📰 UAE confers prestigious Zayed Medal on Narendra Modi
"This friendship is contributing to the peace and prosperity of our people and planet,” Modi wrote to crown prince Mohammad bin Zayed
•UAE President Khalifa bin Zayed Al Nahyan has awarded Prime Minister Narendra Modi the country’s highest civilian award, ‘the Order of Zayed’, its crown prince Mohammad Bin Zayed Al Nahyan announced on April 4, a decision that has given rise to speculation PM Modi could travel to the gulf emirate soon.
•“We have historical and comprehensive strategic ties with India, reinforced by the pivotal role of my dear friend, Prime Minister Narendra Modi, who gave these relations a big boost. In appreciation of his efforts, the UAE President grants him the Zayed Medal,” the UAE crown prince, who is also deputy supreme commander of the UAE’s armed forces wrote in a tweet.
•In response, Prime Minister Modi said he would accept the honour with “utmost humility”. “Under your visionary leadership, our strategic ties have reached new heights. This friendship is contributing to the peace and prosperity of our people and planet,” he wrote to crown prince Mohammad bin Zayed. The two leaders have met a record number of times in the past few years, with PM Modi visiting the UAE and Mohammad Bin Zayed visiting India twice each since 2015. Previous recipients of the Order of Zayed include Russian President Putin, Chinese President Xi Jinping, British Queen Elizabeth II, and former Pakistan President Musharraf.
•Neither the MEA nor UAE officials confirmed when the award ceremony would be held for PM Modi. When asked, diplomatic sources indicated it could be held as early as the next few weeks. In a statement, the MEA said that the honour came in recognition of the “PM’s leadership to develop the strategic partnership between India and the UAE”. “The UAE is home to the largest number of our citizens outside India, and is our partner in diverse pillars of cooperation including investment, energy defence and security.”
'Strong bilateral strategic and personal relationships'
•The Hindu had reported last week that a “high level” representation was also expected from India for a foundation laying ceremony for Abu Dhabi’s first Hindu temple on April 20th. The temple, which will be built by the BAPS Swaminarayan Sanstha, a Gujarat based international spiritual organisation would be the second temple in the UAE, and will be constructed on land donated by the UAE government. PM Modi had performed one foundation laying ceremony (Shilanyas) via video conference last year during a visit to the UAE in February 2018.
•When asked specifically about reports that PM Modi would attend the latest, Shilanyas, UAE Ambassador Ahmed Al Banna told The Hindu on Monday that the “UAE welcomes all high level visits in keeping with our strong bilateral strategic and personal relationships, taking into account scheduling and protocol considerations that are applicable.”
•PM Modi’s possible travel for the award and the temple event during the election campaign, if confirmed, would set a precedent for a Prime Ministerial foreign visit after the Model Code of Conduct is in place, but would not violate it, officials said, given that the PM is exempted from the rules governing official travel once elections are declared.
‘Ensures transparency, checks misuse’
•Electoral bonds have been introduced to promote transparency in funding and donation received by political parties, the government told the Supreme Court on Thursday.
•“They [bonds] can be encashed by an eligible political party only through their accounts with authorised banks. The bonds do not have the name of the donor or the receiving political party and only carry unique hidden alphanumeric serial numbers as an in-built security feature,” a 21-page affidavit said. The government described the scheme, introduced on January 2 last year, as an “electoral reform” in a country moving towards a “cashless-digital economy.”
Yechury’s plea
•The government was responding to a petition filed by the CPI(M) and party secretary general Sitaram Yechury to strike down the ‘Electoral Bond Scheme 2018’ and amendments in the Finance Act, 2017, which allow for “unlimited donations from individuals and foreign companies to political parties without any record of the sources of funding.”
•Denying the charge, the government said “the scheme envisages building a transparent system of acquiring bonds with validated KYC and an audit trail.” It said a limited window and a very short maturity period would make misuse improbable. “The electoral bonds will prompt donors to take the banking route to donate, with their identity captured by the issuing authority. This will ensure transparency and accountability and is a big step towards electoral reform,” it said.
•The electoral bond, a bearer instrument, can be bought for any value and has a life of only 15 days. Bonds will be available for purchase only for 10 days in designated months.
📰 In the name of transparency, we cannot destroy institution of judiciary, says CJI
The CJI pointed out that the Collegium does not recommend judges to the high courts and the apex court casually.
•Good people opt out of becoming judges for fear that negative things, right or wrong, about them will come out into the public domain, Chief Justice of India (CJI) Ranjan Gogoi observed on Thursday.
•The CJI, heading a Constitution Bench, was responding to arguments made by advocate Prashant Bhushan that Supreme Court and its Collegium should accede to the Right to Information (RTI) regime. Mr. Bhushan argued that the public has a right to know why a certain person was appointed or rejected as a judge or what was the reason to transfer or not transfer a judge.
