Aadhaar must for bank accounts
Number should also be produced for bank transactions of Rs. 50,000 or more, says government
•The government, through a notification amending a prevention of money laundering law, has made it mandatory to provide Aadhaar to open a bank account and to conduct a transaction of Rs. 50,000 or more.
•The notification amending the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, although dated June 1, was not gazetted till Friday.
•It says that that individuals who are eligible to be enrol for an Aadhaar number need to provide that number and the Permanent Account Number (PAN) to open a bank account or conduct any transaction “of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected, or any international money transfer operations.”
Small accs. not spared
•The amendment also tightens the rules for small accounts, which can be opened without having officially valid KYC documents, by saying that such accounts can only be opened at bank branches that have core banking solutions.
•“The small account shall be opened only at core banking solution-linked banking company branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to a small account and that the stipulated limits on monthly and annual aggregate of transactions and balance in such accounts are not breached, before a transaction is allowed to take place,” the notification said.
‘What’s the hurry’
•The move came under fire from several quarters with CPI(M) leader Sitaram Yechury and Trinamool Congress supremo Mamata Banerjee both criticising it.
•"While the case is still pending before the Supreme Court, what’s the unearthly hurry for this government to force linking of bank accounts with Aadhaar,” Mr. Yechury tweeted.
•“There are serious concerns about privacy and security of personal data related to Aadhaar. The govt. must not foist mandatory Aadhaar.”
•“The poorest of the poor and the marginalised people will be the worst sufferers if Aadhaar is made mandatory unilaterally,” Ms. Banerjee tweeted.
‘Global trend’
•“See, this doesn’t really matter, because everybody who has a PAN card has to get Aadhaar,” Girish Vanvari, Partner and Head of Tax at KPMG India told The Hindu . “The Supreme Court order regarding this has effectively been overruled by this rule.”
•“And given that we have till July 1 to apply for Aadhaar to comply with this, it is not an issue whether the notification came out on June 1 or today,” Mr. Vanvari added, saying that he had not heard of this notification till Friday.
•“This is in line with the recent global thinking about putting up mechanisms to ensure there is no income that escapes the tax net,” S.P. Singh, Senior Director of Tax at Deloitte India said. “This is part of the overall thinking of the government.”
SC ruling
•The Supreme Court had on June 9 ruled that while those possessing an Aadhaar ID must link it to their PAN, those who have as yet not got an Aadhaar need not do so in order to file returns — their PAN cards will not be rendered void, something the government had said would happen in the Finance Bill 2017.
ISRO set to launch back-up satellite
IRNSS-1A has been hobbled by failure of atomic clocks on board
•In an attempt to keep India’s regional navigation satellite system fully operational, the Indian Space Research Organisation (ISRO) is preparing to launch a back-up for IRNSS-1A, one of the seven satellites in the constellation, that has been hobbled by the failure of the atomic clocks on board.
•The PSLV C39 mission, scheduled for late July or early August, will carry the new satellite named IRNSS-1H into orbit, K. Sivan, Director of Vikram Sarabhai Space Centre, told The Hindu .
A priority
•Replacing IRNSS-1A became a priority for the ISRO after it was confirmed in January this year that all the three rubidium atomic clocks on board had stopped functioning. The space agency had decided on launching one of the two spare satellites after initial efforts to restart the clocks failed.
First of seven
•IRNSS-1A is the first of the seven satellites comprising the Navigation Indian Constellation (NavIC), a multi-purpose satellite-based positioning system, envisaged as India’s alternative to the American GPS. NavIC has been designed to support vehicle tracking, fleet management, disaster management and mapping services besides terrestrial, marine and aerial navigation for India and its neighbourhood.
•The system became operational in 2016 after the seventh satellite in the series was placed in orbit.
Margaret Atwood to get literary lifetime achievement award
Atwood to get lifetime achievement award
•Margaret Atwood will receive a lifetime achievement award from one of the world’s oldest literary organisations. PEN Center USA has announced that the 77-year-old author of more than 40 books of fiction, poetry and essays will accept the honour at the group’s annual Literary Awards Festival on October 27 in California.
