📰 NITI Aayog seeks ideas on population policy
Think tank to hold consultation today
•Government think tank NITI Aayog will hold a national consultation on population stabilisation on Friday to explore ways to strengthen the country’s population policy and family planning programmes.
•The event, being held in partnership with the Population Foundation of India, will include government officials from the Centre as well as seven States — Uttar Pradesh, Bihar, Rajasthan, Madhya Pradesh, Assam, Kerala and Tamil Nadu — and experts on the subject. “The conference will contribute to a NITI Aayog working paper to help India in its vision for attaining population stabilisation as voiced by Prime Minister Narendra Modi on August 15, 2019,” said a press statement from NITI Aayog.
•Speaking from the ramparts of Red Fort about population explosion, Mr. Modi said keeping families small is “an act of patriotism.” The officials will brainstorm over recommendations such as treating population stabilisation and family planning as a national priority and ensuring inter-governmental convergence and multisectoral participation, increasing budgetary allocations for family planning, enhancing the basket of contraceptive choices, addressing existing socio-cultural barriers towards contraception as well as social determinants of health such as age at marriage and sex-selective practices, the statement added.
Voting was largely along party lines; Senate trial next month
•Donald Trump on Wednesday became the third U.S. President to be impeached as the House of Representatives formally charged him with abuse of power and obstruction of Congress in a historic step that will inflame partisan tensions across a deeply divided America.
•The Democratic-led House’s passage of two articles of impeachment on a mostly party-line vote sets the stage for a trial next month in the Republican-controlled Senate on whether or not to convict and remove him from office.
•No President in the 243-year history of the U.S. has been removed from office by impeachment. That would require a two-thirds majority in the 100-member Senate, meaning at least 20 Republicans would have to join the Democrats in voting against Mr. Trump — and none has indicated they will.
‘No chance’
•The Senate’s top Republican, Mitch McConnell, has predicted that there is “no chance” his chamber will remove Mr. Trump when it holds its trial.
•House Speaker Nancy Pelosi said after the vote that she would wait to name the House managers, or prosecutors, until she knew more about the procedures for the Senate trial. She did not specify when she would send the articles to the Senate.
•Mr. Trump, 73, is accused of abusing his power by pressuring Ukraine to investigate political rival Joe Biden, a leading contender for the 2020 Democratic presidential nomination, as well as a discredited theory that Democrats conspired with Ukraine to meddle in the 2016 election.
•Democrats said Mr. Trump held back $391 million in security aid intended to combat Russia-backed separatists and a coveted White House meeting for Ukrainian President Volodymyr Zelensky as leverage to coerce Kiev into interfering in the 2020 election by smearing Mr. Biden.
•The second article accused Mr. Trump of obstruction of Congress by directing administration officials and agencies not to comply with lawful House subpoenas for testimony and documents.
•Mr. Trump, who is seeking another four-year term in the November 2020 election, has denied wrongdoing and called the inquiry launched by Ms. Pelosi in September a “witch hunt”.
•Mr. McConnell, Senate Majority Leader, said the House of Representatives had conducted the “most rushed, least thorough and most unfair impeachment inquiry in modern history.”
•“This is by far the thinnest basis for any House-passed presidential impeachment in American history,” he said. “A political faction in the House of Representatives has succumbed to a partisan rage.”
📰 Pact to open door for U.S. defence firms
They can cooperate with Indian private sector for future agreements, including the one on fighter jets
•The Industrial Security Annex (ISA), signed between India and the U.S. at the second 2+2 dialogue in Washington, will open the door for U.S. defence companies to partner with the Indian private sector for several multi-billion dollar deals in the pipeline, including the one for 114 fighter jets. The two sides also took stock of the steps being taken to operationalise the foundational agreement, the Communications Compatibility and Security Agreement (COMCASA).
•With this, three of four foundational agreements are through. The Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation (BECA) is still under negotiation as both sides try to iron out few reciprocal issues.
•“We hope that this [ISA] will enable smooth transfer of classified technology and information between private entities of the U.S. and India,” Defence Minister Rajnath Singh said at a press conference after the talks.
•U.S. Secretary of Defence Mark Thomas Esper stated that the ISA would “facilitate collaboration between our defense industries by supporting the secure transfer of key information and technology.”
•The ISA is a part of the General Security Of Military Information Agreement (GSOMIA), which India signed with the U.S. long back. It became critical as India opened up the defence sector to the private sector and the Strategic Partnership policy, which has few big military platforms and is reserved for the Indian private sector. U.S. companies are in the race for multi-billion dollar deal for 114 fighter jets, among other deals.
•“The IAF and Navy fighter competitions are a once in a generation opportunity. We are offering some of the best technology widely employed by the U.S. Navy and Air Force, including the F/A-18 Super Hornet and the bespoke F-21,” said Joel Starr, Deputy Assistant Secretary in the Bureau of Political-Military Affairs, US State Department, at a conference in Hyderabad on Wednesday.
•After decade-long negotiations, India signed the Logistics Exchange Memorandum of Understanding (LEMOA) in 2016 and third agreement COMCASA last year.
