesday’s announcements appear to be a knee-jerk reaction to the mounting pressures on the Pakistani establishment to respond to India’s executive-legislative actions that whittle down Article 370. Pakistan has consistently described chief ministers of Jammu & Kashmir as “puppets” and never recognised the legitimacy of the government in Srinagar. Its sudden concerns about India’s actions in its own territory are reflective of muddled confusion. Ironically, this is the first time Islamabad has articulated that Article 370 was aligned with the interests of the Kashmiri people. Every Pakistani government and the country’s permanent establishment have continued to peddle the myth that they could unilaterally alter the status quo in J&K. Now, they feel compelled to respond to the expectations that they have themselves raised in Pakistan Occupied Kashmir. Sections of Indian civil society have legitimate concerns about the actions of the BJP Government in emptying out Article 370 and the continuing lockdown of the Valley, but this does not license Pakistan to interfere in what the MEA correctly described on Thursday as India’s internal matter.

•In the days to come, India can expect Pakistan to raise the Kashmir issue at the United Nations, mobilise the Organisation of Islamic Cooperation and send envoys to friendly capitals. India is well placed to deal with Pakistan on the diplomatic front given the changed international context. India’s economic clout has grown enormously in the last couple of decades, and given doubts in the Western world about Pakistan’s overt and covert support to Islamist terror, New Delhi has the space to deal with Islamabad’s efforts to “internationalise” the Kashmir issue. Downgrading diplomatic relations between troubled neighbours is never a good idea. Neither is snapping trade and transport links. India withdrew its High Commissioner to Pakistan after the 2001 Parliament attack, but chose not to send back the Pakistani envoy at the time. However, the Pakistani High Commissioner was expelled by India after the Kaluchak terror strike in 2002. It’s interesting to note that despite all the troubles the two countries have had, High Commissioners have been able to return to their jobs since full diplomatic relations were restored in 1976. In fact, even after the 2001 Parliament attack, India and Pakistan managed to have their High Commissioners back in place by March 2003. Diplomacy is a mechanism to ensure that channels of communication remain open. While India and Pakistan have used back channels in recent years, the presence of seasoned diplomats in Delhi and Islamabad has always benefited the two countries. Pakistan needs to comprehend this.

πŸ“° Economic milestone and a poignant anniversary

Bank nationalisation eased rural credit and aided financial inclusion. Any move to reverse it would be self-defeating

•The nationalisation of banks in 1969 was a watershed moment in the history of Indian banking. From July 19 that year, 14 private banks were nationalised; another six private banks were nationalised in 1980. It is certain that one cannot locate a similar transformational moment in the banking policy of any country at any point of time in history.

•At the time of Independence, India’s rural financial system was marked by the domination of landlords, traders and moneylenders. In 1951, if a rural household had an outstanding debt of ₹100, about ₹93 came from non-institutional sources. From the 1950s, there were sporadic efforts to expand the reach of the institutional sector, particularly in the rural areas. Despite these measures, the predominantly private banking system failed to meet the credit needs of the rural areas.

Class to mass banking

•India’s banking policy after 1969 followed a multi-agency approach towards expanding the geographical spread and functional reach of the formal banking system. First, as a part of a new branch licensing policy, banks were told that for every branch they opened in a metropolitan or port area, four new branches had to be opened in unbanked rural areas. As a result, the number of rural bank branches increased from 1,833 (in 1969) to 35,206 (in 1991). Second, the concept of priority-sector lending was introduced. All banks had to compulsorily set aside 40% of their net bank credit for agriculture, micro and small enterprises, housing, education and “weaker” sections. Third, a differential interest rate scheme was introduced in 1974. Here, loans were provided at a low interest rate to the weakest among the weakest sections of the society.

•Fourth, the Lead Bank scheme was introduced in 1969. Each district was assigned to one bank, where they acted as “pace-setters” in providing integrated banking facilities. Fifth, the Regional Rural Banks (RRB) were established in 1975 to enlarge the supply of institutional credit to the rural areas. Sixth, the National Bank for Agriculture and Rural Development (NABARD) was constituted in 1982 to regulate and supervise the functions of cooperative banks and RRBs.

•The outcomes of such a multi-agency approach were admirable. The share of institutional sources in the outstanding debt of rural households increased from just 16.9% in 1962 to 64% in 1992.

