📰 Scam, or folklore? on 2G case verdict
2G acquittals call into question the political, investigative narratives of the past decade
•What is illegal from the point of view of administrative law may not necessarily be an offence from a criminal court’s perspective. The Supreme Court declared in 2012 that the allocation of 2G spectrum by the Congress-led UPA government was illegal and an arbitrary exercise of power. It went on to cancel all 122 telecom licences allotted to companies in early 2008 during the tenure of A. Raja as Communications Minister. With the trial court’s en masseacquittal of all those arraigned by the Central Bureau of Investigation in the 2G spectrum allocation case, the claim that this was the biggest scam in India’s history lies in tatters. Every ground that the CBI had adduced to prove that Mr. Raja manipulated the first-come, first-served system to favour Swan Telecom and Unitech Wireless, among others, and helped them make a windfall profit by offloading their stakes, has been rejected by Special Judge O.P. Saini. The immediate fallout is that the Dravida Munnetra Kazhagam, to which Mr. Raja belongs, and its national ally, the Congress, will at last be in a position to shake off the perception that they were irredeemably beset by corruption. The Congress, in particular, is now in a position to reiterate that the spectrum allocation resulted in ‘zero loss’; also, that its rule between 2004 and 2014 was not as scam-tainted as it was generally made out, a perception that has impacted its electoral performance since. Attention will now turn to Vinod Rai, whose sensational report as Comptroller and Auditor General, pegging the loss as a result of not auctioning spectrum at ₹1.76 lakh crore, contributed to the perception that a huge scam had taken place.
•Many had argued that the figure was only notional. Mr. Raja said that not revising the entry fee and not auctioning spectrum ensured cheaper telephony, increased tele-density and contributed to the sector’s overall development. He has been undoubtedly vindicated, but there is a lesson for everyone in the long 2G saga: public perception and audit reports cannot be the sole basis for criminal trials; investigating agencies must carefully sift the available material before deciding to prosecute. Eliminating graft from public life is not only about making allegations stick during election time, but also about diligent investigation and efficient prosecution. The CBI’s image has taken a beating, with the court calling it out for its waning enthusiasm in pursuing the case. There is a cloud over the present government’s commitment to fighting corruption. It may yet have a chance to redeem itself, as the CBI has said it will appeal the verdict. An appeal is in order given the sweeping dismissal of the CBI’s contentions, so sweeping that it dismisses, arguably a tad too breezily, what the prosecution said were suspicious quid pro quo transactions. It is said that the folklore about corruption is bigger than the actual incidence of corruption. Could this be true of the 2G ‘scam’ as well?
📰 For a wider food basket
While undernutrition remains high in India, over-nutrition too is becoming an emergency
•In the last few decades, with strides in technology, irrigation practices, and extension services, and with progressive agricultural policies, India has seen improvement in food and nutrition security. Agriculture, food grain production, and agricutlural export have grown. This is good news.
•However, despite hunger (as measured by undernutrition) decreasing, the level of undernutrition remains unacceptably high in the country. India ranks 114th out of 132 countries in stunting among children aged less than five and 120th out of 130 countries in under-5 wasting, as per the Global Nutrition Report, 2016. The burden of vitamin and mineral deficiencies (‘hidden hunger’) is also considerable.
•This is because a vast majority of Indians eat cereal-based food, mainly wheat and rice. There is an insufficient intake of food such as milk, pulses, and fruits and vegetables, which are rich sources of micronutrients. Women and children are the most vulnerable to micronutrient deficiencies. This has adverse affects on their health. Deficiency of iron in women not only reduces physical work capacity and causes fatigue, but could lead to depression and post-partum maternal haemorrhage. In children, it impairs growth and cognitive development.
•What is ironic is that over-nutrition is emerging as an emergency in India. As per the recent findings of the National Family Health Survey-4 (2015-16), the Body Mass Index (BMI) of 15.5% of urban women was found to be less than 18.5 kg/m2, whereas 31.3% of urban women were in the category of overweight or obese (BMI of or more than 25.0 kg/m2). Around 15% of urban men were underweight, while 26.3% belonged to the category of overweight and obese. Dramatic changes in lifestyle and dietary patterns in recent decades have contributed to an increasing prevalence of non-communicable diseases. If this double burden of undernutrition and growing percentage of obesity and associated non-communicable diseases is not controlled, it can have serious implications for the economy.
