📰 Lethal filth: India's manual scavenging problem
The law should be enforced vigorously to eliminate manual scavenging in its entirety
•The death of five young men who were employed to clean a septic tank in an upmarket residential community in New Delhi is a shocking reminder that India’s high-profile sanitation campaign has done little to alter some basic ground realities. Around the same time as the Delhi incident, five workers died in a septic tank in Odisha. The law is not being enforced, and there is no fear of penalties. The workers in Delhi were apparently asked to perform the task in violation of Section 7 of the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013; a violation can be punished with two years of imprisonment or fine or both. Under the provision, no person, local authority or agency should engage or employ people for hazardous cleaning of sewers and septic tanks. Mechanised cleaning of septic tanks is the prescribed norm. But in spite of a well-funded programme such as the Swachh Bharat Abhiyan in operation, little attention is devoted to this aspect of sanitation. The requirements of worker safety and provision of safety gear for rare instances when human intervention is unavoidable are often ignored. Mere assertions by the Centre that it is pressing State governments to prosecute violators, therefore, ring hollow. More and more incidents are being reported of workers dying in septic tanks. In the absence of political will and social pressure, more lives could be lost because more tanks are being built in rural and urban areas as part of the drive to construct toilets.
•If the law on manual scavenging is to be effective, the penalties must be uniformly and visibly enforced. It is equally important for State governments to address the lack of adequate machinery to clean septic tanks. The Ministry of Drinking Water and Sanitation in its manual of 2016 on toilet design acknowledges that in rural areas, mechanical pumps to clear septic tanks are not available. In the southern States, sanitation has expanded along with urbanisation, but it has brought with it a higher number of deaths as workers clean septic tanks manually. For instance, Tamil Nadu recorded 144 fatalities of workers engaged for septic tank cleaning in the past three years, according to official data. On the other hand, toilet designs proposed by the government include those in which fully composted waste must be removed from pits every two years. The Centre must ensure that this does not become a fresh avenue to oppress members of some communities who are expected to perform such work, reflecting social inequalities. India’s sanitation problem is complex, and the absence of adequate toilets is only one lacuna. The Swachh Bharat Abhiyan should make expansion of the sewer network a top priority and come up with a scheme for scientific maintenance that will end manual cleaning of septic tanks. The law should be enforced vigorously to eliminate manual scavenging in its entirety.
•The death of five young men who were employed to clean a septic tank in an upmarket residential community in New Delhi is a shocking reminder that India’s high-profile sanitation campaign has done little to alter some basic ground realities. Around the same time as the Delhi incident, five workers died in a septic tank in Odisha. The law is not being enforced, and there is no fear of penalties. The workers in Delhi were apparently asked to perform the task in violation of Section 7 of the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013; a violation can be punished with two years of imprisonment or fine or both. Under the provision, no person, local authority or agency should engage or employ people for hazardous cleaning of sewers and septic tanks. Mechanised cleaning of septic tanks is the prescribed norm. But in spite of a well-funded programme such as the Swachh Bharat Abhiyan in operation, little attention is devoted to this aspect of sanitation. The requirements of worker safety and provision of safety gear for rare instances when human intervention is unavoidable are often ignored. Mere assertions by the Centre that it is pressing State governments to prosecute violators, therefore, ring hollow. More and more incidents are being reported of workers dying in septic tanks. In the absence of political will and social pressure, more lives could be lost because more tanks are being built in rural and urban areas as part of the drive to construct toilets.
•If the law on manual scavenging is to be effective, the penalties must be uniformly and visibly enforced. It is equally important for State governments to address the lack of adequate machinery to clean septic tanks. The Ministry of Drinking Water and Sanitation in its manual of 2016 on toilet design acknowledges that in rural areas, mechanical pumps to clear septic tanks are not available. In the southern States, sanitation has expanded along with urbanisation, but it has brought with it a higher number of deaths as workers clean septic tanks manually. For instance, Tamil Nadu recorded 144 fatalities of workers engaged for septic tank cleaning in the past three years, according to official data. On the other hand, toilet designs proposed by the government include those in which fully composted waste must be removed from pits every two years. The Centre must ensure that this does not become a fresh avenue to oppress members of some communities who are expected to perform such work, reflecting social inequalities. India’s sanitation problem is complex, and the absence of adequate toilets is only one lacuna. The Swachh Bharat Abhiyan should make expansion of the sewer network a top priority and come up with a scheme for scientific maintenance that will end manual cleaning of septic tanks. The law should be enforced vigorously to eliminate manual scavenging in its entirety.
📰 The power of Kudumbashree
The Kerala model can be implemented across India with the same secular and gender-sensitive spirit
•Kumari died on September 1. She had contracted leptospirosis while doing relief work in Kerala after the floods, away from her own home which had not been affected. She was a health volunteer and prominent member of the Kudumbashree Mission in her panchayat in Ernakulum district. Kumari’s work and life symbolises the spirit of Kerala reflected in the inspirational way in which the people of the State have faced the worst disaster in a century.
