📰 Sushma asks report on abduction of Hindu sisters in Sindh, Pakistan retorts
According to available reports two sisters Raveena (13) and Rina (15) were abducted and forced to undergo religious conversion.
•External Affairs Minister Sushma Swaraj’s statement on the abduction of two sisters from the minority Hindu community in Pakistan snowballed into an online spat on Sunday after strong responses from Islamabad.
•India followed the Minister’s statement with a rare note of protest, citing widespread incidents of forced conversion of Hindu women in parts of Pakistan.
•Radio Pakistan later reported that Prime Minister Imran Khan had ordered an immediate investigation.
•The incident was taken up by social media in Pakistan with videos showing the father of the girls protesting at a police station in Sindh. Subsequent videos showed the girls begging to be saved from captivity after they were taken away by goons during Holi. Responding to a news release, Ms. Swaraj said, “I have asked the Indian High Commissioner in Pakistan to send a report.”
•This drew a quick response from Pakistan’s Information Minister Fawad Hussain Chaudhry, who said the incident was an internal issue.
•Sources said India then sent a note of protest or “note verbale” on Sunday asking Pakistan to take “remedial action” to ensure the safety of its citizens from minority communities.
•According to reports, the two sisters Raveena, 13, and Rina, 15, were abducted and forced to undergo religious conversion. Pakistan Hindu Sewa Welfare Trust alleged that police initially refused to lodge an FIR in the case and did so only after the local Hindus protested.
•In his social media response, Mr Chaudhry alleged that minorities were not safe in India and argued that his country was committed to protecting its minority communities. “...White colour of our flag is equally dearer to us,” the Pakistani minister said, urging the senior Indian minister to address alleged violation of human rights of Indian minority communities. This led to further exchanges between Ms. Swaraj and Mr. Chaudhry.
•Ms. Swaraj responded by saying that her order to the Indian High Commission had made the Pakistan minister “jittery”. “This only shows your guilty conscience,” she said. To which Mr. Chaudhry referred to the human rights situation in Kashmir and Gujarat, saying, “…sincerely hope that your conscience will allow you to stand up for minorities at home as well.”
•Later, the Minister said the matter was being looked into by the Ministry of Human Rights of Pakistan. Radio Pakistan also reported that Prime Minister Imran Khan had ordered an immediate investigation into the abduction.
•Mr. Chaudhry said the Prime Minister has also ordered the Sindh and Punjab governments to devise a joint action plan.
PTI adds:
Imran orders probe
•Meanwhile, Pakistan Prime Minister Imran Khan has ordered a probe into reports of abduction, forced conversion and underage marriages of the two Hindu girls and to take immediate steps for their recovery.
•The Hindu community in Pakistan has carried out massive demonstrations calling for strict action to be taken against those responsible, while reminding Prime Minister Khan of his promises to the minorities of the country.
📰 Red tape holds up carbine procurement
The matter is pending with Defence Ministry even after completion of cost negotiations
•The fast-track procurement of 93,895 Close Quarter Carbine (CQB) rifles for the Army has been delayed even after the completion of cost negotiations as the case is pending with the Defence Ministry, according to defence sources.
•“Cost negotiations have been completed, and the file has gone to a three-member oversight committee where it has been held up without a decision,” a defence source said.
•The status of the case was on the agenda of the Defence Acquisition Council (DAC) meeting held last week.
•In January 2018, the DAC approved the purchase of 72,400 assault rifles and 93,895 carbines for ₹3,547 crore through the fast-track procurement (FTP) mode. After evaluation, Sig Sauer of the U.S. emerged as the lowest bidder for the assault rifles and the United Arab Emirates-based Caracal for the carbines.
•Last month, the Defence Ministry signed an agreement with Sig Sauer for SIG 716 assault rifles meant for front-line infantry soldiers deployed in operational areas.
•The oversight committee consists of members of the Army, the Defence Research and Development Organisation (DRDO) and the Defence Ministry. It had received questions on the company’s capability to deliver the entire volume in time. “The case has been held up by objections from the DRDO official on the committee,” said a second official with knowledge of the matter.
•The committee was supposed to give its comments in three days, but it had taken longer, and had not given any reason for the delay, another defence source said.
