The HINDU Notes – 14th October 2019 - VISION

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Monday, October 14, 2019

The HINDU Notes – 14th October 2019

📰 Education for mothers directly linked to better nutrition for children: survey

Education for mothers directly linked to better nutrition for children: survey
Pan-India study of 1.2 lakh children by Health and Family Welfare Ministry shows children received better diets with higher levels of schooling among mothers

•A first-of-its kind pan-India survey conducted by the Health and Family Welfare Ministry on nutrition levels among children shows a direct correlation between mothers’ education and the well-being of children.

•The Comprehensive National Nutrition Survey (CNSS) studied 1.2 lakh children between 2016 and 2018 and measured food consumption, anthropometric data, micronutrients, anaemia, iron deficiency and markers of non-communicable diseases.

•These were compared with different population characteristics such as religion, caste, place of residence and the mothers’ level of schooling.

•The data recorded show 31% of mothers of children aged up to four years, 42% of women having children aged five to nine and 53% of mothers of adolescents aged 10-19 never attended school. Only 20% of mothers of pre-schoolers, 12% of those of schoolchildren, and 7% of those of adolescents had completed 12 or more years of schooling.

Core indicators

•Diet diversity, meal frequency and minimum acceptable diet are the three core indicators of nutrition deficiency among infant and young children.

•Data from the CNNS study show that with higher levels of schooling in a mother, children received better diets. Only 11.4% of children of mothers with no schooling received adequately diverse meals, while 31.8% whose mothers finished Class XII received diverse meals.

•The study found 3.9% of children whose mothers had zero schooling got minimum acceptable diets, whereas this was at 9.6% for children whose mothers finished schooling. Moreover, 7.2% of children in the former category consumed iron rich food, whereas this was at 10.3% for children in the latter category.

•The proportion of children aged two to four consuming dairy products, eggs and other fruits and vegetables the previous day increased with the mothers’ education level and household wealth status. For example, only 49.8% of children in that age group whose mothers did not go to school consumed dairy products, while 80.5% of children of mothers who completed their schooling did so. These trends also show among older children and adolescents — only 25.4% of children in the 5-9 age group with uneducated mothers received eggs, but 45.3% of children whose mothers studied till Class XII had eggs.

Stunting, wasting

•Levels of stunting, wasting and low weight were higher in children whose mothers received no schooling as opposed to those who studied till Class XII. Stunting among children aged up to four was nearly three times for the former category (19.3% versus 5.9%), and the number of underweight children was nearly double among them (14.8% versus 5.1%) as compared to the latter category. Also, 5.7% of the children were wasted in the former category, while this was at 4.3% in the latter category.

•Anaemia saw a much higher prevalence of 44.1% among children up to four years old with mothers who never went to school, versus 34.6% among those who completed their schooling.

Flip side

•But on the flip side, a higher level of education among mothers meant that their children received meals less frequently, perhaps because their chances of being employed and travelling long distances to work went up — 50.4% of children in the age group of 6-23 months born to illiterate mothers versus 36.2% among those who had finished schooling.

•Such children were also at higher risk of diabetes and high cholesterol as relative prosperity could lead to higher consumption of sugary drinks and foods high in cholesterol. Children in the age group of 10-19 showed a higher prevalence of pre-diabetes if their mother had finished schooling (15.1% versus 9.6%). The prevalence of high cholesterol levels was at 6.2% in these children as opposed to 4.8% among those whose mothers never attended school.

📰 Nepal, China ink road connectivity deal

Kathmandu to import more from Beijing; Chinese banks to open branches in Nepal

•China and Nepal on Sunday concluded agreements for all-weather connectivity between Kathmandu and the Tibet Autonomous Region.

•The infrastructure-building agreements were part of the 20 documents that were signed after delegation-level talks held by visiting Chinese President Xi Jinping and Nepalese Prime Minister K.P. Sharma Oli.

•An agreement for upgraded all-weather road connection that includes building of Himalayan tunnels was reached between the Ministry of Finance of Nepal and the China International Development Cooperation Agency.

•Both sides resolved to begin feasibility studies for the construction of the tunnels along the road from Keyrung in Tibet to Kathmandu, said a joint statement issued at the end of the visit. The joint statement declared that both sides will intensify cooperation to realise “trans-Himalayan multidimensional connectivity network”.