United in relief work
•Among the heroic stories of selfless community service are those of the Kudumbashree women, who have perhaps not got the attention they deserve. The attention is necessary not just to accord women relief helpers like Kumari recognition and appreciation, but also to understand how such an enormous, effective and well-planned intervention could be made across the State by women through their own initiatives.
•One got a glimpse of the process at a district-level informal review meeting of around 60 key coordinators of Kudumbashree in Kozhikode, which suffered landslides and heavy rain. Women from working class families, women from the lower middle class and middle class, Muslim women and Dalit women were present. They were a microcosm of the 2.43 lakh groups functioning across the State.
•Within a day or two of the deluge, the Kudumbashree members started contacting each other to discuss what they should do. They divided themselves into squads of five to six members and started relief work. They were helped by the district coordination team of five women, who were on deputation to the Kudumbashree Mission from the government. Within a short span of time, there were 7,000 women volunteers engaged in various tasks. When the situation in their district improved, some of them set out to neighbouring districts like Thrissur and Wayanad to help. Many of these women have family responsibilities, but they convinced their families of the urgency of the work at hand and set off with all the equipment required for cleaning which they themselves had collected through sponsorships. Some of them went to relief camps to distribute relief material; others went to tribal areas which had been badly affected by landslides.
•Volunteers Zarina and Sudha said: “We saw mounds of foul-smelling black mud piled outside the houses blocking the entrances and, in some cases, partially covering the houses. There were dead animals too. At first we were looked at with suspicion. But when we started working, we saw relief on the tribal women’s faces. We all worked together. We stood, sometimes knee-deep, in the filthy mud and began removing it. It was difficult work and one group could clean only a few houses in a day. We knew we could fall ill or be stung by poisonous insects or snakes, but we were not afraid. Tribal women and members of Kudumbashree from nearby areas also joined us.”
•Like Zarina and Sudha, around 4,00,000 women of Kudumbashree self-mobilised across the State to do relief work, including collecting, packing and distributing relief material, cleaning up public spaces and private homes, and counselling affected families and putting them in touch with concerned authorities. The Kudumbashree State Mission estimates that Kudumbashree groups cleaned up 11,300 public places including schools, hospitals, panchayat buildings, and anganwadi centres, and two lakh houses. Around 40,000 affected families received counselling and information assistance from Kudumbashree groups. To provide shelter to families rendered homeless by the floods, 38,000 Kudumbashree members opened up their own homes. Kudumbashree members also donated ₹7.4 crore to the Chief Minister’s Distress Relief Fund. This scale of voluntary relief work by women is quite unprecedented by any standard.
A unique model
•How were these women motivated? The Kudumbashree model may provide some answers. Started in 1998 by the CPI(M)-led government, it was envisioned as a part of the People’s Plan Campaign and local self-governance, with women at the centre of it. In its conceptualisation, it was markedly different from the self-help group (SHG) movements in many parts of India. While the commonality with other States was in the thrift and credit activities at the grassroots level through the formations of saving groups, the structures differed.
•Kudumbashree has a three-tier structure. The first is the basic unit — the neighbourhood groups (NGs). There could be several such units within a ward and they are networked through the area development societies (ADS). All ADSs are federated through the community development societies (CDS). There are core committees of elected coordinators at all three levels — at least five in each NG; seven or more at the ADS level, depending on the number of NGs; and around 21 at the CDS level. Unlike in other States, all the coordinators are elected in Kerala. Each Kudumbashree member has a vote. Direct elections for the NG coordinators are held every three years. These people, in turn, elect the coordinators of the ADS who elect the members of the CDS. A majority of the members of the coordinator groups have to belong to women below the poverty line or from comparatively poorer sections. There is reservation for Dalit and Adivasi women. At the district and State levels, employees/officers of the government are appointed on deputation to help the Kudumbashree groups. Thus, there is a socially representative leadership.
•This secular composition acts as a facilitator for the secularisation of public spaces. In other States, SHGs came to be dominated by women from better-off families or from powerful castes. This led to unhealthy hierarchies in which poorer women and Dalit women were denied decision-making powers. Over the years, as women dropped out from these sections for a number of reasons, the social potential of the SHGs to challenge dominant structures of gender bias at the local level weakened.
•The micro-enterprises undertaken by the women NGs in Kerala also strengthen community bonds. These include organic vegetable growing, poultry and dairy, catering and tailoring. The concepts and practices have expanded over the years. Today the community farms run by Kudumbashree groups are acknowledged as a critical avenue for the rejuvenation of agricultural production in Kerala. Kudumbashree training courses are quite comprehensive and include women’s rights, knowledge of constitutional and legal provisions, training in banking practices, and training in skills to set up micro-enterprises.