‘BRICS must lead globalisation’
Conference urges nations to stand for open world economy
•A major brainstorming exercise involving political parties, think tanks and civil society organisations of the BRICS (Brazil, Russia, India, China and South Africa) grouping have counselled emerging economies to lead a new wave of globalisation, and step up the fight against international terrorism.
•The two-day conference organised by the Communist Party of China (CPC) proposed recommendations for the September summit of BRICS in Xiamen, a coastal city in southeastern China. It advised that a coalition of emerging economies and developing countries should lead the combat against climate change — a proposal that is aimed to fill the leadership vacuum following the withdrawal of the U.S. from the Paris climate accord.
•The Fuzhou conference focused on rewriting the rules of global economic governance led by a coalition of BRICS and developing countries. It also urged the emerging economies to promote sustainable globalisation, and build coalitions to counter climate change.
Equitable world order
•The Fuzhou Initiative, released at the end of the conference, pointed out that on account of the “setbacks and global challenges” experienced by globalisation, the BRICS and developing countries must “stand firm to preserve and foster an open world economy, champion multilateral trade regime and facilitate healthy development of economic globalisation”.
•The BRICS should also work towards “a more equitable and reasonable international order, whose rules are no longer defined by the great powers that emerged after the World War II.
•The initiative also recommended that Intelligence sharing and a cyber-security focus among BRICS should be integrated as part of a collective counter-terrorism strategy.
Undoing the gains
The rush to hand out farm loan waivers raises the broader issue of adherence by States to fiscal obligations
•The viral of farm loan waivers is acquiring epidemic proportions. In some ways it is a competitive race to the bottom. This is notwithstanding serious concerns that this can scarcely address the distress of the farming community. Unfortunately, broader structural changes in agriculture have eluded coherent implementation. Loan waivers in the past failed to address intended outcomes. We know that the loan waivers of February 1990 by the National Front government led to sharp fiscal deterioration and the subsequent balance of payments crisis. Subsequent loan waivers had similar results.
•The Finance Minister has spoken wisely that the Central government has no role to play. State governments are entitled to take such decisions but manage their financial consequences. Farm loan waivers are a subset of the broader issue of sustainable State finances. We need to address several issues.
A growing concern
•Following the 14th Finance Commission recommendations, the total State expenditure (as a percentage of GSDP) is higher than even the Centre’s. State finances have increasingly become a crucial lynchpin of India’s fiscal framework. Many State governments have adopted State-level fiscal laws and adhered to the 3% fiscal target under the State-level FRBMs (Fiscal Responsibility and Budget Management Act). However the recent report of the Reserve Bank, State Finances: A Study of Budgets 2016-17 , has some worrying conclusions. The combined deficit of the States reached 3.6% of GDP in FY16, significantly higher than 2.6% in the previous year. This significantly breaches the 3% fiscal deficit stipulated by the States themselves in their FRBMs. As a consequence, the consolidated fiscal deficit of the Central government (Centre and States combined) will increase from 6.7% in FY15 to 7.5% in FY16. The fiscal consolidation of the Centre is more than offset by expansion of the States. This is partly explained by the State power distribution companies (DISCOM) debt, 75% of which will be explicitly accounted in States’ balance sheets, and treated as capital spending in fiscal accounts. The quality of compliance by States has also deteriorated. These go beyond UDAY (Ujwal DISCOM Assurance Yojana) to include irregularities in food credit accounts of State governments with commercial banks, off-balance sheet expenditures, and creative accounting engineering to evade stipulated targets.
•Debt is considered sustainable if debt-GDP ratio is stable or on a declining path. This is a necessary condition for solvency of any government’s finances. While debt ratios for the Central government are projected to decline under plausible assumptions, the behaviour of the States is strikingly different. The debt ratio for the States under status quo and present FRBM scenarios is actually projected to increase! This is mainly because the primary deficit (total deficit excluding the interest payments), a driving variable in debt dynamics, is much higher for the States compared to the Centre. The Centre’s primary deficit according to the RBI report is 0.7% of GDP while that of the States is close to 2% of GDP. A significant part of the Central government’s deficit is mainly towards interest payments on existing borrowings, unlike the States which spend significantly less on interest payments. Nonetheless, if this picture persists, State debts will increase from close to 20% of GDP to 35% of GDP over the next 10 years. A significant consolidation by the States would be needed to keep the debt ratio stable for the States, let alone decline.