•The tunnel network will connect Tokha and Chhahare within Nepal that will ultimately reduce the road distance between Nepal and China.

•The current road network is unsafe as it is prone to disruption due to landslips and poor maintenance.

•Both sides also gave the green signal for a feasibility study of the trans-Himalayan rail connectivity aimed at connecting the Nepal capital with major commercial centres of the Tibetan Autonomous Region and beyond in China.

•Nepal agreed to allow Chinese banks to open branches and other financial services in Nepal and increase imports from China.

•President Xi began his visit to Kathmandu on Saturday afternoon, after his trip to Chennai for the informal summit with Indian Prime Minister Narendra Modi. He was accompanied by his full diplomatic team headed by Foreign Minister Wang Yi.

•Nepal also signed a treaty with China on mutual legal assistance in criminal matters which will allow China to investigate cases of crime that might target Nepal.

•Nepal reiterated its “firm commitment” to the One China policy.

•Nepal also acknowledged that Taiwan was an “inalienable” part of China and promised not to allow any anti-China activities on Nepal territory.

•The joint statement clarified that both sides were working towards an extradition treaty.

Increased opportunity

•As per agreements, China will offer 100 training opportunities to the Nepalese law enforcement officers each year, increase exchange of visits of security personnel, joint exercises and training of personnel for disaster relief and prevention.

•China has agreed to build the Madan Bhandari University for Science and Technology as a mark of respect for the late leader of the Communist Party of Nepal.

•It also committed to build a railway line connecting Kathmandu and Pokhara with the birthplace of Lord Buddha at Lumbini.

•Welcoming President Xi, Nepal President Bidhya Devi Bhandari said that Lumbini should be developed as a centre of global peace.

📰 Chennai Connect: On Xi-Modi informal summit

Modi and Xi have not allowed recent disagreements to cloud their meeting

•Just ahead of the Chennai informal summit between China’s President Xi Jinping and Prime Minister Narendra Modi, senior officials said the purpose of the second meeting of its kind, following the Wuhan summit, was for the leaders to show that they are “getting down to business”. Cutting through much of the pomp and show at Mamallapuram, the leaders ensured just that — by putting “business” first. In a decision taken after their talks, the leaders established a “High-Level Economic and Trade Dialogue mechanism” between the Finance Ministers with the three-pronged objective of enhancing trade volumes, bridging the massive bilateral trade deficit, and increasing mutual investment in sectors agreed upon. If the mechanism works, it will not only succeed in taking away one of the major irritants in ties but also allow influential stakeholders in the business communities of both countries to promote ties as well as help New Delhi and Beijing work more closely on the multilateral stage. A key test of the bonhomie and trust-building will be seen towards the month-end when the two leaders attend the ASEAN-led summit in Bangkok that is due to announce the conclusion of the 16-nation free trade Regional Comprehensive Economic Partnership agreement. India has been reluctant to join it thus far, mostly because of concerns over China’s predatory trade policies. Among the key takeaways from the Chennai summit, which added the “Chennai Connect” to the “Wuhan Spirit”, was the decision to mark the 70th anniversary, in 2020, of the establishment of India-China relations. The others were to nudge the Special Representatives on the boundary issues to meet soon to add more confidence building measures, to cooperate on fighting terror, and to continue the “informal summit” series, with Mr. Modi attending the next meeting in China next year.

•Above all, the leaders decided, as they had in Wuhan, that they would “prudently manage” differences and not allow “differences to become disputes” or as Mr. Xi put it, “dilute cooperation”. This is easier said than done as many of the bilateral disputes appear to have an external factor. India often sees China through the prism of its ties with Pakistan, while China looks constantly for an American role in Indian actions. Both the China-Pakistan Economic Corridor and the U.S.-India joint Indo-Pacific vision have further derailed bilateral trust. It is thus necessary to remove the worry of “third parties” from the room if New Delhi and Beijing are to move beyond laying the foundations of engagement and building atmospherics to actually resolving the serious issues they have in territorial, economic and strategic areas. Only when they see each other as independent and autonomous decision-makers will the leaders realise their vision of an Asian century where the “elephant and dragon” learn to dance.

📰 World Bank cuts India’s growth projection to 6%

In 2018-19, the growth rate of the country stood at 6.9%

•After a broad-based deceleration in the initial quarters of this fiscal year, India’s growth rate is projected to fall to 6%, the World Bank said on Sunday.