•The Kudumbashree groups are therefore often seen as a threat by those who would like women to adhere to socially conformist roles. In earlier years, women of the Kudumbashree groups had to organise protests when the Congress-led government drastically cut the budgetary allocation of funds and floated a parallel Janashree project. The BJP and RSS have also floated parallel groups, but so far these groups have not been able to make much headway.
•Although conceived, initiated and helped by the Left Front governments and supported by Left-oriented organisations, the Kudumbashree groups are not affiliated to any political party. This ‘Made in Kerala’ model can be implemented across India, if it is done with the same secular and gender-sensitive spirit.
📰 CIC wants break-up of how MPLADS funds are utilised
₹12,000 crore remains unspent: Information Commissioner
•Noting that ₹12,000 crore of the Members of Parliament Local Area Development Scheme (MPLADS) funds remains unspent, the Central Information Commission (CIC) has asked the Lok Sabha Speaker and the Rajya Sabha Chairman to come out with a legal framework to ensure its transparency and hold parliamentarians and political parties accountable for their obligations under the scheme.
•The MPLADS allots ₹5 crore per year to each Member of Parliament (MP) to be spent on projects of their choice in their constituency. The scheme is funded and administered through the Union Ministry of Statistics and Programme Implementation (MoSPI). Projects are to be recommended to and implemented by the district-level administration.
•Central Information Commissioner Sridhar Acharyulu issued interim orders on Sunday in two cases where petitioners had requested details on MPLADS, but were told by the MoSPI that the Centre does not maintain constituency-wise, and work-wise details.
•Prof. Acharyulu noted that a recent MoSPI report showed that in February 2018, funds allotted to MPLADS but unspent stood at ₹4,773.13 crore, while 2,920 instalments of ₹2.5 crore were yet to be released. That resulted in a total backlog of ₹12,073.13 crore, it said.
•The CIC’s orders asked the leaders of the two Houses of Parliament to consider providing the “necessary legal frame” for the scheme, which would “make all Parliamentary parties and MPs answerable and accountable for MPLADS funds as public authorities under the RTI Act to prevent MPLADS irregularities.”
‘Transparency must’
•The framework should make transparency a legal obligation, with all MPs and parties required to present the public and Parliament with a comprehensive report on the number of applications received for their constituency, works recommended, works rejected with reasons, progress of works and details of beneficiaries.
•Liabilities for any breach of duties should also be imposed, said the order. Further, the framework should prohibit and prevent MPs using the funds for their private works, or diverting them to private trusts or to their own relatives.
•District administrations must provide regular information — work-wise, MP-wise, and year-wise details on progress — which are to be compiled by the MoSPI and made available to the public, said the order.
📰 More river stretches are now critically polluted: CPCB
Maharashtra, Assam, Gujarat account for 117 sections
•The number of polluted stretches in India’s rivers has increased to 351 from 302 two years ago, and the number of critically polluted stretches — where water quality indicators are the poorest — has gone up to 45 from 34, according to an assessment by the Central Pollution Control Board (CPCB).
•While the Rs. 20,000 crore clean-up of the Ganga may be the most visible of the government’s efforts to tackle pollution, the CPCB says several of the river’s stretches — in Bihar and Uttar Pradesh — are actually far less polluted than many rivers in Maharashtra, Assam and Gujarat. These three States account for 117 of the 351 polluted river stretches.
•Based on the recommendations of the National Green Tribunal, the CPCB last month apprised the States of the extent of pollution in their rivers.
Mithi among the worst
•The most significant stretches of pollution highlighted by the CPCB assessment (which is yet to be published) include the Mithi river — from Powai to Dharavi — with a BOD (Biochemical Oxygen Demand) of 250 mg/l, the Godavari — from Someshwar to Rahed — with a BOD of 5.0-80 mg/l; the Sabarmati — Kheroj to Vautha — with a BOD from 4.0-147 mg/l; and the Hindon — Saharanpur to Ghaziabad — with a BOD of 48-120 mg/l.
•In its compilation of polluted stretches in Uttar Pradesh, the Ganga with a BOD range of 3.5-8.8 mg/l is indicated as a ‘priority 4’ river.
•“The cultural significance of the Ganga is such that there’s been greater focus on it but many more rivers are far more polluted,” said an officer in the Union Water Resources Ministry, who didn’t want to be identified.
Graded scale
•The CPCB, since the 1990s, has a programme to monitor the quality of rivers primarily by measuring BOD, which is a proxy for organic pollution — the higher it is, the worse the river. The health of a river and the efficacy of water treatment measures by the States and municipal bodies are classified depending on BOD, with a BOD greater than or equal to 30 mg/l termed ‘priority 1,’ while that between 3.1-6 mg/l is ‘priority 5.’
•The CPCB considers a BOD less than 3 mg/l an indicator of a healthy river.
•In its 2015 report, the CPCB had identified 302 polluted stretches on 275 rivers, spanning 28 States and six Union Territories.
