📰 Modi likely to carry the spirit of Wuhan to Qingdao
SCO summit expected to reject pursuit of ‘unilateralism’
•Prime Minister Narendra Modi will participate in a two-day summit of the eight- nation Shanghai Cooperation Organisation (SCO) at the weekend, riding on the bonhomie generated by the Wuhan informal summit with Chinese President Xi Jinping, and an extended one-on-one dialogue with Russian President Vladimir Putin in Sochi.
•“When we were preparing for the summit, we asked the Prime Minister, whether he would like to have another separate meeting with President Xi on the sidelines of the SCO summit, so soon after an intensive late-April dialogue in Wuhan. Mr. Modi’s answer was an emphatic yes,” an official source, who did not wish to be named, told The Hindu.
•The official said that Mr. Modi’s talks in Sochi with President Putin were also “highly important.”
•Russia, China and India were likely to emerge as the core of the SCO, after New Delhi and Islamabad joined the grouping last year, and would be participating as full SCO members for the first time in Qingdao. But it was also imperative that the importance of the four Central Asian Republics — Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan — were not undermined in the expanded SCO, the official observed.
•In an interview with China Central Television (CCTV) ahead of the Qingdao summit, India’s ambassador to China Gautam Bambawale elaborated on the importance of the Wuhan summit. “As a result of their discussions in Wuhan, the two leaders have arrived at … the first and most important consensus [which] is that India and China are partners in progress and economic development.”
•“The second most important consensus is that there are many more commonalities than differences... Of course, there are some differences but we will also work at the differences to ensure that the two countries will continue to progress together.”
•Analysts point out that the “America-first” doctrine of U.S. President Donald Trump, which was getting translated into rising protectionism and threat of trade wars, had provided an important subtext to the Wuhan summit.
•In his interview, Mr. Bambawale was emphatic that the SCO summit in Qingdao would reject anti-globalisation and pursuit of “unilateralism.” “I think one of the important points that will come out is that unilateralism is not necessary in today’s world. Multilateralism, learning to live with each other, is the important message, which will come from Qingdao,” he said.
•He stressed that India fully backed the “Shanghai spirit,” of inclusivity and collaboration, despite differences in political systems among the member states.
•“The Shanghai spirit is very important. And the Shanghai spirit stands for multipolarity, for countries with different systems to live together; to have peaceful coexistence and we believe that the message that will come out of the Qingdao summit is that important big countries that are members of the SCO can peacefully coexist despite differences in their systems, and that they can work together.”
•Counterterrorism has been a forte of the SCO, which had established the Regional Anti-Terrorist Structure (RATS), as a permanent institution in Tashkent, Uzbekistan. With the growing threat from Islamic State (IS), RATS was expected to play an increasingly important counter-terrorism role in the future.
•Between 2013-2017, RATS has become the nucleus of a counter-terrorism drive, which helped thwart over 600 terror plots, and eliminate more than 500 training bases, said Rashid Alimov, Secretary General of the SCO, in an interview with Tass.
•He pointed out that the Qingdao summit was expected to approve a three-year counter-terrorism plan, which would be tuned with the UN Global Counter-Terrorism Strategy.
•He added that in Qingdao, the participating heads will work out an understanding on better managing the vast mineral resources of the SCO members, in tune with the grouping’s expanding focus on the collective economic development.
•Mr. Alimov said that with the addition of the India and Pakistan in its ranks, the Qingdao summit “will usher in a new stage of the SCO’s development,” and highlight the grouping’s “growing role and importance in global affairs”.
📰 Questions of promotion
Barring a few exceptions, the judiciary has not been encouraging on quotas
•The Supreme Court’s one line order that the government can go ahead with promotions in government offices — which will have bearing on Scheduled Caste/Scheduled Tribe (SC/ST) reservations in promotions — has come with the caveat “in accordance with law”. This is no victory at all as all such promotions, if made, will again be challenged due to a non-fulfilment of conditions laid down in earlier judgments (which under Article 141 of the Constitution are “law declared by the Supreme Court which is binding on all courts”). The solution could be an ordinance if the Dalit cause is dear to the government.
