📰 The balancing act
It is now time to draw up a ‘to-do’ list and begin the heavy lifting in India-ASEAN ties
•When you stand at the peak of a mountain, you get a full view of the path travelled and the road ahead that will take you to the next peak. The principal gain of the Association of Southeast Asian Nations (ASEAN)-India Commemorative Summit, held in New Delhi last week, is to provide ample clarity on what their partnership has achieved and where it should move in the future.
Scope for cooperation
•A good way to begin is to listen to ASEAN voices. The participation of ASEAN leaders in a second summit in Delhi in five years and their historic presence as chief guests at the Republic Day celebrations convey a clear message: India is important to ASEAN; it is viewed as a benign power; and huge scope exists to develop cooperation with it.
•“We believe,” said Singapore Prime Minister Lee Hsien Loong as co-chair of the summit, “that India makes a major contribution to regional affairs, helping to keep the regional architecture open, balanced and inclusive.”
•Recent developments in the Indo-Pacific region have lent special significance to the summit. China’s economic progress is welcomed, with every ASEAN nation keen to derive optimal benefit from it. But Beijing’s assertive diplomacy, strategic postures and coercive action in the South China Sea have combined to sour the environment. U.S. President Donald Trump, on the other hand, gives the impression that ASEAN’s priorities and concerns are unimportant. This mix has impelled ASEAN states to expect and encourage India to enhance its role as a balancer in the region.
•For India, ASEAN is of vital importance both for strategic and economic considerations. New Delhi seeks to redefine the contours of its neighbourhood. Constraints and setbacks in South Asia and opportunities in Southeast Asia have led it to blur the traditional distinction between ‘immediate neighbourhood’ and ‘extended neighbourhood’. Friendly South Asians and welcoming Southeast Asians now constitute our new neighbourhood, with an eastward tilt.
Key areas
•The summit’s Delhi Declaration reflects a mutual commitment “to further deepen and strengthen” the strategic partnership. Of its 36 paragraphs, nine are devoted to political-security cooperation and socio-cultural exchanges each, while 11 paragraphs deal with economic issues. The remaining sections refer to connectivity and cooperation in narrowing the development gap. Taken together, the measures, spelt out with precision, reveal the bold path the two sides have pledged to follow.
•On political and security cooperation, two themes stand out. Freedom of navigation and overflight “in the region” is of the highest importance. How the two sides deepen maritime cooperation and to what extent it is extended to practical collaboration among the navies of major ASEAN states and India will be watched closely. The other theme relates to India’s support to ASEAN efforts to obtain a legally binding Code of Conduct with China in the South China Sea. An unspoken idea, which may have been covered in bilateral meetings, is how to engage nations such as Indonesia, Vietnam, Singapore and others in the deliberations that ‘the Quad’ members — the U.S., India, Japan and Australia — have already launched.
•Consensus emerged on elevating the existing — rather limited — trade and economic cooperation to a higher level. Full utilisation of the ASEAN-India Free Trade Area and “the swift conclusion” of a modern, comprehensive and high quality Regional Comprehensive Economic Partnership (RCEP) are the next steps. Of course, the RCEP should be “mutually beneficial”, but note that the adjective “balanced”, preferred by India, is missing from the text. New Delhi does not have the option to stay out of the RCEP, but it needs ASEAN’s support to secure an acceptable bargain. Tough negotiations lie ahead.
•The plan to expand socio-cultural cooperation is straightforward: just scale up and diversify exchanges in the desired fields. Separately, Thailand’s Minister of Foreign Affairs Don Pramudwinai built a case for “Moral Connectivity” which places people at the centre of inter-state relations.
•Prime Minister Narendra Modi made a significant point by wisely including Islam in the list of common bonds, together with the Ramayana and Buddhism. “Islam, in many parts of Southeast Asia,” he said, “has distinctive Indian connections going back several centuries.” The Declaration commits the parties to enhancing physical and digital connectivity. It also reflects ASEAN’s appreciation for India’s assistance in bridging the development gap between its older and newer member states. As the year of celebrations and colourful spectacles ends, it is time to begin the hard work. Diverse stakeholders, both in India and ASEAN, have a huge responsibility to shoulder.
📰 ‘WH is asking a big price for Dreamers’ protection’
Indian American urges lawmakers to reject Trump plan
•The massive cuts in legal immigration proposed by the White House in exchange for offering a path to citizenship for a section of undocumented residents is too high a price, and lawmakers should not accept that, an Indian American activist, who could be a beneficiary of the proposal, said.