•A person involved in the monitoring exercise, who didn’t wish to be identified as he was not authorised to speak to the media, told The Hindu that the increase in numbers reflected higher pollution levels as well as an increase in water quality monitoring stations.
📰 Where goes the rupee?
There are several moderate but effective instruments available to the government to help the rupee find an equilibrium
•The travails of the rupee have dominated newspaper headlines over the last fortnight. Its value has fallen precipitously against the dollar, and is now hovering around the 72 level; it was just under 64 at the beginning of the year. There is now intense debate in the media on whether the Reserve Bank of India (RBI) should step in and take steps to defend the dollar.
The U.S. honeypot
•Finance Minister Arun Jaitley has rightly observed that external factors are the cause. In particular, global capital and perhaps currency speculators have been flocking to the American economy. This is not really surprising because the U.S. economy has become a very attractive option. Some months ago, U.S. President Donald Trump announced a massive decrease in corporate tax rates. More recently, the U.S. Federal Reserve has also increased interest rates. The icing on the global investors’ cake is the booming U.S. economy.
•Not surprisingly, the dollar has appreciated sharply against practically all other currencies too. For instance, it has moved up against both the euro and the pound. Developing economies are typically even harder hit since global portfolio investors tend to withdraw from these markets, perhaps because their economic or political fundamentals are relatively more unstable. Countries such as Turkey and South Africa have experienced significantly higher rates of devaluation than India.
•A long time ago, the ‘standard’ or textbook prescription for countries with severe balance of payments deficits was to devalue their currencies. The underlying rationale was that devaluation decreases the price of exports in foreign countries and so provides a boost to exports by making them more competitive. Correspondingly, imports become more expensive in the domestic economy, in turn reducing the volume of imports. Unfortunately, this seemingly plausible reasoning does not always work. For instance, if several countries are devaluing at the same time — as it seems to be happening now — then none of these countries benefit from their exports being cheaper abroad. In other words, there may not be any surge in Indian exports following the current round of devaluation. Neither will there be a huge fall in imports. Crude oil is by far the biggest item in the list of Indian imports, and this is price-inelastic. Imports from China now constitute a tenth of overall imports. Since the yuan has also depreciated against the dollar, there is not much reason to believe that Chinese imports will be costlier than earlier.
Ripple effects
•Fortunately, the RBI has a huge stock of foreign exchange reserves and so the balance of payments situation is not (at least in the immediate future) the main cause of anxiety for the steady decline in the value of the rupee. What must concern policy-makers is that the slide in the rupee can have adverse effects on the domestic economy. For instance, the surge in the landed price of crude oil has already resulted in a steep rise in the prices of petroleum and diesel. Diesel price hikes increase the cost of transportation of goods being transported by road. Unfortunately, many food items fall in this category. Obviously, any increase in food prices must set alarm bells ringing in the Union Finance Ministry. The devaluation will also increase prices of imported inputs, particularly those for which there are no alternative domestic sources of supply. This can have some effect on output expansion. Many domestic companies that have taken dollar loans will also face significantly higher servicing costs.
Corrective options
•What are appropriate policy responses in such a situation? Should the monetary and fiscal authorities sit tight, hope and pray that self-correcting mechanisms will gradually cause the rupee to appreciate against the dollar? Or should the RBI and the government come out with guns blazing? Certainly, neither the government nor the RBI can afford the option of inaction. The other extreme of knee-jerk, overkill options must also be avoided. Luckily, there are several moderate but effective instruments available to the government.
•Consider, for instance, the problems caused by the spiralling prices of petroleum products. Both the Central and State governments earn huge revenues from excise duties and value-added tax (VAT) on petrol and diesel. In fact, excise duties were raised in the recent past by the Central government when crude oil prices were low, merely as a revenue-gathering device. Now that the rupee cost of crude has shot through the roof, the Centre should certainly lower duties. Rates of VAT should also be lowered by State governments. A small reduction in VAT may even be revenue neutral since VAT is levied as a percentage of price paid by dealer. Some State governments have done so. However, the Centre and most States are busy passing on the buck, because no one wants to part with tax revenue.
•The RBI has several policy options. It could, of course, take the most direct route — of offloading large amounts of dollars. This would increase the supply of dollars and so check the appreciation of the dollar, but at the cost of decreased liquidity. Clearly, this weapon has to be used with caution. Of course, the RBI does intervene in the foreign exchange market from time to time to manage a soft landing for the rupee, and this has to continue.
•The Central bank now has an explicit inflation target of 4%, a level that is almost certain to be breached if the rupee remains at its current level. This is very likely to induce the Monetary Policy Committee (MPC) of the RBI to raise interest rates again in order to dampen inflationary tendencies. But, the MPC must moderate any rate increase. Any sharp increase has an obvious downside risk to it — any increase in interest rates can have an adverse effect on growth. This can actually backfire if profitability of companies goes down. Any ‘big’ negative change in profitability may make foreign portfolio investors pull out of Indian stocks and actually exacerbate the rupee’s woes.