Significant verdicts
•Barring a few exceptions, the judiciary has not been encouraging on reservation policies. In the State of Madras v. Srimathi Champakam Dorairajan (1951), which related to medical and engineering seats, the Madras High Court struck down the reservation policy. The judgment led to the first amendment to the Constitution to protect reservations. The newly introduced Clause (4) of Article 15 read: “Nothing in this Article or in Clause 2 of Article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes.”
•In M.R. Balaji (1962), the Supreme Court did make some positive observations. These included: the government need not appoint a commission to determine backwardness under Article 340 prior to formulation of a reservation policy; executive orders giving reservation are valid; caste is important but not the sole determinant of backwardness; and ‘caste’ and ‘class’ are not synonymous. The court struck down the distinction between ‘backward’ and ‘more backward’ communities and termed 68% reservation as a ‘fraud’ on the constitutional power conferred on the state by Article 15(4). It also introduced a 50% upper limit in reservation. This judicial innovation is unreasonable as there is no statistical basis to argue that efficiency will be adversely affected if reservation exceeds the 50% limit or if it is extended to promotions.
•In C.A. Rajendran (1967), where governmental policy of 1963 that did not provide for reservation of posts in class I and II posts was challenged, a five-judge bench upheld the policy by saying that reservation both in appointments and promotions is merely discretionary rather than the constitutional duty of the state. In T. Devadasan (1963), the “carry forward” in reservations (if reserved seats remained unfilled in a year they would be carried forward subsequently) was struck down.
•In State of Kerala v. N.M. Thomas (1975), the Supreme Court did extend the benefit of reservations to promotions while upholding the rule that gave further exemption of two years to SC/ST candidates in passing the tests.
•In Indra Sawhney (1992), where 27% Other Backward Classes (OBC) reservation was challenged, a nine-judge bench authoritatively laid down the law on reservation. The positive findings were: Article 16(4) is not an exception to the right to equality of opportunity provided under Article 16(1) but an illustration of the right to equality of opportunity; a caste can be and quite often is a social class in India; a classification between ‘backward’ and ‘most backward’ is constitutionally permissible, and T. Devadasan was wrongly decided. But here too the court explicitly said that in future reservation, benefits cannot extend to promotions and ‘creamy layer’ is to be excluded in reservation for OBCs. Further, reservation though not ‘anti-merit’, should not apply to some services and certain posts.
•The government brought in the 77th amendment to the Constitution in order to overturn Indra Sawhney on the issue of promotions. But in Virpal Singh Chauhan (1995), and subsequently in Ajit Singh (1999), a ‘catch up rule’ was introduced under which senior general candidates who were promoted after SC/ST candidates would regain their seniority over SC/ST candidates promoted earlier. As a result, the 85th amendment had to be passed to reverse these judgments and to give consequential seniority to SC/ST candidates.
•The two amendments were challenged leading to M. Nagaraj (2006) in which the court made certain unusual observations: the concept of SC/ST reservation is hedged by three constitutional requirements — backwardness of SC/STs, inadequacy of their representation in public employment, and overall efficiency of administration. A number of High Courts following Nagaraj have struck down reservation in promotions after applying these requirements.
•Surprisingly, the bench in Nagaraj also went against the judgment of Indra Sawhney where the court had said that SC/STs were definitely socially backward. In 2004 a constitution bench in E.V. Chinnaiah did admit the backwardness of Dalits and said that SCs are not only backward but indeed most backward.
•Moreover, since the backwardness of SCs was taken into account (Article 341), Nagaraj was erroneous in insisting on quantitative collection of data to prove their backwardness. Ironically no petitioner in Nagaraj disputed the backwardness of Dalits.