•Chirayu Patel reached America as an 11-year old in 1994 legally, but lost his legal status along with that of his parents. He is one of the 8,000 people of Indian origin who are protected from deportation and allowed to work by an Obama-era executive order titled Deferred Action for Childhood Arrivals or DACA. President Donald Trump has announced that DACA will end on March 5 and called upon Congress to make law to deal with the situation.
•“They want a wholesale reduction of immigration for something that should have been done decades ago — the protection of Dreamers. We are pushing our elected officials to ensure that they don’t accept that,” Mr. Patel told The Hinduin an interview. ‘Dreamers’ are children who arrived in the country illegally, and a law offering them a path to citizenship has been pending since 2001.
•In 2012, the DACA programme offered protection to a section of them. “Many people were not eligible to apply for DACA,” said Mr. Patel, who received work authorisation in 2013.
•“With DACA, I could further integrate into the American society, get a loan, sign a lease and become financially independent. I have been able to use my degree to find a job,” Mr. Patel, who now works as an asset manager for a real estate company in Chicago, said. His 2013 DACA approval was renewed subsequently every two years, for a fees of $500, an interview and finger-printing. If Congress does not make a new law, he won’t be able to apply for the next renewal later this year.
•Mr. Patel has been fortunate that Illinois, the State where he grew up, allowed people without an immigration status to go to college. “In school, we were trying to blend in, in the midst of the uncertainty surrounding our immigration status. We had to be careful not to reveal the details, but until the high school, it was not a problem,” he recalled his early days in America.
•“When you were applying to colleges, the status comes into play,” he said. Mr. Patel could find some scholarships and his parents had the wherewithal to organise private loans to finance his college education.
Belligerent debate
•When the bipartisan DREAM Act — Development, Relief, and Education for Alien Minors Act — offering a path to citizenship for people like him was introduced in 2001, he “hoped this could be the first step” to a more certain future. But the immigration debate in America became increasingly belligerent in the years that fallowed 9/11. “I grew up Gujarat and speak a bit in Hindi but I don’t think I could survive in India,” Mr. Patel said. There are an estimated 3.6 million people like him America, who grew up in America but continues to be undocumented. Around 8,00,000 of them received DACA protection.
•The proposal floated by the Trump White House offers a path to citizenship for ‘dreamers’ such as him, over a period of 10 to 12 years. In return, Congress would have to create a $25 billion trust fund to pay for a southern border wall, increase immigration arrests, allow quicker deportations of others, sweep up people who overstay their visas, disallow citizens from bringing their parents to the U.S., and end the diversity lottery programme for immigration from under-represented countries.
•“It is a pretty big price they are asking for our protection. They are using our future as a gambling chip. The White House has its agenda and the Republican Party has its own agenda,” said Mr. Patel.
•Mr. Patel has come out into the open on his status in order to encourage larger mobilisation of the Indian-American community on the issue. “That is why I share my story and encourage others to share their stories,” Mr. Patel, who lends his voice behind the South Asian Americans Leading Together, an organisation that works on immigrant rights, said.
📰 ‘Britain worse off under any exit scenario’
Least harm would be done by remaining in the single market, says leaked report
•Britain will be worse off under the three main scenarios of Brexit — whether it remains in the single market or leaves it with or without a new trade deal with the EU — a leaked government report revealed on Tuesday. The report, revealed by the news website Buzzfeed and which suggests the least harm would be done by remaining in the single market, was dismissed by the government and leading Brexiteers as “incomplete” and an attempt to “undermine” Brexit but will be a boost to those campaigning for a “softer” Brexit.
•The report, “EU Exit Analysis — Cross Whitehall Briefing”, dated this January and prepared by the Department for Exiting the European Union, points to the three main scenarios: if Britain opted to remain in the single market, growth over the next 15 years would be 2% lower than if it remained in the union, but still better off by a “no deal” scenario (with Britain reverting to WTO terms for its relationship with the EU) under which growth would be 8% lower. Under a comprehensive free trade agreement, it would be 5% lower.
Short-term factors
•The analysis does not take into account short-term factors such as the cost of adjusting to new customs arrangements, which could further dampen growth.
•Among the hardest hit sectors will be those in which Indian companies are involved — cars and manufacturing — alongside others such as chemicals, retail, food and drink, while all regions of the country would be hit, particularly the North East and West Midlands, as well as Northern Ireland.
•The hit to the British economy far outweighs the positives of future trade deals: it estimates that a deal with China, India, Australia and others would add in total 0.1 to 0.4% to the economy in the long term, while a trade deal with the U.S. could add 0.2%.
•The report was leapt upon by government critics within and outside the Conservative Party. “Govt report says least damaging #Brexit model is#SingleMarket #CustomsUnion so let’s put country before ideology & stay in both,” tweeted Anna Soubry, a leading Conservative MP.
