📰 Govt. launches campaign to promote ‘eat right movement’
‘Crucial measure to trigger social and behavioural change’
•“It’s time for India to eat right,” said Health Minister Harsh Vardhan on Thursday, kick-starting POSHAN Maah 2019 with a year-long social and mass media campaign on the Eat Right India movement.
•Leading with a tweet-a-day focusing on a weekly theme of eating right for the next 365 days, Dr. Vardhan also launched the new Eat Right India logo that represents a healthy plate, an online eat right quiz and online course for frontline health workers.
Preventive health
•Stating that the country is in need of a movement on preventive health for all in the backdrop of the increasing burden of non-communicable diseases including diabetes, hypertension and heart diseases, widespread deficiencies of vitamins and minerals and rampant food-borne illnesses, Dr. Vardhan said: “The Eat Right India movement is a crucial preventive healthcare measure to trigger social and behavioural change through a judicious mix of regulatory measures, combined with soft interventions for ensuring awareness and capacity building of food businesses and citizens alike.”
Aligned with plans
•This movement is aligned with the government’s flagship public health programmes such as POSHAN Abhiyaan, Anemia Mukt Bharat, Ayushman Bharat Yojana and Swachh Bharat Mission.
•The Food Safety and Standards Authority of India (FSSAI) has also put in place robust regulatory measures under three major pillars: Eat Safe, Eat Health and Eat Sustainably for the programme.
•FSSAI has prescribed a limit for Total Polar Compounds (TPC) at 25% in cooking oil to avoid the harmful effects of reused cooking oil.
•The Minister said Eat Right India takes a holistic approach to food habits that promote health and sustainability. “Launching this movement on this platform with the support of stakeholders such as the World Health Organization (WHO), along with Ministers and delegates from South East Asian countries, is a landmark event,” noted the Minister.
WHO’s message
•Poonam Khetrapal Singh, Regional Director, WHO, said: “The Eat Right India movement’s message is close to the heart of what the WHO has been saying all along. There has been a shift in the cause of mortality from communicable diseases to non-communicable diseases such as diabetes, hypertension, heart disease and cancer, not only in India, but also across the world. The four main factors to prevent non-communicable diseases are healthy diet, physical exercise, avoidance of tobacco and alcohol. Therefore, the message of ‘Eat Right’ should be promoted everywhere. Citizens should choose healthy food and the food industry should manufacture healthy food.”
It will facilitate real-time information sharing with investigators across the country
•Union Minister Jitendra Singh on Thursday said a Centralised Technology Vertical (CTV) would be set up under the Central Bureau of Investigation (CBI) at a cost of ₹99 crore to facilitate real-time information sharing with investigators across the country.
•The CTV would be functional by next year, said the minister at the 1st national conference on cyber-crime investigation and forensics organised by the CBI.
•Dr. Singh said after the abrogation of special status to Jammu and Kashmir under Article 370 of the Constitution, “cyber manipulators” were posing risk to the country by circulating fake videos on social media, which needed to be addressed.
•The Union minister highlighted the importance of studying cyber offences, given that India has the second largest users of Internet in the world. He said non-government organisations and activists should also join the fight against cyber crime.
•He said under the leadership of Prime Minister Narendra Modi, the Central government had given thrust to the optimum use of technology, quoting examples of Digital India, Government e-Marketplace, Aadhaar and Jandhan schemes.
•Dr. Singh praised the CBI for having gained a “high degree of credibility” over the years in terms of the quality of investigations. Stating that India was still evolving as a nation, he said organisations like the CBI had helped enhance the credibility of Indian democracy.
•CBI Director R.K. Shukla said the conference was a platform for the State Police and enforcement agencies to share their best practices and replicate them.
•The two-day conference, which concluded on Thursday, was attended by Directors-General of Police and other senior officers of various States, officers of Central agencies, Union Home Ministry, the Ministry of Electronics and Information Technology, other government departments and also cyber experts.
📰 WHO South-East Asia Region plans to banish measles, rubella by 2023
•Member-countries of the World Health Organisation (WHO) South-East Asia Region have resolved to eliminate highly infectious childhood killer diseases measles and rubella by 2023.
•“The new target to eliminate both the diseases will leverage the existing momentum and a strong political commitment, which is being demonstrated through unprecedented efforts, progress and successes in recent years,” said Dr. Poonam Khetrapal Singh, Regional Director, WHO South-East Asia.
•A resolution to eliminate the diseases was adopted at the 72nd session of the WHO Regional Committee for South-East Asia in Delhi.
•Measles is particularly dangerous for the poor, as it attacks malnourished children and those with reduced immunity. It can cause serious complications, including blindness, encephalitis, severe diarrhoea, ear infection and pneumonia, while rubella/ congenital rubella syndrome (CRS) causes irreversible birth defects.