•How has this happened? While the Green Revolution phase saw new, fast-growing varieties of staples, especially wheat and rice, the following decades saw a steady decline in the food basket diversity, especially of traditional grains such as bajra and millet, which have high nutritional value. The 1990s, though, saw a focus on the role of micronutrients. Deficiencies of micronutrients such as zinc, folic acid, magnesium, selenium and vitamin D started receiving more attention.
•The Sustainable Development Goal-2, which aims to “end hunger, achieve food security and improved nutrition and promote sustainable agriculture”, is a priority area for India. To ensure food and nutrition security, there is a growing need for a multisectoral approach. The policies and programmes of various ministries should be converged for better results. This will not only transform India’s agricultural practices, but also spread awareness about nutritious food among key target groups, including tribals, women and children.
📰 Arab outreach works, as India votes for negotiated settlement of Jerusalem
The dramatic vote came a day after a fortnight-long outreach by the Arab countries to India.
•Reiterating its traditional policy on the Israel-Palestine dispute, India on Thursday voted for a negotiated settlement of the Jerusalem issue at the UN General Assembly with 127 other member countries.
•The dramatic vote came a day after a fortnight-long outreach by the Arab countries to India.
•Saudi and Palestinian envoys met diplomats from the Ministry of External Affairs ahead of the vote.
•Speaking to the media during the weekly briefing, the MEA spokesperson acknowledged that Arab diplomats held consultation with India on the vote and the Minister of State for External Affairs M.J. Akbar informed them about India’s traditional policy on Jerusalem.
•The meeting with Mr. Akbar took place on December 11 to discuss the U.S. position on Jerusalem and the Minister reiterated India’s position, said spokesperson Raveesh Kumar on Thursday. India has maintained since December 7 that it follows an independent policy on the issue of Jerusalem which does not get influenced by “third parties”.
•The UN resolution received nine votes against and 35 abstentions.
•The resolution which expresses deep “regret” on the December 7 declaration by U.S. President Donald Trump recognising Jerusalem as the capital of Israel received India’s vote even as Prime Minister Benjamin Netanyahu is expected to visit India in the new year.
Consistent approach
•However, it is likely to serve India well as high-level visits are reportedly being planned between several Arab countries and India. Next week, Jordanian Foreign Minister Ayman Al-Safadi will be in New Delhi.
•However, senior officials said India maintains a consistent approach on this issue and pointed at the speech by External Affairs Minister Sushma Swaraj at the NAM Ministerial Meeting on Palestine on the sidelines of the September UNGA session where India reiterated its traditional policy to have a negotiated settlement to the Palestinian issue.
📰 India-China border talks today
•India and China will hold the 20th round of negotiations on the border issues on Friday. The meeting, which comes four months after the forces of the two sides confronted each other at the Doklam plateau, will be headed by special representatives from both sides, National Security Advisor Ajit Doval and his Chinese counterpart Yang Jiechi.
•The Ministry of External Affairs made a formal announcement for the talks on Thursday which were finalised during last week’s bilateral meeting between External Affairs Minister Sushma Swaraj and her Chinese counterpart Wang Yi, held on the sidelines of the trilateral RIC (Russia-India-China) foreign ministers’ meeting. Ms Swaraj and Mr Wang had both indicated that the two sides realise the need to continue normal dialogue given the importance of overall relationship.
•The MEA did not comment on what would be on the agenda of the Doval-Yang dialogue even though there have been some discussion in the Indian policy studies circles about the various issues like the One Belt One Road initiative, China’s opposition to Indian membership at the Nuclear Suppliers Group (NSG) and the Indian opposition to China-Pakistan Economic Corridor (CPEC) that might feature in the talks.
