Cyclone Mora likely to bring heavy rain to Northeast today
Storm to make landfall near Chittagong; West Bengal to experience gusty winds
•The cyclonic storm ‘Mora’ in the Bay of Bengal is expected to make a landfall near Chittagong around noon on Tuesday. It is likely to cause heavy to very heavy rainfall in Assam and Meghalaya, besides scattered to very heavy rainfall in Tripura, Mizoram, Manipur, Nagaland and Arunachal Pradesh.
•In West Bengal, the cyclone will be limited to gusty winds reaching up to 65 km per hour in the coastal districts. “We have not issued any forecast of heavy rain in the State so far,” said a weather department official in Kolkata.
•According to the Indian Meteorological Department, the storm is currently located about 610 km south-southeast of Kolkata and 500 km south-southwest of Chittangong.
•“The system is likely to intensify into a severe cyclonic storm during the next 12 hours. It is very likely to move north-eastwards and cross the Bangladesh coast between longitude 91.0 degrees E and 92.0 degrees E near Chittagong around May 30 forenoon,” said an IMD release.
Strong gale winds
•The cyclone will cause gale winds with speeds up to 70-80 kmph in Mizoram and Tripura on Tuesday. According to IMD, it will also result in “squally winds” reaching up to 65 km per hour in South Assam, Meghalaya and Manipur.
•The storm is expected to damage thatched huts in the two States along with paddy and orchards. Power lines may also suffer minor damages.
•In West Bengal, the cyclone will be limited to gusty winds. “Fishermen along and off the coast of West Bengal have been advised not to venture out into the sea on May 29 and 30 and those out at sea are advised to return to the coast,” said the release.
Meeting held
•In neighbouring Odisha, the government on Monday put four district administrations on alert. State Revenue and Disaster Management Minister Maheswar Mohanty took a review meeting on the preparedness at the State Secretariat here.
•Four districts — Balasore, Bhadrak, Mayurbhanj and Jajpur — are expected to receive rainfall.
•The Bhubaneswar Meteorological Centre said rain or thundershower is likely to occur at many places in north Odisha districts during the next 48 hours. However, other coastal districts would receive little rain.
Germany looks eastward as it welcomes Modi
Angela Merkel believes the U.S. and the U.K are no longer dependable and her nation hence has to shift its gaze and find new friends
•A day after warning that Europe can no longer “depend” on its Western partners, the U.S. and the U.K., German Chancellor Angela Merkel met Prime Minister Narendra Modi shortly after he landed in Berlin on Monday.
•Ms. Merkel’s comments are likely to set the atmosphere for her meetings this week with Mr. Modi, followed by Chinese Premier Li Keqiang, who will visit Germany on May 31, as she discusses closer cooperation with leaders from the “East” after her stated disappointment with those from the “West”.
•Mr. Modi and Ms. Merkel, who met informally for dinner at the Schloss Meseberg castle outside Berlin, will address a press conference on Tuesday after the announcement of expected agreements on investment, technology, counter-terror, clean energy and water partnerships as well a joint statement likely to focus on cooperation on global issues such as climate change and UN Security Council reform.
G-20 agenda
•Germany will host the next G-20 summit in Hamburg in July, and Mr. Modi is expected to discuss Chancellor Merkel’s agenda at the multilateral forum.
•Germany is expected to raise issues over trade with India after their bilateral treaty lapsed this year and push for the resumption of the India-EU Free Trade Agreement talks. Mr. Modi is likely to pitch his government’s recent reforms on foreign investment and the rollout of the GST to attract more German investment in India, and take trade beyond its current levels of €17.42 billion.
•“Both (the German and Indian) governments are firmly committed to strengthening economic relations,” Mr. Modi was quoted as saying in an interview with the Handelsblatt newspaper of Germany. “I am very optimistic about our future partnership.”
•After his meeting with Ms. Merkel, Mr. Modi will meet many top CEOs and business leaders to strengthen the push for bettering economic ties.
•While the economy was always expected to top the agenda for the Prime Minister’s Germany visit, it is now likely to be overshadowed by Ms. Merkel’s comments after the just-concluded G-7 summit in Italy as well as the NATO-U.S. summit. The Chancellor told a party convention in Munich on Sunday that the “days when Europe could completely count on others are over to a certain extent”.