•“Eliminating measles will prevent 500,000 deaths a year in the region, while eliminating rubella/ CRS would avert about 55,000 cases of rubella and promote health and wellbeing of pregnant women and infants,” Dr. Singh said.
•Measles elimination and rubella control has been a regional flagship priority since 2014. Bhutan, DPR Korea, Maldives, Sri Lanka and Timor-Leste have eliminated measles and Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka and Timor-Leste have controlled rubella.
•To achieve the new targets, the member-countries resolved to strengthen the immunisation systems for increasing and sustaining high level of population immunity against the two diseases at both the national and sub-national levels.
•The resolution calls for ensuring a highly sensitive laboratory supported case-based surveillance system – better evidence for appropriate planning and response. It also emphasises on preparedness for outbreak response activities.
•All countries pledged to mobilise political, societal and financial support to ensure the interruption of transmission of indigenous measles and rubella virus by 2023.
📰 India extends $1 billion line of credit for development of Russia’s Far East
•Prime Minister Narendra Modi on Thursday said India will walk shoulder-to-shoulder with Russia in its development of the Far East and announced a $1 billion line of credit for the development of the resource-rich region.
•Addressing the plenary session of the 5th Eastern Economic Forum here, Mr. Modi said the friendship between India and Russia was not restricted to governmental interactions in capital cities, but was about people and close business relations.
•“India’s connection to Russia’s Far East go back a long way. India was the first country to open a Consulate in Vladivostok,” he said.
•“For the development of Far East, India will give line of credit worth USD 1 billion. My government has actively engaged East Asia as part of its ‘Act East’ policy. I firmly believe that today’s announcement will add a new dimension to the economic diplomacy of the two countries,” Mr. Modi said at a packed house in Vladivostok.
•The Prime Minister, in the presence of Russian President Vladimir Putin, also unveiled the “Act Far East” policy to boost India’s engagement with Russia’s Far East region.
•“Let us deepen the bond between India and Russia even further. India is proud of the achievements of the Indian diaspora. I am sure here in the Russian Far East too the Indian diaspora will make an active contribution towards the region’s progress,” Mr. Modi said.
•“India is a proud and active participant in the various activities of the Eastern Economic Forum. Participation has come from top levels of government and industry,” he said.
•Indian firms have invested over $7 billion in taking stake in Russian oil and gas fields. India ventured into Russia when its flagship overseas firm ONGC Videsh in 2001 acquired a 20 per cent stake in Sakhalin-1 oil and gas field in Far East Russia.
•OVL later bought Imperial Energy, which has fields in Siberia, as also stakes in Vankor oilfield in eastern Siberia.
•IOC and its partners have picked up 29.9 per cent stake in a separate Taas-Yuryakh oilfield in East Siberia.
•Russian oil firm Rosneft in 2017 bought Essar Oil, which operates in Vadinar oil refinery in Gujarat and some 5,500 petrol pumps, for USD 12.9 billion.
•Mr. Modi appreciated the vision of Mr. Putin for the welfare for Russia’s Far East, saying the President has opened up investment opportunities for India in the region.
•“By declaring the development of the Russian Far East a ‘national priority for the 21st century’, President Putin has taken a holistic approach towards improving everything ranging from economy, education, health to sports, culture or communication,” he said.
•Mr. Modi also emphasised on India’s commitment to become a five trillion dollar economy by 2024.
•Mr. Modi, who arrived in Russia on a two-day visit on Wednesday, is the first Indian prime minister to visit to the Russian Far East Region.
•He arrived here to participate in the 20th India-Russia annual summit with President Putin and the fifth meeting of the Eastern Economic Forum (EEF).
•The forum focuses on development of business and investment opportunities in the Russian Far East Region, and presents enormous potential for developing close and mutually beneficial cooperation between India and Russia in the region.
📰 Russia proposes joint development of submarines with India
Conventional vessels to be built to Navy’s requirements with technology access
•Russia has offered India joint design and development of conventional submarines through an Inter Governmental Agreement (IGA) at the delegation-level dialogue between Prime Minister Narendra Modi and Russian President Vladimir Putin in Vladivostok, sources said.
•“The proposal includes joint design and development of a conventional submarine with Air Independent Propulsion (AIP) through an IGA as per the Indian Navy requirements with full access to technology and Intellectual Property Rights [IPR],” a Russian source said.
•The Navy has issued an Expression of Interest (EoI) for six advanced conventional diesel-electric submarines under Project 75I and the bids are expected to be submitted later month. The procurement is through the Strategic Partnership (SP) model of the defence procurement procedure and valued over Rs. 40,000 crore.