•The Hindu earlier reported that Chinese ambassador Luo Zhaohui had indicated China will be willing to change the name of CPEC to address India’s concerns regarding CPEC. “We can change name of CPEC (China Pakistan Economic Corridor). Create an alternate corridor through Jammu and Kashmir, Nathu La pass or Nepal to deal with India’s concerns,” the envoy had said in November in an academic meeting.
•However, a new issue on the ground that may also feature is the issue of the pollution of the Siang river which has contaminated the flow of the mighty Brahmaputra in Assam. Though India has raised the issue most recently during last week’s discussion with visiting foreign minister Wang Yi, the Chinese foreign ministry’s spokesperson has dismissed the report.
•“On the issue of Siang, now this is naturally a matter of concern to us. We are coordinating with the Ministry of Water Resources and we have ascertained certain facts. I can also share with you that the matter did come up during External Affairs Minister’s meeting with the Chinese Foreign Minister and again as you are aware there are existing mechanisms between the two countries to deal with such matters on the river arrangement,” said the spokesperson last week.
📰 Manipur Assembly demands peace agreement disclosure
Passes resolution seeking details of Centre-NSCN(I-M) pact
•After a four-hour-long discussion on Thursday, the Manipur Assembly passed a resolution to demand disclosure of the contents of the framework agreement signed between the Union government and the NSCN(I-M).
•The agreement was signed at the residence of Prime Minister Narendra Modi on August 3, 2015, between the government’s interlocutor, R.N. Ravi, and NSCN leader Thuingaleng Muivah.
•Opposition leader Okram Ibobi Singh, who was the Chief Minister at the time of singing of the agreement, said that he was not taken into confidence about the pact. He said that no other person knows the details of the agreement.
•Cutting across party lines, the members of the Assembly felt that while the territorial integrity is kept intact, there may be some clauses which are alarming.
•The House constituted a four-member committee to prepare a memorandum to be submitted to the Prime Minister.
•It will demand territorial integrity and disclosure of the contents of the peace agreement.
📰 Overseas votes
An amendment to allow NRIs to vote by proxy
•The Representation of the People (Amendment) Bill of 2017, introduced by the government during the winter session of Parliament, proposes to allow non-resident Indians (NRIs) to emerge as a decisive force in the country’s electoral politics on their own terms. The amendment paves the way to remove an “unreasonable restriction” posed by Section 20A of the Representation of the People Act, which requires overseas electors to be physically present in their electoral constituencies to cast their votes.
•The effort to empower NRI voters began with two PILs filed by V.P. Shamsheer, a U.A.E.-based doctor, and Nagender Chindam, chairman of Pravasi Bharat in London, in the Supreme Court.
•The Election Commission prepared a report titled ‘Exploring Feasibility of Alternative Options for Voting by Overseas Electors’ and presented it in the apex court. The EC said NRI voters could be empowered better if the law was amended.
•In the statement of objects and reasons for the 2017 Amendment Bill, the government explains that the original Representation of the People Act was enacted as an all-encompassing law for the conduct of elections, delimitation of constituencies, allocation of seats in Parliament and State Legislatures, corrupt electoral practices, and so on.
•Section 20A of the Act provides for registration and inclusion of overseas electors in the electoral rolls. The Registration of Electors Rules, 1960 provide for overseas electors to register themselves in the electoral rolls of their respective constituencies on the basis of self-attested copies of their passport and valid visa, and exercise their franchise in person on production of the original passport at the time of voting at the specified polling booth.
•Thus, the rules demand for the physical presence of overseas electors in their respective polling stations in India on the day of polling. “This causes hardship to the overseas electors,” the statement said. This amendment proposes facilitating an external mode of voting, that is, voting by proxy, whereby such electors can exercise their franchise from their places of residence abroad.
•If the Bill is passed, overseas voters can appoint a proxy to cast their votes on their behalf, subject to certain conditions to be laid down in the Conduct of Election Rules, 1961.
•“This would considerably mitigate the difficulties presently faced by overseas electors in exercising their franchise,” the statement in the Bill reasoned.
📰 Black money: India-Swiss data sharing from Jan. 1
•In a move aimed at combating black money stashed abroad, India signed an agreement with Switzerland on Thursday that would allow automatic sharing of tax-related information from January 1 next year, the CBDT said.