•Ms. Merkel was responding to U.S. President Donald Trump’s refusal to commit to the U.N. climate change accord this far, his insistence on more contributions from other NATO partners, as well as Britain’s exit from the European Union.
Concern over OBOR
•In what is being described as her version of the U.S.’s “Pivot to Asia”, Ms. Merkel is expected to discuss closer cooperation with both India and China as part of Europe’s quest for alternative coalitions, raising speculation that the moves could make Germany an unusual new venue for India-China rivalry.
•“It would be wrong to see Germany-India and Germany-China as a zero sum game,” said the spokesperson of the Federal Foreign Office, when asked at a press briefing on Monday in Berlin, ahead of the high level visits. “Improving our relations with any country in the world will not come at the cost of any other.”
•Mr. Modi would also like to discuss shared concerns over China’s Belt and Road initiative that India has refused to join on sovereignty issues. Germany is part of the B&R connectivity initiative, but refused to sign a statement on trade — along with other EU countries — that they said would contravene World Trade Organisation (WTO) commitments.
•“We maintain concerns over China’s ambiguity on free trade commitments and human rights,” conceded a foreign ministry official who didn’t wish to be named. “But the fact is there is no way around China if you want to achieve anything on the global stage in today’s world,” he added, in a possible reference to a bilateral trade partnership of €169.9 billion which saw China surpass both U.S. and France in 2016.
More Akash systems for Army
Defence Acquisition Council bats for indigenously developed missiles
•The Defence Ministry has decided to cancel the Army’s global contest for Short Range Surface to Air Missile (SR-SAM) systems and instead procure two additional regiments of the indigenously developed Akash missile systems.
•The decision was taken at a meeting of the Defence Acquisition Council (DAC) chaired by Defence Minister Arun Jaitley two weeks ago. The Army is expected to begin inducting the systems by December 2018.
•“The DAC has cancelled the global buy of two regiments of SR-SAM. The case continued for 5-6 years and trials of certain equipment were conducted. The DAC has now decided to go in with additional Akash systems,” a defence source said on Monday.
•The Army has a requirement for four regiments of SR-SAMs. It had earlier ordered two Akash regiments and formally began inducting them in May 2015. Two more regiments were meant to be procured by a global tender for which competition was under way between 3-4 global firms.
•Of the Akash systems, the first regiment has been inducted and operational and induction of the second regiment will be completed in the next 2-3 months.
•On the new regiments, the source added, “Lot of improvements have taken place in the vehicles and systems since the initial development. The new system will be operationally more compact and mobile.”
A way out for her too
Muslim women are not without remedy if they want to end their marital ties
•The marathon arguments on the subject of triple talaq before the five-judge bench of the Supreme Court have ended. While most Muslim women petitioners wanted nothing more than just implementation of the Koranic procedure of divorce and an end to arbitrary and instant divorce, the Attorney General said that the government could bring in a comprehensive law should the court strike down triple talaq.
•Should the court or the government compel Muslim women to mandatorily use the expensive, slow and formal judicial system to get a divorce? Should the wider and more liberal right of divorce of Muslim women be taken away for the sake of judicial oversight of divorces?
•It is wrong to say that Muslim women can get a divorce only through courts under the Dissolution of Muslim Marriages Act, 1939. The Act in no way takes away a Muslim woman’s right to divorce outside the formal judicial system. Since the Act was to permit courts to extend the benefit of liberal provision of Maliki and Shafii schools to Hanafis, it cannot be said to take away women’s rights under the Maliki and Shafii schools. The Act was passed because British courts were hesitant to apply Maliki law where parties were Hanafis.
A study and options
•A Muslim wife is certainly entitled to divorce her husband without taking recourse to the 1939 Act. What are the options available to a Muslim woman to dissolve her marriage?
•First, Muslim women can seek divorce through a court under the law of faskh (annulment of marriage) on certain grounds — i.e. the whereabouts of her husband are not known for four years; non-payment of maintenance for two years; imprisonment of her husband for seven years; non-performance of marital obligations; impotency; insanity or suffering from diseases such as leprosy or venereal diseases; cruelty which includes the husband taking on a second wife.