Growth spurring

•India’s nationalisation experience is an answer to mainstream economists who argue that administered interest rates cause “financial repression”. According to this view, if the government administers interest rates, the savings rate would decline, leading to a rationing of investment funds. On the contrary, India’s nationalisation led to an impressive growth of financial intermediation. The share of bank deposits to GDP rose from 13% in 1969 to 38% in 1991. The gross savings rate rose from 12.8% in 1969 to 21.7% in 1990. The share of advances to GDP rose from 10% in 1969 to 25% in 1991. The gross investment rate rose from 13.9% in 1969 to 24.1% in 1990.

•Nationalisation also demonstrated the utility of monetary policy in furthering redistributionist goals. Some economists argue that banks cannot be used to right “historical wrongs”. On the other hand, India’s nationalisation shows that monetary policy, banks and interest rates can be effectively used to take banks to rural areas, backward regions and under-served sectors, furthering redistributionist goals in an economy.

A retreat

•Yet, strangely, arguments in favour of financial liberalisation after 1991 were based on the theory of financial repression. The Narasimham Committee of 1991 recommended that monetary policy should be divorced from redistributionist goals. Instead, banks should be free to practise commercial modes of operation, with profitability as the primary goal.

•Taking the cue, the Reserve Bank of India allowed banks to open and close branches as they desired. Priority sector guidelines were diluted; banks were allowed to lend to activities that were remotely connected with agriculture or to big corporates in agri-business, yet classify them as agricultural loans. Interest rate regulations on priority sector advances were removed.

•The outcomes were immediately visible. More than 900 rural bank branches closed down across the country. The rate of growth of agricultural credit fell sharply from around 7% per annum in the 1980s to about 2% per annum in the 1990s. This retreat of public banks wreaked havoc on the rural financial market. Between 1991 and 2002, the share of institutional sources in the total outstanding debt of rural households fell from 64% to 57.1%. The space vacated by institutional sources was promptly occupied by moneylenders and other non-institutional sources.

A to and fro

•The government and the RBI probably saw the danger coming. In 2004, a policy to double the flow of agricultural credit within three years was announced. Only public banks could make this happen. So, in 2005, the RBI quietly brought in a new branch authorisation policy. Permission for new branches began to be given only if the RBI was satisfied that the banks concerned had a plan to adequately serve underbanked areas and ensure actual credit flow to agriculture. By 2011, the RBI further tightened this procedure. It was mandated that at least 25% of new branches were to be compulsorily located in unbanked centres.

•As a result, the number of rural bank branches rose from 30,646 in 2005, to 33,967 in 2011 and 48,536 in 2015. The annual growth rate of real agricultural credit rose from about 2% in the 1990s to about 18% between 2001 and 2015. Much of this new provision of agricultural credit did not go to farmers; it largely went to big agri-business firms and corporate houses located in urban and metropolitan centres — but recorded in the bank books as “agricultural credit”. For this reason, the share of institutional credit in the debt outstanding of rural households in 2013 stood at 56%, still lower than the levels of 1991 and 2002. Yet, in achieving the high growth of credit provision, the expansion of public bank branches was pivotal.

•After 2005, public banks also played a central role in furthering the financial inclusion agendas of successive governments. Between 2010 and 2016, the key responsibility of opening no-frills accounts for the unbanked poor fell upon public banks. Data show that more than 90% of the new no-frills accounts were opened in public banks. Most of these accounts lie dormant or inactive, but it is unmistakeable that the fulfilling of the goal required the decisive presence and intervention of public banks. The same public banks were also India’s vanguard during the global financial crisis of 2007 when most markets in the developed world, dominated by private banks, collapsed.

•However, despite such a stellar track record, the macroeconomic policy framework of successive governments has hardly been supportive of a banking structure dominated by public banks. In times of slow growth, the excess liquidity in banks was seen as a substitute for counter-cyclical fiscal policy. Successive governments, scared of higher fiscal deficits, encouraged public banks to lend more for retail and personal loans, high-risk infrastructural sectors and vehicle loans. Here, banks funded by short-term deposit liabilities were taking on exposures that involved long-term risks, often not backed by due diligence. Unsurprisingly, many loans turned sour. Consequently, banks are in crisis with rising non-performing assets. The same fear of fiscal deficits is also scaring the government away from recapitalising banks. The solution put forward is a perverse one: privatisation. The goose that lays golden eggs is being killed.