•In 2018-19, the growth rate of the country stood at 6.9%.

•However, the bank in its latest edition of the South Asia Economic Focus said the country was expected to gradually recover to 6.9% in 2021 and 7.2% in 2022 as it assumed that the monetary stance would remain accommodative, given benign price dynamics.

•The report, which has been released ahead of the annual meeting of the World Bank with the International Monetary Fund, noted India’s economic growth decelerated for the second consecutive year.

•In 2018-19, it stood at 6.8%, down from 7.2% in the 2017-18 financial year.

•While industrial output growth increased to 6.9% due to a pick-up in manufacturing and construction activities, the growth in agriculture and the services sector moderated to 2.9% and 7.5%, respectively.

•In the first quarter of 2019-20, the economy experienced a significant and broad-based growth deceleration with a sharp decline in private consumption on the demand side and the weakening of growth in both industry and services on the supply side, the report said.

•Reflecting on the below-trend economic momentum and persistently low food prices, the headline inflation averaged 3.4% in 2018-19 and remained well below the RBI’s mid-range target of 4% in the first half of 2019-2020. This allowed the RBI to ease monetary policy via a cumulative 135 basis point cut in the repo rate since January 2019 and shift the policy stance from neutral to accommodative , it said.

•The World Bank report also noted that the current account deficit had widened to 2.1% of the GDP in 2018-19 from 1.8% a year before, mostly reflecting a deteriorating trade balance.

•On the financing side, significant capital outflows in the first half of the current year were followed by a sharp reversal from October 2018 onwards and a build-up of international reserves to $411.9 billion at the end of the fiscal year.

•Likewise, while the rupee initially lost ground against the Dollar (12.1% depreciation between March and October 2018), it appreciated by about seven per cent up to March 2019, the report said.

•“The general government deficit is estimated to have widened by 0.2 percentage points to 5.9% of the GDP in 2018-19. This is despite the central government improving its balance by 0.2 percentage points over the previous year. The general government debt remained stable and sustainable - being largely domestic and long term-at around 67% of GDP, the report said.

•According to the World Bank, poverty has continued to decline, albeit possibly at a slower pace than earlier. Between 2011-12 and 2015-16, the poverty rate declined from 21.6% to 13.4% ($1.90 PPP/day).

Poorest households at risk

•The report, however, said disruptions brought about by the introduction of the GST and demonetisation, combined with the stress in the rural economy and a high youth unemployment rate in urban areas may have heightened the risks for the poorest households.

•The significant slowdown in the first quarter of the fiscal year and high frequency indicators, thereafter, suggested that the output growth would not exceed 6% for the full fiscal year, the bank said.

•The report said the consumption was likely to remain depressed due to slow growth in rural income, domestic demand (as reflected in a sharp drop in sales of automobiles) and credit from non-banking financial companies (NBFCs).

•However, the investment would benefit from the recent cut in effective corporate tax rate for domestic companies in the medium term, but also will continue to reflect financial sector weaknesses, the report said.

•“Growth is expected to gradually recover to 6.9% in 2020-21 and 7.2% in 2021-22 as the cycle bottoms-out, rural demand benefits from effects of income support schemes, investment responds to tax incentives and credit growth resumes. However, exports growth is expected to remain modest, as trade wars and slow global growth depresses external demand,” the report said.

The way forward

•The main policy challenge for India is to address the sources of softening private consumption and the structural factors behind weak investment, the bank said.

•“This will require restoring the health of the financial sector through reforms of public sector banks’ governance and a gradual strengthening of the regulatory framework for NBFCs, while ensuring that solvent NBFCs retain access to adequate liquidity.”

•“It will also require efforts to contain fiscal slippages, as higher-than-expected public borrowings could put upward pressure on interest rates and potentially crowd-out the private sector,” it said.

•According to the bank, the main sources of risk included external shocks that result in tighter global financing conditions, and new NBFC defaults triggering a fresh round of financial sector stress.

•To mitigate these risks, the authorities would need to ensure that there was adequate liquidity in the financial system while strengthening the regulatory framework for the NBFCs, the bank added.

