THE HINDU – CURRENT NOTE 21 February
Centre not for terming Pakistan a ‘terror state’
Move will hit ties, says Home Ministry
•The Centre will oppose a Private Member’s Bill moved in the Rajya Sabha recently seeking to declare countries like Pakistan “terror states.”
•Independent Member of Parliament Rajeev Chandrasekhar had moved The Declaration of Countries as Sponsor of Countries as Sponsor of Terrorism Bill, 2016 to impose legal, economic and travel sanctions on citizens of countries which promote terror. The Bill came up for discussion on February 3.
•The Home Ministry has written to the Parliament Secretariat opposing the Bill as it jeopardises international relations under the Geneva Convention.
•“We have diplomatic relations with the neighbouring country which includes High Commissions as well as trade relations. It will be not prudent to declare any country as a terror state as India is bound by international norms,” said a senior government official.
Engagement continues
•India has accused Pakistan of instigating terror attacks but the two countries have maintained diplomatic relations even during the Kargil war and Operation Parakram.
•Last year, India asked its officials in Pakistan High Commission to not send their children to schools there and return them to India.
•While presenting the Bill, Mr. Chandrasekhar said, “For decades, India and other countries in the region have been victims of terror attacks from organisations and individuals based in and with the support of elements in Pakistan. Yet for decades we have remained engaged with Pakistan in an attempt to draw it into the mainstream. Pakistan’s track record of fostering terrorism and terrorists is long and incontrovertible… It is time that we stop running to other countries to declare Pakistan a terror state and stood up and did this job ourselves.”
•A private member’s Bill can be enacted into a law once it has been screened by a House committee, which is optional, and passed by a majority vote. Parliament adjourned for the recess and will resume on March 9; there is a probability that the Bill might again be taken up for discussion.
•Mr. Chandrashekhar had said that from 1998 to January 29, 2017 as many as 14,741 civilians had been killed in terror attacks in India and 6,274 security force personnel lost their lives. As many as 23,146 terrorists were also killed.
Sabarimala case for Constitution Bench?
SC asks petitioners to suggest legal questions on women’s entry issue for the Bench to answer
•Indicating that it will refer the Sabarimala temple entry restriction on women of a certain age to a Constitution Bench, the Supreme Court on Monday said the main issue to be decided was whether the multitude of worshippers of Lord Ayyappa visiting the shrine form a separate religious “denomination”, and if so, should their privilege to manage their religious affairs yield to the fundamental right of women to practice religion freely.
•On Monday, a three-judge Bench of Justices Dipak Misra, R. Banumathi, and Ashok Bhushan reserved its judgment on the question of referring a batch of petitions challenging the temple’s restriction to a Constitution Bench of five judges of the Supreme Court.
•The court asked all the parties in the case, from various petitioners, women's organisations, Ayyappa groups, the State of Kerala and the Travancore Devaswom Board (TDB) to suggest legal questions which the three-judge Bench would formally refer to the Constitution Bench to answer.
1991 HC order
•A 1991 Kerala High Court judgment supported the restriction imposed on women devotees. It had found that the restriction was in place since time immemorial and not discriminatory to the Constitution. The Bench said the High Court judgment was no bar on a Constitution Bench of the Supreme Court from deciding the issue afresh. “We are not bothered by the principle of res judicata,” Justice Misra responded to senior advocate K.K. Venugopal, who represents the TDB .
•The Pandalam royal family and several Ayyappa groups had contended that the deity was not “interested” in women devotees of the restricted age bracket visiting him, Justice Misra reacted that such arguments merely based on conjecture without any constitutional basis cannot be entertained in the Supreme Court.
•“The deity’s interest is a hypothesis which we do not want to comment on now. It is not within our domain. God is everywhere, in every atom,” Justice Misra remarked. “But the deity is a perpetual minor, the case cannot be decided without considering his interest,” advocate V.K. Biju, appearing for Rahul Easwar, president of the Ayyappa Dharma Sena, argued.
•Justice Misra orally observed that the primary questions which the larger Bench would have to answer was whether the restriction was a “permissible practice”, whether the Ayyappa devotees visiting Sabarimala form a religious denomination, who is the competent authority to decide on whether the restriction comes within the ambit of “custom” and, whether such a “custom” comes under the constitutional principles.
•Senior advocate Jaideep Gupta, counsel for the State government, said the restriction on women was not “necessarily a custom”. The court said that another aspect which may have to be decided was whether the freedom for a denomination to manage their religious affairs under Article 26 should yield to the freedom of conscience and religion under Article 25 of the Constitution.
•Mr. Venugopal argued that the worshippers of Swami Ayyappa form a denomination and their “denominational rights should get primacy”. Mr. Venugopal submitted that there was no question of “absolute prohibition” in the temple.
An Indian challenge to China in space?
Urgent action needed for Beijing to reduce the cost of putting satellites into orbit, says state media
•China is clinically analysing the successful and cost-effective launch of 104 satellites in one go by the Indian Space Research Organisation (ISRO), as well as the outcome of the Aero-India show, with some media reports acknowledging that New Delhi may out-compete Beijing in the commercial space-launch business.