The NRI route again
•Perhaps the best option for the government would be to borrow from non-resident Indians (NRIs) by floating special NRI bonds that have to be purchased with foreign exchange, and with maturity periods of at least three years. Interest rates have to be attractive, and investors must of course be protected from exchange rate fluctuations. Since interest rates in countries like the U.K. and even the U.S. are quite low, the promised interest rate does not really have to be very high by prevailing Indian levels.
•This has been tried before, the last time being in 2013 when too the rupee was under stress. It worked then and there is no reason why it should not work again.
•Hopefully, the storm will pass over and the rupee will soon find an equilibrium. In the near future, the rupee is unlikely to return to anything below 70 to the dollar. This should not be cause for much concern because the economy will adjust to the lower value of the rupee. What must be avoided is any sharp fluctuation in the exchange rate — in either direction. Much will depend on whether the economy can continue to grow at a reasonably high rate, for this will steady the nerves of portfolio investors and prevent them from pulling out of the Indian stock market.
📰 Covering the last field
Reinvigorate the crop insurance scheme to provide social protection to every farmer
•Excess rains and floods in Kerala, deficit rainfall in eastern and north-eastern India, and associated large-scale crop losses have again highlighted the need for providing social protection to poor farmers. A highly subsidised Pradhan Mantri Fasal Bima Yojana(PMFBY) was launched in 2016 to provide insurance to farmers from all risks. Aiming to reduce basis risk and premium burden of the farmers, the scheme’s total expenses today are almost ₹30,000 crore. In comparison to earlier schemes, the PMFBY is more farmer friendly, with sums insured being closer to the cost of production. The scheme’s linkage with parallel programmes like the ‘Jan Dhan Yojana’ and ‘Digital India’ makes it a truly inclusive and welfare-based scheme. The scheme therefore led to increased coverage of 5.7 crore farmers in 2016 and the sum insured crossed ₹200,000 crore. However, notwithstanding its ambition and intent, the scheme since its operation has been scrutinised more for its misses than its hits.
•Some handicaps of the scheme are: outmoded method of crop loss assessment; inadequate and delayed claim payment; high premium rates; and poor execution. Consequently, in 2017, the expansive coverage of the scheme suffered some setback as seen in a drop of nearly one crore farmers in enrolment (about 17%). Such shortcomings have inspired recent announcements such as that of Bihar to start its own scheme, the “Bihar Rajya Fasal Sahayata Yojna”.
Giving it teeth
•In order to make the PMFBY a sustained developmental action for a comprehensive climate risk protection for every Indian farmer, the following action points are suggested.
•Faster and appropriate claim settlement: Timely estimate of loss assessment is the biggest challenge before the PMFBY. The Achilles heel of the PMFBY (and most likely for the Bihar variant) is the methodology deployed for crop loss assessment: the crop cutting experiments (CCEs). CCEs are periodic exercises conducted nationwide every season to determine crop yields of major crops. Sample villages are chosen through scientifically designed surveys, and crops are physically harvested to determine yields. These experiments require huge capital and human resources and have to be done simultaneously all over India in a limited time. Therefore, they have large errors.
•To improve the efficacy of the PMFBY, technology use must be intensified. With options such as available today, such as detailed weather data, remote sensing, modelling and big data analytics, the exercise of monitoring crop growth and productivity can be not only more accurate and efficient but also resource saving. Hybrid indices, which integrate all relevant technologies into a single indicator, are good ways to determine crop losses. Their deployment can assist in multi-stage loss assessment and thus provide farmers with immediate relief for sowing failure, prevented sowing and mid-season adversity apart from final crop loss assessment.
•The whole process of monitoring can be made accessible and transparent to farmers, policy-makers and insuring agencies alike through an online portal. Immediate claims settlements can be made once this is linked to the process of direct benefit transfers.
•Universal and free coverage for all smallholders: Farmers’ awareness about the scheme and crop insurance literacy remain low in most States, especially among smallholders in climatically challenged areas in most need of insurance. The complicated enrolment process further discourages farmers. To increase insurance coverage we should think of a system whereby farmers do not need to enrol themselves and every farmer automatically gets insured by the state. This will provide social protection to every farmer if the full premium of smallholders is also paid by the state. It is not an expensive proposition. Currently, farmers pay a capped premium rate of 1.5-2%, while the rest is shared equally between the States and the Centre. At this rate, if today all 14 crore farmers were to be insured under the PMFBY, they would need to pay the premium close to ₹10,000 crore annually. If no premium is charged from marginal and small farmers (who own less than 2 hectares and account for 12 crore out of 14 crore) and only partial subsidy on actuarial premium is given to others, almost the same revenue can be collected, but in the process, coverage can go up almost 100%. Such differential subsidies are already applicable in urban areas for water and electricity.