•But the Chief Justice was not fully convinced. “Nobody wants a system of opaqueness, but in the name of transparency we cannot destroy the institution of judiciary,” the CJI reacted to Mr. Bhushan.
•“Lately, we find this phenomenon of good people opting out of becoming judges. The reason we found, after talking to chief justices in various high courts, is they are apprehensive that negative things about them, right or wrong, will come out into the public domain,” CJI Gogoi explained.
•“They fear that ultimately they would not become judges and they would also lose their reputation. It will not only destroy their reputation but also their family, career,” the CJI said.
Judicial appointments process
•Remarking that every decision made by the Collegium or the government in the judicial appointments process should not be painted with the same brush.
•“You have to trust someone,” Chief Justice urged Mr. Bhushan. The Bench, after a day-long hearing, reserved the petitions for judgment.
•During the hearing, the CJI pointed out that the Collegium does not recommend judges to the high courts and the apex court casually.
•“Do you know why we spend 10-15 minutes with each candidate. Do you know from how many sources we verify them and from how many we re-verify them?” Chief Justice asked after a brief conversation with Justice N.V. Ramana on the Bench.
•The Bench pointed out that too much transparency may become counter-productive. It is necessary to “draw a line”.
Bhushan touches mental, physical health of sitting judge
•Mr. Bhushan said there are cases where names are reiterated repeatedly by the Supreme Court Collegium, only to be rejected time and again by the government. There are cases in which the Collegium suddenly drops the name after the government sends the name back.
•“Would the public not want to know why the government rejected these names?” Mr. Bhushan asked.
•Mr. Bhushan asked if the person under consideration for judgeship is a homosexual and the government rejects his name. Should the information not be disclosed? Why did the government have to refuse his name. His sexual preferences have nothing to do with the public office he aspires to occupy.
•“What if the person himself does not want the information to be disclosed? Where do you draw the line?” Justice Deepak Gupta, on the Bench, asked Mr. Bhushan.
•“It is then best is to ask the person concerned himself,” the Chief Justice intervened.
•Mr. Bhushan touched upon how the physical and mental health of a sitting judge should be ideally subject to RTI as the judge, in his or her official capacity, decides the fate of many.
•To this, Justice D.Y. Chandrachud, also on the Bench, asked if a judge seeks transfer in order to avail better treatment for his schizophrenic wife. “Should this information also be made public?”
Case-by-case basis
•Mr. Bhushan said whether to disclose information or not under RTI could be decided on a case-by-case basis.
•“You are saying there is a category of information which can be disclosed and another category which should not,” Chief Justice Gogoi addressed the lawyer.
•The Chief Justice pointed out that even RTI does not favour blanket disclosure of information.
•“Even in the RTI Act, there is a balance. There are five categories of information which are exempted. But even in this exemption, information can be disclosed if it is found to be in public interest,” Chief Justice Gogoi observed.
•Justice Sanjiv Khanna asked the lawyer whether the Chief Justice of India is obliged to disclose under RTI information shared with him by a judge as part of a fiduciary relationship
•To this, Mr. Bhushan said the office of a judge is a public one. If the information relates to public interest, no stipulation can be levied against their disclosure under RTI.
📰 Making democracy meaningful
Freedom must be foregrounded, and each person enabled to contribute her best to it
•Within Indian common sense periodic elections, party-based competitive candidates, and universal adult franchise have turned out to be the primary ingredients of democracy. This common sense has come to cloud everything centrally associated with the idea of democracy in general and constitutional democracy in particular. Reading elections as democracy has also led to the equating of means with ends, celebrating the former, and abdicating it from all responsibility the latter demands. Denoting elections as ‘the festival of the masses’, a phrase that tweaks Mao’s dictum ‘revolution is the festival of the masses’, or terming India as the ‘largest democracy in the world’ tends to suggest a view of democracy in which the role of the masses decidedly ends at the hustings. This reduction of democracy to elections, today, threatens to undermine the core aspirations associated with it.
•For appreciating such aspirations we do not necessarily have to revert to the classics on this term elsewhere, such as Rousseau’s Du Contrat Social, Tocqueville’s Democracy in America, Marx’s writings on the revolutions of 1848 in the Neue Rheinische Zeitung and Dewey’s Democracy and Education, but India’s own reflections on it in such works as B.R. Ambedkar’s Annihilation of Caste, K.M. Panikkar’s Caste and Democracy, Ram Manohar Lohia’s Marx, Gandhi and Socialism, Jayaprakash Narayan’s A Plea for Reconstruction of Indian Polity, and above all the Constituent Assembly Debates (1946-1949). These later writings do have a place for elections and representation that they engender, but also call for pre-requisites for a fair election that claims to represent the will of the people, and stipulate conditions for its continued salience.