•The leak also coincided with the release of a report criticising “Lexit”, the left-wing case for leaving the EU, calling for the Labour Party to clarify its stance on Brexit. Labour Minister for Exiting the EU Keir Starmer called on the government to urgently publish its impact analysis. Addressing the House of Commons on Tuesday, Minister Steve Baker described the leak as a “selective interpretation” of government analysis and an attempt to undermine Britain’s exit from the EU.
📰 Allahabad High Court judge Narayan Shukla to be impeached
His orders in cases on private medical colleges had come under CJI’s scanner
•Chief Justice of India Dipak Misra on Tuesday recommended the impeachment of Justice Shri Narayan Shukla, the eighth senior-most judge of the Allahabad High Court, following an adverse report about him by an in-house panel. The panel had been set up by the CJI.
•The CJI has set the process in motion with a letter to the Prime Minister for the impeachment of the judge.
•When the impeachment motion is moved in Parliament, an investigation is conducted. If the findings of guilt are confirmed, the impeachment motion will be put to vote for the removal of the judge by a majority.
•The move for a possible impeachment of Justice Shukla began with Allahabad High Chief Justice D.B. Bhosale withdrawing judicial duties from him from January 23, 2018.
•The trigger was a scathing report by the committee led by Madras High Court Chief Justice Indira Banerjee.
•Justice Shukla joined the Allahabad High Court in 2005 and was set to retire on July 17, 2020.
•His orders in the cases of blacklisted private medical colleges in Lucknow had come under the scanner of the CJI Bench last year.
SC direction defied
•Chief Justice Misra had expressed “shock” at an order passed by a Division Bench led by Justice Shukla on September 1, 2017. allowing G.C.R.G. Memorial Trust, based in Lucknow, in defiance of a “graphically clear” restraining direction from the Supreme Court on August 28 to stop admissions for the academic session 2017-18.
Corrections to order
•The Supreme Court noted how Justice Shukla, on September 4, even made some corrections to the September 1 order.
•On November 23, Chief Justice Misra, in a 14-page judgment, held that the Division Bench, led by Justice Shukla, had abandoned “the concept of judicial propriety” and transgressed judicial rules to “proceed on a path where it was not required to.”
•The CJI had held that such transgressions cause “institutional problems”. The Justice Banerjee Committee was formed shortly after this judgment on December 8.
•Justice Shukla was also heading the High Court Division Bench which passed an order on August 25, 2017 in the case of another banned medical college of Lucknow-based Prasad Education Trust, which led to a scandal that sent shock waves across the judiciary and compelled the CJI to re-affirm his authority as the master of the roster.
•Justice Shukla’s Bench had, in an interim order, restrained the Medical Council of India from de-listing Prasad Education Trust’s medical college. This order is part of an FIR filed by the CBI which alleges that a criminal conspiracy was hatched by officials of the Prasad Education Trust along with several persons, including I.M. Quddusi, retired judge of the Orissa High Court, to lift the ban on the college from admitting students for the couple of years.
📰 Facing criticism, govt. backs down on orange passports
The Opposition had criticised the move as discriminatory
•Weeks after announcing that Indian migrant labourers would be issued orange-coloured passports instead of the usual blue, the government on Tuesday backed down after sharp criticism, especially from the Opposition.
•The Ministry of External Affairs (MEA) said the decision to continue with the current blue passports for all general sections was taken after “comprehensive discussions.”
•“After comprehensive discussions with the various stakeholders, the MEA has decided to continue the current practice of printing of the last page of the passport, and not to issue a separate passport with orange colour jacket to ECR (Emigration Check Required) passport holders,” a release from the Ministry said.
Sushma chairs meeting
•The decision was taken at a meeting chaired by External Affairs Minister Sushma Swaraj and Minister of State for External Affairs General V.K. Singh (retd.), the release added.
•The announcement reversed the January 12 decision, in which the MEA had done away with printing of the last page of the passport that contains the names of the parents of the passport applicant. At the same time, the MEA also declared that the covers of the ECR category passports, catering to migrant workers from India, would be in orange instead of the usual blue.
•The decision to do away with the last page was taken following suggestions from an expert panel to make passports more suitable for single parents, the MEA had clarified then. However, the idea of orange jackets for ECR passports, meant for migrant workers to the Gulf countries and a few other southeast Asian countries had drawn criticism from the Opposition.
📰 Medical body opposes NMC Bill
More Indian doctors will leave the country, it tells parliamentary panel
•The National Medical Commission (NMC) Bill, aimed at replacing the existing Medical Council of India, has now attracted the World Medical Association’s (WMA) criticism.