•Mr. Singh also highlighted the operationalisation of COMCASA and the maritime cooperation. “Our Maritime Domain Awareness (MDA) cooperation has been extremely useful. We have sent an invitation to the U.S. to nominate a liaison officer for the fusion centre in India,” he said. The Indian Navy has invited friendly nations to post liaison officers at the Information Fusion Centre for Indian Ocean Region (IFC-IOR) that was set up last year. Mr. Singh stated that one of the major movements over the last year has been steps to operationalise the COMCASA, which enables most of the U.S.-origin platforms to have a “secure communication capability.” Mr. Singh said they had been holding meetings and taking necessary steps to open a COMCASA account. “This will be discussed in the Military Cooperation Group format, including our agreement to explore cooperation in defence-space and defence-cyber and special forces,” he added.
•Defence officials said the account of $5 mn, from which any deductions would be done for services or information sought from the U.S. under the COMCASA had been created and work was on to develop a tactical data link.
📰 Inaccurate diagnosis, draconian remedy
India’s black money problem was misdiagnosed; unverified, exaggerated numbers went into enactment of harsh laws
•India’s fight against foreign black money has returned a whimper. The government’s intent cannot be faulted, but since the problem itself was misdiagnosed, the ensuing legislative measures have been bereft of constitutional and economic common sense. They relied too little on persuasion, and far too much on browbeating. The economic results are nothing to rave about.
•High on populism, low on constitutional wisdom, the Black Money Act was a draconian law that was bound to fail. At minimum tax rate of 60%, it gave marginal incentive for the hoarders to come clean. Lawmakers overestimated the writ of international laws and made no economically persuasive case. Resultantly, as of May 2019, the total untaxed foreign assets mined was Rs. 12,500 crore. Wholly recovered, this wouldn’t even pay Prasar Bharati’s bills for four years. Even this recovery was aided greatly by international exposes such as the Panama Papers in which the government’s legislation had no role to play. In comparison, Indonesia recovered about Rs. 25 lakh crore under similar schemes. The government’s initial obsession with browbeating had an ominous start. But, instead of doing course correction, it passed an even more confiscatory law, the Fugitive Economic Offenders Act.
Existing laws
•The intent of both the laws could have been achieved by a few tweaks in the existing laws. The Income Tax Act has, since 1989, provided for up to three times penalty on escaped tax. Similarly, wilful attempts to evade taxes have, since 1975, been punishable with imprisonment of up to seven years. A protocol for automatic exchange tax information, under which India is now receiving data from Switzerland, was signed in 2011, as was the amendment requiring all citizens to disclose foreign assets with their domestic tax returns.
•Post-May 2014, tax control policy is different only in three aspects, all constitutionally suspect. The first relates to retrospective application of tax and penal laws that are so confiscatory and brazenly discriminatory that they walk all over a citizen’s right to life, carry on business and own property. The second is about shifting the burden of proof onto the citizen to establish that he is not an offender. Lastly, and this is what makes this new policy rather wicked, citizens can be subjected to criminal trial, without the taxman first proving that there has been tax evasion. The results of giving such unbridled powers to agencies have been disastrous.
•The Enforcement Directorate, India’s money laundering watchdog, secured conviction in less than 1% of case but attached assets worth Rs. 29,468 crore. In contrast, the agency’s equivalents in the U.S. and the U.K. secured conviction in about 50% cases. The Income Tax Department’s records were not inspiring either, hovering at near 2% conviction rates in Financial Year (FY) 2016-2017. A Comptroller and Auditor General report showed that in FY 2016-2017 — the demonetisation year — the number of raids more than doubled, as compared to FY 2013-2014, the last year of UPA-II; but in the same period, the undisclosed income detected was less than one-fourth the amount during the latter period.
•In medical sciences, intrusive methods of treatment are generally resorted to when diagnosis shows evidence that less risky methods may not be restorative. But, India’s fiscal policy seems to be driven by the opposite logic: intrusion first, diagnosis later.
•No clear estimate of black money owned by Indians and stashed abroad is available. Between 2008 and 2012, various reports quoted anywhere between $500 billion and $1.5 trillion, some relying on estimates of a Swiss Bankers Association (SBA) report. These turned out to be false. James Nason, an officer of the SBA, has said that the SBA had never published any such report. In March 2019, National Institute of Financial Management reported to the Lok Sabha Standing Committee on Finance, that the estimate is about $216 billion-$490 billion. This is one-seventh the estimate quoted ahead of the 2014 elections. In essence, India’s foreign black money problem was misdiagnosed and unverified, exaggerated numbers went into satisfying Parliament that draconian financial laws are justified.
Taking cognisance
•For the judiciary, one question that arises is: if the conventional wisdom on black money was based on disinformation, should it take cognisance of it? If yes, how? For example, should the Supreme Court take a relook at its verdict in Ram Jethmalani’s case against black money, especially to guide lower courts in their examination of financial crime allegations?