Elections as tools
•Elections can hardly be termed as the sole and effective conveyor belts of popular will in India any longer. Probably, they were never so. But there were reasons to hope, as the poor and the marginalised, cutting across diversity and the social and gender divide, rallied behind it in strength. But the hype that has come to surround elections, the resources that it calls for, the close monitoring of the voters by boxing them in social straitjackets, and the media’s obsessive focus on elections as a gladiators’ den have deeply compromised elections as the preeminent device of representation of popular will.
•In the process the electoral space of the poor and the marginalised has shrunk, as other devices have been put in place to elicit their assent. The rectitude of the election machinery alone cannot ensure that the voter is enabled to make a deliberated choice of momentous significance to his everyday life, opportunities and access to resources. Political parties with their stakes, almost without exception, have increasingly tended to fix the voters in social silos, rather than help them redefine their affiliations and connect to the wider social ensemble, if they choose to do so. Redistribution of resources and opportunities has been lost in the endless litany of promises of goods and bounties. A promise, here and there, in the manifestoes of political parties that allude to redistribution sounds theatrical before their socially conservative stance.
•Sections of the media have come to play second fiddle in amplifying the sound-bites of political leaders, deploying them to construct and reconstruct opponents, with specified social constituencies in view. They have found jingoism and archaic frames easy to stoke rather than nudge public sensitivity to reinforcing the democratic temper. Highlighting fragments from popular memory-lane, spreading isolated events wide across the political space, and nurturing the effect of simultaneity, particularly with certain audiences in view, have been the take of much reporting these days. Negatively, the advances people had made in shaping their self-rule, in a context of bewildering diversity and complexity and widening inequalities, are given short shrift.
•While elections have been successful in reproducing the order of things, they can hardly be considered as the tool of deepening democracy and the nursery of imagining alternative human possibilities.
Imaginary of democracy
•There has been an ambivalence regarding elections as the route to democracy in India from early on, even before Independence. It is important to recall that the Indian National Congress rejected the Montagu-Chelmsford Reforms (1919) that expanded the then electoral base, and entertained grave doubts with regard to the provisions of the Government of India Act, 1935 till it accorded a qualified endorsement to it. There have always been political tendencies in India after Independence, particularly on the Left, that have sought boycott of elections by appealing to a richer and thicker version of democracy. But there is little to suggest that those who sought to reject or do away with elections have had much success in putting together an alternative, or enjoyed significant and consistent mass support for any appreciable time across the complex and deeply plural social ensemble in India. If the great scholarly account of W.H. Morris-Jones, Parliament in India, is to be believed, the 1951-52 general elections demonstrated to an incredulous world, entertaining deep doubts about the prospects of parliamentary democracy in India, the faith that people had come to repose in elections as a mode of choosing their rulers. Subsequent developments, particularly the option of Left parties to take the parliamentary path, demonstrate that elections as a device of choosing representatives find deep echo in the public culture in India. The challenge that the democratic project confronts in India can scarcely be imagined by setting aside elections.
•In the reflections on democracy in India, a distinct imaginary of the same stands out, i.e. a political community of free and equal citizens who wish to define their collective life in the indefinite future, irrespective of, and taking along, the differences among them. There is a disconnect between this imaginary and the turn elections have taken in India today.
Looking ahead
•As a political community, the bonds that unite Indians are not given but have to be forged, and have to be forged consciously and deliberately. Certain inheritances, beliefs, memories and shared practices can be a great help in this direction, but it is also important to realise that they can be equally divisive. India’s constitutional layout and public institutions can extend much support in streamlining and directing this political project, but cannot be its replacement. In a complex society such as India, such a political project needs all layers of the political community. The deliberation and participation such a project calls for will remain merely a slogan unless we foreground freedom, and enable everyone to contribute one’s best to it.
•There is no reason for anyone to participate in such a project unless it welcomes them as equals and enables them to pursue what they regard as the best for them. This calls for auditing the election promises of political parties, extending support to some measures and rejecting others. Measures such as access to quality education in the mother tongue, neighbourhood schools, strengthening public health systems, public transport, entrepreneurship and skill development, universal social insurance, and reaching out to those who suffer disadvantages in accessing these measures are definitely in synchrony with the democratic project. At the same time for a large number of Indians the beliefs they uphold, and the practices that ensue therefrom are central to their idea of themselves. There is no reason why India’s democratic project cannot encompass such embeddedness and aspirations. There is a dire need to create a helm to focus on India’s democratic project.
📰 Protecting freedoms
Political parties should pledge to uphold human rights — and mean it
•Everyone, everywhere, is entitled to the protection of their fundamental rights. These rights are not just violated by the most authoritarian governments, such as in China or North Korea, but can also be undermined in well-established democracies such as India. This time, as India goes to polls, human rights need to be an important part of the discussion.