•My study of 74 Darul Kaza (arbitration councils) run by the Muslim Personal Law Board too reveals that 69.70% of women resort to this outside the court forum to resolve their disputes. Out of 74 Darul Kaza, in 90% of cases women approached as many as 49 Darul Kaza for annulment of marriage. In 16 Darul Kaza, 70% women came for this purpose.
•Second, a Muslim woman is entitled to Talak-e-Tafwid, i.e. delegated divorce which gives her an identical right to divorce on a par with men. The Orissa Mohammedan Marriage & Divorce Registration Act, 1949 does provide for the registration of such a divorce. In Moharam Ali v. Ayesha Khatun (1915), the Calcutta High Court upheld this kind of agreement under which wife was authorised to divorce her husband in case he married any other woman.
•Khula, the third type of divorce, is the unconditional and absolute right of the Muslim wife, is on a par with the husband’s right to talaq, and is not subject to his consent. Several State laws such as in Odisha, Bihar, Assam and West Bengal do provide for the registration of khula. It is wrong to presume that she must necessarily surrender her mehar (dower) for getting khula because the Koran discourages men to take back the gifts given to their wives and the dower is indeed a free gift. The moment she decides to divorce her husband under khula, the husband has no right to oppose it. My study showed that more than 70% women get khula through Darul Kaza.
•Fourth, a Muslim wife is also entitled to divorce with mutual consent (Mubaraat) which too is mentioned as a distinct form of divorce in the Shariat Act of 1937. Unlike khula, here both parties agree to dissolve their marriage outside court.
•Fifth, Muslim law goes out of its way to protect the character of the wife. Thus when the husband indulges in slandering his wife’s character by alleging adultery and has no proof of it, she is entitled to divorce. This divorce, at the instance of wife, is called lian and is specifically mentioned as a distinct form of divorce in the Shariat Act, 1937.
•Sixth, if a Muslim wife was married by her guardian when she was a child, on attaining maturity, she has a right to walk out of this marriage under doctrine of khyar-ul-bulugh (option at puberty).
•Thus, Muslim women are not without remedy if they want to put an end to their marital ties. Let our courts not be further burdened with the additional load of Muslim divorces. Let Muslim women continue to use these liberal out-of-court divorce provisions. Alternative methods of dispute resolution such as arbitration and mediation are an integral part of our legal system.
Shocking cover-up
Awareness is key to containing Zika. Why did the Health Ministry keep three cases secret?
•The surveillance system put in place by the Health Ministry succeeded in identifying three adults infected with the Zika virus between November 2016 and February 2017 in Gujarat. But the Ministry acted less than responsibly by withholding the information from everyone. Even the World Health Organisation was informed about the three cases as recently as May 15, more than five months after the first case was laboratory-confirmed. Information regarding the cases came to light when the WHO posted the information on its website on May 26. By not disclosing the information in real time, India behaved as China did in the case of the severe acute respiratory syndrome (SARS) outbreak in 2003. China was then widely criticised by the global community for trying to cover up the outbreak — by doing so, the Chinese government was arguably partly responsible for SARS spreading to other countries. That none of the three Zika-infected adults or their spouses or relatives had travelled to any country with Zika virus transmission indicates that the virus was transmitted within India. Based on the local circulation of the virus, the WHO has warned that “new cases may occur in the future”, particularly as the Aedes aegypti mosquito that transmits the virus is widely found in India.
•Over 34,000 human samples and nearly 13,000 mosquito samples were tested for the presence of the Zika virus, and there was monitoring for cases of microcephaly, a birth defect that has been connected to the mother being Zika-infected while pregnant. But it is not clear whether the person who brought the infection into the country (the index case) has been identified. While the bite of an infected A. aegypti is the main route of Zika virus transmission, it can also be sexually transmitted from an infected man. As the virus remains present in the semen for a long time, the WHO recommends that couples abstain from sex for at least six months after the onset of symptoms. Secrecy about Zika outbreaks, even if seen only in isolated cases, can lead to a public health disaster. Given that local transmission is already present, the A. aegypti is commonly found, and many infected people exhibit no or only mild, non-specific symptoms, up-to-date health bulletins and advisories are vital. India has the responsibility to keep the WHO and the global community informed, especially in the case of dreaded infectious diseases, for both global risk assessment and risk preparedness. The government machinery should have been on overdrive to educate and increase awareness about ways to avoid infection; the decision to keep the information under wraps to avoid creating “panic” is totally unconvincing.
