The HINDU Notes – 09th May 2020 - VISION

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Saturday, May 09, 2020

The HINDU Notes – 09th May 2020

πŸ“° Lockdown, social distancing measures can’t continue forever: Harsh Vardhan

Given the diversity of a country like India, it becomes essential to use the lockdown strategy very judiciously, he says

•Noting that lockdown has great repercussions for economy, society and psychology, Union Health Minister Harsh Vardhan in the exclusive interview to The Hindu said that lockdown has its socio-economic implications, in addition to the health-related issues. "Given the diversity of a country like India, it becomes essential to use this extreme strategy very judiciously,’’ he said.

•He cautioned that any relaxation to the lockdown should not damage the gains in disease containment. "It would suffice to say that we need an optimal mix of relaxations and restrictions so that disease control continues along with nil or minimal impacts on economy,’’ said the Minister.

•Speaking about the world-wide rush to find a treatment of vaccine for the virus he said that so far four treatment options have been identified - Remdesivir; Lopinavir/Ritonavir; Lopinavir/Ritonavir with Interferon beta-1a; and Chloroquine/ Hydroxychloroquine, which are under consideration.

•"International clinical trials have been started to assess their relative effectiveness against COVID-19. By enrolling patients in multiple countries, World Health Organisation’s Solidarity Trial aims to rapidly discover whether any of the drugs slows disease progression or improves survival. Further, 7 candidate vaccines are at clinical evaluation stage while another 82 are at preclinical evaluation stage which include those developed by half a dozen Indian firms also,’’ he said.

•Speaking about the large number of asymptomatic cases in India the Minister added that identification of all these asymptomatic cases will require repeated testing of 130 crore population which is a resource expensive and time consuming exercise for any country and is neither possible nor recommended because of its feasibility.

πŸ“° India should talk directly to Taliban, says U.S. Special Envoy Zalmay Khalilzad

The territory of Afghanistan must not be used against the United States, our allies and in fact the world

•India should discuss its concerns on terrorism directly with the Taliban, said U.S. Special Representative for Afghanistan Reconciliation Zalmay Khalilzad, adding that he had discussed how India could play a “more active role” in the Afghan reconciliation process during his talks in Delhi on Thursday.

•“India is an important force in Afghanistan and it would be appropriate for that [India-Taliban] engagement to take place,” Mr. Khalilzad told The Hindu in an exclusive interview.

•The envoy said India had a “significant role” in Afghanistan’s development, but paradoxically, doesn’t play a role in the international peace efforts. “India and Afghanistan have historic ties, and I believe that dialogue between India and the Taliban is important, and it would be important that issues of concern like this [terrorism] are raised directly,” he added.

•This is the first time the U.S. has publicly suggested an engagement between India and the Taliban. New Delhi, that still considers the Taliban a terror group allied to Pakistan, has thus far distanced itself from any talks.

•During their meeting on Thursday, External Affairs Minister S. Jaishankar and National Security Advisor Ajit Doval had raised concerns over increasing violence in Afghanistan and the need to protect minorities including Afghan Sikhs and Hindus.

•Mr. Khalilzad, the architect of the U.S.-Taliban agreement, travelled to Doha, Delhi and Islamabad, in an effort to iron out an impasse in the agreement over the release of prisoners and intra-Afghan negotiations. While recognising concerns over the Doha agreement, he told The Hindu that there “was no alternative” to it and hoped that India would engage “all forces” in Afghanistan, including the Taliban.

πŸ“° Mass hatching of Olive Ridley turtles begins at Odisha’s Rushikulya rookery

The Forest department had put up a metal net fencing along a section of the coast to protect the eggs

•Mass hatching of Olive Ridley turtles began at Odisha’s Rushikulya rookery, a major nesting site of these marine turtles, on Thursday night.

•Thousands of hatchlings came out of the nests buried in sand to crawl towards the sea to start their long journey. On an average 80 to 100 turtles hatch from each nest.

•According to Berhampur Divisional Forest Officer (DFO) Amlan Nayak, the event marked the beginning of mass hatching at the rookery.

Set to increase

•The number of mass hatchings were expected to increase in the coming days. “In the past few days, the eggs collected from sporadic nesting spots to be incubated at artificial hatcheries of the Forest department along this coast have also started to hatch,” he added.