•Given the increased foreign holdings of Indian government bonds, a worsening of State finances will dent India’s credibility among foreign institutional investors (FIIs). The rise in government bond yield of State government securities would increase the interest burden on new debt and also for the old debt which are re-priced. Such a scenario could make State debt more explosive. Indeed, the yields of State government debt have increased, remaining higher than the Central government securities and with the spread showing a rising trend.
Composition of the deficit
•An ameliorating factor for the States is that the revenue deficit for the Centre is 2.5% of GDP compared to 0.2% for the States. Thus while the Centre borrows largely for revenue spending and current consumption like wages, salaries, the States do so for capital expenditure like infrastructure. This is despite the fact that delivering public services which are growth enhancing, such as health and education, is the prime responsibility of the States. Overall, however, this is a compositional issue and matters less for solvency or debt sustainability.
•Although composite State finances are useful to analyse, there are marked variations across States. States like Tamil Nadu, Gujarat, and Maharashtra have significantly lower fiscal deficit, with more intensive tax efforts, than States like Uttar Pradesh and Jharkhand, which collect lower tax and are fiscally less prudent.
•Despite significant variations across States in the degree of fiscal prudence, there is little correlation between State government yields (measured as spread over Central government securities) and fiscal deficits. Yields have no relationship to State fiscal prudence. Perhaps this is on account of the implicit guarantee by the sovereign. The implicit sovereign guarantee, however, cannot explain why State bonds consistently trade above Central government Gsecs, and the spread may, in fact, suggest the additional credit risk associated with State bonds. Or perhaps the latter spread could reflect the liquidity risk.
•Borrowings by States are likely to increase sharply due to interest of UDAY bonds, and more importantly, the viral of farm loans waivers. With little compensatory action, this will seriously undercut the hard-won battle to secure fiscal prudence for the country as a whole.
What can be done
•We must recognise that macroeconomic stability is contingent on the fiscal position of the general government. The Central government has pursued fiscal prudence against many odds. Unchecked profligacy by States can undermine the overall macro stability.
•There are three short-term steps. First, we must improve the due diligence by the Central government in giving consent to borrowings by States under Article 293 of the Constitution. Unfortunately, there is some lack of coordination within the Ministry of Finance itself. Approvals for State government borrowings are accorded by the State Plan Division with little coordination with the Budget Division, which monitors implementation of FRBM obligations. A more stringent criteria in approving borrowings for States which deviate from stipulated fiscal norms is urgently needed. The criteria must be transparent and apolitical in character.
•Second, whenever the Central government breaches the fiscal norms, it secures parliamentary approval. State governments must be encouraged to adopt a similar practice by securing the approval of the State Legislature.
•Third, regulatory measures can be devised to enable bond yields to be responsive to market signals and bridge the information asymmetry between markets and State finances of the concerned State governments.
•Finally the 15th Finance Commission must address the broader issue of adherence by States to fiscal obligations. It must restore adherence to fiscal norms as an important ingredient in the devolution formula. This also implies inter se distributional burden among the States themselves.
•Investors recognise and reward macro stability. Fiscal prudence exercised by the Central government has been widely acclaimed. The management of State finances must not undercut this important achievement which is central to investor confidence and enhanced credit rating. A lot is at stake. We must not undo the gains.
Access to excellence
We have failed to provide institutions of excellence for everyone, for people to enjoy growing up in India
•Summer is one of the toughest periods of the year for anyone graduating from school. This means we are talking about almost one crore students who gave their class XII exam. With an enrolment ratio of around 24.3%, we are looking at almost 30 lakh students desperately trying to obtain good scores in their XII board exams or sitting for entrance examinations for various higher education institutions. If their scores are not good, their careers will be perceived to be dead.