•The carbine should have an effective range of 200 m and weigh less than 2 kg. Under the FTP process, there is no elaborate general staff evaluation, and the exercise is expected to be completed in a year. The evaluation is based on the operational requirements, and deliveries should be completed in a year of the contract having been signed. The deal is estimated to cost ₹1,800 crore.
📰 Disinformation is everywhere in India
It is not only social media that is responsible for it, but also news media and some politicians
•With the Lok Sabha elections coming up, it is critically important that Indians have access to credible and trustworthy information before they vote. The problem is that many do not feel they do. In a brand new survey of English-language Internet users in India conducted by the University of Oxford, we have found that a majority of the respondents are concerned with whether the news they come across online is real or fake.
•Who can blame them? After the Pulwama attack, social media and messaging apps were flooded with false and misleading content as people tried to make sense of the horrible violence. As Trushar Barot, a former BBC journalist who leads Facebook’s integrity initiatives in India, tweeted, “I’ve never seen anything like this before — the scale of fake content circulating on one story.”
•Some of this was ordinary people sharing misinformation in good faith, but much of it was not. As the Central Reserve Police Force noted a few days after losing 40 men in the attack, “It has been noticed that on social media some miscreants are trying to circulate fake pictures of body parts of our Martyrs to invoke hatred while we stand united. Please DO NOT circulate/share/like such photographs or posts.” Even as some news media made the occasional misstep and amplified some of this disinformation, other journalists and fact-checkers were working overtime to identify and debunk some of the worst examples shared online, including fake or manipulated material trying to link Congress president Rahul Gandhi and Congress general secretary in-charge of eastern Uttar Pradesh, Priyanka Gandhi Vadra, to the attack.
The heart of the problem
•Social media and messaging apps are thus at the heart of the disinformation problems that India faces. Of our survey respondents, 52% say they get news via Facebook, and the same percentage say they get news via WhatsApp, which is owned by Facebook. With an estimated quarter billion Indians having come online since the last general election, companies like Facebook, Google and Twitter have become central parts of the Indian media environment, including the disinformation problems that it faces.
•But disinformation is not only a problem of social media and digital platforms. In our survey, strikingly, those who use Facebook and/or WhatsApp for news do not report higher levels of concern over whether the news they come across is real or fake than those who do not rely on them. It seems people are as concerned about information from news media as they are about information from social media. More detailed questions in our survey reveal a far more complex set of wider problems. At the heart of disinformation problems are stories that are completely made up for political or commercial reasons, to try to discredit rivals or make money from clickbait. Of our respondents, 51% say they are concerned about this problem. But strikingly, a similar number say they are concerned about what they consider to be poor journalism (stories that respondents consider marred by factual mistakes, inaccuracies, etc.). And 50% say they are concerned by hyperpartisan political content, where facts are spun or twisted to push a particular agenda, whether from politicians, pundits or publishers.
•So, when many Indians in the run-up to the elections say they are concerned about what is real and what is fake on the Internet, this is clearly in part about social media and digital platforms. But unfortunately, it is also about some news media and some politicians who people see as part of the disinformation problems that India faces. It is only a few years ago that the Press Council of India said that “the phenomenon of ‘paid news’ has acquired serious dimensions”, “goes beyond the corruption of individual journalists and media companies and has become pervasive, structured and highly organised.” The Press Council concluded: “It is undermining democracy in India.” Cobrapost’s sting operation last summer, which exposed large media houses willing to peddle propaganda as news, demonstrates that some of these problems persist.
Low trust in institutions
•Beyond the rise of digital media, the backdrop of disinformation problems in India is thus low trust in established institutions. Though there are some admirable exceptions, established institutions often seem to fail the people who rely on them. Other studies have found low trust in politicians and political parties. Our own survey shows that just 36% of respondents feel they can trust most news most of the time, statistically indistinguishable from the 34% who say they trust news found via social media.
Addressing the issues
•What can be done do address these issues? It is clear that platform companies have much to do to improve their content moderation and contain disinformation. Facebook has announced that it currently has over 500 full-time employees and at least 3,500 external contractors who focus on election work, on top of the 30,000 people across the company focused on safety and security issues. (Given the fact that India accounts for more than 10% of the global user base of both Facebook and WhatsApp, and is growing rapidly, it would be good to know how many of these people are focused specifically on India.)