•This year, 3,23,063 Olive Ridley turtles had nested at the Rushikulya rookery. The mass nesting process began in the wee hours of March 21 and continued till the night of March 28. Olive Ridley turtle eggs incubate on their own in the heat of the beach sand.

Temperature matters

•They hatch in 45 to 60 days, depending on the temperature of the sand and atmosphere during the incubation period. As mass nesting numbers had gradually increased to reach the peak and then decreased, mass hatching was also expected to take the same path, said the DFO. To protect the eggs from predators and humans, the Forest department had put up metal net fencing over 5 km from Gokharkuda to Bateswar, and the area was divided into 50 segments for regular watching.

•Rabindranath Sahu, president of the Rushikulya Sea Turtle Protection Committee (RSTPC), an organisation of villagers living near the rookery involved in protection of Olive Ridleys, said this year there was minimal human intervention during the mass nesting, incubation period and continuing hatching process.

•The lockdown due to COVID-19 had stopped outsiders from reaching the spot. “But high tides related to new moon on April 23 had washed away a large number of nests,” Mr. Sahu said.

πŸ“° Govt. raises borrowings to ₹12 lakh crore in FY21

Revision necessitated due to pandemic

•The government on Friday increased its market borrowing estimate by staggering ₹4.2 lakh crore to ₹12 lakh crore for the current fiscal to deal with the expected shortfall in revenue due to the impact of COVID-19 crisis on the economy.

•The government resorts to market borrowing to make up for mismatch between its revenue and expenditure. “The estimated gross market borrowing in FY 2020-21 will be ₹12 lakh crore in the place of ₹7.80 lakh crore as per BE 2020-21. The revision has been necessitated due to COVID-19 pandemic,” the Finance Ministry said. The government has also increased the weekly borrowing target to ₹30,000 crore from ₹21,000 crore fixed on March 31.

•Finance Minister Nirmala Sitharaman in her Budget for 2020-21 had pegged gross borrowing in the new fiscal at ₹7.8 lakh crore, higher than ₹7.1 lakh crore estimated for 2019-20. With the increase in estimate, the government would have to revise upwards its fiscal deficit target from 3.5% pegged for the current fiscal.

πŸ“° Slower growth and a tighter fiscal

India slid into the pandemic crisis in the backdrop of economic downslide; fiscal stimulus has to be structured

•The impact of COVID-19 will be debilitating for the global as well as the Indian economies. Various institutions have assessed India’s growth prospects for 2020-21 ranging from 0.8% (Fitch) to 4.0% (Asian Development Bank). This wide range indicates the extent of uncertainty and tentative nature of these forecasts. The International Monetary Fund (IMF) has projected India’s growth at 1.9%, China’s at 1.2%, and the global growth at (-) 3.0%. The actual growth outcome for India would depend on: the speed at which the economy is opened up; the time it takes to contain the spread of virus, and, the government’s policy support.

Growth prospects

•India slid into the novel coronavirus crisis on the back of a persistent economic downslide. There was a sustained fall in the saving and investment rates with unutilised capacity in the industrial sector. In 2019-20, there was a contraction in the Centre’s gross tax revenues in the first 11 months during April 2019 to February 2020, at (-) 0.8%. These trends continue to beset the Indian economy in this crisis.

•We examine the growth prospects for 2020-21 from the output side, making reference to real gross value added (GVA). In 2019-20, which would serve as the base year, India may show GVA growth of about 4.4%, well below the Central Statistics Office’s second advance estimate of 4.9%, as the fourth quarter number is likely to be revised downwards on account of the adverse impact of the virus on economic activities. The IMF’s GDP growth estimate for 2019-20 is at 4.2%.

•GVA is divided into eight broad sectors. Although all sectors have been disrupted, some may be affected less than the others. We divide the output sectors in four groups.