•Warning that the NMC Bill, if passed, would lead to more Indian doctors leaving the country, affecting patient care, the WMA has condemned the government’s plan to dismantle the professional self-governance of Indian physicians.
•The global body has written to the Chairman of India’s Parliamentary Standing Committee on Health and Family Welfare saying “professional self-governance is a tried and tested tool for regulating the profession in a responsible and effective way and for protecting it from undue influence, such as economic or political interests.”
•According to the letter, jointly signed by WMA president Yoshitake Yokokura and WMA Chair Ardis Hoven: “there is absolutely no evidence from anywhere in the world that the regulation of a profession is better done by government.”
•Last month, the Indian Medical Association (IMA) opposed the Bill and appealed to Prime Minister Narendra Modi to recall the draft Bill, which has now been referred to the Parliamentary Standing Committee on Health and Family Welfare. The IMA’s argument was that the NMC would “seriously impede the democratic functioning of the medical profession”.
•The WMA’s letter has pointed out that professional self-governance facilitates professional autonomy and clinical independence. It has stated that “a shift from a democratically elected, autonomously governed body to a politically established and government directed body would be counterproductive for patients and for furthering the development of the medical profession in India.”
•“India suffers from a strong brain drain. Taking away a part of their professional identity will increase dissatisfaction and frustration and probably lead to an even higher attrition rate,” the letter stated.
📰 ‘ICJ has no jurisdiction in Indian fishermen row’
MEA files a counter-affidavit in response to PIL filed by a forum of fishermen
•The Centre has told the Madras HC that there was no treaty between India and Sri Lanka conferring jurisdiction on the International Court of Justice (ICJ) to resolve issues related to alleged human rights violations committed by the Sri Lankan Navy against Indian fishermen on the high seas since 1983.
•The submission was made in a counter-affidavit filed before the first Division Bench of Chief Justice Indira Banerjee and Justice Abdul Quddhose who were seized of a PIL petition filed by Fishermen Care, a private body, that had sought for a direction to the Centre to refer the alleged violations to the ICJ.
•Binoy George, Deputy Secretary (Sri Lanka), Ministry of External Affairs, had filed the counter-affidavit. According to him, there was neither a treaty nor any special agreement between the two countries for submitting the issue to the ICJ.
•The conduct of foreign policy in the country was purely an executive function not amenable to the writ jurisdiction of the High Courts under Article 226 of the Constitution. “It is respectfully submitted that seeking remedies against a foreign State is not amenable under Article 226 under which only infraction of a legal right is remedied,” he added.
•Though the petitioner forum, in an affidavit filed through its counsel L.P. Maurya, had relied upon a judgment passed by the Gujarat HC in 2011 in Jagjit Singh Aurora’s case related to the release of 54 Indian Prisoners of War from Pakistan by approaching the ICJ, the Centre contended that the judgment would not apply to the present issue on hand.
📰 Kovind approves Bill to hike judges’ salary
•President Ram Nath Kovind gave his approval to a Bill that will more than double the salaries of Supreme Court and High Court judges.
•In the Winter Session of Parliament, the Bill to increase salaries of judges was passed. Now after the President's approval, the Chief Justice of India will draw a monthly salary of ₹2.80 lakh, up from the current ₹1 lakh.
•Other judges of the Supreme Court and Chief Justices of High Courts will draw a monthly salary of ₹2.50 lakh, a jump from the current ₹90,000.
📰 Aadhaar petitioners quote Gandhiji
Read out excerpts from the Father of the Nation’s speech
•On Martyrs’ Day, Mahatma Gandhi’s public speech against the fingerprinting and profiling of Indians in South Africa was quoted by the petitioners against the Aadhaar scheme as a case of profiling of free citizens by the state.
•Arguing before a Constitution Bench, led by Chief Justice of India Dipak Misra, the petitioners quoted the Transvaal Ordinance which required Indians to be subjected to fingerprinting if they did not want to face imprisonment or deportation.
•Senior advocate Shyam Divan and advocate Vipin Nair submitted that they wanted to present a page from history about regressive laws which robbed citizens of their dignity and privacy while “branding them as criminals”.
•Mr. Divan then read out excerpts from Gandhiji’s speech against the Transvaal Ordinance.
📰 With Roman law precept, India steps to stub out tobacco industry rights
•The Indian government is pushing the Supreme Court to apply a rarely used doctrine that would strip the $11 billion tobacco industry’s legal right to trade, an effort aimed at deterring tobacco companies from challenging tough new regulations.
•New Delhi has for the first time asked the top court to classify tobacco as “res extra commercium”, a Latin phrase meaning “outside commerce,” according to a Reuters review of previously unreported court filing by the Health Ministry on Jan. 8.