•“With the completion of the parliamentary procedure in Switzerland and signing of mutual agreement, India and Switzerland are set for automatic exchange of information for the period beginning from January 1, 2018,” the Central Board of Direct Taxes said.
•The policy-making body for the Income Tax Department said the agreement was signed by CBDT chairman Sushil Chandra and Swiss Ambassador to India Andreas Baum at the North Block here.
•A joint declaration for the implementation of Automatic Exchange of Information was signed last month between the two sides here, and it provided that both countries would start collecting data in accordance with the global standards in 2018 and exchange it from 2019 onwards.
📰 GST, a work in progress
We need to immediately move towards three tax slabs, and eventually two
•The introduction of the Goods and Services Tax (GST) raised much hope that it would herald the emergence of a ‘good and simple tax’ with ‘one nation, one market, one tax’. However, there has been considerable concern with the new tax, both in its structure and operational details, including the ease of paying the tax and filing returns. Trade and industry have been grappling with the problem of payment, filing the returns and claiming input tax credit, and exporters have been facing liquidity crises as the zero-rating of the tax has not worked and refunds have not been forthcoming, with difficulty in filing returns. Of course, the GST Council has been quite responsive to tweak the structure and operational details to make it simpler. Yet, considerable work needs to be done to ensure a smooth transition and to reap the revenue and productivity gains to the economy.
History of GST
•Introduction of the GST is an important reform and is a standard policy recommendation for every country going in for the structural adjustment programme of the International Monetary Fund. This has been a major money spinner and a source of productivity gain. According to Michael Keen, of over 165 countries which have adopted GST in one form or another, only five have repealed it (Belize, Ghana, Grenada, Malta and Vietnam), but have reintroduced the tax later. The GST has taken centre-stage in many countries and is considered important in view of the competitive reduction in corporation tax rates due to high mobility of capital. It is also true that there is no “one-size fits all” GST and each country has to adopt the structure depending on political bargains and operational feasibility. It is a major reform, and even as every country makes a lot of preparations before it is introduced, it takes time to smoothen the rough edges and settle contentious issues.
•International experience shows that some features of the reform are inherently desirable. It is important not to have too low thresholds. In fact, reasonably high thresholds will reduce the compliance burden to a large number of small businesses without much impact on revenue. Richard Bird and Pierre-Pascal Gendron, after a detailed examination of a number of countries adopting GST, suggest that in developing countries, a threshold closer to $100,000 would eliminate 75% of the taxpayers with a revenue loss of less than 4%. (See Bird and Gendron, The VAT in Developing and Transitional Countries, Cambridge University Press, 2007). Another desirable feature of a successful GST is to have fewer rates. Multiple rates create classification problems, are harder to administer and would require the general rate of tax to be higher. It would also invite a lot of lobbying by special interest groups. Third, it is important to prepare well before the plunge. Most countries take at least two years to prepare for the introduction of reform to ensure a smooth transition. This is particularly necessary for developing and testing the technology platform, educating the tax collectors and tax payers and to avoid any anomalies in the structure of the tax.
The Indian version
•In the Indian context, given that the reform had to be evolved by taking into account the views of 29 States, two Union Territories with legislatures and the Union government, compromises are inevitable and it is impossible to expect the structure of the tax to be ideal. As stated by Bird and Gendron, some bad initial features may be an essential compromise to get the tax accepted in the first place.
•It would have been preferable to evolve the structure with two rates, one lower on items of common consumption and another general rate on consumer durables and luxuries. Notably, given that the VAT in the earlier regime had predominantly two rates, it should have been possible to convince the States of the need to fix the GST rates at two rather than four. In addition, the levy of three rates of cesses has further complicated the structure. Having four tax rates and three rates of cesses should have been avoided. As mentioned above, multiple rates create problems of classification, inverted duty structure and large-scale lobbying. It enormously complicates the technology platform to ensure input tax credit mechanism. It therefore appears desirable to move immediately towards three slabs with the final goal of reducing the slabs to two. It would also have been desirable for the “fitment committee” to evolve the rates by thinking afresh instead to merely adding up the excise and VAT rates to fit the item to the nearest rate decided. This is particularly relevant in the case of commodities which are predominantly inputs as in the earlier VAT regime they were placed in the lower rate category. Hopefully, the GST Council will act soon on this.