•The judgment is also off the mark on the issue of exclusion of the creamy layer in promotions. When this layer is not relevant at the initial appointment, how can its exclusion be insisted upon in promotions? In fact, in Ashoka Kumar Thakur (2008), the Supreme Court clarified that the creamy layer doctrine has no relevance in SC/ST reservation.
On efficiency
•Efficiency is demonstrated in the performance of employees. No research has so far proved that SC/ST employees are less efficient than employees recruited under the general category. And the judiciary should not pre-judge the efficiency of any category of employee prior to their appointment/promotion. Justice Chinnappa Reddy in K.C. Vasanth Kumar demolished the efficiency argument when he said: “Efficiency is very much on the lips of the privileged whenever reservation is mentioned.” He added: “The underlying assumption that those belonging to the upper castes and classes, who are appointed to the non-reserved castes will, because of their presumed merit, ‘naturally’ perform better than those who have been appointed to the reserved posts and that the clear stream of efficiency will be polluted by the infiltration of the latter into the sacred precincts is a vicious assumption, typical of the superior approach of the elitist classes.” In 2017, the Supreme Court finally referred reconsideration of Nagaraj to a Constitution bench.
📰 U.S. seeks to dissuade India from buying Russia's S-400 air defence systems
New Delhi planning to buy 5 S-400 Triumf air defence systems for $4.5 billion from Moscow that may attract curbs from America.
•The United States is trying to discourage India from buying large defence systems from Russia, an action that might attract sanctions, according to a senior State Department official. The 2017 law Countering America's Adversaries through Sanction Act or CAATSA, requires that countries that have significant defence cooperation with Russia must be sanctioned by America.
•India is planning to buy five S-400 Triumf air defence systems for around $4.5 billion from Russia.
•In a conference call with reporters on Thursday, Tina Kaidanow, Principal Deputy Assistant Secretary of State for Political-Military Affairs, who returned from India recently, said: “We’ve discussed CAATSA with the government of India just as we have discussed it with a number of others who might be potentially contemplating a purchases of large defence systems from the Russians. We want to work with all of our partners to help them identify and avoid engaging in any potentially sanctionable activity.”
Trump regime seeks to ‘protect India’
•The Trump administration has publicly expressed its desire to protect India from CAATSA, considering the U.S.-India strategic ties. Secretary of Defence James Mattis and Secretary of State Mike Pompeo have urged lawmakers to make changes in the law so that partners such as India are not punished. But efforts in this direction are being strongly resisted by Democratic lawmakers who want to put the administration on the mat on Russia relations.
•“…I can’t prejudge and I don’t want to prejudge anything regarding the imposition of sanctions under CAATSA because we don’t want to get to that place. We really want to be in a place where we find a way forward with all of our allies,” Ms. Kaidanow said.” “Our encouragement here is to strengthen the US-India defence trade relationships. That’s the focus of all of this.”
•“We have seen activities by Russia in those places as well that disturb us…We have real concerns about Russian activities, the acquisition of these systems in theory is beneficial to the Russian government. That is our set of concerns….We’ve made it clear and therefore our hope is that other countries will take that into account as they make their decisions. Absolutely we are not going to talk about what's going to happen down the road,” said Ms. Kaidanow.
‘US to make progress with India’
•Ms. Kaidanow hoped the U.S. could make progress with India on concluding pending foundational defence agreements. “I think we can hopefully make some progress in that relatively soon,” she said. “If we want that defence relationship to be everything it can be, if we want to realize that full potential, then those foundational agreements are important and we are going to need to find that way forward.”
•The official said the U.S has given India new options to address concerns raised by India regarding some of these agreements. Indian officials familiar with the negotiations said some provisions in the standard agreements that the U.S does with treaty allies such as Japan were not comfortable for India.
📰 China-Pakistan Economic Corridor is the elephant in the room: Nirmala Sitharaman
However, there are now greater engagements between India and China, the Defence Minister says.