The flow of funds in India
An alternative lens to understand economic transformation
•At its heart, capitalism is a financial system. Every entity in the economy, whether an individual, a household, a business, or a state institution faces monetary constraints in its operations and must constantly balance the exigencies of cash inflows and cash outflows. Thus, money flows, including the accumulation of debt and the acquisition of financial assets, are the very lifeblood of the system. Despite this fact, most of our understanding of the macroeconomy is based on the national accounts system which foregrounds current expenditure by various sectors. While highly useful, such an approach often misses or obscures underlying monetary relations. To provide a sharp example, if one is buying a second-hand property, perhaps one of the most important financial transactions in one’s life, this will not show up in the national accounts because the property has already been accounted for when it was originally built and there is no current expenditure associated with it.
C.D. Deshmukh’s vision
•Given such lacunae, an alternative approach was originally suggested in 1947 by Morris Copeland, who promoted the Flow of Funds (FoF) account approach. This is an accounting system created to capture the pattern, duration and timing of money flows within the economy. Examining these flows of funds provides a simple but effective portrait of the nature of financial claims in an economy, and acts as a very useful adjunct to the national income accounts in understanding the current and likely future trajectories of an economy. Interestingly, due to the pioneering efforts of the then Finance Minister, C.D. Deshmukh, India was an early adopter of a domestic FoF framework and has always had one of the most extensive and up-to-date sets of data on money flows for developing economies. These accounts examine flows across six sectors — households, government, private corporations, banks, other financial institutions (OFIs) and the Rest of the World.
•Surprisingly, despite the availability of the data, there have been very few attempts to provide a description of the monetary flows in the economy. Some of this may be because the data are calculated from balance sheet positions and may not always tally with other published accounts, some of it may be because the data is not easily collated, but neither are sufficient to explain the lack of scholarly engagement with the data. In a recent paper, we collated this data published by the Reserve Bank from 1955 to 2014 to provide a broad-brush picture of the evolution of Indian financial relations over this period. A few key findings were evident. Households in 2010 saw their net assets increase by 10% of GDP while the government increased its net liabilities by 5% of GDP.
•First, almost across the entire period, the government sector is the largest net deficit sector while the household sector is the largest net creditor. Second, following the onset of liberalisation, the private corporate sector is running larger deficits as a fraction of GDP than any time in the past, although these deficits rarely exceed those of the government. Third, since the period of liberalisation there is a lot more volatility in financial positions than before it, signalling the growing complexity of monetary relations during this time. Fourth, the rest of the world has moved from being quite unimportant to becoming the second largest net surplus sector in the economy after households.
•In addition, we find several striking results that are often glossed over in the general discourse on the Indian economy and that therefore bear highlighting. First, we find that the patterns of sectoral transfers have changed substantially over time. For example, the private corporate sector relies much more extensively on households and the rest of the world for their financing now than in the past where they relied on banks and OFIs.
•Similarly, since 2010, banking has suddenly seen an influx of funds from the rest of the world and these funds account for a larger part of banking sources of funds than ever in the past.
•Second, while the government is funded by the issuance of securities, the private corporate sector still relies more extensively on loans and advances and while this spread has reduced since the 1980s it is still large and significant.
•Third, despite this India is moving from a bank-based to a market-based financial system. Between 1970 and 1990 loans and advances exceeded security issuances in all but two of the years; between 1991 and 2010, by contrast, loans and advances were smaller than security issuances in 11 of the 19 years.
Devil’s in the detail
•These are only some of the results and insights that one can obtain from an examination of the data. While such a broad-brush picture necessarily omits details, using the flow of funds allows us to have significantly enriched picture of the broader economy. As Indian financial markets become more sophisticated and important, more fine-grained analyses will certainly need to be made for anyone wishing to understand the patterns and financing of India’s development. C.D. Deshmukh’s early and perspicacious development of these accounts provide a very useful starting point in this regard.