•Improved and transparent insurance scheme design: Insurance companies are supposed to calculate actuarial rates, and based on tenders, the company quoting the lowest rate is awarded the contract. We have seen rates quoted by companies for the same region and for the same crop varying from 3% to more than 50%. Such large variations are irrational. One reason for such inflated premiums is lack of historical time series of crop yields at the insured unit level. To minimise their risks caused by missing data and to account for other unforeseen hazards, insurance companies build several additional charges on pure premium. Science has the capacity today to characterise risks and reconstruct reasonably long-time series of yields. The premium rates, and hence subsidy load on the government, can come down significantly if we make greater use of such proxies and appropriate sum insured levels.
•If such a comprehensive social protection scheme is implemented, there would be opportunities for further rationalisation of subsidies. The government today spends more than ₹50,000 crore annually on various climate risk management schemes in agriculture, including insurance. This includes drought relief, disaster response funds, and various other subsidies. Climate-risk triggered farm-loan waivers are an additional expense. All these resources can be better utilised to propel farm growth.
📰 The rupee problem
Ad hoc steps to check the currency’s decline must not deflect from the deeper problems
•The rupee, which is currently the worst-performing currency in Asia, is finally receiving some help from the authorities. The Union government, after a meeting with Reserve Bank of India Governor Urjit Patel, on Friday announced a list of measures to arrest the sharp decline in the currency, which has lost about 12% of its value since the beginning of the year. These include steps to curb the import of non-essential goods and encourage the export of domestic goods, which will help in addressing the country’s burgeoning current account deficit that hit a five-year high in July. Other steps such as removing restrictions on foreign portfolio investments and encouraging Indian borrowers to issue rupee-denominated ‘masala bonds’ were also announced to facilitate the inflow of dollars and de-risk the economy from fluctuations in the exchange rate. Further, the term limit imposed on borrowings of manufacturing companies is to be shortened further in order to curb dollar demand. The response to the move from the markets will need to be carefully tracked. Even before the official announcement on Friday, the rupee witnessed some recovery against the dollar amidst hopes of favourable government intervention, while stocks and bonds also recovered.
•These steps to strengthen the rupee in the short term are welcome, given the large-scale outflow of capital from emerging markets to the West. These ad hoc steps to avoid an immediate crisis in the external sector, however, should not deflect attention from the more fundamental reasons behind the decline of the rupee. India has been unable to boost exports over the years for various reasons. At the same time, it has been unsuccessful in finding sustainable domestic sources of energy to address the over-reliance on oil imports. This has meant that the rise in the price of oil has traditionally exerted tremendous stress on the current account deficit and the currency, as is happening now. The government needs to think of a long-term plan to boost exports, preferably through steps that remove policy barriers that are impeding the growth of export-oriented sectors, in order to find a sustainable solution to the problem of the weakening rupee. The depreciating rupee is also a symptom of persistently higher domestic inflation in India over many decades. For example, in line with vastly different inflation rates in India and the U.S., the rupee has lost about 60% of its value in the last 10 years against the dollar. So this problem cannot be addressed without drastic changes in the style of monetary policy conducted by the RBI, which is an unlikely proposition. Until then, the best that can be hoped for is a steady drop in the value of the rupee without any drastic shocks to the economy.
📰 Transforming agriculture
The Green Agriculture project synergises biodiversity conservation, agriculture production, and development
•India is signatory to the Convention on Biological Diversity. As four of the 35 biodiversity hotspots are located in India, it is biodiversity-rich. However, climate change and development without consideration for biodiversity are leading to loss of biodiversity.
•India’s National Biodiversity Action Plan (NBAP) recognises the importance of biodiversity for inclusive development. The Green Agriculture project implemented by the Indian government and the Food and Agricultural Organisation (FAO) takes a novel approach to support the NBAP and synergise biodiversity conservation, agriculture production and development. It is being implemented in five landscapes adjoining Protected Areas/Biosphere Reserves: Madhya Pradesh, Mizoram, Odisha, Rajasthan and Uttarakhand. It envisages a transformation in Indian agriculture for global environmental benefits by addressing land degradation, climate change mitigation, sustainable forest management, and biodiversity conservation.
•Man-animal conflicts in the fringes of Protected Areas or animal corridors, and conflicts over unsustainable procurement of non-timber forest products (NTFPs) have been contentious, especially in Odisha and Uttarakhand. A participatory and landscape approach can ensure sustainability of conservation efforts. Keeping the focus on initiatives for sustainable NTFP harvest, eradication of invasive alien species, and mitigation of wildlife conflicts is essential.
•Biodiversity conservation is a part of traditional wisdom. The landscape approach will aim to restore traditional knowledge systems, such as the conservation of common property resources. Examples include the Orans of Rajasthan and the village safety and supply reserves in Mizoram. Traditional farming systems such as jhum encouraged crop diversity. However, climate change and shortened fallow cycles are undermining jhum cultivation sustainability. Participatory learning tools will encourage farmers to adopt more sustainable indigenous soil conservation.