•The indigenous AIP being developed by the Defence Research and Development Organisation (DRDO) could be incorporated in the submarine, the source stated. However, the Russian fifth generation fighter aircraft, Su-57, was not offered to India, the sources added.
•For the P-75I, Russia has pitched a modified Amur 1650 conventional submarine to suit Indian requirements. The contenders in the P-75I are Naval Group of France, Rosoboronexport Rubin Design Bureau of Russia, ThyssenKrupp Marine Systems of Germany and Saab group of Sweden.
•India has signed a series of mega defence deals with Russia in the last few years through the IGA route.
•“Last year and today saw the emergence of a tremendous portfolio of contracts in contrast to all previous years, $14.5 billion. This is an impressive figure, it’s a real breakthrough,” Dmitry Shugaev, Director General of Federal Service of Military-Technical Cooperation of Russia, was quoted by Russian news agency TASS on Wednesday.
📰 IIT-Madras, Delhi University, three others get Institution of Eminence status
“Orders have been issued to five public institutions including IIT-Madras, IIT-Kharagpur, DU and University of Hyderabad, declaring them as IoEs,” Union HRD Minister Ramesh Pokhriyal Nishank said.
•The Human Resource Development Ministry has awarded the status of Institute of Eminence to the IIT-Madras, the IIT-Kharagpur, Delhi University, Benares Hindu University and the University of Hyderabad, said an official statement.
•Four private universities — the Vellore Institute of Technology, Amrita Vishwa Vidyapeetham, Jamia Hamdard University and the Kalinga Institute of Industrial Technology — were issued Letters of Intent to grant them the status. The new greenfield Bharti Institute, a project of Airtel’s Satya Bharti Foundation, has also been issued the letter.
•The Ministry took the action on Wednesday, following a recommendation from the University Grants Commission (UGC) last month. Each university will be required to sign a Memorandum of Understanding with the Ministry, laying out its plan to achieve the objective of becoming a world-class institution. The public institutions on the list will then be eligible for a government grant of ₹1,000 crore.
•Four other institutions, which had also been recommended by the UGC, require the State governments to act before they can be awarded the status. The Tamil Nadu and West Bengal governments must commit themselves to contributing half of the funds required for Anna University and Jadavpur University. The Uttar Pradesh and Haryana Assemblies must pass legislation to end the private university status of Shiv Nadar University and OP Jindal University, so that they could receive the new status of IoE Deemed Universities.
UGC inspections
•These institutions will not be subject to UGC inspections, and are free to set their own courses and curriculum, fee structure and merit-based admission systems.
•They will have complete academic, administrative and financial autonomy, the statement said.
📰 A weak chase: On controlling hepatitis B
Controlling the hepatitis B virus calls for universal vaccination of newborns
•On September 3, Bangladesh, Bhutan, Nepal and Thailand became the first four countries in the World Health Organization’s southeast Asia region to have successfully controlled hepatitis B. The virus is said to be controlled when the disease prevalence is reduced to less than 1% among children less than five years of age. Despite the introduction of hepatitis B vaccine in the Universal Immunisation Programme in 2002 and scaling-up nationwide in 2011, about one million people in India become chronically infected with the virus every year. According to the Health Ministry, as on February 2019, an estimated 40 million people in India were infected. Hepatitis B infection at a young age turns chronic, causing over 1,00,000 premature deaths annually from liver cirrhosis or liver cancer. A study published in 2013 found lower coverage of hepatitis B vaccine in eight of the 10 districts surveyed. But the coverage has witnessed an increase with the introduction of a pentavalent vaccine on a pilot basis in Kerala and Tamil Nadu in December 2011 and national roll-out in 2014-2015. According to the WHO, the coverage of hepatitis B third dose had reached 86% in 2015. However, despite the high vaccination coverage, disease prevalence in children aged less than five years has not dropped below 1%. One of the reasons for this is the sub-optimal coverage of birth dose in all infants within 24 hours of birth.
•Hepatitis B birth dose, given in the first 24 hours, helps prevent vertical transmission from the mother to child. The compulsion to increase birth dose to cut vertical transmission arises from two important reasons — about 70-90% newborns infected this way become chronic carriers of hepatitis B, and about 20-30% carriers in India are due to vertical transmission. But even seven years after the Health Ministry approved the birth dose in 2008, its coverage remained low — 45% in 2015 and 60% in 2016 — according to a 2019 Health Ministry report. What is indeed puzzling is that even in the case of institutional delivery, the birth dose vaccine coverage is low — 76.36% in 2017. Incidentally, institutional delivery accounts for about 80% of all deliveries in the country. The birth dose coverage when delivery takes place outside health-care institutions is not known. One of the reasons for the low coverage is the fear of wastage of vaccine when a 10-dose vial is used. Unfortunately, health-care workers are very often unaware of the WHO recommendation that allows hepatitis B open-vial policy. Opened vials of hepatitis B vaccine can be kept for a maximum duration of 28 days for use in other children if the vaccine meets certain conditions. There is also a need to increase public awareness about the merits of the birth dose.