•The China-Pakistan Economic Corridor (CPEC) is the “elephant in the room” for India, but India does not view its bilateral relations with China through the prism of China-Pakistan relationship which “is getting intense”, Defence Minister Nirmala Sitharaman said.
China-Pakistan prism
•“There has been an increased dependence of Pakistan’s military on Chinese arms and ammunition. The fundamental reorientation of the China-Pakistan relationship is getting intense. (But) We do not view our relations with China through the prism of China-Pakistan relations,” Ms. Sitharaman said.
•She was speaking at an international seminar on China’s geopolitics to commemorate the 10th anniversary of the Chennai Centre for China Studies here on Friday.
•Ms. Sitharaman said there was now a greater engagement between India and China, and with India’s participation in the Shanghai Cooperation Organisation (SCO), the relationship was becoming stronger.
•“There is now a greater scope for engagement, and engagement itself can be a very strong way in which the relationship can be bettered,” she said.
•The Defence Minister further said that India had good bilateral cooperation with many members of the SCO. “There are many platforms available for engagement. There is a reinvigoration, there are many mechanisms that are existing whether it is border personnel meet, the dispute redressal meets, crisis management study groups meet, are all actively engaging every now and then,” she said.
‘Create hotline’
•However, having a hotline between the two countries would help disputes to be resolved faster.
•“A hotline would definitely reduce the time consumed in reaching the empowered group of decision-makers in case there is a crisis at the ground level,” in a reference to the Doklam stand-off between the two countries.
•She added that the two-day informal engagement between Prime Minister Narendra Modi and Chinese President Xi Jinping at Wuhan “will have some outcome in the short term, but without doubt in the long term the relationship will benefit from it.”
📰 Indonesia wins UNSC vote
Maldives loses bid; India remains silent on who it voted for
•The Maldives on Friday failed to get elected to the UN Security Council as a non-permanent member. Maldives and Indonesia had contested for a seat in the UNSC, but in the plenary session of Friday held at the UN headquarters in New York, Indonesia won the seat after securing 144 votes against 46 for the Maldives.
•The Ministry of External Affairs maintained a studied silence on whether India voted against the Maldives. An official source said, “We rarely make public announcement on this kind of issues.”
190 members participate
•In the election, 190 members participated, and the winning members had to get more than two-thirds majority or 127 votes. Indonesia is likely to take up the seat on January 1, 2019 with other newly elected non-permanent members — Germany, Belgium, Dominican Republic and South Africa.
•India’s relation with the Maldives has nosedived in recent months with Delhi expressing dissatisfaction on the law and order situation as well as on the imposition of a state of emergency by the Abdullah Yameen government. Earlier in the week, a prominent member of Mr. Yameen’s party was not allowed to enter India and was sent back from the airport in Chennai. In comparison, India’s ties with Indonesia have witnessed an upswing with the recent visit of Prime Minister Narendra Modi to the country.
•In a statement issued by the Ministry of Foreign Affairs, the Maldives said it will continue to champion its priorities at the UN, despite not winning the seat at the Security Council. “The Maldives extends congratulations to Indonesia. The Maldives also reiterates its solidarity and commitment to work closely with Indonesia, and all the newly elected members.”
📰 Uranium contamination in Rajasthan groundwater, finds study
Level exceeds drinking water safety standards, according to the study
•Many parts of Rajasthan may have high uranium levels in their groundwater, according to a study by researchers at the Duke University in North Carolina, United States, and the Central Groundwater Board of India.
•The main source of uranium contamination was “natural,” but human factors such as groundwater table decline and nitrate pollution could be worsening the problem.
•“Nearly a third of all water wells we tested in one State, Rajasthan, contained uranium levels that exceed the World Health Organization (WHO) and U.S. Environmental Protection Agency's (EPA) safe drinking water standards,” said Avner Vengosh, a professor of geochemistry and water quality at Duke’s Nicholas School of the Environment, in a press statement.