•In group A, we consider two sectors that have suffered only limited disruption — namely agriculture and allied sectors, and public administration, defence and other services. In the case of agriculture, rabi crop is currently being harvested and a good monsoon is predicted later in the year. Despite some labour shortage issues, this sector may show near-normal performance. The public and defence services have been nearly fully active, with the health services at the forefront of the the COVID-19 fight. For the group A sectors, it may be possible to achieve 90% of the 2019-20 growth performance.
Slower growth and a tighter fiscal
•Next, we consider the group that is likely to suffer maximum disruption (Group D). This includes, trade, hotels, restaurants, travel and tourism under the broad group of “Trade, Hotels, Transport, Storage and Communications”. This sector may be able to show 30% of 2019-20 growth performance. Group B comprises four sectors which may suffer average disruption showing 50% of 2019-20 growth performance. These sectors are mining and quarrying, electricity, gas, water supply and other utility services, construction, and financial, real estate and professional services. In the last group (Group C), we place manufacturing which has suffered significant growth erosion in 2019-20. It is feasible to stimulate this sector by supporting demand.

•In this case, we apply a 40% performance factor, not on the 2019-20 growth which is an outlier, but on the average growth of the preceding three years. Considering these four groups together, a GVA growth of 2.9% is estimated for 2020-21. Realising this requires strong policy support, particularly for the manufacturing sector which has a weight of 17.4%. It is also based on the assumption that the Indian economy may move on to positive growth after the first quarter. In the first quarter, GVA growth will be negative.

Calibrating policy support

•Monetary policy initiatives undertaken so far include a reduction in the repo rate to 4.4%, the reverse repo rate to 3.75%, and cash reserve ratio to 3%. The Reserve Bank of India has also opened several special financing facilities. These actions will have a positive impact on output only after the lockdown is lifted. These measures need to be supplemented by an appropriate fiscal stimulus. Although industry has been clamouring for a large fiscal stimulus, cash-constrained central and State governments have taken expenditure reducing measures by announcing a freezing of enhancements of dearness allowance and dearness relief. This may result in savings of ₹37,000 crore for the Centre and about ₹82,000 crore for the States, together amounting to 0.6% of GDP.

•There is also a talk of substantially reducing non-salary defence expenditure. With lower petroleum prices, fertilizer and petroleum subsidies may be reduced. These expenditure cuts are contemplated to keep the fiscal deficit under some control.

On fiscal deficit

•Fiscal stimulus can be of three types: relief expenditure for protecting the poor and the marginalised; (b) demand-supporting expenditure for increasing personal disposable incomes or government’s purchases of goods and services, including expanded health-care expenditure imposed by the novel coronavirus, and, bailouts for industry and financial institutions. The Centre had earlier announced a relief package of ₹1.7-lakh crore of which the additionality was only ₹65,000 crore, since it included a frontloading of the budgeted expenditures. The Centre’s budgeted fiscal deficit of 3.5% of GDP may have to be enhanced substantially to make up for the shortfall in budgeted revenues; account for a lower than projected nominal GDP for 2020-21, and provide for a stimulus. Thus, the Centre’s fiscal deficit may increase to 6.0% of GDP. Expenditure on construction of hospitals, roads and other infrastructure and purchase of health-related equipment and medicines require prioritisation. These expenditures will have high 
multiplier effects. Similar initiatives may be undertaken by the State governments which may also enhance their combined fiscal deficit to about 4.0% of GDP to account for 3.0% of GDP under their respective Fiscal Responsibility Legislation/Law and to provide for the shortfall in their revenues and some stimulus.

•Financing of the fiscal deficit poses a major challenge this year. On the demand side, the Central (6.0%) and State governments (4.0%) and Central and State public sector undertakings (3.5%) together present a total public sector borrowing requirement (PSBR) of 13.5% of GDP.

•Against this, the total available resources may at best be 9.5% of GDP consisting of excess saving of the private sector at 7.0%, public sector saving of 1.5%, and net capital inflow of 1.0% of GDP3. The gap of 4.0% points of GDP may result in increased cost of borrowing for the Central and State governments. This gap may be bridged by enhancing net capital inflows including borrowing from abroad and by monetising some part of the Centre’s deficit. Monetisation of debt can at best be a one-time effort. This cannot become a general practice.

πŸ“° Shaping India’s response in a global hinge moment

The most important improvements concern its national security structures and their work, and flexibility in thinking

•India finds itself in an increasingly dangerous world, one that is fragmenting and slowing down economically. We are today in a new geopolitical situation, caused primarily by the rise of China, India and other powers — Indonesia, South Korea, Iran, Vietnam — in a crowded Asia-Pacific, which is the new economic and political centre of gravity of the world.