📰 Teaching in the time of consumerism
Changes in social ethos and state policy have pushed the once-venerated Indian teacher to the margins of public life
•Like many other topics, teaching and those who earn a living by teaching are subjects of a highly polarised debate in our country. Public perception of schoolteachers is quite negative in many parts of the country. If you ask a young urban audience: ‘Who wants to be a schoolteacher?,’ the answer will come with so much hesitation that you will be right to summarise it as: ‘No one, really.’ You can verify this by asking freshly enrolled students at a teacher-training course: ‘Was teaching your first preference?’ Very few will say, ‘yes.’ Among young men, there will probably be no one answering in the affirmative.
•This low popularity of school teaching can be linked to several changes that social ethos and state policy have gone through over the last three decades or so. In a consumption-oriented environment, the kind of idealism school teaching requires is not easy for a young person to cultivate and sustain. The working conditions and ethos at their respective schools erode the stamina of the few who start with a sense of dedication.
•I hardly need to add that this macro picture conceals the tales of several thousand teachers who battle on and remain committed to their duty against all odds. Some of them do get appreciation from parents of the students, but more often than not, parents remain dissatisfied. Many parents now treat their progeny’s school life as an ‘investment’ for which they demand the best ‘value’, often by relentlessly criticising the teacher and the principal. They don’t know the burden teachers carry on their fragile, ill-equipped professional shoulders. This burden includes the weight of family and community life, and the pressure coming from officialdom.
•On their part, children bring to schools the psychological bruises incurred at home where the adults are too preoccupied with their own lives. Further, as recent surveys in both urban and rural habitations show, technology is a dominant player in child upbringing. A schoolteacher must cope with the impact that these drastic changes have made on the inner world of children.
Weak professional training
•Speaking of training, the vast majority of teachers being hired today have had their professional training in poorly equipped institutions. Weak professional preparation is not a recent woe, but it has certainly worsened under the ‘licensing raj’ of the National Council of Teacher Education (NCTE). There was a time when teacher training had no licensing authority. The NCTE was an advisory body then, with no statutory powers. It acquired legal teeth as a result of the NCTE Act, 1993. The new, empowered NCTE came into being two years later.
•The mid-1990s marked a period of tumultuous change in the landscape of public education. The impact of market-friendly policies was spreading across the system, but it was the most palpable in professional education. Private enterprise in medical, engineering and management education had already set in. Compared to these areas, teacher training was both cheap and highly profitable.
•Demand for qualified teachers rode the wave of rapid growth in primary education. In response to this demand, teacher-education institutes and correspondence courses mushroomed. The NCTE had a difficult mandate to fulfil and had to maintain standards by regulating a bullish market of enrolment providers. Initially, it seemed as if the NCTE’s regulatory role would succeed in imposing quality norms. However, before long, the body’s failure to control the flood of commercial private interests started looking inevitable.
•Teacher training was, of course, not the only area of professional education to be corrupted by the new licensing regime. The system of education was in general battling hard to find ways to regulate the swelling, strong current of privatisation.
•The teacher-training sector became so afflicted by fraudulent institutions and practices that internal mechanisms of correction proved inadequate. Hundreds of cases against bogus institutions reached the Supreme Court, which appointed a commission chaired by late Justice J.S. Verma. For a few years after 2012, when its report was published, an attempt was made to implement its recommendations, but the momentum slowed down before long. Several recommendations required substantial state funding, but the NCTE had already taken the self-financing route. Its institutional capacity to provide academic leadership to teacher training was already limited. Its further decline coincided with the rise of technological gimmickry. However, it would be wrong to hold the NCTE alone responsible. The wider problems of higher education have also made their contribution to the decline of teacher training. This is not hard to explain. Graduates whose college education is of poor quality cannot be expected to overcome their learning backlog at a training institute. Faculty shortage exacerbates this deprivation.
•The government recently came up with a policy decision favouring four-year courses that integrate undergraduate learning with pedagogic training. This model is not new, and its success depends on investment in institutional infrastructure. But with commercialisation fully entrenched in teacher education, one cannot expect generous spending on faculty and infrastructure.