•India gave the world crops such as rice, chickpea, pigeon pea, mango and eggplant. However, with the focus on policies that cater to market demands, its reservoir of indigenous traditional crops has dwindled. Most keepers of these crop genetic diversity are smallholder farmers, including women. The approach will be to strengthen their role as agrodiversity guardians by developing value chains for their indigenous crops such as traditional rice varieties in Odisha.
•Environmental concerns are inadequately reflected in the development rhetoric. Thus, projects such as Green Agriculture are essential in equipping decision-makers with the necessary instruments to design effective and informed policies to underpin environmental concerns.
📰 Centre’s steps may not stop rupee sliding: economists
‘External sources key to fall in rupee’
•The measures announced by Finance Minister Arun Jaitley on Friday to address widening current account deficit and attract inflows to stabilise the currency may not yield result immediately and the rupee could be under further pressure.
•The steps were primarily aimed at easing conditions related to external commercial borrowings, hedging conditions for infrastructure loans, and relaxing restrictions on masala bonds. “The government believes these measures could lead to additional capital flows to the tune of $5 billion-$10 billion and limit currency pressures to some degree. We are doubtful about the impact of such measures in the immediate future,” Abheek Barua, chief economist, HDFC Bank said in a note.
•The rupee went close to 73 per dollar last week, weakening by about 13% in 2018 on the back of rising oil prices and widening current account deficit. Concerns over trade wars have also made emerging market currencies vulnerable, along with the strengthening dollar.
•The capital account measures announced are unlikely to result in any significant shift in fund flows in the immediate future since these are better suited when the sentiment in the global market is positive towards emerging markets and when it is relatively easy for emerging market corporates to raise money abroad, Mr. Barua added.
•Currency experts, while appreciating that the Centre avoided any knee jerk reaction since the primary source of the rupee weakening is coming from external sources, said the rupee could depreciate again and test the 73-to-a-dollar mark.
‘Will attract inflows’
•“It is good that there was no knee-jerk reaction from the government, like NRI deposits schemes etc. because the main reason for the rupee’s weakness is coming from external sources. The steps... will help attract inflows in the long run,” said Anindya Banerjee, currency strategist at Kotak Securities,
•The rupee, which had strengthened in the last two trading sessions in anticipation of the measures, could start weakening again. On Friday, it closed at 71.86 to a dollar, appreciating 0.3% over its previous close.
•“Rupee may depreciate as long as the external factors are in play. It may touch 73 a dollar levels. We expect announcement of the separate dollar window for oil marketing companies which may help the [rupee]” Mr. Banerjee said. The $400 billion of foreign exchange reserves is a source of comfort for the currency but reserves have depleted in the last few months.
📰 Why Foreign Portfolio Investors are swimming against the tide
Foreign investors not only need rising stock prices for returns, but also a favourable exchange rate that has often been elusive
•As an Indian investor, you may well believe that trying to make money in the stock market is a frustrating affair. But there’s one set of investors who face an even tougher task than you do in getting reasonable returns: Foreign Portfolio Investors (FPIs).
•To take home reasonable returns from their India investments, FPIs need not just rising stock prices but also favourable exchange rates. This hasn’t proved easy in recent years.
Dollex trails Sensex
•The BSE Dollex 30, an index which translates the Rupee returns on the BSE Sensex basket into dollars based on prevailing exchange rates, is a commonly used gauge of foreign investors’ returns.
•The Sensex 30 has beaten the Dollex 30 hands down on trailing returns over the last one-, five-, 10- and even 15-year period. While the Sensex 30 has delivered a 11.4% gain on a year-to-date basis in 2018 (as of September 14), the Dollex 30 is down by about 1%. Local investors who bought the Sensex basket ten years ago would have a 11.4% annual return to show, but the Dollex 30 has scrounged up just 7%. The lower returns are explained by the fact that while the rupee traded at 47 to a U.S. dollar in September 2008, the going rate today is 71.7.
•In the 17 years since its inception, the Dollex 30 has outpaced the Sensex in eight years and lagged it in nine. But the real problem for foreign investors is that the Dollex fares much worse than the Sensex in big bear years.
•In 2008, hit by the global crisis, the Sensex nosedived by over 52%, but the Dollex plummeted by a steeper 61%. In 2011, the Dollex, with a 37% plunge, lost much more than the Sensex’s 25%. Periods of stock market turbulence in India are often accompanied by a slip-sliding rupee. Perversely though, the Dollex doesn’t always do better than the Sensex in good times. It beat the Sensex in bull years 2017, 2010 and 2009, but lagged it in 2014 and 2012.
•Net-net, with rupee weakness magnifying market falls, foreign investors suffer though far bigger swings in their returns than domestic investors.
•But with the Dollex hinting at modest as well as highly volatile returns for foreign investors, why are the FPIs such ardent fans of the Indian market? After all, despite the rupee headwinds, FPIs have been net buyers of Indian stocks in 14 of the last 17 years and have poured over $200 billion in net investments since 2001.