•A democratic state cannot unjustly enrich itself by making citizens pay for what is not rightly owed. The belief that the government will act on principles of honour and good faith is an invaluable but fragile national asset, Nani Palkhivala wrote in an article in 1993. He said that fiscal system must have not just legality but also legitimacy. It is denuded of all legitimacy when there is a breach of faith on the part of the government in its dealings with the taxpayer.
•International media called demonetisation, among the government’s purported measures to fight the black money menace, as a ‘massive theft of people’s property’. Similarly, the announcement that Rs. 15 lakh will be deposited in each citizen’s account was found to be nothing more than a political bait. In civil cases if a trustee breaches faith this way, trust laws provide recourse. As do penal laws in similar circumstances against agents, servants and even against wives. There is, however, no punitive recourse against political skulduggery. The doctrine of promissory estoppel deserves to be tried in political jurisprudence also.
•The government should give up the belief that being an intrusive, browbeating confiscator enriches Indians. It doesn’t. This approach is reminiscent of India’s imperialistic past and, in its current form, is impoverishing us into an economic depression. The draconian fiscal laws must at once be repealed. Increased international cooperation, technological advances and banking penetration implodes black money more than any law or sermon on patriotism. India’s war on black money can only be won through democratic, persuasive and economically-sound means.
📰 RBI to conduct ‘Operation Twist’ to manage yields on December 23
Bank to simultaneously buy and sell government securities.
•The Reserve Bank of India (RBI) will simultaneously buy and sale government securities worth ₹10,000 crore each on December 23 under its open market operations — a move aimed at managing the yields.
•“On a review of the current liquidity and market situation and an assessment of the evolving financial conditions, the Reserve Bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for ₹10,000 crore each on December 23, 2019,” the RBI said. The RBI will purchase the longer-term maturities, that are trading at a spread of 150 bps (basis points) over the repo rate, so that the yield of these papers will soften and sell the shorter duration ones.
•The central bank said it will buy ₹10,000 crore of 6.45% government bonds maturing in 2029 and simultaneously sell ₹10,000 crore of short-term bonds maturing in 2020.
•“The action of Operation Twist by the RBI today is encouraging. There is indeed a need to bring down the term premium because that remains the driving factor for long-term economic activity and addition of new investment stock,” said Madhavi Arora, economist, FX & Rates, Edelweiss Securities.
•Market experts had suggested unconventional steps by the central bank as policy rate cuts are unable to bring down the bank lending rates proportionately.
•Operation Twist is a move taken by U.S. Federal Reserve in 2011-12 to make long-term borrowing cheaper.
📰 Firms for more ease of doing business
India Inc. makes suggestions on mergers and acquisitions, last mile issues at pre-Budget meet with FM
•India Inc. leaders, including Bharti Enterprises chairman Sunil Bharti Mittal, CII president Vikram Kirloskar and Assocham president Balkrishan Goenka, on Thursday asked the government to take measures to augment ease of doing business to “create more freedom for the industry to perform.”
•In a pre-Budget meeting with Finance Minister Nirmala Sitharaman, the corporate leaders highlighted several issues, including certain income tax (I-T) matters coming in the way of mergers and acquisitions (M&A) or slowing them down.
•“I have come here today to discuss only one thing — make doing business easy in the country. That was what my thrust was,” Mr. Mittal told reporters after the meeting.
•He said some suggestions about M&A, demergers, NCLT process, certain sections of I-T that were coming in the way of M&A or slowing them down were made.
•“The idea is to create more freedom for the industry, for them to perform. I think the Finance Minister received them very well with her associates and secretaries. What we look forward to this Budget is that they unleash the energy of the Indian entrepreneurs to do more,” Mr. Mittal said.
•Echoing similar views, Mr. Goenka said for “ease of doing business, States have to play an important role” and last mile issues are there, which need to be resolved.
•RP-Sanjiv Goenka Group chairman Sanjiv Goenka said the discussions “centred more around what can be done to stimulate growth, to facilitate the ease of doing business. I think the Finance Minister and her team were extremely open to all suggestions,” Mr. Goenka said, adding “it is the first time I have seen this kind of response from the government.”
•On the current slowdown and its impact on capacity utilisation, he said, “We all recognised that it is going to take a couple of quarters, three quarters, four quarters, before this capacity gets utilised. We understand that, and that is the reality of the situation.”
Reducing I-T
•FICCI president Sandip Somany said the industry representatives gave suggestion to the Finance Minister “to reduce I-T for those who earn less than Rs. 20 lakh a year so that there is more disposable income in the hands of consumers and the economy benefits.”
•He further said, “We have also asked the Finance Minister to take measures to reduce EMIs, which can happen only if the banks reduce the interest rates on loans.”
•Stating while the RBI had cut 135 bps in rates, banks had reduced them by only 45 bps, Mr. Somany said, “If there can be more transmission of RBI’s rate cut to consumers, then the EMIs will reduce and it will also improve consumption.”
•A Finance Ministry statement said, “During the interactive session, prominent industrialists spoke about improving regulatory environment to safeguard investments through ease of doing business, increasing export competitiveness, reviving private investment and kick-starting growth measures.”
•Industrialists also suggested ways to boost rural economy, especially to increase consumption, the statement added.