Impact on school education
•Problems of teacher training have had a pervasive impact on school education as a whole. Governments have been aware of this, both at the Centre and in the States. One of the steps they have taken to fill the quality gap is to introduce a teacher-eligibility test. This has only made a marginal difference, as the proportion of trained teachers who get through the test is low, creating a vast backlog in recruitment. On the other hand, para-professionals have been growing in number and influence. They are known by various names in different States, but they also exist in vast numbers outside the system — as providers of home tuition and coaching. This underbelly of the education system suffers no interference from state norms. In the world of coaching, we see the utopia of free enterprise and the demise of teaching as noble work.
•It is hard to date the beginning of the current, ongoing decline in the status of teachers. A conversation with a senior official in Madhya Pradesh comes to mind. During a visit to Bhopal more than two decades ago, I asked him if it was correct to say that school teaching was no longer considered a career in M.P. He readily agreed. We discussed the new realities that had emerged. We agreed that a major shift in culture, pushed by economic changes, had occurred, and it had marginalised the teacher.
•The Indian teacher, once a foot soldier in the freedom struggle and a contributor to nation building in the early years after Independence, now stands relegated to the margins of public life. This marginalisation is reflective of the social change that has taken place in the country and flags the diminishing importance of intellect. This is also evident from the news about our greatest historian being insulted by her university. Our collective vulnerability to the power of propaganda and rumour is not new; disrespect for the teacher’s dedication to a life of intellect is.
•Nonetheless, no matter what the subject and howsoever limited his or her own knowledge, every teacher tries to nudge his students towards reality and truth. Children want their teacher to verify and appreciate their efforts. Having faith in his/her teacher is a part of being a child, a blow to which will disturb the foundations of social living.
📰 New traffic rules may entail steeper penalties, court visit
Many States are yet to pass an order that will allow police personnel to let off offenders after paying a fine
•Traffic violations after the implementation of the Motor Vehicles Act, 2019, will not only have you digging deeper into your pockets to pay steeper penalties, but will also entail a visit to a court as many States are yet to pass an order that would allow police personnel to let off offenders after the payment of the fine.
State orders awaited
•According to the new Act, as many as 30 offences are compoundable, including common violations such as over-speeding, not wearing helmets and seatbelts as well as not restraining children under the age of 14, among others.
•However, most States are yet to issue an order granting officers the authority to discharge offenders.
•As a result, regardless of the offence you have committed, you will be given a date on which you will have to appear before a court.
•“So far, we have only received information from the Karnataka government that it has issued the relevant notification,” a senior official of the Ministry of Road Transport and Highways said on condition of anonymity.
•Meanwhile, data collected in the first four days since the implementation of the Act on September 1 showed that Haryana had issued 343 challans and collected ₹52,32,650 in penalties, while Odisha had issued 4,000 challans and collected ₹88,90,107.
•The 30 offences which are compoundable include some of the most common violations such as over speeding, not wearing helmets and seatbelts as well as not restraining children under the age of 14, driving a vehicle without a registration/ licence or insurance, violating road safety and causing noise and air pollution, not allowing passage to emergency vehicles, among others. The fine for most of these offences range from ₹1,000 to ₹5,000.
Collecting data
•“So far we have only received information from the Karnataka government that it has issued the relevant notification,” a senior official of the Ministry of Road Transport and Highways said on condition of anonymity. He added that five days after the amended law came into effect, the Centre is still in the process of collecting data from the State governments on this issue.
•Delhi is among those States which has refused to allow compounding yet and has said it needs to hold discussions with the traffic police as the penalties levied are very high.
•Meanwhile, data collected from two States issued in the first four days since the implementation of the Act on September 1 showed that Haryana issued 343 challans and collected ₹52,32,650 in penalties, while Odisha issued 4,000 challans and collected ₹88,90,107.
📰 Putting the pedal to the metal
The government should consider dropping GST rates for BS-IV vehicles to revive the automobile industry
•The automobile industry is notoriously cyclical. It is also a lead indicator for economic growth. And it has been in a tizzy since this time last year when the signs of an impending slowdown were first seen. Sure enough, the decline began in the last quarter of calendar year 2018 and intensified with the passage of every month in 2019.
•So, if the industry goes through cycles of ups and downs, is the current slowdown something to worry about seriously? Yes, indeed. Are auto manufacturers heading towards an apocalypse? No, certainly not. So, why do we need to worry about this slowdown? Simply because the current downturn is like nothing that the industry has seen in a long, long time in terms of depth, scale and character.
•So, what’s different this time? First, every segment of the auto industry, beginning from two-wheelers to passenger cars, light commercial vehicles and heavy commercial vehicles, and even tractors, has been hit. The downturn this time is all-encompassing.
•Second, what was a natural, cyclical downturn has been amplified by extraordinary circumstances unleashed by reform measures that may have been well-meaning but have come back to bite the government.