How they cope
•One explanation could be that many FPIs are good timers of their buys and sells in the Indian market, which helps them benefit from the violent swings in stock prices and the rupee.
•For instance, FPIs who bought into the Sensex basket in February 2009 and sold out in December 2010 would have notched up a cool 160% gain in less than two years, with exchange gains adding to returns. Foreign funds who jumped in in August 2013 and bailed out in February 2015 would have pocketed 70%.
•It is also likely that long-term FPIs, aware of the exchange rate risks, hedge their India exposures to shield from rupee swings. While this would entail a cost, it would cushion such FPIs from the worst of rupee volatility.
•But the most important factor to keep in mind is that FPIs aren’t one homogenous class of investors who behave like a herd of sheep.
•FPI is an umbrella term that refers to a wide gamut of investors using different strategies. It includes individuals and family offices on one hand, but also savvy institutions like sovereign wealth funds, exchange traded funds, pension funds and hedge funds, on the other.
•Not all of these investors rely on long-only strategies to make their returns. There’s also considerable churn in the identity of FPIs participating in India from year to year.
•All this does not mean that the steadily depreciating rupee doesn’t make a difference to foreign investors. It does. But India’s ability to attract strong FPI flows despite this, suggests that many foreign investors have become adept at swimming against the tide.
📰 India calling: 5G networks may be in place by 2020
Next generation mobile Internet connectivity will offer faster, more reliable networks that will form the backbone for era of IoT
•Having missed the bus for early adoption of latest technologies in the past, India — one of the fastest growing telecom markets in the world — is pushing for a timely roll-out of 5G technology in the country.
•The Indian government is aiming to commercially introduce 5G services in the country by the end of 2020, almost in line with rest of the world. 5G is the next generation of mobile Internet connectivity that would offer much faster and more reliable networks, which would form the backbone for the emerging era of Internet of Things (IoT).
•“Previous generations of mobile networks addressed consumers predominantly for voice and SMS in 2G, web browsing in 3G and higher speed data and video streaming in 4G. The transition from 4G to 5G will serve both consumers and multiple industries,” Ericsson said in a report recently.
•Globally, over 150 pre-commercial 5G trials are under way around the world, including South Korea, China and the U.S. However, a recent report by a top panel set up by the Centre pointed out that so far, 5G trials are yet to begin in India.
•Ericsson pointed out in the report that the 4G networks now serve more than 240 million subscribers in urban areas across the country; however, LTE coverage in rural areas remains a challenge. The “4G link speeds in India are picking up, averaging 6-7 Mbps as compared to 25 Mbps in advanced countries,” it stated. The 5G standards, currently being developed by the third Generation Partnership Project (3GPP) — an industry-driven standardisation body — envisages high speed links with peak rates of 2 to 20 Gbps for various services.
Disrupting industries
•Once commercialised, 5G is expected to disrupt not only telecom but other industries as well as. 5G is expected to see use beyond delivery of services just on “personal phone platforms.” It will also connect new devices including machines, sensors, actuators, vehicles, robots and drones, to support a much larger range of applications and services.
•“Initially the next generation network will see usage in key government projects such as smart cities and Digital India, besides other business-to-business applications,” said Rajan Mathews, Director General, COAI.
•“We probably may not see direct consumer consumption of 5G services initially but it depends on the ecosystem… We may see consumer consumption in terms of using IoT devices such as connected refrigerators etc,” he said. An Ericsson report estimates that 5G would enable a $27-billion revenue opportunity for Indian telecom operators by 2026. The largest opportunity, it said, would be seen in sectors like manufacturing, energy and utilities followed by public safety and health sectors. The government panel report noted that even after the entry of 5G, the earlier generation mobile technologies — 2G, 3G and 4G — would continue to remain in use and it may take 10 or more years to phase them out.
•The government expects the cumulative economic impact of 5G on India to be about $1 trillion by 2035.Mr. Mathews pointed out that 5G required large chunks of spectrum The reserve price for proposed spectrum band for 5G services in 3300-3600 MHz frequency had been fixed at ₹492 crore per MHz for a pan-India minimum block of 20 MHz, meaning operators would have to shell out about ₹10,000 crore.
•This comes at a time when the industry continues to reel under financial stress, weighed down by high debt. “Going by global standards, the price of ₹492 crore per MHz for 5G spectrum is on the higher side as the South Korean auctions that happened recently had the price at ₹130 crore per MHz,” COAI pointed out, adding that a new way of pricing needs to be looked at.
•The steering committee has recommended that the 5G spectrum allocation policy should be announced by the end of this year.
•The high-level panel has recommended that 5G programmes be also funded by the government. “At present, there are only notional figures available… the committee recommends a broad planning estimate of ₹300 crore in Year one, ₹400 crore in Year two, ₹500 crore in Year three and ₹400 crore in year four.”