•An op-ed in the Global Times on Monday highlighted that India’s successful record-breaking satellite launch could serve as a “wake-up call” for China's commercial space industry.
•The article diagnosed China’s inability to access components and parts from the U.S. as part of the problem. Consequently, China had to step up independent research and indigenous manufacturing in order to by-pass the U.S. restrictions. China also has to cut down costs, as it is likely to target price-sensitive customers in the developing countries.
Low price advantage
•On the contrary, of the 104 satellites that were launched by ISRO, 96 belonged to the U.S. “The South Asian nation's achievements are largely driven by its low price advantage, a weak point for China's commercial space sector,” the article observed.
•It added: “Competition with India for commercial space launches may be inevitable, and the most urgent action needed for China to expand its market share is to reduce the cost of putting satellites into orbit.”
•Separately, the website, Chinamil.com.cn, affiliated with the People’s Liberation Army (PLA), noted that simultaneously, the Indian aviation industry was also undergoing a rapid transition, focusing on military exports, and technologically upgrading itself through joint ventures.
•Commenting on the Aero-India show that concluded in Bangalore last week, the website said: “We observed that this year’s Aero India kept a very low profile in arms purchase and Indian Defence Ministry didn’t sign any official agreement with foreign arms dealers.”
India’s progress here too
•On the contrary, Indian arms dealers leveraged the exhibition to tap the overseas defence market. “The Astra air-to-air missile, Pinaka multi-barrel rocket launcher and Rustom UAV independently developed by India were popular among foreign clients,” it observed. The write-up noted that India has also made progress on aircraft and vessel technology transfer. It quoted Christopher, head of the Defence Research and Development Organisation (DRDO), as saying, that India will export advanced light torpedo worth $21 million, which also involves transfer of technology. The article pointed out that India’s Reliance Defence has signed an agreement with the U.S. Navy on vessel repair and retrofitting services.
•The pursuit of joint ventures has improved the quality of Indian military equipment. During the show, India’s Kalyani Strategic Systems Ltd. (KSSL) has signed an agreement with Israel Aerospace Industries (IAI).The two sides will work together on the Barak-8 air-defence missile.
•Raytheon of the U.S. has also signed a MoU with a subsidiary of the Tata’s to jointly produce parts of the Stinger ground-to-air missile in India.
Centre starts listing process of rail PSUs
Expression of interest sought from merchant bankers
•Within three weeks of the Budget announcement, the Finance Ministry on Monday started the process of listing three rail PSUs — IRCTC, IRFC and IRCON.
•The government is considering divesting a portion of the paid-up equity share capital through an IPO and has sought Expression of Interest (EoI) from merchant bankers by March 16.
•The Department of Investment and Public Asset Management is scouting for merchant bankers to manage the IPO of the three PSUs.
•The government currently holds 100% stake in these three companies.
•In his 2017-18 Budget speech, Finance Minister Arun Jaitley had said that the government will put in place a revised mechanism and procedure to ensure time-bound listing of identified CPSEs on stock exchanges as it would foster greater public accountability and unlock their true value.
•The government intends to raise Rs. 72,500 crore through disinvestment of PSUs in the next fiscal.
In India, diverging incomes despite equalising forces
Disparities have been strengthening, not weakening, over time. The less developed States are falling behind the richer ones instead of catching up
•If India has to do well, the States as a whole must do well — which also requires that large differences in economic development between them must narrow over time. Economists call this narrowing — reduction in relative disparities — “convergence”.
•This year’s Economic Survey throws up a deep puzzle about convergence within India. Rather, one striking outcome suggests two puzzles. The outcome is this: in the 2000s, while standards of living (measured in terms of Gross State Domestic Product or consumption) per capita increased in all the States, the disparities among them also increased. In other words, there was divergence across the States instead of convergence. The first puzzle stems from the international comparisons: across countries disparities are declining in contrast to India. The second puzzle is a temporal one: the tendency towards disparities within India has been strengthening, not weakening, over time.
Bucking a global trend
•Figure 1 shows the general improvement in living standards across the States. It plots the level of real per capita GSDP over time between 1984 and 2014. There has been an across-the-board improvement reflected in the whole per capita GSDP distribution shifting right, e.g. between 1984 and 2014, the least developed State (Tripura) increased its per capita GSDP 5.6 fold (from per capita GSDP of ₹11,537 in 1984 to ₹64,712 in 2014) and the median State (Himachal Pradesh) increased its income level 4.3 fold.
•Next we document divergence. Convergence occurs when a State that starts off with a lower level of per capita GDP sees faster growth of per capita GDP in the future so that it catches up with better-performing States. If we plot per capita GDP growth on the y-axis and the initial level of per capita GDP growth, convergence would show up in the form of States being distributed around a downward sloping line.
•This is what we do on Figure 3, which plots this relationship for the period 2004-2014 for the Indian States (blue), Chinese provinces (red), and countries in the world (green). The line for India is upward sloping while those for the Chinese provinces and countries in the world are downward sloping.
