The HINDU Notes – 25th January 2020 - VISION

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Saturday, January 25, 2020

The HINDU Notes – 25th January 2020

📰 Monetary policy has its limits, reforms must continue: Das

Govt. focusing on infrastructure spending to augment growth potential, says the RBI Governor

•Though recognising the signs of an economic slowdown and acting early helped the central bank to reduce interest rate as falling inflation provided space, monetary policy has its own limits, Reserve Bank of India Governor Shaktikanta Das said on Friday.

•Speaking at the St. Stephen’s College, his alma mater, on ‘Seven Ages of India’s Monetary Policy’, Mr. Das said structural reforms and fiscal measures may have to be continued and further activated to provide a durable push to demand and boost growth.

•He said inflation had fallen successively and averaged below 4% since 2017-18, though there was a recent up-tick driven by food prices, especially the sharp increase in vegetable prices, reflecting the adverse impact of unseasonal rains and cyclone.

•Since 2016, the RBI follows a flexible inflation targeting framework defined by a target of 4% for consumer price headline inflation, with a tolerance band of +/- 2% around it.

•The central bank’s primary objective is price stability, while keeping in mind the objective of growth, as defined by the RBI Act.

•The RBI Governor said there were some potential growth drivers which, through backward and forward linkages, could give a significant push to growth.

•“Some of these areas include prioritising food processing industries, tourism, e-commerce, start-ups and efforts to become a part of the global value chain,” he said, adding that the government was also focussing on infrastructure spending which would augment the growth potential of the economy. Financial stability had emerged as another key consideration for monetary policy, “though jury is still out as to whether it should be added as an explicit objective,” Mr. Das said.

•“It is interesting to note that the central banking function as the lender of last resort (LOLR) has remained intact, notwithstanding the developments and refinements in the policy frameworks across countries, including India,” he said.

📰 Centre seeks to revamp child care scheme in urban areas

NITI Aayog will develop draft policy, which will be circulated to the Ministries for consultations

•Urban areas are likely to receive a renewed focus under the government’s ICDS programme, which provides for anganwadis or day-care centres across the country for delivery of nutrition and pre-school education.

•The government’s think tank, the NITI Aayog, has prepared a draft working paper, which once approved would be circulated to different ministries for consultations. These include the Ministry of Health and Family Welfare, the Ministry of Women and Child Development, the Ministry of Urban Housing and Affairs and the Ministry of Drinking Water and Sanitation.

•“Health and ICDS models that work in rural areas may not work in urban areas because of higher population density, transportation challenges and migration,” a government official familiar with the deliberations, who spoke on condition of anonymity, told The Hindu .

‘Other models’

•“Because of these issues it may not be possible for a community worker to keep in contact with the beneficiaries, which she is able to achieve in rural settings. We have seen some models in India, and in other countries and we are trying to synthesize learnings from those,” the official added.

•According to government data from 2018, of the 14 lakh anganwadis across the country there are only 1.38 lakh anganwadis in urban areas. The Integrated Child Development Services (ICDS) provide for anganwadis or day-care centres which deliver a package of six services including supplementary nutrition, pre-school non-formal education, nutrition and health education, immunisation, health check-up and referral services to hospitals.

Urban challenges

•The first-ever pan-India survey on the nutrition status of children, highlighted that malnutrition among children in urban India is characterised by relatively poor levels of breastfeeding as mothers have to travel long distances for work. It also found a higher prevalence of obesity because of relative prosperity and lifestyle patterns, along with iron and Vitamin D deficiency.

•Avani Kapur, a policy researcher, said improving infrastructure in urban areas would be key as the government embarks on improving service delivery under the ICDS programme.

•“One thing which will be crucial for anganwadi services in urban areas is strengthening safety and infrastructure,” said Ms. Kapur, Director at Accountability Initiative of the Centre for Policy Research.

📰 Nepal pitches for informal SAARC summit

It wants to host the event on the sidelines of Sagarmatha Sambaad

•Nepal will be “happy” to host an informal summit of the leaders of the South Asian Association for Regional Cooperation (SAARC) on the sidelines of the coming Sagarmatha Sambaad here.

•Speaking to Indian journalists here on Friday, Foreign Minister Pradeep Kumar Gyawali reiterated that Nepal would also work to build greater connectivity with China. “It will be fantastic. We will be happy to welcome all SAARC leaders and provide them with... [an opportunity] to discuss measures informally to develop cooperation,” he said.

•This offer gives a chance to revive the forum, which has been unable to meet formally during the last four years because of the negative India-Pakistan relations. The SAARC summit could not be held in Islamabad in 2016 after India faced terror strikes blamed on elements in Pakistan.

Tenure completed

•Mr. Gyawali said Kathmandu had invited all SAARC heads of government for Sagarmatha Sambaad, the first edition of a multi-stakeholder dialogue, to be held from April 2 to 4 and argued that an alternative to the formal summit model could be explored. He said Nepal had served out its tenure as chair of the regional body and was “eager” to pass the position to the next in line, Pakistan.

•“We are optimistic that an alternative way to revive the regional formation could be found,” Mr. Gyawali said, arguing that coordination at the regional level would be essential to tackle challenges before South Asian countries.