•“By analysing previous water quality studies, we also identified aquifers contaminated with similarly high levels of uranium in 26 other districts in north-western India and nine districts in southern or south-eastern India,” he said.
•While previous studies have referred to high uranium levels in some districts of India, this analysis gave a bird’s eye view into the extent of such contamination. The WHO has set a provisional safe drinking water standard of 30 micrograms of uranium per litre, a level that is consistent with the U.S. EPA standards. Despite this, uranium is not yet included in the list of contaminants monitored under the Bureau of Indian Standards’ Drinking Water Specifications.
📰 An unexceptional economic performance
It is now clear that the Indian economy is moving along a lower growth path
•At the end of May the Central Statistics Office (CSO) released much-awaited estimates of national income for the final quarter of the 2017-18 financial year. The timing coincided with the completion of four years in office of the National Democratic Alliance (NDA) government. In a propaganda blitz, surging through the Net, the government embraced the GDP figures to declare that it has successfully “accelerated growth”. However, while this holds true for the past few quarters it does not when the past four years are taken into the reckoning. The facts are that the annual rate of growth since 2014 has first risen and then declined. By 2017-18 growth at 6.6% was less than the 6.9% it was in the final year of the second United Progressive Alliance (UPA) government.
Along which horizon?
•So how you see the growth performance of the economy under Prime Minister Narendra Modi depends on the horizon chosen. When you take a view longer, you see that on average annual GDP growth in these years is, thus far, no higher than what it was earlier. Actually, by a certain calculation, it is exactly the same but such precision is hardly necessary to conclude that the NDA has not done much better than its predecessor as far as the growth of the economy is concerned. There are of course other aspects of an economy that should legitimately be of our concern but this government has generally prioritised production as reflected in its attention to the ‘ease of doing business’ and its flagship programme ‘Make in India’. It is indeed right that there should be focus on production, as incomes are low in India and the expansion of employment is a function of the growth of output. However, growth has not taken off under this government in a way that was anticipated during the election campaign of 2014. The accelerating growth in the most recent quarters may be placed in perspective as follows: the economy is accelerating along a lower growth path. Further, and it needs recognition, that the Modi government had inherited a strongly accelerating economy.
•The reason for the lack of success in accelerating growth may be understood by a claim regarding the performance of the government by a leading member of the Prime Minister’s Economic Advisory Council made soon after the CSO’s announcement. He claimed that the four-year period just past had seen more reforms than ever in India’s history, citing the demonetisation and GST as instances. Even without accepting less charitable descriptions of demonetisation, such as that it shook confidence in the currency, it is questionable whether any of the changes since 2014 compare with the reforms of 1991. The latter altered the policy regime in a way that the recent changes have not. Anyway, the question remains as to why the economy has not responded with alacrity to reforms that were supposedly so significant. Some factors may be identified, all of which point to the role of demand. The reforms since 2014 have mostly focussed on the supply side of the economy.
•The first factor alluded to above is macroeconomic policy. We have seen four years of contractionary macroeconomic policy. The only question is whether the government is unable to see this or that it has stubbornly persisted with what it believes to be a virtue. Let us take the fiscal and monetary policy stances in turn. As part of a tacit all-party agreement, the fiscal deficit has been lowered over the past nine years. Fiscal consolidation, as this drive is tendentiously referred to, lowers aggregate demand. Its votaries claim that ‘crowding out’ will work in reverse to boost private investment, thus restoring the original position. This has not happened yet, and a decade is a long enough time to have allowed it to play out if it is inevitable. There is a way of dealing with the demand-contracting effects of fiscal consolidation. That is, to bring about expenditure switching in the government budget, whereby expenditures with high multiplier effects are privileged over those with a lower potential on this score. For instance, the government can change the composition of capital outlay and subsidies, expanding the former at the expense of the latter. The government has not done it, instead sticking to the extant subsidy regime, showing itself to be no less political from its predecessor in this regard.