•Finally, an unthinking approach to a critical policymaking area such as electric vehicles has only intensified and prolonged the slowdown. Yes, key Ministers are now scrambling to contain the damage by retracting some of their earlier statements and reassuring the industry that the electric motor will not be privileged over the internal combustion engine but it has come too late.
Revision in axle-load norms
•Let’s take the case of the commercial vehicles (CV) industry. In July 2018, the government revised axle-load norms (for the first time since 1983) for cargo carriers by between 12% and 25%. The idea was to legalise over-loading, which is common practice, and help reduce freight costs for both consignors and consignees.
•But by applying the higher cargo rules to all trucks on the roads, instead of only trucks to be produced after a given date, the government, in one stroke, raised existing carrying capacity by up to a quarter, forcing per-tonne freight rates down. This at a time when carrying capacity was already increasing due to the introduction of the Goods and Services Tax (GST), which helped in quicker turnaround of trucks. Operators were able to keep the trucks gainfully deployed for 25% more days in a month than before.
•These two reform measures only served to advance the cyclical slowdown which was on its way. The CV industry has a well-earned reputation for sharp practices such as steep-price discounting and dealer dumping by vehicle manufacturers. Like elephants that spray their own heads with sand, vehicle manufacturers — CVs and cars — have honed into a fine art the practice of clogging the pipeline by over-producing vehicles without a care for demand, and dumping them on dealers to sell.
•This became a particularly painful issue because of the approaching deadline for the transition to BS-VI norms from April 1, 2020. Dealers are saddled with inventory of BS-IV vehicles that they need to clear out before the deadline. For the manufacturers, the problem is that they’re unable to plan their production schedules for BS-VI vehicles as freight operators are watching the fun from the sidelines. They’re waiting for the steep discounts that are bound to come by as the deadline nears and are not in a hurry anyway to add new trucks given the slowdown in goods movement.
Model fatigue
•If it was a deadly cocktail that consumed the CV industry, in the case of cars, it appears to be one of model fatigue. Between Maruti and Hyundai, the two big players that account for two-thirds of the industry, there have been hardly any exciting new launches in the last one year. There have been facelifts and limited editions of existing models but the two biggies have not ventured into launching fresh models, at least until very recently.
•The model-fatigue theory is proved by the response that two new kids on the block — the Kia Seltos and the MG Hector — received. Though they’re not mass-market cars and are priced considerably higher than the median range, the two models have attracted bookings in excess of 30,000 units each in what is supposedly a depressed market. Maruti and Hyundai have clearly been caught sleeping at the wheel.
•The onset of festival season sales and the impact of recent measures by the government may help the cycle play itself out soon but is there something that the government can do to quicken the turnaround? Of course, yes. Should it reduce GST on automobiles from 28% to 18% as per the demand of the industry? Yes, it should, but not for all vehicles.
•The government should consider dropping GST only for BS-IV vehicles — CVs, cars and two-wheelers — that are now idling in stockyards of vehicle manufacturers and dealers. It should consider a scheme where all BS-IV vehicles sold until March 31 will suffer only an 18% GST. For the industry, this will help clear the clogged pipeline and for the government, it will help contain the fallout on its revenue as the lower rate will apply only on a limited stock and until a specified time.
•A quick GST Council meeting by video conference should be called right away instead of waiting for September 20 when it’s slated to next meet. Prospective buyers, of cars as much as CVs, are delaying their decision as the word is out that the government may consider a tax cut. If rates are to be cut anyway, it makes sense to do it immediately. Two weeks can make a huge difference to an industry writhing in agony.
📰 Interesting, but risky: On RBI’s floating rate loans diktat
RBI’s diktat to banks could spur borrowing but may pressure lenders’ margins
•The Reserve Bank of India (RBI) has finally decided that it needs to address the problem of inadequate interest rate transmission head on. In a circular to banks on Wednesday, it directed lenders to link all new floating rate loans given to borrowers in the personal, retail and micro, small and medium enterprise (MSME) categories to external benchmarks, including the repo rate, with effect from October 1. While giving banks the relative freedom to choose the specific external benchmark, including yields on the 3-month and 6-month Treasury Bills published by the Financial Benchmarks India Pvt. Ltd., the central bank made it clear that lenders would need to adopt a uniform benchmark within a loan category. Banks have also, crucially, been given the leeway to determine their spread over the benchmark rate with a caveat that changes to the credit risk premium can only be made when the borrower’s credit assessment undergoes a substantial change. That the inadequate transmission of policy rate moves has been an abiding conundrum for the RBI is well known. In 2015, then Governor Raghuram Rajan decided that the system used by banks to price their loans needed to be changed and so introduced the Marginal Cost of Funds based Lending Rate (MCLR) regime. In October 2017, an internal study group of the RBI recommended the adoption of external benchmarks to ensure effective policy transmission, after observing that the MCLR too had failed to deliver.