•But speaking out for rights in India is getting increasingly difficult. Often, the loudest voices in the media defend the government’s failures. A rising number of rights defenders and lawyers have faced arbitrary arrest and jail; some have even been accused of fabricated national security offences. Mobs have hounded, beaten or threatened activists. Some activists, such as Gauri Lankesh, have been killed. The arbitrary use of financial regulations and allegations of misappropriation have prevented many independent organisations from functioning. Writers, painters, actors, filmmakers and students have been censored or succumb to self-censorship. Dissent is often deemed unpatriotic.
•Meanwhile, many have endorsed crimes under the cover of ultra-nationalism. Among the most troubling was when some politicians came to the defence of the men accused of raping and murdering a little girl in Kathua, Jammu and Kashmir. Lawmakers look away or applaud as mobs kill Muslim herders and traders in the name of protecting cows from slaughter, murder couples who choose relationships outside their caste or religion, or attack Dalits and Adivasis.
•The government has given a ‘free hand’ to security forces to resolve the decades-long insurgency in Jammu and Kashmir, failing to investigate allegations of arbitrary arrests, torture, or excessive use of force that has left many maimed and blinded. In U.P., a similar ‘free hand’ given to the police to contain crime has resulted in at least 59 alleged extrajudicial killings in the last two years, according to the UN.
•After the horrific gang rape in Delhi in December 2012 of a young woman, promised reform is still hostage to those same institutional barriers that have long kept rape survivors from finding justice — stigma, harassment and threats, particularly if the accused are powerful. Other human rights problems are newly emerging — for instance, the poorest and most marginalised Indians are being excluded from essential services through an ambitious biometric identification programme. People’s rights to privacy and data protection are being undermined by claims of national security.
•As India goes to polls, candidates of all political affiliations should make a commitment to ensure accountability in public service, to protect religious minorities and other marginalised communities, and defend the rights of those most vulnerable. They should also uphold freedoms of expression, association and assembly, and recognise that by welcoming criticism and dissent they can make better informed decisions. In other words, they should pledge to uphold human rights — and mean it.
📰 RBI cuts repo rate to 6%, lowers GDP forecast to 7.2%
Economy facing headwinds, need to spur private investment, says central bank
•The monetary policy committee of the Reserve Bank of India (RBI) for the second consecutive time cut the benchmark lending rate by 25 basis points to 6% on Thursday. It cited concerns over growth as it lowered the GDP forecast to 7.2% for the current financial year from 7.4% projected in the February policy.
•The central bank said the output gap remained negative and the domestic economy was facing headwinds, especially on the global front. (Output gap refers to the difference between the actual output of the economy and its maximum potential.) “The need is to strengthen domestic growth impulses by spurring private investment that has remained sluggish,” it said.
•Four members of the committee voted for a rate cut, while RBI Deputy Governor Viral Acharya and Chetan Ghate voted for status quo.
•The committee maintained the neutral policy stance, which means interest rates can move in either direction. “With the inflation outlook remaining benign, the RBI will address the challenges to sustained growth of the economy while ensuring price stability on an enduring basis,” Governor Shaktikanta Das said.
•The RBI lowered its inflation forecast to 2.9%-3% from 3.2%-3.4% for the first half of the current financial year and 3.5-3.8% in the second half, assuming a normal monsoon. “Domestic GDP growth is also estimated to slow in 2018-19, with high frequency indicators suggesting slackening of urban and rural demand as well as investment activity,” he said.
•Bond traders, however, were not impressed with the 25 bps rate cut as they were expecting a higher quantum to address growth headwinds and deficit liquidity. The yield on the 10 year benchmark bond hardened from 7.27% to 7.35%.
•“Markets were perhaps anticipating a relatively high degree of dovishness from the policy statement which hasn’t materialised,” HDFC Bank said in a note to its clients.
Hoping for more
•Economists said there is still scope for further rate reduction. “We expect another rate cut, with June as our base case. An argument for the cut to be delayed to August is equally strong if the RBI sees reason in factoring in the full-year budget due in July and awaits a clearer picture on monsoon developments,” said Radhika Rao, Economist, DBS Bank.
•The Governor expressed concern over monetary transmission, while noting banks have only reduced lending rate by 10 bps after RBI reduced the policy rate by 25 bps in February. “More needs to be done.”
•The State Bank of India, the country’s largest lender, said the marginal cost of fund-based lending rate (MCLR), which is the benchmark rate, can go down by 7-10 bps. “We have already announced a framework that we will link some products with the policy rate. So that transmission will happen through the linking that we have already announced,” P.K. Gupta, managing director, SBI told The Hindu.
•“As we said whereever there is direct linking (with repo rate) the full pass through will happen. And wherever the linking is through MCLR, we believe 7-10 bps MCLR will go down. Our ALCO (asset-liability committee) will meet and take a call,” Mr. Gupta said.