Budgetary strategy
•Two points may be made about the Modi government’s budgetary strategy. First, over the five budgets it has presented, it has maintained the share of capital expenditure but this has occurred alongside a declining total expenditure, perhaps motivated by the pursuit of ‘less government’. The net effect of these is a slightly lower budgetary capital outlay as a share of GDP. Second, the rate of growth of ‘government final consumption expenditure’ has been steadily increased. The growth implications of such a strategy are obvious.
•What about monetary policy? Here we have been observing a stance not just contractionary but one bordering on the reckless. Though producer price inflation has continued its downward trend since 2014, the policy rate of the Reserve Bank of India has not kept pace, raising the real cost of borrowing. While there has been self-congratulation on the part of government that it engineered a shift to inflation targeting as the alpha and the omega of monetary policy in India, there is insufficient acknowledgement that when faced with food price inflation the mechanism works by sacrificing output. The latter feature is either ignored, or, worse still, actually rationalised as optimal. The irony is that while India finally has ‘inflation targeting’ it does not yet have an effective anti-inflationary policy, which would be to ensure food supply at steady price.
•So, unimaginative conduct of macroeconomic policy has resulted in slowing demand growth. The second factor contributing to slack demand in the economy has been agricultural performance. In the first two years of this NDA government, the weather cycle wreaked havoc by reducing agricultural output in 2014-15 and barely increasing it in 2015-16. The growth of agricultural incomes could not but have been affected by this. In 2016-17, however, agricultural output rebounded, posting very strong growth. But now demonetisation, by disrupting the supply chain, is likely to have not just stymied the growth of agricultural incomes but actually lowered them. The growth of manufacturing reflects this. The CSO’s estimates show that it declined considerably in 2016-17, and by 2017-18 was barely half of what it was in the year before the demonetisation. ‘Make in India’, which had targeted manufacturing, has not had much success despite any progress made on the ease of doing business.
Despite the advantages
•What about the role of the external environment in domestic growth? Till recently, it has mostly been benign. For three years running from 2014-15 the price of oil fell continuously. The windfall could have been used to step up India’s creaking public infrastructure to address hardship and boost demand. But it appears to have been used up expanding government consumption expenditure. Another favourable development, which unlike the oil price decline continues, is that the world economy is growing steadily for the first time since the global economic crisis set off in 2007-08. Surprisingly, however, India’s export performance since 2014 is far less impressive than it was in the five years following the crisis. The balance of payments is being shored up by capital inflow, much of it short-term. India’s high foreign reserves, advertised by the Prime Minister at Davos, reflect this aspect rather than dollars earned. This is costly for growth. It keeps interest rates high and demand shackled.
📰 NEET nostrums
The national medical entrance test is here to stay; States must prepare their students better
•There was no uncertainty over the medical admission process this year in Tamil Nadu. There were no attempts to get an exemption from the National Eligibility-cum-Entrance Test (NEET). And, willy-nilly, as many as 1.14 lakh aspirants took the examination that has been made mandatory by the Supreme Court as the sole admission window for medical colleges. Yet, the poor performance of students from Tamil Nadu in the entrance test has demonstrated that the State is still far from being ‘NEET-ready’. It is true that a well-intentioned beginning has been made to upgrade the syllabus and to make students more competitive. However, only 45,336 candidates, or 39.6% of those who took the test, qualified for admission. Along with Maharashtra, this is the lowest ratio in the country. What is important is that these candidates are merely eligible for admission, and far fewer students are actually likely to get admission. Further, the chances of many of the candidates in the lower percentiles gaining entry into a government medical college are quite low, and many of them may not be able to afford to pay for seats in private colleges. Proponents of NEET may maintain that its objectives — ensuring uniformity in standards of medical education by admitting students on the basis of a common national test and eliminating capitation fee for medical courses in private institutions — are being successfully met. However, it is a moot question whether the commercialisation of education has been really eliminated, and whether the admission policy is sufficiently inclusive for this large and diverse country.