πŸ“° Cycle of extremes: On droughts and floods

India must address its crippling cycles of drought and flood with redoubled vigour

•After a worrying pre-monsoon phase between March and May, when rainfall was scarce, the current robust season in most parts of coastal, western and central India augurs well for the entire economy. Aided apparently by beneficial conditions in the Indian Ocean, very heavy rainfall has been recorded, notably in Maharashtra, Gujarat, Rajasthan, the northeastern States, Karnataka, the Konkan coast, hilly districts of Kerala and Tamil Nadu. This pattern may extend into Chhattisgarh, Odisha, Bengal and other eastern regions. A normal Indian Summer Monsoon is bountiful overall, but as last year’s flooding in Kerala, and the Chennai catastrophe of 2015 showed, there can be a terrible cost in terms of lives and property lost, and people displaced. Distressing scenes of death and destruction are again being witnessed. Even in a rain-shadow region such as Coimbatore in Tamil Nadu, the collapse of a railway parcel office after a downpour has led to avoidable deaths. What this underscores is the need to prepare for the rainy season with harvesting measures, as advocated by the Centre’s Jal Shakti Abhiyan, and a safety audit of structures, particularly those used by the official agencies. In drafting their management plans, States must be aware of the scientific consensus: that future rain spells may be short, often unpredictable and very heavy, influenced by a changing climate. They need to invest in reliable infrastructure to mitigate the impact of flooding and avert disasters that could have global consequences in an integrated economy.

•The long-term trends for flood impact in India have been one of declining loss of lives and cattle since the decadal high of 1971-80, but rising absolute economic losses, though not as a share of GDP. It is important, therefore, to increase resilience through planning, especially in cities and towns which are expanding steadily. Orderly urban development is critical for sustainability, as the mega flood disasters in Mumbai and Chennai witnessed in this century make clear. It is worth pointing out that the response of State governments to the imperative is tardy and even indifferent. They are hesitant to act against encroachment of lake catchments, river courses and floodplains. The extreme distress in Chennai, for instance, has not persuaded the State government against allowing structures such as a police station being constructed on a lake bed, after reclassification of land. Granting such permissions is an abdication of responsibility and a violation of National Disaster Management Authority Guidelines to prevent urban flooding. As a nation that is set to become the most populous in less than a decade, India must address its crippling cycles of drought and flood with redoubled vigour. Scientific hydrology, coupled with the traditional wisdom of saving water through large innovative structures, will mitigate floods and help communities prosper.

πŸ“° ‘Linking farmers with futures market can benefit both’

Higher farmer participation will provide more liquidity to market: ICRIER study

•With the Finance Minister’s budget speech announcing the Centre’s commitment to create 10,000 new farmer producer organisations (FPOs) in the next five years, a new study has made the case for empowering these FPOs to trade in the commodities futures market.

•Such a move could help farmers make their cropping decisions based on next year’s prices rather than last year’s rates, as well as break the crippling hold of middlemen and traders and ultimately boost income for agricultural families, stated a study published by the Indian Council for Research on International Economic Relations (ICRIER) on Thursday. Lessons are being drawn from China’s success in getting small farmers connected to the commodities market since 2005.

•The first futures trade by an Indian FPO took place in 2014 when the Ram Rahim Pragati Producer Company – an enterprise started by 3,000 women belonging to self-help groups in a tribal area of Madhya Pradesh – hedged soyabean price risk on the National Commodity and Derivates Exchange (NCDEX). By May 2018, a total of 69 FPOs had traded on the exchange. However, a whopping 80% of them – 55 FPOs – had only made a single transaction.

•Between April 2016, when NCDEX began making formal efforts to directly engage with FPOs, and May 2018, FPOs had a miniscule 0.004% share of the agri-futures trade at NCDEX. More than half of the FPO futures trade of ₹50.8 crore was in soyabeans, while another third was in maize. Bihar, Maharashtra and Madhya Pradesh account for 92% of the trade.

•The ICRIER working paper, titled ‘Linking farmers to futures market’ in India, notes that small farmers often do not have the required scale to trade in the futures market as individuals, and also view it with some suspicion, as akin to “satta” or gambling. Instead, they depend on traders in traditional marketing channels who charge high commissions, but provide easy access to credit and market. However, FPOs, as aggregates of small farmers, can provide the scale of production needed if they receive sufficient information and support.

Lessons drawn

•Some of the lessons drawn from Indian case studies include the need to focus on commodities with limited government intervention on prices and procurement, and the need to identify production centres and build warehouses and delivery centres around them in order to encourage futures trading in these areas. In China, the state has been helping smallholder farmers by providing customised products and reducing price distortions, said the study.

•“Linking farmers with futures market can be mutually beneficial to both,” says the ICRIER paper. “Farmers, when linked with a consistent, liquid and deep futures market will be able to reap benefits of efficient price discovery. Higher farmer participation will provide more liquidity to the market, helping it achieve its objective of price discovery. If farmers start finding that the markets are consistent [i.e. without abrupt interventions], reliable and accessible, their participation will also increase, making markets more liquid and deep.”