•SBI had linked savings bank rate (for over ₹1 lakh deposit) and some short term loans with repo rate, with effect from May 1. The current savings bank rate of 3.5% was linked to a repo rate of 6.25%, so now with 25 reduction in the repo rate, savings bank rate (for ₹1 lakh) will become 3.25% from May 1.
Highlights
* Short-term lending rate (repo) reduced by 25 basis points to 6 per cent
* This is second back-to-back rate cut
* RBI maintains Neutral stance on the monetary policy
* Four out of six MPC members voted in favour of rate cut
* GDP growth projection lowered to 7.2 per cent for 2019-20
* RBI revises downward retail inflation estimate to 2.4 per cent in Q4 FY19.
* MPC notes output gap remains negative and domestic economy facing headwinds
* Next monetary policy statement on June 6.
📰 No surprises: on RBI repo rate cut
RBI’s reduction in benchmark rates is an acknowledgement of a slowdown in growth
•There was no surprise in the 25 basis points cut in benchmark interest rates by the Reserve Bank of India in its first bi-monthly policy statement of the financial year announced on Thursday. The market had anticipated such a cut and the only question was whether the central bank would surprise with a deeper 50 basis points cut. In the event, the Monetary Policy Committee (MPC) seems to have decided to hold its horses and settle for a conservative approach given the divergent sets of data that it was confronted with. On the one hand, inflation, despite the mild spike in February, is well under control at 2.6% and is projected to average 3.2% to 3.4% in the first half of 2019-20. This is below the 4% target set for the MPC. But there are some factors that could spring a surprise on the upside, such as the behaviour of the monsoon and the trend in global oil prices, both of which feed directly into inflationary expectations. Early forecasts indicate a strong possibility of a below-normal monsoon due to El Niňo. Such an event would cast a shadow on agricultural output, and consequently the food prices. Similarly, global oil prices are now edging close to the $70 a barrel mark on the back of production cuts by the OPEC cartel. While the soft growth trends in the global economy could act as a check on any runaway increase in oil prices, the chances of a sharp fall in the next few months appear remote at this point in time. If these are points of upward pressure on inflation, on the other side growth has been faltering in the last few months, going by both data on industrial output and overall GDP. The Central Statistics Office has revised the GDP growth for 2018-19 downwards to 7% while the RBI has projected a lower growth of 7.2% in 2019-20 compared to the 7.4% estimated in the last policy.
•The 25 basis points cut is, therefore, an acknowledgement by the MPC of the slowdown in growth. It also signals a shift in policy since Shaktikanta Das assumed office as Governor of the RBI, whereby the MPC is not solely focussed on inflation but also takes into account growth trends with equal seriousness. The MPC’s neutral policy stance is prudent given the uncertainties ahead as it gives the central bank the flexibility to tailor policy to emerging data sets. Meanwhile, Mr. Das has sent out a welcome, clear signal on the central bank’s commitment to the framework for resolution of stressed assets in the backdrop of the Supreme Court striking down its circular issued on February 12, 2018. While underlining that the RBI’s powers have not been compromised, he has indicated that the central bank will soon reissue the circular taking into account the apex court’s observations. This is as it should be.
📰 Outer clarity: on 'weaponisation' of outer space
India must take up more forcefully the case against weaponisation of outer space
•The Indian Space Research Organisation’s successful April 1 launch of the PSLV-C45 rocket that placed 29 satellites in three different orbits is remarkable both for the complex set of multi-tasking the mission accomplished and for the timing. Coming three days after ISRO and the Defence Research and Development Organisation knocked out a satellite in a Low Earth Orbit with a direct hit, it would appear that the Indian space programme stands galvanised and poised for a giant leap. The dexterity with which so many satellites, most of them American, were placed in three different orbits certainly showcases both the reliability and the expertise that ISRO offers. This is not a new development. In February 2017, the PSLV-C37 placed 104 satellites, 96 of them from the U.S., in one go, a testimony to ISRO’s ability to launch satellites at a fraction of the cost that other countries incur. Equally important, just as the February 2017 launch also placed the fifth of the Cartosat 2 series in orbit, an earth observation satellite with cameras that have a resolution of less than a metre, the PSLV-C45 placed EMISAT, which can, among other things, aid in electronic intelligence. In other words, India is assiduously putting in place a space military architecture. Over the next few months, as many as eight satellites are expected to be launched, strengthening the defence dimension.