•If applied, the doctrine — which harkens back to Roman law — would have far reaching implications: in denying an industry’s legal standing to trade, it gives authorities more leeway to impose restrictions.
•For example, the Supreme Court’s application of the doctrine to alcohol in the 1970s paved the way for at least two Indian states to ban it completely and allowed courts to take a stricter stance while regulating liquor - something constitutional law experts say could happen with tobacco if a similar ruling was made.
•“The effects of tobacco are much more than even alcohol ... It will be a fillip to this drive against tobacco,” said government lawyer R. Balasubramanian, who is acting on behalf of the Ministry of Health in pursuing the designation.
•Mr. Balasubramanian, however, said the government is not discussing banning tobacco and the goal of invoking the Roman law doctrine was only to curtail the industry’s legal rights.
Curbs and restrictions
•With an aim to curb tobacco consumption — which kills more than 9,00,000 people each year in India — the government has in recent years raised tobacco taxes, started smoking cessation campaigns and introduced laws requiring covering most of the package in health warnings.
•But a court in Karnataka last month quashed those labelling rules after the tobacco industry successfully argued the measure was “unreasonable” and violated its right to trade.
•The government, this month, appealed the ruling in Supreme Court which put on hold the Karnataka court order. The top court will hear the case on March 12.
•In its filing, the government included “res extra commercium” because it wants to stop the industry from pursuing such arguments again, said Mr. Balasubramanian.
•Seeking to apply the doctrine to tobacco, the government argued it should have the power “to regulate business and to mitigate evils” to safeguard public health, the court filing showed.
•Sajan Poovayya, a senior lawyer representing top cigarette maker ITC Ltd and Philip Morris International Inc’s Indian partner, Godfrey Phillips, said the industry’s legal rights would be severely limited if the court applies the doctrine to tobacco.
•Poovayya said he would fight the government’s argument “tooth and nail” and make a case that taking away the industry’s right to trade would imperil millions of Indian farmers who depend on tobacco for their living. The industry estimates 45.7 million people in India depend on tobacco for their living.
•“India is a tobacco growing country and there’s a need to look at the interest of those people who are already in the sector,” Poovayya said.
•“Tobacco is not destructive to health. If tobacco is, sugar is as well.”
•ITC and Godfrey Phillips, as well as India’s health ministry, did not respond to requests for comment.
SET A PRECEDENT
•India’s tobacco labelling rules, which mandate 85 percent of a cigarette pack’s surface be covered in health warnings, have been a sticking point between the government and the tobacco industry since they were enforced in 2016.
•That year, the industry briefly shut factories across the country in protest and filed dozens of legal cases challenging the rules.
•The federal health ministry says stringent health warnings on packages help reduce consumption of tobacco by making people aware of its ill-effects. A government survey last year found 62 percent of cigarette smokers thought of quitting because of warning labels on the packets.
•Mary Assunta, a long-time tobacco control advocate and a senior policy advisor at the Southeast Asia Tobacco Control Alliance, said she had never heard of a country applying the “res extra commercium” doctrine to tobacco, but hoped India would set a precedent.
•“Such a classification will help protect tobacco control measures from being challenged, particularly for developing countries where the bulk of the smokers are,” Assunta said.
•The doctrine would open the door to an outright ban on tobacco sales if a state so wished, said Pratibha Jain, a partner at law firm Nishith Desai Associates and a specialist in Indian constitutional law.
•“It gives the state autonomy to completely ban trade in tobacco,” Jain said. “It gives governments the constitutional cover that will protect future litigation. The industry will lose significant ground as your protection of right to trade is gone.”
📰 Skill development to get leg-up
Sops likely for firms engaging apprentices and states affected by Left extremism
•With poor employment generation being a major concern, the skill development ecosystem is keen that the Union Budget should have adequate allocation to help complete the plan to set up model training centres in all districts, and special schemes to support skilling of women and the disabled. The Budget is also likely to have an allocation to upgrade Industrial Training Institutes (ITIs), sops including interest subsidies to boost skilling in ‘difficult’ areas, including the hilly States and those affected by left wing extremism, as well as financial incentives for corporates to engage more apprentices, according to sources in the skill development ecosystem.
Model training centres
•Pointing out that the Ministry of Skill Development and Entrepreneurship envisaged establishing 650 (one in each district) ‘model training centres’ or ‘Pradhan Mantri Kaushal Kendras’ (PMKKs), Jayant Krishna, Executive Director and Chief Operating Officer, National Skill Development Corporation , said that so far, allocations had been made for setting up 527 PMKKs covering 484 districts in 27 States. These allocated PMKKs would cover 406 Lok Sabha constituencies.