Raising the threshold
•As mentioned above, expert opinion based on international experience shows that there is much to be gained by having the threshold at reasonably high levels. As mentioned above, international experience is that a threshold closer to $100,000 would eliminate 75% of the taxpayers and the sacrifice in terms of revenue would be less than 4%. Moreover, it is the small businesses which produce and trade in commodities and services which are predominantly consumed by low income groups and therefore, keeping the threshold high would be desirable from the viewpoint of equity as well. Considering this, going further, it may be desirable to fix the threshold at ₹50 lakh. The revenue loss will be minimal but ease of doing business will be high. The inclusion of petroleum products in the GST base will depend on mainly the revenue gains from the reform. Nevertheless, it is a desirable objective and the GST Council must act on it. International experience shows that including real estate may not be easy.
Steps ahead
•There is some concern that the revenues from GST in the past few months are somewhat below expectations. Things could improve as the new changes bring in stability and technology platform stabilises. Hopefully the implementation of GST may help in augmenting income tax as well.
•Strong political commitment, to implementing the reform, thorough advance preparation, adequate investment in tax administration and taxpayer services, extensive public education programme, support from business community and good timing of reform are the important pre-requisites for successful implementation of the GST. It is also important to note that problems of transition to a major tax reform are unavoidable and most countries go through this. In this regard, the approach of the GST Council must be commended for being receptive to the concerns of businesses and in dealing with the glitches in technology. Some of the noise heard is also due to the fact that all traders, in one way or the other, are brought into the formal sector. That hurts some. The GST Council has recognised that it needs to carefully calibrate the reform until the desired goal of a Good and Simple Tax is realised. Hopefully the GST Council will keep the goals clear and consider the reform effort as a work in progress.
📰 Now, private banks face bad loans heat
Private lenders’ GNPAs rose 40.8%: RBI
•Private sector banks registered a 40.8% year-on-year increase in gross non-performing assets as of September 30, 2017, according to latest data released by the Reserve Bank of India (RBI).
•In comparison, gross NPAs at public sector banks (PSBs) rose by 17% over the corresponding period, while industrywide gross NPAs increased 18.5%.
•The gross NPA ratio of the banking sector increased to 10.2% in September, from 9.6% in March, while net NPA ratio rose to 5.7%, from 5.5%. However, the total net NPA ratio of private sector banks as on September 30, at 2%, is much lower than the 5.7% for PSBs.
•In its Financial Stability Report released on Thursday, the RBI said an analysis of the slippage ratio of 27 banks (accounting for about 87% of the total assets of the banking system), the median as well as the tails were showing signs of moderation. However, banks needed to increase their provision coverage ratio.
•“While assessing the risk absorbing capacity of banks, it was found that all PSBs and some PVBs had a negative provisioning gap assuming a benchmark provision coverage at 50%,” the central bank said.
Stress test
•The macro stress test for credit risk indicates that under the baseline macro scenario, the GNPA ratio may increase to 10.8% by March 2018 and further to 11.1% by September 2018, RBI said.
•The report observed that the ongoing deleveraging in the heavily indebted parts of the corporate sector and muted credit growth in public sector banks pose a risk to growth. Subdued credit, which may also be a consequence of thin capital buffers of PSBs, leads to lower investments in the economy, it said.
•Credit growth in major sectors as well as industries has witnessed a decline over the past two years.
•However, there was a silver lining. The RBI noted that the number and cost of stalled projects reported in the second quarter of the current fiscal had declined from the first quarter.
•“The positive signals of improvement – the decline in number and cost of stalled projects, the efforts to improve the quality of government expenditure, ease of doing business ranking, sovereign rating upgrade by Moody’s and the bank recapitalisation announcement are expected to provide a significant fillip to investment sentiment in the coming quarters,” the RBI added in the report.