•That is precisely why the government should articulate much more clearly the doctrinal aspects of the space programme, as well as the deterrence sought to be achieved by it. India must communicate its peaceful intentions just as it showcases its capabilities, so as to contribute to a better understanding among countries it hopes to deter and thereby reduce the chances of wrong inferences being drawn in crisis situations. After all, missiles are but one aspect of space warfare. There are other, less visible but equally effective methods to incapacitate satellites that are being developed and are of equally serious concern. The problem is that there is no global regulatory regime to address the growing militarisation in space. Last year, at the UN Disarmament Commission, India expressed concern about the “weaponisation” of outer space, and sought collective action to secure space-based assets. In this regulatory vacuum, India has legitimate reasons to develop deterrence for the security of its space-based assets. Equally, New Delhi must take a bigger lead in forging a global and legally binding instrument to prevent militarisation of space. It is encouraging that after the ASAT test, India said it “expects to play a role in the future in the drafting of international law on prevention of an arms race in space”. This is morally and pragmatically in keeping with India’s power projection. Given the prohibitively expensive nature of space projects, India and other countries must utilise the increased presence in space to legitimately advance the well-being of their people.
📰 Jobs or doles: which is the way forward?
Governments can provide direct cash transfers while creating conditions for employment
•With the Congress promising through the Nyuntam Aay Yojana (NYAY) scheme ₹6,000 every month to the poorest 20% of households if voted to power, Mahendra Dev and Pronab Sen talk of the importance and problems of direct cash transfers. Providing social protection is important even as governments try to create conditions for income-generating activities, they say in a discussion moderated by Sharad Raghavan. Excerpts:
Professor Dev, in the light of unemployment being such a big issue now, should the government that comes to power next double down on employment creation or opt for direct transfers to the people who need it?
•Mahendra Dev: Let me start on the employment question. Productive employment is the best way to remove poverty. But the organised sector constitutes only about 10% of the population; unorganised sector employees constitute almost 90%. In that context, unless you create jobs for everybody in the organised sector, the working poor will have problems. People are working, but at low wages. About 50% are self-employed. Unless you create productive jobs, you need to have social protection measures because the poor face many risks — health risks, labour market risks, financial risks.
•But whether it is a minimum income guarantee or the Pradhan Mantri Kisan Samman Nidhi Yojna (PM-Kisan), are these the best ways to reach them, or some other programmes like old-age pensions and maternity entitlements? That’s the debate. But the need for social protection for the poor is important in the context of risks. And now there is also rural distress. The best way is to create jobs, but for job creation at the higher level, we need to increase more labour-intensive manufacturing, which may take time. So, in that context, giving cash transfers may be right, but how to get resources for the scheme and implement it is another issue.
Dr. Sen, is the way forward to try to increase the number of productive jobs, increase skilling and train people better, or provide them with economic assistance?
•Pronab Sen: I think what Mahendra Dev is saying is that the two are not mutually exclusive. We keep talking about governments creating jobs, but the fact is that governments don’t of themselves create jobs. The best a government can do is to create conditions whereby private enterprises create jobs. That has to be done, and people must have the expectations of being able to access the jobs. In the interim, when you have people who cannot get employment, like the old, you do need social protection for them.
•And then comes the problem of the working poor, which is the largest chunk of the Indian economy. Do you need to do a top-up is the question. Now, the thing is, the two are related. So long as productivity and the income accruing from jobs don’t reach a particular level, a certain amount of help is necessary.
•The problem with entitlement sort of programmes, which is what both PM-Kisan and NYAY are, is that they don’t create that link. When we think about jobs, we should be very careful in our choice of words. Jobs are when someone else is employing you. What we are really talking about is income-generating activities. That could be a job, it could be self-employment, there is a variety of things that people do.
•We have simply gone away from the discussion on how to increase income-creating opportunities for the people at large. Our focus is too much on the formal sector, which, as Mahendra Dev rightly says, employs just 10%. Even if it grows at a very rapid rate, it is not going to make a dent for a while. But we are really not discussing the steps, the measures, the macroeconomic conditions that are necessary to create non-formal jobs which have been the mainstay of income for the bulk of the Indian working class.
Professor Dev, keeping that in mind, would increasing allocations to, say, MGNREGA, which is giving people work and also income, be one way instead of directly giving money to those who can work?
•MD: I am an advocate of MGNREGA. Of course, that is for unskilled workers mostly, although some skilled component is there. It is a self-targeted programme also. In the minimum income guarantee scheme, the problem of targeting errors is there. There will be exclusion and inclusion errors in identifying the poor. In MGNREGA, it is mostly self-targeted. The rich may not participate unless they do some corruption with the muster rolls. Otherwise MGNREGA is a good one. But that itself may not be enough because we have the self-employed poor and the old. That is one of the social protection things...
•But also remember that the amount allocated for this minimum income guarantee, ₹3 lakh crore, comes with opportunity costs. Human development people say, why can’t this be spent on health and education instead of on minimum income guarantee? There are opportunity costs to any expenditure, unless the government expands the tax base much more. Otherwise, there is always a trade-off.
Dr. Sen, how does one pay for something like the minimum income guarantee scheme?