•As of January 25 this year, 356 PMKKs have been established in 24 States and two Union Territories and work is going on at 124 additional sites for setting up of these centres.
•“To cover the remaining unallocated districts/parliamentary constituencies, proposals from market were invited through request for proposal , released on September 12, 2017, covering the remaining 185 unallocated districts/parliamentary constituencies,” he said. “There could be a push [in the Budget] to complete [the setting up of] PMKKs in the coming fiscal in the remaining districts...”
•Then, there would be complete assessment of the PMKKs by around mid-2018, when the placement data would be available, Mr. Krishna said.
•There was also the expectation that the Budget would have some measures to take forward the Skills Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) and Skill Strengthening for Industrial Value Enhancement (STRIVE) programmes, he said. The SANKALP has a $250 million loan assistance from the World Bank to the Government of India to boost the National Skill Development Mission.
•The programme provides specific incentives to the States to help skill disadvantaged populations through innovative models, with focus on women and persons with disability. The STRIVE — a $425 million Central scheme, with half of the outlay as World Bank loan assistance — incentivises ITIs to improve their performance by involving small and medium firms, business associations and industry clusters, Mr. Krishna said.
•The Centre is also likely to make the National Apprenticeship Promotion Scheme (NAPS) more attractive by increasing the overall allocation for reimbursement of 25% of prescribed stipend (subject to a maximum of ₹1500/- per month per apprentice) by it to all employers who engage apprentices.
📰 A wider net: on the expanding tax base
As the tax base widens, the Finance Minister should cut the share of indirect taxes
•The demonetisation of high-value currency notes and the advent of the goods and services tax regime have triggered a surge in the number of those filing taxes in the country. The Economic Survey argues that the large gains on the indirect and direct tax fronts indicate that the primary intentions behind the two big-bang economic strides — of formalising the economy and bringing more income into the tax net — have been met to some extent. From about 59 million individuals who filed income tax returns or whose tax was deducted at source in 2015-16, the number of tax-filers rose by 10.1 million since the note ban. Stripped of statistical adjustments to avoid a bias in findings, the Survey assesses that roughly 1.8 million, or 3% of the existing compliers, started paying up. Many of them are reporting incomes close to the ₹2.5-lakh threshold for personal income tax, so this may not swell the exchequer much. But it holds potential for growth as the new taxpayers progress in their vocations. Personal income tax collections are expected to rise to a historic high of 2.3% of GDP in 2017-18, compared to 2% between 2013-14 and 2015-16. This may seem glacial progress but could be considered a tipping point in a country where just 4% of adults pay personal income tax, though the government reckons that number should be 23%.
•The Survey finds a 50% increase in unique indirect taxpayers in the first six months of GST, with around 10 million registered taxpayers now compared to an estimated 6.5 million pre-GST. The GST regime, despite the initial chinks, could end up boosting India’s macro-economic stability by breaking what the Survey terms ‘inertia’ of the tax-GDP ratio. This ratio for the Centre has remained at the same level since the 1980s, though the economy grew at an annual average of about 6.5%. The Survey has noted that both of India’s underlying macro weaknesses — the fiscal and current account deficits — tend to get exacerbated when oil prices move up. A wider tax base could at least help tackle the former. Fixing exporters’ GST woes and continuing to ease the transition pains under its new features, such as e-way bills to deter evasion, would be critical to attain the 7%-7.5% growth projected for the coming year. At the same time, the government needs a road map to expand the direct tax pie by pruning blanket exemptions for vocations such as farming and using a more proactive Big Data-driven approach to target evaders. The government must reward this tax base expansion by offering the ‘compliant’ some relief in the Budget, even if it means slashing high duties on petroleum products. After all, high indirect taxes pinch the poorest the most.
📰 A road map for renewal
Will the Budget address the concerns raised in the Economic Survey or will it go its own way?
•The Economic Survey, a statutory document tabled in Parliament, is meant to be a scorecard of the economy for the current fiscal year. But over the years, it has morphed into a sourcebook for data and policy analysis. Indeed, economists and even academicians look forward to its scholarly content, even though it may have a partisan outlook.
Sober realities
•This year’s Survey too does not disappoint in being a veritable feast and also presenting fairly sober realities. Under the leadership of Chief Economic Adviser (CEA) Arvind Subramanian, one quirk of the Survey is its thematic catchphrases. For instance, a few years ago, the CEA, in the Survey’s preamble, said that the Indian political economy was not capable of big bang reforms. Instead, reforms would be persistent, creative and incremental. It’s a different matter that in November 2016, India got the world’s biggest bang announcement in the form of demonetisation. Last year the Survey introduced the catchphrase JAM (the Jan Dhan, Aadhaar and Mobile trinity) indicating their potent combination of enabling direct benefit transfers and using technology to deliver subsidies as well as trim leakages.