•Policymakers, in fact, have been so vexed with poor transmission — against a total of 75 basis points (bps) reduction in the RBI’s repo rate between February and June, the weighted average lending rate on fresh rupee loans at banks eased only by 29 bps — that Monetary Policy Committee member Chetan Ghate in August cited the issue as reason to oppose the proposed 35-bps cut and instead voted for a 25-bps reduction. “By a large cut (35 bps) I feel we will be burning through monetary policy space without much to show for it. While the real economy needs some support, we should wait for more transmission to happen,” he said at the MPC’s rate setting meeting, the minutes show. Though the latest move will surely lower the interest cost on new floating rate loans availed by borrowers to buy cars or homes, it may force banks to start cutting the interest rate they pay deposit holders or risk seeing their margins shrink. And while the RBI wants to try and nudge an uptick in credit for becalmed personal consumption and borrowing by beleaguered MSMEs, the success of the measure will ultimately be determined by a regaining of confidence by consumers to spend and a conviction by industry to invest.
📰 Will PSB mergers alter the banking scenario?
Consolidation will cause disruption in the short run, but could lead to speedier decision-making in future
•Last week, the Centre announced a sweeping consolidation that would see 10 public sector banks being merged into four. While the government has touted the move as one that will enhance credit capacity, there are concerns that more large banks could make the banking system vulnerable. In a conversation moderated by Suresh Seshadri, T.T. Ram Mohan, Professor of Finance, IIM-Ahmedabad, and V. Srinivasan, a veteran banker, look at the challenges to successful integration. Excerpts:
How does this merger benefit the economy?
•T.T. Ram Mohan: How it benefits the economy remains to be seen. Because I think the case for the merger has not been articulated properly enough. We have some reference to Indian banks becoming global in size. But that sort of talk needs to be discounted. Because, even if you take the largest of the mergers that have been proposed, which is PNB combining with two other entities, it’s going to give you a bank which is about one third the size of the 50th largest bank in the world, which is not saying much.
•Second, the correlation between size and efficiency is suspect beyond a certain minimum size. And that size is quite low: say $10 billion in assets or so you get the necessary scale of economy. Beyond that, the empirical evidence does not suggest there are many great advantages to simply growing bigger. And we have seen this in the Indian context where the large public sector banks underperform in relation to private banks, which are much smaller. And of course, the classic comparison is between HDFC Bank and the consolidated State Bank of India, which is many times its size. The price to book value ratio of HDFC Bank is close to 4, whereas the price to book value of SBI is around 1.25. Therefore, the suggestion that getting bigger is going to, in itself, give you some benefits is not validated by experience, either internationally or within India.
Srinivasan, as someone who is from within the industry, is integration going to be something which ends up in some way impacting the so-called benefit that the integration move aims to provide? Is the timing going to end up getting the management of these banks to focus on integration itself rather than on using the balance sheet to lend to the economy, especially when investment pickup is crucially required?
•V. Srinivasan: I would agree with the argument that, from a timing point of view, this does not seem an ideal time for going ahead with these mergers. Because, as all of us are aware, the economy is clearly going through a major slowdown. And it requires all hands on the deck. And whenever a merger of such scale happens, I think the senior management gets distracted in terms of trying to make sure who gets what. I think there’s a lot of work to be done. Even though that may be done by several teams, ultimately human emotion will come into play here, where people are going to be looking at saying, “What’s in it for me? Where am I headed as far as this action is concerned?” And therefore, in the short term, I think there is going to be some amount of disruption. That is something which you could have avoided in this sort of time. Consolidation is good, because from an administrative perspective, as people retire, you would see some economies of scale getting through, but just sort of putting banks together is not going to solve the problem as far as the credit flow is concerned.
There’s also this other issue, that from a structural perspective, fewer larger banks might increase the risks to the banking industry.
•TTR: The way to look at that question is to see the share of the top three or the top five banks in assets. And if that share is very large, then you have a concentrated banking system. If the share is too low, then you have a highly fragmented banking system. And I think it’s fair to say that in India we were tending towards a high degree of fragmentation rather than concentration. So, I think so far as the increase in systemic risk is concerned, it’s not going to be an immediate problem. Because if you look at the share of the top three or four banks in assets it was about 30-32%. That is not a very high degree of concentration.
•But I do know that regarding the point that Srinivasan made, which is that in order to make a success of a merger, you need two conditions to be satisfied — you need a very high degree of managerial ability, and at least one of the entities in the merger must be financially strong — I’m afraid I can’t see either condition being satisfied in the mergers that are being proposed. If you’re not able to make a success of your operations and deliver the performance of your existing level of assets, how does the management propose to make a success of a much bigger and more complex entity? The question is not answered simply by citing the theoretical scale economy. Making a success of merger is a huge challenge.