•PS: Let’s be very clear. The scheme is a pure transfer, which is perfectly legitimate in any society that is caring. You take from the rich and you support the poor. There is nothing inherently wrong with that, but the implication is that you are going to have to tax the rich. And if you really look at the discourse we have been having in India over the last 25 years, it has mainly been focused on how to increase profitability of Indian enterprises and persuade them to invest and create jobs. Now that part of the narrative continues to be valid if you’re talking about creating jobs. But in a context where you need to tax the rich and get much more out of them, some of this narrative is going to have to change. For instance, we have sequentially been lowering the corporate tax rate. This government has already announced that it wishes to bring the corporate tax rate to 24%. It’s been done for one category of companies but has not been fully extended yet. All of those are actually leading to reduction in the amount you are taxing the rich, which becomes a problem for you to fund this sort of a programme.
•The other way you can do it is to remove a whole bunch of government activities. But anybody who has taken a long, hard look at the government’s budgets knows that there are very few items of expenditure which you can legitimately question as being unnecessary. So, there is a problem, and the problem now is that if the discourse now says, we are going to do this, we are going to tax the rich, what effect it has on the larger macroeconomic picture then becomes an issue that we need to debate.
Professor Dev, the thing with directly giving people money is that you are in essence just increasing their consumption expenditure, but the revenue earned by the government from them is more or less the same. Yes, there is some increase in indirect tax collections, but direct tax collections remain the same, whereas the consumption expenditure goes up. Is that a sustainable way? How do you mitigate that?
•MD: As Pronab said, we are not against the concept of minimum income guarantee. But how we do that is important. If the consumption expenditure increases, the demand for industrial goods, many durable or non-durable goods will increase. So that may have some taxes for the government. But how do you raise ₹3 lakh crore is an important issue. There are implications, as Pronab mentioned, like taxing the corporate sector. So, one has to see how to raise the resources. Can you reduce the so-called non-merit subsidies or concessions to the corporate sector in the Budget? These are issues one has to see, apart from how to identify the poor and implement the scheme.
Dr. Sen, if the government does manage to raise this quantum of resources, would direct transfers be the best way for it to utilise this extra resource?
•PS: I think this is where Mahendra Dev and I completely agree. The problem with the direct transfer mechanism is that there is an inherent assumption which has not been discussed, that is, the poor always remain poor. This is not necessarily the case. We are in a fairly dynamic economy and a person or household that was poor three years ago or five years ago may no longer be poor because their children have started working, they are earning better. The direct income transfer that is being talked about now is inherently non-dynamic. It’s very difficult to drop people who have been receiving these funds.
•On the other hand, MGNREGA is dynamic. That is, as people move into poverty, they will access MGNREGA because, as Mahendra Dev rightly said, it is self-targeting. People who are moving out of poverty will stop going to MGNREGA work sites. So, the ideal combination would be to have MGNREGA as a safety net and to have direct transfers to those who, for whatever reason — physical, age, gender — are unable to access the work market. It’s a combination of social protection and a social safety net.
Professor Dev, Dr. Sen had mentioned that the corporate tax rate has been lowered and it could possibly be increased. Do you feel this is the case for personal income tax as well? There was a calculation that increasing the tax rate for people earning more than ₹2.5 crore a year by 2 percentage points would pay for this scheme. Is something like that feasible?
•MD: I don’t know the implications for the economy of increasing the tax rate for the ultra-rich. Economist Thomas Piketty talks of a wealth tax. One has to see the implications and how much you get and those kinds of things. One has to think much more about resource mobilisation and how to mobilise this ₹3 lakh crore and also continuously map the dynamic poor. For example, the Socio-Economic and Caste Census (SECC) is of 2011. From that data, one can identify the poor, but what we had in 2011 could be quite different in 2019.
Dr. Sen, how then do we increase targeting? Do we need to increase the frequency of surveys such as the SECC or is there some other form of targeting we can use?
•PS: There are other forms of targeting. It could be on the basis of readily verifiable parameters such as age, physical disability, being an orphan. There are ways of targeting without going into the issue of poverty itself. So that what you are targeting is the inability to work and you focus on the growth process and for social safety nets like MGNREGA to take care of those who are able to work.
📰 ‘Linking small loans to external benchmark after further talks’
RBI factors in issues such as interest rate risk management, system upgrade
•The proposal to link small floating rate loans with an external benchmark for improving monetary transmission seems to have taken a back seat, with the Reserve Bank of India (RBI) deciding to hold further consultation with stakeholders before implementing such a scheme.
•“Taking into account the feedback received during discussions held with stakeholders on issues such as management of interest rate risk by banks — from fixed interest rate linked liabilities against floating interest rate linked assets — and the related difficulties, and the lead time required for IT system upgradation, it has been decided to hold further consultations with stakeholders and work out an effective mechanism for transmission of rates,” the RBI said in a statement during the first bimonthly policy review of the current financial year.