•Poorer countries are catching up with richer countries, the poorer Chinese provinces are catching up with the richer ones, but in India the less developed States are not catching up; instead they are, on average, falling behind the richer States. Internationally, growth rates of per capita GDP widened at least since the 1820s with poorer countries growing slower than richer countries, leading to the basic divide between advanced and developing countries characterised as “Divergence, Big Time” by Prof. Lant Pritchett of Harvard University. However, since 1980 this long-term trend was reversed and poorer countries started catching up with richer ones. In stark contrast, there continues to be divergence within India or an aggravation of regional inequality.
•What is especially striking is how convergence has evolved over time. In the 1990s, convergence patterns were not dissimilar (Figure 2) across the world, China and India with either weak convergence or divergence. But things really changed for both the world and China in the 2000s; however they did not change for India. This was despite the promise that less developed States such as Bihar, Madhya Pradesh and Chhattisgarh had started improving their relative performance. But the data show that those developments were neither strong nor durable enough to change the underlying picture of divergence or growing inequality. The findings are similar when we use consumption per capita instead of GSDP per capita.
•Therefore, the evidence so far suggests that in India, catch-up remains elusive. The opposing results in India versus those in China and internationally pose a deep puzzle. Convergence happens essentially through trade and through mobility of factors of production. If a State/country is poor, the returns to capital must be high and should be able to attract capital and labour, thereby raising its productivity and enabling catch-up with richer States/countries. Trade, based on comparative advantage, is really a surrogate for the movement of underlying factors of production as economist Paul Samuelson pointed out early on. A less developed country that has abundant labour and scarce capital will export labour-intensive goods (a surrogate for exporting unskilled labour) and import capital-intensive goods (a surrogate for attracting capital).
•The findings suggest that India stands out as an exception. Within India, where borders are porous, convergence has failed whereas across countries where borders are much thicker (because of restrictions on trade, capital and labour) there is a convergence dynamic. That is not easy to explain. That is the cross-country puzzle.
•The Indian puzzle is deeper still as contrary to perception, the Economic Survey shows that trade within India is quite high and mobility of people has surged dramatically — almost doubled in the 2000s. These indicate that India has porous borders — reflected in actual flows of goods and people — and that porosity has been increasing. Yet over time, divergence has been increasing rather than narrowing. That is the inter-temporal puzzle within India. The driving force behind the Chinese convergence dynamic has been the migration of people from farms in the interior to factories on the coast, raising productivity and wages in the poorer regions faster than in richer regions. But India is not lagging far behind and yet disparities have been widening.
A governance deficit?
•Although further research is required to understand the underlying reasons, one possible hypothesis is that convergence fails to occur due to governance or institutional traps. If that is the case, capital will not flow to regions of high productivity because this high productivity may be more notional than real. Poor governance could make the risk-adjusted returns on capital low even in capital-scarce States. Moreover, greater labour mobility or exodus from these areas, especially of the higher skilled, could worsen governance.
•A second hypothesis relates to India’s pattern of development. India, unlike most growth successes in Asia, has relied on growth of skill-intensive sectors rather than low-skill ones (reflected not just in the dominance of services over manufacturing but also in the patterns of specialisation within manufacturing). Thus, if the binding constraint on growth is the availability of skills, there is no reason why labour productivity would necessarily be high in capital-scarce States. Unless the less developed regions are able to generate skills (in addition to providing good governance), convergence may not occur.
•Both these hypotheses are ultimately not satisfying because they only raise an even deeper political economy puzzle. Given the dynamic of competition between States where successful States serve both as models (examples that become evident widely) and magnets (attracting capital, talent, and people), why isn’t there pressure on the less developed States to reform their governance in ways that would be competitively attractive?
•In other words, persistent divergence amongst the States runs up against the dynamic of competitive federalism which impels, or at least should impel, convergence. The move towards economic divergence across India in the face of the equalising forces of trade and migration is a deep puzzle waiting to be unravelled.
Tea-producers’ sales war on coffee
•Delegates from 20 tea-producing and tea-drinking countries will open a seven-day conference here [London] to-day [Feb. 20] under pressure to declare a sales war on coffee. India, Pakistan and Ceylon — three of the world’s biggest producers – want the conference to consider ways of ousting coffee as the top beverage of many tea-buying nations, according to a British spokesman. Organised by the UN Food and Agriculture Organisation, the first session of the conference will centre on individual tea quotas and the world market situation. Problems facing the tea industries of developing countries will also be given special consideration. Other countries represented at the conference include Kenya, Malawi, the Congo, Uganda, Saudi Arabia, Tanzania, Poland and Britain.
The war loan
•The papers are unanimous that the first results of the loan form a veritable triumph and afford an unmistakable proof of the country’s determination to give as freely of its wealth as of its manhood to secure victory. Experts emphasise that Government has obtained a hundred million more than it expected without recourse to Bankers and the mere fact that the assistance of the big financial houses was not invoked is itself evidence of assured success. The papers contrast the proofs of the German exhaustion as evidenced by the renewed appeal for gold ornaments with the splendid proof of British financial stability which has enabled the country to raise the largest loan in history besides a revenue of five-hundred million.