•Lavish advertisements, as well as interviews with toppers, make it quite obvious that those who can afford expensive coaching classes have a distinct advantage in this system. Like many other competitive examinations, NEET has spawned a coaching industry, with some parts of the country proving to be ideal locales for academic sweatshops. Many of those in the top percentiles have attended long-term coaching classes as well as crash courses, paying exorbitant fees. There is anger in Tamil Nadu against this perceived socio-economic asymmetry built into the medical admission process that keeps medical courses out of bounds for disadvantaged sections. Such feelings intensified as a result of at least two young women committing suicide after they failed to clear NEET. One of them had enough marks in her higher secondary examination to gain admission to a medical college, if the State government had its own admission system. But overall, there is no escaping the fact that the country is committed to having uniform standards in medical education, and that this can play a role in meeting the important objective of maintaining standards in health care. NEET is here to stay and State governments are now best-advised to upgrade academic standards and prepare their students better. This will help in seeing that India’s healthcare infrastructure continues to get a steady inflow of medical manpower drawn from all sections of society.
📰 A vicious cycle: on trade wars
The escalating trade wars will hurt economic growth worldwide
•Nobody wants to lose a trade war. The European Commission on Wednesday announced it would impose tariffs as high as 25% on imports worth $3.3 billion from the U.S. beginning July. A whole range of American goods, from motorbikes and jeans to peanut butter and orange juice, will now face higher taxes when sold in the European Union zone. The Commission is also mulling import duties on more American goods if the trade war with the U.S. intensifies. Europe is not alone in waging a battle against imports from the U.S.; China, Mexico and Canada have joined hands in response to President Donald Trump’s decision to impose tariffs on steel and aluminium imports. Last week, the U.S. imposed a 25% tax on steel and a 10% tax on aluminium imports from the EU, Mexico and Canada. The first salvo in this ongoing trade war, however, was fired by Mr. Trump in March this year, when he imposed tariffs on Chinese steel and aluminium to protect American producers. Workers in America’s manufacturing sector have played a key role in Mr. Trump’s electoral success, so his zealousness to be seen to be protecting their interests is unsurprising. However, consumers in America and the rest of the world are likely to suffer as their respective governments make it costlier for them to access foreign goods and services.
•Judging by their actions, it is now clear that America’s major trading allies would not really want to lose this trade war against the U.S. The sad fact, however, is that at the end of the day nobody actually wins a destructive trade war. Tariffs that seek to disadvantage foreign producers in favour of domestic producers, whether they are imposed by the U.S. or any of its major trading partners such as Europe or China, only increase the burden of taxes. What this leads to eventually is slower global economic growth. The World Bank has warned that the effect of the increased use of tariffs to regulate international trade could be similar to the significant drop in global trade after the financial crisis a decade ago. Countries that are protesting America’s metal tariffs in the name of free trade are also only encouraging further protectionism when they impose retaliatory tariffs. As former Reserve Bank of India Governor Raghuram Rajan aptly put it, the ongoing trade war is a “lose-lose situation” for the warring parties. The only winners will be special interest groups and consumers in countries that do not engage in the tit-for-tat tariff war, but their winnings will come at the cost of global growth. It is high time countries worldwide come together to promote the cause of free trade.
📰 Panel to mull ARC for stressed assets
Aim is to quicken resolution of bad loans; executive vacancies in PSBs will be filled in 30 days, says FM
•The finance ministry has set up a committee to examine the possibility of setting up an asset reconstruction company or an asset management company to fast track resolution of stressed assets. Punjab National Bank’s non executive chairman Sunil Mehta will be heading the panel.
•Bank of Baroda’s MD and CEO P.S. Jayakumar will be one of the members and another member would be nominated from State Bank of India. The committee will submit its report in two weeks. “A committee has been formed under the chairmanship of Mr. Sunil Mehta, non-executive chairman, PNB, which, over two weeks, will come out with recommendations [for] a suggestion that was deliberated with great detail among bankers today who believe it may be worth considering the set up of an ARC and/or AMC for faster resolution of stressed assets,” finance minister Piyush Goyal told the media after a meeting with chief executives of public sector banks.