Dec. proposal
•During the December review of monetary policy, the RBI had proposed to implement the system of linking floating rate personal or retail loans, and floating rate loans to Micro and Small Enterprises, to an external benchmark from April 1, 2019. At present, all loans are linked to the Marginal Cost of Fund based Lending Rate (MCLR). Banks opposed the move to link loan rate to an external benchmark on the grounds that lending rates are a function of cost of funds and change in an external benchmark like repo rate does not have much impact on their cost of funds.
📰 Stressed assets circular to be revised soon
Committed to credit discipline: Das
•With the Supreme Court quashing the February 12 circular of the Reserve Bank of India (RBI) on stressed asset resolution, its governor Shaktikanta Das said on Thursday that the the central bank would come up with revised norms.
•At the post-monetary policy press conference, Mr. Das said, “In light of the Hon’ble Supreme Court’s order, the Reserve Bank of India will take necessary steps, including issuance of a revised circular, as may be necessary, for expeditious and effective resolution of stressed assets.”
‘Not under doubt’
•At the same time, he clarified that the powers of RBI under Section 35AA and other sections of the Banking Regulation Act, 1949, were not under doubt.
•“The court has held that RBI’s directions under Section 35AA of the Banking Regulation Act, 1949, which are in respect of debtors generally would be ultra vires of that section. Thus, the order of the Supreme Court mandates RBI to exercise its powers under Section 35AA in respect of specific defaults by specific debtors. The powers of RBI under Section 35AA and other sections of the Banking Regulation Act, 1949 are, therefore, not under doubt,” he said.
•Section 35AA allows the RBI to issue directions on initiation of insolvency in case of a default. “The RBI stands committed to maintaining and enhancing the momentum of resolution of stressed assets and adherence to credit discipline,” Mr. Das said.
•The February 2018 circular directed lenders to classify a loan account stressed and start the resolution process even for a day’s default.
•Asked by when the new circular on stressed asset resolution would be released, Mr. Das said, “We will get the circular soon, there will not be any undue delay.”
📰 ‘Banks have cut MCLR by 10 bps, but more needs to be done’
We are also conscious of the fact that there has to be an appropriate and effective transmission of rates, says the RBI Governor
•RBI Governor Shaktikanta Das explains the rationale behind 25 bps (basis points) rate cut and responds to a host of questions during the post monetary policy media interaction: Edited excerpts:
How will RBI’s forecast on growth and inflation change if Skymet’s forecast of less- than normal monsoon holds?
•All risk factors are taken into account during the deliberations of the MPC (Monetary Policy Committee). After taking all that into account, the MPC has decided to cut repo rate by 25 bps and maintain the neutral stance of the monetary policy.
Did MPC take into consideration the prospects of a hung Parliament or political uncertainty post- elections while taking its decision? Also, there have been instances in the recent past in which the RBI had been taken to the court. Do you see this as a welcome time to democratise RBI’s powers or is there a concern that it will take away the aura of invincibility of RBI?
•The first question is a trap, I will not answer that. I would like to say [that the] MPC has considered all upsides and downsides to the current macroeconomic situation.
•With regard to the litigation, it is always the democratic right of any person or entity to challenge the decision of any authority in the court of law.
•RBI cannot be an exception to this.
•And also, as I have said earlier, we are undertaking a wider stakeholder consultation and decisions are taken on that basis.
•You would have seen over the years, before a decision is taken a draft discussion paper or a draft circular is always placed in the public domain.
•But then, it has to be appreciated that considering the criticality of the regulatory aspects, it is not possible for the central bank to place [them] in the public domain.
•These are cases where the RBI has to act based on wisdom and internal consultation.
You have cut both inflation and growth forecast with inflation projection at 3.8% in the second half of this financial year. This leaves 200-225 bps positive real rates. Has the MPC fallen behind the curve to give domestic growth an impulse with 25 bps cut when there has been space to do more?
•I am not going to comment on the real interest rate or whether there is an additional space [for rate cut]. We are also conscious of the fact that there has to be an appropriate and effective transmission of rates.
•After the last meeting, I have held a meeting with the banks. Banks have cut their MCLR up to 10 bps. But more needs to be done. We have cut rate by 25 bps in two successive MPCs. And during this entire period also, the RBI has taken lot of action [by] infusing additional liquidity into the system, not only by OMO (open market operations) but also by currency swap.
There is liquidity deficit in the system. Do you like to go in for a surplus? What will be your preferred mode of infusion, OMO or dollar swap?
•With regard to liquidity, as I have said earlier, it shall be RBI’s effort to ensure that adequate liquidity is available in the system.
•With regard to currency swap and OMO, let me say that currency swap is an additional tool which we have added to our toolkit to deal with liquidity infusion.
•We will use all possible tools of infusing liquidity depending on requirement and other relevant factors.
How concerned are you about the fiscal situation? Was that also a reason for not going in for a bigger rate cut?
•The fiscal situation is also being monitored and will continue to be monitored. It is a relevant factor with other relevant factors and we have taken it into consideration.