‘Revision of rates left to GST Council’
•The decision on revising the tax rates fixed on various goods and services has been left to the discretion of the GST Council, Central Board of Excise and Customs (CBEC) Chairperson Vanaja Sarna said.
•“We have been getting representations from various industries and businesses to revise rates. So, whether any of the items will be opened for revision or not, it is something the Council will take a call on that. It is meeting on June 3,” she said on Monday.
•Various industries and businesses, including traders, FMCG and automobiles had been petitioning the central government for revising rates, Ms. Sarna told reporters here.
SEBI targets participatory note norms
Proposes $1,000 regulatory fee on each issuing foreign portfolio investor
•The Securities and Exchange Board of India (SEBI) plans to further tighten norms for issuance of offshore derivative instruments (ODIs) and participatory notes (PNs) as part of its overall effort to reduce the exposure investors take via such instruments in the Indian equity market.
•In a consultation paper released on Monday, the capital market regulator has proposed levying a regulatory fee of $1,000 on every foreign portfolio investor (FPI) that issues ODIs or PNs. SEBI-registered FPIs will have to pay this fee once every three years for each of their ODI subscribers. “It is proposed that beginning April 1, 2017, for a period of every three years, regulatory fees of $1,000 be levied on each ODI issuing FPI for each and every ODI subscriber coming through such FPI,” states the SEBI paper.
Multiple issuers
•“We understand from the monthly ODI data reported by the ODI issuers that quite a few ODI subscribers invest through multiple issuers. It will discourage the ODI subscribers from taking ODI route and encourage them to directly take registration as an FPI,” it added.
•Typically, the ODI or PN route is used by foreign entities who want to take an exposure to Indian equity but without getting registered with SEBI. So, SEBI-registered FPIs buy shares on behalf of such entities and then transfer the securities to the actual beneficiaries.
•The regulator has also proposed to prohibit ODIs from being issued against derivatives for speculative purposes. Currently, ODIs are issued against derivatives along with equity and debt.
•SEBI has given time until December 31, 2020, to wind up ODIs issued against derivatives, which are not for hedging purpose. It will be incumbent on ODI issuing FPI to ensure that ODI is issued against those derivatives which are purely for hedging purpose and not for naked speculation, said the SEBI paper.
•Incidentally, this is not the first time that the regulator is attempting to tighten the norms related to ODIs or PNs. In June last year, SEBI issued instructions on Know Your Customer (KYC) norms for ODI subscribers, transferability of ODIs, reporting of suspicious transactions and periodic review of systems.
•The regulator has given the public time until June 12 to submit comments on its latest proposals.
Social impact of note ban not gauged: WB
More data needed to evaluate outcome of the policy, says World Bank
•The World Bank has said the social impact of demonetisation may have been greater as the informal economy was likely to have been hit especially hard. However, the bank said the impact of demonetisation on the informal economy was difficult to measure and greater data availability, especially on labour markets, is needed to better gauge the social impact of such policies in the future.
•In its India Development Update released on Monday, the bank said there were “statistical issues that mask some of the impact of demonetisation on measured economic growth in Q3 (third quarter of 2016-2017).” The government had on November 8, 2016 announced that existing Rs. 500 and Rs. 1000 banknotes, corresponding to 86 % of India’s currency in circulation by value, had been “demonetised” – that is, ceased to be legal tender.
•Noting that demonetisation caused an immediate cash crunch and that activity in cash-reliant sectors was affected, the bank said India’s GDP growth slowed to 7% year-on-year during the third quarter of 2016-2017 from 7.3 % in the first quarter. As a result, a modest slowdown is expected in the GDP growth in 2016-2017 to 6.8 %. According to the update, growth is expected to recover in 2017-2018 to 7.2 % and is projected to gradually increase to 7.7 % in 2019-2020.
•Though the informal economy may account for only 40 % of (India’s) GDP, it employs 90 % of workers, and the disproportionate impact of demonetisation on the informal sector suggests it would have affected those workers the most.
•Frederico Gil Sander, senior country economist, World Bank, and the main author of the update, said: “Private investment growth continues to face several impediments in the form of excess capacity, regulatory and policy challenges, and corporate debt overhang. However, the recent push to increase infrastructure spending and to accelerate structural reforms will eventually drive a sustained rebound of private investments.”