•Similarly, it is troubling that some coordinated attempts to amplify and spread misleading and false information sometimes seem to emanate from major political parties and activists who support them. This ought to stop, and if it does not, has to be continuously and critically covered by independent journalists to ensure that people are aware of what is going on. Finally, it is clear that Indian news media has a lot of work to do if it wants to gain the trust of the Indian public. Many express high levels of trust in some individual brands, most notably major newspapers and some broadcasters. But many news media are not trusted.
•In a situation where disinformation seems to be everywhere, and digital platforms, some politicians and some news media are intertwined in these problems, we can only hope that those news media which genuinely do stand out as providers of credible information are able to convince people that they provide exactly that — news that is worthy not only of people’s attention, but also their trust.
📰 Odisha’s Rushikulya rookery awaits Olive Ridleys
Climate could be a reason for delay
•Even after waiting for almost a month, Olive Ridley turtles have not yet arrived for mass nesting at Odisha’s Rushikulya rookery and Devi river mouth. The reasons are not fully understood yet.
•Mass nesting has already occurred at the Gahirmatha coast of the State.
•Wildlife Institute of India’s (WII) scientist Bivash Pandav said it could not be said for sure whether mass nesting would occur or not at the Rushikulya rookery this year. According to Mr. Pandav, who has studied mass nesting along the Odisha coast over the past decades, mass nesting of Olive Ridleys can occur up to any time till the end of April.
•Berhampur Divisional Forest Officer (DFO) Ashis Behera said that, till now, lakhs of impregnated female Olive Ridleys are continuing to congregate in the sea near the Rushikulya rookery, but they aren’t approaching the beach for mass nesting. “Sporadic nesting is continuing at this coast since February. Till now, over 1,000 mother turtles have nested at the Rushikulya rookery,” said Mr. Behera.
•“Although it is held that climatic parameters as well as beach conditions decide mass nesting at a coast, we are still not sure how these parameters affect their decision-making,” said Mr. Pandav.
•The Forest Department has readied six artificial hatcheries to incubate eggs resulting from sporadic nesting. The beach has been cleaned up. A metal net fences a stretch of over five kilometres from Gokharkuda to Prayagi — this fencing is expected to protect Olive Ridleys and their eggs from predators and human intervention. CCTV cameras continue to keep a watch on the nesting beach.
•This year, the Forest Department also prepared a three-km-long coast near the Bahuda river mouth, from Sunapur to Anantpur, as an alternative mass nesting site, about 20 km to the south of Rushikulya. However, except for few occurrences of sporadic nesting, mass nesting has yet not occurred at this new beach.
📰 Another look at fiscal transfers
The time has come to amend the Constitution to fix the proportion of shareable taxes for the States
•Federalism is an old concept. Its origin is mainly political. It is well known that the efficiency of a government depends on, among other factors, its structure. In large countries, it has been felt that only a federal structure can efficiently meet the requirements of people from different regions. Underlying this proposition is the premise that preferences vary across regions.
•In our country during the independence struggle, provincial autonomy was regarded as an integral part of the freedom movement. However, after Independence, several compulsions, which included defence and internal security, led to a scheme of federalism in which the Centre assumed greater importance. Also in the immediate period following Independence, when the Centre and all States were ruled by the same party and when many of the powerful provincial leaders migrated to the Centre, the process of centralisation gathered further momentum. Economic planning at a nation-wide level helped this centralising process.
Fiscal federalism
•Fiscal federalism is the economic counterpart to political federalism. Fiscal federalism is concerned with the assignment on the one hand of functions to different levels of government, and with appropriate fiscal instruments for carrying out these functions on the other. It is generally believed that the Central government must provide national public goods that render services to the entire population. A typical example cited is defence. Sub-national governments are expected to provide goods and services whose consumption is limited to their own jurisdictions. An equally important question in fiscal federalism is the determination of the specific fiscal instruments that would enable the different levels of government to carry out their functions. This is the ‘tax-assignment problem’ which is much discussed in the literature on the subject. In determining the taxes that are best suited for use at different levels of government, one basic consideration is in relation to the mobility of economic agents, goods and resources. It is generally argued that the de-centralised levels of government should avoid non-benefit taxes and taxes on mobile units.