•Thirty lakh students! This is an astounding figure for the Darwinian struggle they know they will be getting into. Why? Because the higher education system in India is a binary phenomenon. You either have intellectually elite colleges, a handful of them, or a vast majority of mediocre ones which have lost their ability to even signal the quality of their students — one of the most basic purposes for an educational institution to exist. The trajectory to professional success then crucially hinges on your ability to secure a seat in one of the good colleges.
Cut-throat competition
•How many seats are we talking about? The top 10 colleges in, say, arts, science, humanities, engineering, medicine, architecture and law, every year — with the most liberal estimate — will not go beyond 100,000. Now imagine 30 lakh students competing for 100,000 seats. For the top IITs, the selection rate lies at 0.01%. By contrast, the Massachusetts Institute of Technology’s (MIT) selection rate is 8%. The QS World University Rankings List was released recently. IIT Delhi, the best from India, secured a rank of 172. MIT was at the top!
•The lack of an adequate number of quality institutions then ratchets up the value of the few better ones unusually high. Cut-throat competition for securing a place in a so-called elite institution in India continues to push the cut-off higher every year. Top colleges in the University of Delhi have routinely rejected students who do not score above 95% or so.
•This creates a new normal. It puts students into a constant struggle akin to that of ‘survival’. Those who cannot score above 95% are the unfortunate lot, just like the 99% of those students who won’t clear the entrance exam. For a minority who have the resources, they go abroad. The rest gaze at a career unfolding its misery in front of their eyes. A self-defeating impulse reigns, devastating human dignity. It’s an “educational calamity” in India, unreported, unaddressed and as ubiquitous as invisible. There is practically no family that you would know of that has not suffered at the hands of this calamity. Many of these students may become successful in later life, but for the time being, these scars will pain them and their families unbearably. For many, the performance of failure will never be forgotten.
•This is not a rhetoric, but let’s pause for a moment to see what have we internalised. What kind of educational structures have we installed in place that create such heinous exclusivity, so early in life? Which school of thought claims that someone lying one notch below the cut-off is not a worthy candidate? And what gives the nation and society the right to judge the character of its citizens based on how many marks they received? Have we become so insensitive that we fail to distinguish between what we need and what we demand? Or are we blindly importing the ideas of competitive performance from economics to humanity, failing to realise that capability enhancement is inherently opposed to the idea of meritocracy?
About avoiding failure
•The results are disastrous. Failure becomes the most fearsome entity. The new goal of society is to avoid failure. That alone defines your character, personality and essence of life. Costica Bradatan, the Romanian-American philosopher who is currently writing a book on failure, says that our capacity to fail is essential to what we are. And this capacity is stripped off our students. In the long run, instilling such loathing of failure among our students drives them to recalibrate their ethical compass to what wins, not what is right.
•At the heart of this malady is the wretched education system which creates exclusivity and elitism. We have failed to cultivate institutions of excellence for everyone, for people to enjoy growing up in India, to learn while they grow up.
•Aristotle, the genius that he was, spoke about telos, the essence and purpose of anything. Justice and ethics are teleological. The primary factor to decide who should be granted admission into a university must then be decided by what the telos of a university is. It’s not scholarly excellence, for if it is so, then affirmative action cannot be allowed. It is in fact promotion of virtuous citizens in a society. Universities are a place of learning values of life, and not just employment. And there is no reason to believe that only those who have academic merit must be worthy of being honorific citizens. In fact for a university that claims itself to be engaged in a nation-building project, all the more reason to select those who do not have good scores.
•And how do we do it? Well, as a start, shift the policy discourse from elite to non-elite, ‘B grade’ institutions. That’s where most of our youth are — dissatisfied, while growing up to be part of the country that has given it nothing much.