•In its first chapter, the latest Survey highlights 10 new facts about the Indian economy. Unfortunately some are not so new, and some are inane. For example, the fact that adverse weather affects agricultural yields and that parents in India have a preference for male children are hardly new “facts”. But others are significant, such as the finding that demonetisation and more formalisation of the economy have led to a huge jump in the number of taxpayers, for both direct and indirect taxes. Or that the formal part of the non-agricultural payroll is much bigger than believed. Unfortunately, this new “fact” is not substantiated with latest data; the Survey presents data from 2012. Surely the government is not stuck in a time warp, is it?
•Another interesting fact is that India’s export sector is more diversified in comparison to other peer countries; that is, the top 1% of exporting firms account for a much smaller share of total exports, compared to East Asian countries. It is heartening to note the important role of small and medium enterprises in industrial employment and exports. On the other hand, this could be due to the inability of Indian firms to achieve global scale. Are the scale aspirations being thwarted by restrictive labour laws?
A populist hint
•One of the most sobering facts in the Survey has been on the rural and agricultural sector. Farm incomes have remained stagnant for the past four years, hit by a drop in crop prices, output glut, and possibly demonetisation. So what is the prospect of doubling farm incomes in the next few years? Given that the Budget will be the last one before the 2019 general election (a fact reiterated by the Survey), it is almost a foregone conclusion that there will be great emphasis on the farm sector. This also means a tilt towards populism.
•How then will the fiscal limits be obeyed? Here the Survey hints that some slippage from pre-announced fiscal deficit targets are to be expected in this pre-election Budget. The bond markets hate fiscal slippage and already there is sell-off of bonds. This will lead to a rise in interest rates. The biggest loser from a higher interest rate is the biggest borrower in the system, the Government of India. Even an increase of 0.5-0.6% rate over one year is an increase in the interest burden of more than ₹40,000 crore, equivalent to the full budget of the Mahatma Gandhi National Rural Employment Guarantee Act.
•Hence the government will have to think very carefully on how to avoid slippage and keep bond markets happy. The disinvestment target was overachieved this year which is quite impressive and could be continued next year, given the euphoria in the stock markets. The Survey does point out that India’s stock markets have a different dynamic when compared to global markets. Stock markets all over the world are at record highs and there is concern about a bubble formation. In fact, a new phrase in the international lexicon is melt-up, which is the opposite of melt-down. So whether it’s oil prices or commodity prices, and now stock markets, it’s all going up and this may be the big surge before a crash, big or small.
•But in India, according to the Survey, stock market valuations may not be in bubble territory. That is why the disinvestment target for next year may be higher. Also, the widening of the tax net can be positive for revenues, thus cutting the deficit.
Global factors
•The Survey mentions key macroeconomic headwinds from abroad. First, oil prices are going up. This would mean that the triple advantage that the government enjoyed since late-2014 for almost two years of a lower import bill, lower oil subsidy burden and lower inflation is going to go away. Every $10 increase in oil prices can reduce GDP growth by 0.2-0.3%. And oil prices have gone up by almost 60% in the last six months. The second headwind comes from the tightening stance of the world’s most influential central bank, the U.S. Fed. As rates are being tightened in the U.S., it is likely to lead to a reversal of dollar flows, which can impact India’s domestic liquidity situation, the stock market, and perhaps the exchange rate.
•In addition, there are domestic challenges. The Budget priorities are clearly in these five areas: job creation; revival of private investment spending; revival of exports; focus on rural and agricultural economy; and bringing the banking sector back to a healthier condition. To this one, in the medium to longer term, add worries about increasing inequality. On the eve of the recent World Economic Forum at Davos, Oxfam released a report which said that 1% of India owns 73% of its wealth. This was reportedly mentioned by the Prime Minister in his meeting with Indian corporate leaders at Davos. One cause of inequality is the strain of indirect taxes, which tend to be regressive because they affect the poor disproportionately. The goods and services tax is an indirect tax. Excise duties on petrol and diesel are indirect taxes. In the last three years, the share of indirect taxes in total taxation has gone up steadily, which needs to be reversed. So there is an expectation that there will be action on the direct tax front to correct this trend.