•This implies that the Central government should have the responsibility to levy non-benefit taxes and taxes on mobile units or resources. Building these principles into an actual scheme of assignment of taxes to different levels of government in a Constitution is indeed very difficult. Different Constitutions interpret differently what is mobile and what is purely a benefit tax. For example, in the United States and Canada, both Federal and State governments have concurrent powers to levy income tax. On the contrary, in India, income tax is levied only by the Central government though shared with the States. Recognising the possibility of imbalance between resources and responsibilities, many countries have a system of inter-governmental transfers.
•The Indian Constitution lays down the functions as well as taxing powers of the Centre and States. It is against this background that the issues relating to the correction of vertical and horizontal imbalances have been addressed by every Finance Commission, taking into account the prevailing set of circumstances. However, Central transfers to States are not confined to the recommendations of the Finance Commissions. There are other channels such as those through the Planning Commission until recently as well the discretionary grants of the Central government.
•In 2010-11, in the combined revenue receipts of the Centre and States, the share of the Centre was 64.68%. After transfer, the share came down to 40.20%. In the case of the States, their share before transfers was 35.32%. After the receipts of transfers the share of States went up to 59.80%. Thus the shares got reversed. In 2016-17, the share of the Centre after transfers was 33.37% and that of the States was 66.63%. In the case of total expenditures, the share of the Centre in 2014-15 was 41.14% and that of the States was 58.86%. The ultimate position appears reasonable. The question may be on the mode of transfers.
New developments
•The Fourteenth Finance Commission has broken new ground in terms of allocation of resources. One of its major recommendations has been to increase the share of tax devolution to 42% of the divisible pool. This is a substantial increase by almost 10 percentage points. The commission has argued that this does not necessarily affect the overall transfers but only enhances the share of unconditional transfers. It is true that Centrally sponsored schemes, which have ballooned in recent years, may have ‘encroached’ on the territory of States. Over years, the performance of the Central government is judged not only on the basis of actions taken which fall strictly in its jurisdiction but also on initiatives undertaken in the areas which fall in the Concurrent and even State lists. Centralised planning has something to do with it. Today, the Central government is held responsible for everything that happens, including, for example, agrarian distress. In viewing the responsibilities of the Centre and States we must take a broader view than what is stipulated in the Constitution.
•On the allocation of unconditional transfers, two questions arise. The first is to determine the total transfers that need to be made, while the second is whether all transfers must be done by the Finance Commission alone. Finance Commissions prior to the Fourteenth recognised that some transfers were being made by the Planning Commission; this was kept in mind while deciding on tax devolution. By the time the Fourteenth Finance Commission was required to submit its report, a fundamental change in the institutional framework had occurred.
•The Planning Commission was replaced by the NITI Aayog, which was simply a think-tank with no powers of resource allocation. In this context perhaps what the Fourteenth Finance Commission did was justifiable. Of course, the Fourteenth Finance Commission did what it did because the terms of reference had not made any distinction between Plan and non-Plan revenue expenditures. The moot question is about what happens if any future government revives the Planning Commission with financial powers. This will put the Central government in a fix.
Some suggestions
•Perhaps the time has come for the Constitution to be amended and the proportion of shareable taxes that should go to the States fixed at the desired level. The shareable tax pool must also include cesses and surcharges as these have sharply increased in recent years. Fixing the ratio at 42% of shareable taxes, including cesses and surcharges, seems appropriate. Another possible route is to follow the practice in the U.S. and Canada: of allowing the States to levy tax on personal income, with some limitations. Since one of the concerns is that resources do not match functions, this may be a way out. But, as in the U.S., the scheme should be simple and ride on federal income tax, that is, just a levy on the income assessed by federal authorities. The freedom given to the States must be limited. It is important to note that the levy by the Centre and States together should be reasonable.
•Also once this power is given to the States, the transfers from the Centre need adjustment. As far as India is concerned, this is an area which needs a fuller study. Adoption of any one of these alternatives will avoid friction between the Centre and the States. Perhaps the first alternative of constitutionally fixing the ratio is the easiest.