Another concern is that as earlier mergers haven’t yet given the benefits, why then this rush to announce a whole host of mergers.
•VS: As far as Bank of Baroda (BOB), Vijaya Bank and Dena Bank are concerned, it’s still very early days... I don’t think the merger integration is complete. And clearly we have not seen much in terms of how exactly they have put things together and gone to the market, with a single value proposition. The way I look at it, this was something which has been on the table for a long time. I think they tried out BOB and just decided to go ahead.
•The feedback from the BOB experiment was that things were not falling apart. And things seemed to be broadly business as usual, not very different from what was happening in the past. And they decided that this is something which we can go ahead with and do the rest of the previous plan, which was actually already, I think, part of the blueprint. I think that’s how they have gone ahead with these mergers. The only thing here is, I don’t think there’s any identity which they have tried to create for each of these merged entities in terms of trying to say, one will be focusing on Corporate, one will be on Small and Medium Enterprises, one will be Retail. There’s been no thinking in terms of any or each of these banks’ focus on a particular theme, particular skill-set and developing expertise in a space which is important as far as the overall economy is concerned. Basically, I think they’ve said, every bank falls broadly in the same template, and there’s not much to choose from in terms of who goes with whom.
From an underlying logic perspective, there are those who fear that bank NPAs could worsen, at least in the interim, while this process of integration is on.
•TTR: In terms of resolution of NPAs there is some merit in having the merger because there are coordination problems involved when you have multiple banks trying to resolve NPAs which are common to all of them. So, you have the middle and senior management deputed for meetings, where they have discussions with their counterparts from other banks. And then they have to go back to the top management for a decision, come back again for a meeting, and it goes on and on. Therefore, the resolution of NPAs becomes difficult when you have so many banks trying to arrive at an understanding amongst themselves. So, to the extent that the discussion is happening among fewer banks, I think the resolution of NPAs will be facilitated. That could be one argument for the merger.
•But I think the most important rationale is that the multiplicity of banks was making enormous demands on the bandwidth of the Finance Ministry in terms of appointments of chairmen, managing directors, executive directors, independent directors. Even though they have the banks board bureau to advise them on appointments, the process is extremely time-consuming. There were long delays in making the senior appointments, as a result of which these banks have been incurring substantial costs. When you don’t have a person at the top or persons at the top, or even directors in play, it exacts its own cost on the bank. And so, collapsing the number of banks makes it easier for the Ministry to monitor the banks on its watch. I think that is probably one argument for the merger which I can sort of relate to.
•The other argument is that having bigger entities enables people to make bigger loans, which would give them a degree of pricing power vis-a-vis corporates because corporates have been playing one bank off against the other under the multiple banking system. To the extent that you combine banks and they do a bigger amount of funding, it does improve the bargaining position of the bank. Again, fee income that the banks get from selling mutual funds and insurance products can go up, because now the banks can command a much larger network and therefore demand a bigger commission from the people whose products they’re selling.
•The fundamental issue is a managerial issue with making a success of the merger, which is a challenge even in a developed economy, where you have a lot of flexibility in terms of laying off people, rationalising branches. Here, even if you rationalise the branches, a commitment has been given that people will not be laid off. That is one of the assurances given by the Ministry. And therefore, it’s not clear how any cost economies will be effected... if people are to be retained and yet be redeployed for other purposes.
There are those who say “we were comfortable with a small bank, are we going to be lost in the larger scheme of things once this bank becomes owned by some bank from Mumbai?” How does this really pan out for the customers?
•VS: I would think it is more the lending side which can get impacted on account of this rather than the customer on the deposit side. The deposit side, however weak the government-owned banks, they didn’t face any risk of deposits sort of unwinding and they continued to have reasonably decent deposit growth, irrespective of whether they were figuring in the top quartile or the bottom quartile because the sovereign guarantee was clearly there. It will be business as usual. I don’t think things will change as far as these banks are concerned. From a lending perspective, the impact will be felt more for the SMEs and small businesses, who have a lot to gain from the personal contact they have with a local person. And as that becomes a lot weaker, that can impact... That is something which we will know only as we go along. But there would be some amount of transition issues as things change.
Is this announcement going to make a large difference to the banking industry?
•VS: Clearly, a lesser number of banks means, hopefully, speedier decision-making across banks. That’s the upside one can hope for. And the other thing which it can trigger is some consolidation in private sector banks. Because the private sector banks would now be falling behind in terms of scale compared to some of these banks. And therefore, to some extent, this can force the private sector banks to think of a similar consolidation.