πŸ“° Maharashtra to set up task force on climate change

Experts to study measures taken against flooding, unplanned reclamation

•In the wake of an unprecedented flood-like situation and record rainfall this season, the State government will constitute a task force comprising local and global experts to study impact of climate change on Mumbai.

•The task force will study measures taken against flooding and unplanned reclamation in cities such as Venice, Geneva and London, and coordinate with the European Climate Change Programme of the European Union to prepare a blueprint. The task force will be set up by the environment department in coordination with Mumbai First, a not-for-profit, policy-influencing think tank, officials said.

•Narinder Nayar, chairman, Mumbai First, said the proposal for the task force has been sent to the government while only the last-minute modalities are remaining. On Wednesday, Mumbai First held a meeting with Chief Secretary Ajoy Mehta and discussed the need to set up a task force comprising scientists and experts on climate change from around the globe.

•“We have seen Mumbai has witnessed unprecedented floods and rain this monsoon. There are new flooding spots in the city while the construction of major projects is going on. All of these have raised concerns over the impact of climate change,” Mr. Nayar said after meeting Mr. Mehta.

•Officials said the government has agreed to not only form the task force but also participate in an international conference on climate change, which will be organised by Mumbai First.

•The task force will also study patterns of climate change and steps taken by leading countries such as the Netherlands, which has taken a lead in flood management and measures against climate change.

πŸ“° Food supply is at dire risk: UN

•The world’s land and water resources are being exploited at “unprecedented rates,” a new United Nations report warns, which, combined with climate change, is putting dire pressure on the ability of humanity to feed itself.

•The report, prepared by more than 100 experts from 52 countries and released in summary form in Geneva on Thursday, found that the window to address the threat is closing rapidly. A half-billion people already live in places turning into desert, and soil is being lost between 10 and 100 times faster than it is forming, according to the report.

•Climate change will make those threats even worse, as floods, drought, storms and other types of extreme weather threaten to disrupt, and over time shrink, the global food supply. Already, more than 10% of the world’s population remains undernourished, and some authors of the report warned in interviews that food shortages could lead to an increase in cross-border migration.

•A particular danger is that food crises could develop on several continents at once, said Cynthia Rosenzweig, a senior research scientist at the NASA Goddard Institute for Space Studies and one of the lead authors of the report.

•The report offered a measure of hope, laying out pathways to addressing the looming food crisis, although they would require a major reevaluation of land use and agriculture worldwide as well as consumer behavior. Proposals include increasing the productivity of land, wasting less food and persuading more people to shift their diets away from cattle and other types of meat.

•The summary was released Thursday by the Intergovernmental Panel on Climate Change, an international group of scientists convened by the United Nations that pulls together a wide range of existing research to help governments understand climate change and make policy decisions. The IPCC has been writing a series of reports, including one last year on the disastrous consequences if the planet’s temperature rises just 1.5 degrees Celsius above its preindustrial levels, as well as an upcoming report on the state of the world’s oceans.

πŸ“° India to seek boost to protection status of 5 species at CITES

•India has submitted proposals regarding changes to the listing of various wildlife species in the CITES secretariat meeting, scheduled later this month in Geneva, Switzerland.

•CITES (Convention on International Trade in Endangered Species on Wild Fauna and Flora) is an international treaty to ensure that trade in wild animals and plants do not threaten their survival.

•The proposals submitted are regarding changes in the listing of the smooth-coated otter, small-clawed otter, Indian star tortoise, Tokay gecko, wedgefish and Indian rosewood.

•The country seeks to boost the protection of all the five animal species as they are facing a high risk of international trade.

•For the Indian rosewood, the proposal is to remove the species from CITES Appendix II. The species covered by CITES are listed in three appendices on the degree of protection they require.

•India is among the parties proposing the re-listing of the star tortoise from CITES Appendix II to Appendix I. The species faces two threats: loss of habitat to agriculture and illegal harvesting for the pet trade.

•With regard to the two otter species, India, Nepal and the Philippines have proposed that the listing be moved from CITES Appendix II to Appendix I for the more endangered species. A similar proposal has been made to include the Tokay gecko in Appendix I.

•Saket Badola, head of TRAFFIC India told The Hindu, that India would also support proposals, such as the boosting of protection status for tarantulas, made by other countries. TRAFFIC is an international wildlife trade monitoring network.

•Mr. Badola said that the proposals from India on lesser known species indicate the broadening of the conservation spectrum.