•There are issues relating to horizontal distribution. Equity considerations have dominated the allocations. This is as it should be. However, the ability of bringing about equalisation across States in India has limitations. Even the relatively richer States have their own problems and they feel ‘cheated’ because of the overuse of the equity criterion. An appropriate balancing of criteria is needed particularly in the context of the rise in unconditional transfers. Of course, appropriate balancing is what all Finance Commissions are concerned about.
📰 Parallel tracks on trade ties
Economic diplomacy can still prevent the removal of the U.S.’s trade benefits to Indian exports
•Could it be that the strained trade relations between India and the U.S. are an outcome not of the U.S.’s domestic politics but of India’s? The timeline of U.S. President Donald Trump’s decision to rescind the benefits Indian exports enjoy under the Generalised System of Preferences (GSP) programme is revealing.
E-commerce rules
•It begins with the change in foreign direct investment (FDI) rules in India. The tightened norms that came into effect on February 1 place several restrictions on e-commerce companies, including Walmart-owned Flipkart and Amazon.
•The unexpected changes came after Walmart, the world’s largest retailer, paid over $16 billion to acquire Flipkart last May. To raise the resources needed, Walmart put one of its biggest international operations, Asda, on the block for $10 billion.
•The calculations behind the $500 billion retail giant’s investment in India have gone awry after the change in the FDI rules. The Walmart family are close friends of Mr. Trump. On February 20, Walmart CEO Doug McMillon said the company was disappointed that New Delhi had changed the FDI rules without consultation and hoped for a more collaborative process going forward. Days later, on March 4, Mr. Trump notified Congress of his intention to slap punitive action on India by ending preferential treatment for the country’s exports.
•Walmart has a reputation for killing small retail businesses with ultra-low prices, a concern that influenced New Delhi’s decision to tighten the FDI rules. While the FDI policy might be irreversible, economic diplomacy can still defuse the situation and prevent the removal of the GSP benefits that will not take effect for until at least 60 days after the notifications to Congress and the Indian government.
•The simmering tensions go back to April 2018 when the United States Trade Representative (USTR) launched a review of New Delhi’s eligibility for the GSP programme. Tensions escalated in June, as New Delhi, in response to Washington’s 25% tariff hikes on steel and 10% levies on aluminium, immediately accused it of unfair trade practices, and, seeking to signal a muscular approach, threatened retaliatory tariffs on $235 million of U.S. imports.
•Bilateral talks since then have failed to ease tensions and India now stares at losing the GSP benefits. Foreign Secretary V.K. Gokhale returned empty-handed from Washington recently.
•India’s GSP status came under review after the U.S. medical and dairy industries complained that New Delhi is not providing them “equitable and reasonable access to its market”. India’s data localisation policies deepened the rift.
•New Delhi’s use of price control measures against imported drugs and medical devices has grown noticeably. Cardiac stents were put under price controls in February 2016 and knee implants attracted similar action in August 2017, after which trade margins for many medical devices are sought to be capped.
•U.S. manufacturers complain that in doing so, New Delhi has meted out differential treatment to them vis-à-vis domestic players.
•For domestic companies, the price to distributors is considered while in the case of global manufacturers the base proposed is the landed costs of imports. The U.S. medical device industry wants price controls on cardiac stents and knee implants withdrawn and would like products to be treated on parity with domestic medical devices through a trade margin rationalisation regime.
•New Delhi has preferred to act against unreasonable price mark-ups through price controls when exactly the same outcomes can be achieved through other types of policy alternatives. The USTR is right in pointing out that price capping counts as a trade barrier. New Delhi can easily address the concerns by replacing price controls with trade margin rationalisation measures, applying them equally to domestic and foreign manufacturers.
•India is the largest beneficiary of the GSP, the largest and oldest U.S. trade preference programme. The GSP is aimed at promoting economic development by allowing duty-free entry of products from designated beneficiary countries. Nearly 4,800 different goods from 129 designated countries enjoy duty-free access under the programme.
•The immediate loss for India is preferential access at zero or minimal tariffs to the U.S. in case of about 1,900 products, or about half of all Indian products.