Tax disputes
•Finally, the Survey points out that India’s rank in ease of doing business has jumped significantly, but an area which remains a cause for concern is the settlement of disputes or litigation. A telling statistic is the large amount stuck in tax litigation. By definition, one party to the litigation is the tax department, and quite often the other party is also a government company. The total amount estimated to be locked up in tax disputes is more than ₹8.2 lakh crore. And this happens despite the lower authorities or tribunals ruling in favour of the tax-payer; it is automatically escalated to the higher level till it goes to the courts. There is an incentive problem because tax officers are not incentivised to settle claims for fear of being accused of collusion or corruption. The Economic Survey points out that such a high rate of pendency and the huge amounts stuck in litigation are hurting India’s ease of doing business. Another telling statistic is the pendency in settling or granting of patents. These are “property rights” arising out of innovations. More than two lakh applications are pending, and isn’t this a bad sign for innovators?
•The Survey is overall an excellent document which doesn’t shy away from painting a realistic picture whether it is about jobs, investments, growth outlook or burdensome litigation. Now all eyes are focussed on the Union Budget. Will it address concerns raised in the Survey or will it go its own way?
📰 ISRO chief on a mission to cut expenses on launches
Space agency plans to lower the costs of satellites by using miniaturised avionics and advanced electronics, says K. Sivan
•The Department of Space (DoS) is anticipating an increase in financial outlay in next month’s Budget, even as its new Secretary K. Sivan said the Indian Space Research Organisation (ISRO) was working to reduce the cost of its satellite and launch vehicle missions.
•Speaking to The Hindu, Dr. Sivan, who formally took charge on January 22 as DoS Secretary and ISRO Chairman, said the space body was trying to lower the cost of satellites by using miniaturised avionics, advanced electronics and the recently tested EPS — electric propulsion system — among others.
Launch vehicles
•On the launch vehicles or rockets that put these satellites into space, the use of low-cost, space-grade materials and components can reduce the weight of the rocket and allow it to carry heavier payloads.
•With an allocation of ₹9,093 crore last year, Dr. Sivan said, “We definitely would like a larger allocation. More satellites are required, and more launch vehicles to launch them. We also need new facilities to make them. We have to bring the manufacture of launch vehicles to industry and this needs extra money. All this is projected [in the requirement made to the government.]”
•However, he stressed that, “We never had any problem with the budget. The problem is in executing [spending] it. In fact we should aim for reducing the total mission cost.”
•A medium-sized two-tonne [2,000-kg] communication satellite costs roughly ₹200 crore as also the rocket that puts it in a geostationary orbit in space.
•“We are targeting a substantial lowering of cost and attacking it on all sides with available technology. It is difficult to name the percentage of reduction right now,” Dr. Sivan said.
Enhanced GSLV
•Among the innovations and value additions being developed is the augmentation of the GSLV Mark II launch vehicle. Dr. Sivan said its lifting capability would soon be enhanced from 2.2 tonnes to 3.3 tonnes. The capability then would go up by 1.5 times and would reflect in its per-kilo cost, which could make it quite competitive to future commercial users in the launchers market.
•The first launch of the enhanced GSLV, after necessary tests and confirmations, will be the 3.2-tonne Chandrayaan-2 spacecraft, scheduled to be launched in April. It carries the first Indian moon lander and rover.
•To reduce the size of the satellite without affecting its efficiency, ISRO has begun experimenting with EPS in place of chemical propulsion. The system was first used in GSAT-9 (South Asia Satellite) in May last year to manage satellite functions in orbit and ISRO officials had then said it reduced fuel cargo to 25%.
•Dr. Sivan said the EPS is a promising technology. By bringing this in, a four-tonne satellite can do the job of a six-tonne spacecraft; it will also cost less to launch it. However, its full use in orbit correction is yet to be explored as the satellite will then take six to 12 months to reach its orbit.
•He said smaller, cheaper satellites could also be made using miniaturised and low-cost components.
📰 NGT issues notice to Centre on plea against diversion of Ganga
This adversely affected aquatic life, river ecology: petitioner
•The National Green Tribunal (NGT) on Tuesday issued notice to the Central Pollution Control Board (CPCB) and the Ministry of Environment and Forest among other authorities on a plea seeking an adequate flow of water in the Ganga
•A bench headed by NGT acting chairperson U.D. Salvi sought replies from the authorities, including the National Mission for Clean Ganga (NMCG), Ministry of Water Resources and the Uttarakhand Jal Vidyut Nigam Ltd, before March 8.
•The directions came when the green panel was hearing a plea filed by environment activist Vikrant Tongad. He sought a direction from the court to ensure a minimum flow in the Ganga to maintain wildlife and river ecology.
•It was alleged that a “substantial flow” of the Ganga was being diverted at Pashulok Barrage in Dehradun to a side canal for a hydroelectric power plant.
•The petitioner alleged that due to the diversion, a stretch of the river from the barrage till Motichur in Haridwar had dried up. This in turn was adversely affecting aquatic life and river ecology.