Deep-sea dive
The Reliance-BP plan for the KG-D6 block could draw more oil, gas majors to India
•Reliance Industries’ and BP’s joint investment of Rs. 40,000 crore in the KG-D6 gas block has important implications for the oil, gas and renewable energy sectors in terms of technological development, supply line infrastructure and pricing policy. The investment assumes a projected gas yield of 30 to 35 million cubic metres a day from the fields, and accompanies an overall partnership between the two companies in low-carbon and renewable energy, as well as in fuel retailing. With the last big investment in the sector being BP’s purchase of a 30% stake in some of RIL’s oil and gas production-sharing contracts in 2011, this pact signals a growing comfort with and acceptance of the Centre’s new gas pricing policy, which includes a mechanism for higher rates for gas from deep and ultra-deep wells. The proposed investment also brings into sharp focus the 2014 arbitration case the companies had filed against the government regarding gas pricing. Given the Centre’s current stance, the partners will not be able to derive benefit from the new gas pricing formula till the legal spat is resolved. The RIL-BP partnership also seeks to build capabilities across the entire oil and gas value chain. Thursday’s announcement that the two partners would explore opportunities in fuel retailing too was significant, coming as it did a day before the country moved to a dynamic pricing policy involving daily price revisions. Petroleum and Natural Gas Minister Dharmendra Pradhan had invited the two companies to invest in fuel retailing, and their agreement suggests optimism over the outlook for the pricing regime.
•Conventional energy companies worldwide are realising that traditional markets are diminishing, and sources of conventional energy such as coal mines and gas fields becoming more expensive to operate. The RIL-BP plans to explore opportunities in renewable energy should be viewed against that backdrop. The two companies, in their search for new sources of conventional energy, have developed expertise that could be applied in the renewable energy space. BP has been operating deep and ultra-deep wells for years and has the infrastructure and technology to operate in high-risk, difficult locations. One possible opportunity for the companies is to exploit this know-how and develop offshore wind installations across the KG-D6 block. A company used to drilling at ultra-deep locations should not find it difficult to set up the foundations for offshore windmills at these sites. And it is not that big a jump to get electricity supply lines running alongside pre-existing oil and gas pipelines. With offshore wind installations virtually non-existent in India, the area offers an untapped market that the government would be keen to see exploited. While details of the investment plan have not been presented, the scale of the funds involved, coupled with attractive pricing and FDI policies, may well help draw more global oil and gas majors to the Indian market, upstream and downstream.
Digital economy: policy push on anvil
Revamp of electronics manufacturing norms among measures in pipeline
•The Centre will soon introduce a slew of policies, including a revamped one on electronics manufacturing and a data protection policy, to achieve the aim of making India a trillion dollar digital economy, Electronics and IT Minister Ravi Shankar Prasad said on Friday.
•“The participants were unanimous that one trillion dollar digital is an understatement and India has the potential of reaching two-three trillion dollar digital economy,” Mr. Prasad told reporters after a meeting with select industry experts invited by the Ministry of Electronics and IT to discuss the roadmap to achieve the target by 2025.
•The meeting was attended by Nasscom President R. Chandrashekhar, Google India’s Rajan Anandan, Wipro’s Rishad Premji, Indian Cellular Association National President Pankaj Mohindroo, Internet and Mobile Association of India President Subho Ray, Tech Mahindra’s C.P. Gurnani and Hike Messenger CEO Kavin Bharti Mittal, among others.
•After the deliberations it was decided that the Centre will introduce a new revamped policy to push manufacturing of electronics in the country, Mr. Prasad said. “We will be shortly laying down the new electronics policy because, between the old policy and (now), India under Narendra Modi has changed completely.”
•“Cyber security was also discussed. Low-cost cyber security products have great potential... and we are going to have a framework for data security and data protection,” he said, adding that they will also come up with a new software product policy.
Start-up policy
•The minister added that the idea of setting up special innovative zones for start-ups was discussed and a framework for start-up cluster policy will be developed.
•Mr. Prasad pointed out that the industry highlighted the need to facilitate more start-ups in areas like education, agriculture and healthcare. “I have decided that we will have a coordinated action with Health, Agriculture and HRD Ministries to promote an ecosystem to facilitate more start-ups in these areas.”
•The industry also highlighted the need for setting up a dispute resolution mechanism and liberal regulatory norms.
•The government expects digital economy to grow to more than $1 trillion by 2025 from current about $413 billion, with maximum contribution from IT/ITeS sector ($350 billion) and electronics sector ($300 billion).