📰 A tax policy that could work

Ensuring, with political will, that multinational companies actually pay their fair share of taxes is a feasible strategy

•The Indian government should now be desperate to raise more tax revenues. It missed its tax targets massively in the last fiscal year, largely because of poor goods and services tax (GST) collections. Its declared budgetary target for the current year requires tax receipts to increase by around 25%, when the first quarter increase was only 6% over the previous year. In the misplaced belief that what is required to address the current slowdown is more tax relief to corporates, it has offered tax rate reductions to 25% of profits to companies that do not avail of other concessions, and further rebates to new companies. So very significant tax shortfalls are likely even in the current year, unless the government takes proactive measures.

Looking at MNCs

•But such measures need not — and should not — take the form of the tax terrorism that this government has been prone to, or increasing GST rates, which would be regressive and counterproductive in the slowdown. Fortunately, there are other measures that could provide significantly more tax revenues to the government. One obvious low-hanging fruit is a strategy to ensure that multinational companies (MNCs) actually pay their fair share of taxes.

•It is well known that MNCs manage to avoid taxation in most countries, by shifting their declared costs and revenues through transfer pricing across subsidiaries, practices described as “base erosion and profit shifting” (BEPS). Matters have got even worse with digital companies, some of the largest of which make billions of dollars in profits across the globe, but pay barely any taxes anywhere. The International Monetary Fund has estimated that countries lose $500 billion a year because of this. Also, it creates an uneven playing field, since domestic companies have to pay taxes that MNCs can avoid.

How the idea works

•The Organisation for Economic Co-operation and Development (OECD) has now recognised this through its BEPS Initiative, and has even attempted a belated attempt to include developing countries through what it calls its inclusive process. So far, this process has delivered a few benefits, but these are limited because it has continued to operate on the basis of the arm’s-length principle of treating the subsidiaries as separate entities.

•But this can change if there is political will. The basic idea is breathtakingly simple, and has been proposed by the Independent Commission for the Reform of International Corporate Taxation, or ICRICT (full disclosure: I am a member).

•The idea is this: since an MNC actually functions as one entity, it should be treated that way for tax purposes. So the total global profits of a multinational should be calculated, and then apportioned across countries according to some formula based on sales, employment and users (for digital companies). This is something that is actually already used in the United States where state governments have the power to set direct and indirect tax rates.

•Obviously, a minimum corporate tax should be internationally agreed upon for this to prevent companies shifting to low tax jurisdictions (ICRICT has suggested 25%). Then, each country can simply impose taxes on the MNCs operating in their jurisdictions, in terms of their own shares based on the formula.

•It could be argued that this would only work if all countries agree, and certainly that is the ideal to be aimed at. But the beauty of this proposal is that just some large countries can move the debate and make it less advantageous for global companies to shift their profits around. If the big markets such as the United States and the European Union together decided to tax according to this proposed principle, there would be little incentive for many MNCs to try and shift reported profits to other places. Indeed, the Indian government has already proposed in a white paper that it could take such a unilateral initiative for digital companies.

•The OECD BEPS Initiative will be meeting on October 19 to set out its own proposal, and for the first time, it is willing to consider the possibility of unitary taxation. But there are some stings in the tail that may well render the proposed measures practically impotent. These concerns are set out clearly in a new report from ICRICT.

Key concerns

•The biggest problem is the arbitrary separation between what OECD calls “routine” and “residual” profits, and the proposal that only residual profits will be subject to unitary taxation. This has no economic justification, since profits are anyway net of various costs and interest.

•The proposal does not clearly specify the criteria for determining routine profits, instead suggesting that the “arm’s-length principle” will be used to decide this, which defeats the entire purpose. As it happens, there is no system of corporate taxation anywhere in the world that makes such a distinction — so why should an international system rely on this?

•Another concern is about the formula to be used to distribute taxable profits. The OECD suggests only sales revenues as the criterion, but developing countries would lose out from this because they are often the producers of commodities that are consumed in the advanced economies. Instead, the G24 group of (some of the most influential) developing countries has proposed that a combination of sales/users and employment should be used, which makes much more sense.

•It is important for the Indian government to look at this issue seriously and take a clear position at the OECD meeting, because the outcome will be very important for its own ability to raise tax revenues. A government that is currently ineffective in battling both economic slowdown and declining tax revenues cannot afford to neglect this crucial opportunity. But more public pressure may be required to make the government respond.