•Rapid shifts in the balance of power in the region have led to arms races and to rising uncertainty, also fuelled by the unpredictability, disengagement and the transactional “America First” attitude of United States President Donald Trump. China-U.S. strategic contention is growing, uninhibited so far by their economic co-dependence. As China seeks primacy in a world so far dominated by the U.S., the world faces a destabilising power transition which may or may not be completed. It is a hinge moment in the international system.

Strategic autonomy

•What should India’s response be to the new situation? Fear leads some to suggest alliances. Some Indians are so worried by what they see as an unstoppable China that they advocate that India enter into an alliance with the U.S. India is much greater and more resilient than these people think.

•There is a common thread running through the foreign and security policies of successive governments of India until this one, irrespective of their various political persuasions: it has been the pursuit of strategic autonomy for India. If there is any situation in which India should retain the initiative and not get entangled in others’ quarrels, keeping India’s powder dry and free to pursue its own national interest, it is this disorganised and uncertain world. This is a world that calls for creative diplomacy and flexibility, adjusting to the fast-changing balance of power and correlation of forces around us. An alliance seems to be exactly the wrong answer.

•The Doklam crisis of 2017 is only the most recent example that shows that no one else is ready to deal with India’s greatest strategic challenge — China. It saw a tepid reaction from the rest of the world. To expect anything else is unreasonable.

The China question

•China’s rise is the foremost challenge which could derail India’s quest. But it is also an opportunity. The big question, of course, is how to handle China. One possibility is to engage China bilaterally to see whether the two countries can evolve a new modus vivendi, to replace the one that was formalised in the 1988 Rajiv Gandhi visit. That framework is no longer working and the signs of stress in the relationship are everywhere.

•The more India rises, the more it must expect Chinese opposition, and it will have to also work with other powers to ensure that its interests are protected in the neighbourhood, the region and the world. The balance will keep shifting between cooperation and competition with China, both of which characterise that relationship.

•The important thing is the need to rapidly accumulate usable and effective power, even while the macro balance will take time to right itself. A calculus of interests suggests that India-China relations are more complex than simple narratives suggest, and indeed that there is room here for both sides to seek a new modus vivendi. This would require a high-level strategic dialogue between the two sides about their core interests, red lines, differences and areas of convergence.

•The U.S. is an essential partner for India’s transformation. But it is withdrawing from the world, less certain as to how it will choose to deal with China. Certainly, it will no longer be the upholder of international order, economic or political, and seems to have tired of that role. India must work with other powers to ensure that its region stays multi-polar and that China behaves responsibly.

Double opportunity awaits

•We are living in a time when there is a deep sense of strategic confusion. In India’s case, that confusion extends to it being not just about the ultimate goal India’s foreign policy should pursue but also over the best means to achieve them. Indians seem to mistake controlling the narrative with creating outcomes, which is the real task of foreign policy. Prime Minister Narendra Modi has declared a goal of India to be a ‘Vishwa guru’, or world teacher, which is still a long way away when it is an importer of knowledge and technology. Nor is it clear that this status will actually contribute to transforming the lives of India’s citizens, though it might satisfy the ego.

•It is important for India to remain optimistic. It has a moment of double opportunity if it changes its ways. Tactically, China-U.S. contention — which is structural and, therefore, likely to continue for some time with a paradigm shift away from cooperation to increasing contention, despite temporary deals and “victories” declared by one or both — opens up opportunities and space for other powers.

•Both China and the U.S. will look to put other conflicts and tensions on the back burner while they deal with their primary concern, the other. This effect is already perceptible in the Wuhan meeting between China’s President Xi Jinping and Mr. Modi in early 2018, and the apparent truce and dialling back of rhetoric by both India and China, even though this does not extend to a new strategic framework or understanding or to a settlement of outstanding issues.

•Today, India is more dependent on the outside world than ever before. It relies on the world for energy, technology, essential goods like fertilizer and coal, commodities, access to markets, and capital. When you add the new security agenda and the contested global commons in outer and cyberspace and the high seas to India’s traditional state-centred security concerns, you can see why there is greater worry or a sense of insecurity.

•India risks missing the bus to becoming a developed country if it continues business and politics as usual, or tries to imitate China’s experience in the last 40 years, does not adapt, and does not manage its internal social and political churn better. The most important improvement that India needs to make concerns its national security structures and their work — introducing flexibility into India’s thinking and India’s structures. For change is the only certainty in life.