•New Delhi has downplayed the impact of the proposed withdrawal of benefits, saying exports worth $190 million only are likely to be affected and that the tariff advantage was 4% or more on only 2,165 of a total of 18,770 tariff lines.
Estimating losses
•This is an underestimation. The loss to the economy would be much larger than what the Department of Commerce is projecting. While it is true that the actual tariff advantage from the programme works out to a meagre $190 million, which is just 0.4% of the total Indian exports to the U.S., the actual loss will not be limited to the immediate tariff advantage.
•Indian exporters are competing for market share in the U.S. with other low-income countries in industries where margins are wafer thin. Even minor price hikes can drive significant drops in export volumes. In which case, losing GSP access will be costlier than the projections.
•Among price-sensitive products eligible for higher GSP benefits that risk losing out to competition from other countries are processed food, leather products, plastic products, building materials, tiles, hand tools, engineering goods, cycles and made-ups such as pillow/cushion sleeves and woven women’s apparel.
•Many of these are the very industries the new e-commerce FDI rules seek to protect.
📰 Lesser clicks, a boon for bricks
Brick and mortar retail revenues set to spurt as e-retail stumbles on stricter FDI norms
•The Department of Industrial Policy & Promotion’s recent clarification on the foreign direct investment (FDI) policy for e-retail has an unexpected beneficiary — brick and mortar (B&M) retail.
•The more specific and stringent FDI guidelines require large e-retailers to make changes in their business models in a short timeframe.
•These changes come just as e-retail sales have seen phenomenal growth, averaging 40% a year between fiscals 2014 and 2018 and reaching the ₹1 lakh-crore mark. That’s thrice as fast as the B&M segment, which grew at a 13% clip to ₹3.2 lakh crore. Deeper market penetration and attractive price-tags — helped generously by foreign direct investments of over ₹95,000 crore in the past four fiscals — drove online sales.
•As a result, the organised retail market expanded at a fast pace, with penetration improving enough to tap demand beyond Tier-1 cities, though the organised segment remains but a small part of the ₹60 lakh crore retail market in India.
•Now, following the DIPP clarification, e-retailers have started tweaking supply chains and business models, including adoption of the franchisee model.
•This is leading to higher cost of compliance. And growth will temporarily slow as the players repurpose. Incorporating all the changes was not possible in the less than 40 days that the e-retailers were given. The first few weeks of February have witnessed some slowdown in their sales. However, sales are gradually recovering from March 2019, as e-retailers are reorienting business models and supply chain arrangements.
•For perspective, the top two players, accounting for about 70% of e-retail industry revenue, generate about half their sales through impacted group companies. And, changes are required across parameters.
•In contrast, Crisil estimates that B&M retailers can add ₹10,000-₹12,000 crore in revenue in fiscal 2020 if they are able to garner just a quarter of the potential loss in e-retailer sales, mainly of electronics and apparel. That would crank up their revenue growth 150-200 basis points (bps) to about 19%, compared with Crisil’s earlier expectation of 17%.
Poor penetration
•While near-term drags would ease gradually, the fact that India’s organised retail market is highly underpenetrated at just 7.8% compared with 85% in the U.S., 35% in Brazil, 30% in Indonesia and 20% in China, means there’s huge headroom for growth.
•Penetration of organised retail, which increased from 6.5% to 7.8% over the three fiscals through 2018, is expected to improve further to 9.5% through fiscal 2021 as the overall organised retail segment grows at 20-22% annually, riding on rising incomes and aspirational demand in Tier II and Tier III cities. An analysis of 87 B&M retailers rated by Crisil shows credit profiles are slated to benefit from healthy growth prospects and improving credit metrics. For instance, the debt-to-EBITDA ratio of B&M retailers, which improved to about 2.1 times in fiscal 2018 from 3.7 times in fiscal 2016, is likely to improve further to below 1.5 times by fiscal 2021.
•Faster revenue growth, driven by household consumption, store roll-outs with focus on private-label revenue, and increasing penetration of B&M retailers in Tier II cities, will improve cash flows and obviate the need for substantial debt addition to fund store expansions.
•To summarise, the policy clarifications have helped partially level the field for B&M retailers.