•Mr. Goyal said improving credit flow was one of the issues discussed in the meeting. “Several issues were discussed…particularly with respect to credit flow while mitigating the risks associated with that,” he said. The finance minister also said all vacant executive positions public sector banks would be filled up in one month.
Rising vacancies
•At least five state-run banks do not have a chief executive, and several executive directors’ positions are also vacant. Some more vacancies are expected to arise in the coming months.
•When asked if the Centre would increase capital allocation in PSBs in the current fiscal,, Mr. Goyal said it was too early to take a view on this issue. He said banks are selling non-core assets to boost capital and that resolution of stressed assets would also release some funds.
•“All the banks will have to look at the balance sheet; they have to look at the money they will be receiving [while] shedding non-core assets… Once all of this is on the table, the Indian Banks’ Association can work with all the bankers and come out with what really is the need of these banks,” Mr. Goyal replied.
•Rating agency Moody’s said on Thursday that the government’s recapitalisation plan for the 21 public sector banks will take care of the provisioning requirement for bad loans but will not be sufficient to support credit growth. The government has allocated ₹65,000 crore for capital infusion into 21 public sector banks during the current financial year.
📰 More than 2.25 lakh shell firms may be struck off from the register of companies
This comes after more than 2.26 lakh firms were removed in the last fiscal
•The Centre said it has identified 2,25,910 companies whose names are to be struck off from the register of companies during the current financial year 2018-19.
•This comes on the top of the removal of 2,26,166 companies from the register during the previous financial year.
•The Task Force on Shell Companies had so far confirmed a total of 16,537 shell companies on the basis of the information received from the various law enforcement agencies, according to the Centre. It had also narrowed down a list of 16,739 companies identified on the basis of having 100% common directorships with the confirmed shell companies.
•“For the second drive to be launched during the current financial year 2018-19, a total of 2,25,910 companies have been further identified for being struck-off under Section 248 of the Companies Act, 2013 along with 7,191 LLPs for action under Section 75 of the LLP Act, 2008 due to non-filing of financial statements for the years 2015-16 and 2016-17,” the Centre said in a statement. “An opportunity of being heard will be given to these identified companies and LLPs by way of notices regarding their default and the proposed action. Appropriate action will be taken after considering their response.”
Compilation of database
•“The major achievements of the task force include the compilation of a database of shell companies by the Serious Fraud Investigation Office (SFIO),” the Centre said. “This database, as on date, comprises of three lists, viz the confirmed list, derived list and suspect list. The confirmed list has a total of 16,537 confirmed shell companies on the basis of the information received from the various law enforcement agencies of the companies found to be involved in illegal activities.
•“The derived list has 16,739 companies identified on the basis of 100% common directorships with the confirmed shell companies,” the statement added. “The suspect list has 80,670 suspected shell companies and has been drawn up by SFIO using certain red flag indicators. The task force has identified certain red flag indicators, which will be used to identify more shell companies.”
•The Task Force on Shell Companies, which had, so far, met eight times, was set up in February 2017 by the Prime Minister’s Office under the joint chairmanship of the Revenue Secretary and Secretary, Ministry of Corporate Affairs with a mandate to “check in a systematic way, through a coordinated multi-agency approach, the menace of companies indulging in illegal activities including facilitation of tax evasion and commonly referred to as ‘shell companies’”.
•The Registrar of Companies had removed from the register of companies the names of 2,26,166 companies that had not filed their financial statements or annual returns for a continuous period of two or more financial years. “As many as 3,09,619 directors were also disqualified… for non-filing of financial statements or annual returns for a continuous period of immediately preceding three financial years (2013-14, 2014-15 and 2015-16),” the Centre added.