•The offer of an informal summit is in line with the current global trend whenever a formal agenda could not be worked out because of the contradictory positions of the stakeholders.

•Mr. Gyawali said Kathmandu wanted to broaden connectivity with China. “We want to build crossborder railways, highways, and port connectivity with China.” Nepal hosted Chinese President Xi Jinping in October when both sides sealed several agreements, including the one for a cross-Himalayan Keyrung-Kathmandu train project.

•Mr. Gyawali referred to Nepal’s border dispute with India at Kalapani as a burden from history. “If India can resolve such issues with countries like Bangladesh, why can’t Kalapani be resolved,” he asked, advocating talks.

📰 Direct tax collections set to drop for first time in two decades

Only ₹7.3 lakh crote received as of Jan. 23, over 5.5% below last year’s collection

•India’s corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, over half a dozen senior tax officials told Reuters, amid a sharp fall in economic growth and cut in corporate tax rates.

•Prime Minister Narendra Modi’s government was targetting direct tax collection of ₹13.5 lakh crore ($189 billion) for the year ending March 31, a 17% increase over the prior fiscal year.

•However, a sharp decline in demand has stung businesses, forcing companies to cut investment and jobs, denting tax collections and prompting the government to forecast a 5% growth for this fiscal year — the slowest in 11 years.

•The tax department had managed to collect only ₹7.3 lakh crore as of January 23, more than 5.5% below the amount collected by the same point last year, a senior tax official said.

•After collecting taxes from companies in advance for the first three quarters, officials typically garner about 30-35% of annual direct taxes in the final three months, data from the past three years shows.

•But eight senior tax officials interviewed by Reuters said despite their best efforts, direct tax collections this financial year were likely to fall below the ₹11.5 lakh crore collected in 2018-19.

•“Forget the target. This will be the first time that we’ll see a fall in direct tax collection ever,” a tax official in New Delhi said.

•He estimates that direct tax collections for this year could end up roughly 10% below fiscal 2019.

•Direct taxes typically account for about 80% of the government’s projections for annual revenue, and the shortfall may leave the government needing to boost borrowing to meet expenditure commitments.

•The tax officials also say that a surprise cut in headline corporate tax rate last year aimed at wooing manufacturers and boosting investment in Asia’s third-biggest economy is another key reason behind the sluggish tax collections.

•“We’ll be very happy if we can even break even with what we collected last year,” said another senior tax official in the financial capital Mumbai, the biggest tax generator, accounting for about a third of revenues from direct taxes. “But given the state of the economy, I’m not too hopeful.”

📰 Justice for Rohingya

The ICJ’s ruling on military excesses in Myanmar holds hope for Rohingya refugees

•The unanimous ruling of the International Court of Justice (ICJ), on Thursday, on the prevention of alleged acts of genocide against Rohingya Muslims has finally pinned legal responsibility on Myanmar’s government for the military’s large-scale excesses of 2017. Crucial is the Hague court’s stipulation that the civilian government of Ms. Suu Kyi submit an update, within four months, of the steps it has taken to preserve evidence of the systemic brutalities. Yangon has also been asked to furnish six-monthly reports thereafter, until the conclusion of the case, which relates to genocide accusations. The court has further emphasised that an estimated 600,000 Rohingya resident in Myanmar still remained highly vulnerable to attacks from the security forces. The ruling vindicates findings by the UN and human rights groups on the prevalence of hate speech, mass atrocities of rape and extra-judicial killings, and torching of villages in Myanmar’s Rakhine province, leading to the forced migration of thousands to Bangladesh. The ruling pertains to the Gambia’s suit on behalf of the Organisation of Islamic Cooperation (OIC), alleging that the brutalities by the defence services amounted to crimes of genocide under the 1948 Genocide Convention. Arguing the defence in person during the three-day public hearings last month, Ms. Suu Kyi, who was elected in 2016, insisted that the 2017 violence was proportionate to the threat of insurgency. She even questioned the Gambia’s standing to bring the suit, saying that there was no bilateral dispute.

•Rejecting the ICJ’s ruling, Myanmar’s Foreign Ministry has accused rights groups of presenting the Court with a distorted picture of the prevailing situation. In a statement, it defended the army’s action as a legitimate response to violations of the law by the insurgent Arakan Rohingya Salvation Army. However, the above claim is at odds with the findings this week of an Independent Commission of Enquiry established by the government. The Commission acknowledged that war crimes had indeed been committed during the military campaign, when about 900 people were killed. But there was nothing to back the assertions of gang-rape, or evidence to presume any intent of genocide, it held. Although it could take years before the court pronounces the final verdict in the genocide case, Thursday’s injunction is an important victory for the refugees languishing in Bangladeshi camps. It empowers the UN Security Council to prevail upon Myanmar to take appropriate measures for the rehabilitation and repatriation of displaced communities. As the biggest regional player, China could play a constructive role to ensure a speedy return to normalcy in its neighbourhood. India has its own interests in an amicable resolution of Myanmar’s internal dispute. Above all, finding closure to the current dispute would mark the completion of Myanmar’s return to civilian rule.

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