📰 IMF lowers India’s growth forecast
Slowdown to impact global economy
•The International Monetary Fund (IMF) on Monday lowered India’s economic growth estimate for the current fiscal to 4.8% and listed the country’s much lower-than-expected GDP numbers as the single biggest drag on its global growth forecast for two years.
•In October, the IMF had pegged India’s economic growth at 6.1% for 2019.
Decline in rural demand
•Listing decline in rural demand growth and an overall credit sluggishness for the lowering of India forecasts, IMF Chief Economist Gita Gopinath, however, said the growth momentum should improve next year due to factors like the positive impact of corporate tax rate reduction.
•“Global growth, estimated at 2.9% in 2019, is projected to increase to 3.3% in 2020 and inch up further to 3.4% in 2021,” the IMF said, while releasing an update to its World Economic Outlook (WEO).
•Compared to the October WEO forecast, the estimate for 2019 and the projection for 2020 represent 0.1 percentage point reduction for each year while that for 2021 is 0.2 percentage point lower.
•“A more subdued growth forecast for India... accounts for the lion’s share of the downward revisions,” the IMF said ahead of the start of the World Economic Forum (WEF) annual summit here.
•Ms. Gopinath said growth in India slowed sharply owing to stress in the non-bank financial sector and weak rural income growth.
•The country’s growth is estimated at 4.8% in 2019, projected to improve to 5.8% in 2020 and 6.5% in 2021 (1.2 and 0.9 percentage point lower than in the October WEO), supported by monetary and fiscal stimulus as well as subdued oil prices, it added.
•2019 refers to fiscal year 2019-20.
•India’s economy grew just 4.5% in July-September 2019 period — the weakest pace in nearly six years. The Indian government has been taking various measures to bolster growth.
It is being used to fill the coffers of ruling party: petitioners
•Chief Justice of India (CJI) Sharad A. Bobde on Monday orally made it clear that if the Supreme Court had found it unnecessary to stay the electoral bonds scheme (EBS) earlier, it may not stay the scheme even now.
•The comments came on a fervent plea by advocates Prashant Bhushan and Shadan Farasat that new facts had come up indicating that the scheme was being frequently opened to allow funds to fill the coffers of the ruling party.
ECI, RBI overruled
•Mr. Bhushan said the scheme would be opened again now with the Delhi elections scheduled on February 8. Instead of opening the scheme exclusively for the Lok Sabha elections, as envisaged, it had become a mechanism to funnel benami funds to fuel political parties. Both the Election Commission of India (ECI) and the Reserve Bank of India (RBI) had strongly objected to the scheme and raised the red flag against it.
•Mr. Farasat said over Rs. 6,000 crore had been drawn in through the scheme recently. They sought a stay of the scheme.
•On April 12 last, the Supreme Court passed an interim order directing political parties to provide complete information to the ECI in sealed covers on every single donor and contribution received by them till date through electoral bonds. However, it did not stay the operation of the scheme.
•“If the matter has been argued for stay and it was not granted, we will also not grant it,” the CJI said.
•Mr. Bhushan reiterated that the court should consider the scheme with a new eye as many novel and disturbing facts had come to the fore since April 12.
•The court initially gave four weeks to the ECI to file a reply to the plea for a stay on the scheme. However, Mr. Bhushan argued that it would be too late by then as Delhi elections were due on February 8. The court then asked the ECI to file its reply in a fortnight.
•The April 12 interim order was meant to ensure that the balance was not tilted in anybody’s favour before the May last general elections. The court then ordered political parties to provide the ECI with “detailed particulars of the donors as against the each bond; the amount of each such bond and the full particulars of the credit received against each bond.”
📰 Citizens’ rights dependent on duties, says PM
Modi invokes Mahatma Gandhi’s words at interaction with school students from across the country
•At a time when young people across the country are fighting for the rights of citizens, Prime Minister Narendra Modi emphasised the duties of citizens during an interaction with high school students on Monday.
•“Our rights are directly dependent on the duties performed by others,” he said, using the example of students, whose rights cannot be guaranteed unless teachers carry out their duties.
•The Prime Minister was answering questions during the third edition of Pariksha Pe Charcha , an annual event organised by the Union Human Resource Development Ministry on the issue of examination stress.
•About 2.6 lakh students from Classes 9 to 12 participated in an essay competition, out of which 2,000 were selected to attend the event in Delhi.
•In response to questions on the rights and duties of citizens by students from Arunachal Pradesh and Tamil Nadu, the Prime Minister said there was a connection between rights and duties, invoking Mahatma Gandhi’s words on the importance of fundamental duties enshrined in the Constitution.
•He pointed out that today’s high school students were likely to be leaders of the country by 2047, 100 years after Independence. “If you get a broken and dilapidated country when you become a leader, would you be able to lead well,” he asked.
•Mr. Modi encouraged students to learn their own mother tongues, English, Hindi and other regional languages as a way to celebrate the unity and diversity of the country.
•He exhorted them to buy products made in India, and go on holidays to India, rather than foreign locations. Small steps, such as cleanliness, saving electricity and water, buying tickets for train travel are all important ways to carry out their duties as citizens, he said.
•While the PM introduced the 90-minute interaction as a “hashtag without filter” conversation, the students came up with well-practised questions. Mr. Modi referenced the Chandrayaan moon landing and cricket matches as examples of his motivational mantra that failure was only a step to success. He also encouraged students to participate in extra-curricular activities apart from academics, so that they would not end up as “robots”, he said.
📰 Iran says it may pull out of NPT
•Iran said on Monday it will consider withdrawing from the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) if a dispute over its atomic programme goes before the UN Security Council.
•Britain, France and Germany launched a process last week charging Iran with failing to observe the terms of the 2015 nuclear deal, a move that could eventually see the Security Council reimpose international sanctions on the country.
•Iran has accused the three EU member states of inaction over sanctions the U.S. reimposed on it after unilaterally withdrawing from the landmark accord in 2018.
•The European move “has no legal basis” and if they take further measures, “Iran’s withdrawal from the NPT will be considered,” Foreign Minister Mohammad Javad Zarif was quoted as saying by the Iranian parliament’s website.
•The landmark 2015 deal reached with Britain, China, France, Germany, Russia and the U.S. gave Iran relief from sanctions in return for curbs on its nuclear programme. Since the U.S. pullout, Iran has progressively rolled back its commitments to the accord — the Joint Comprehensive Plan of Action — in retaliation. It has hit out at the three European nations for failing to live up to their promises to ease the impact of U.S. sanctions.
📰 The great Indian citizenship mess
The Supreme Court is largely responsible for the chaos around the CAA and the NRC
•On January 22, the Supreme Court will hear 60-plus petitions challenging the constitutionality of the Citizenship (Amendment) Act (CAA). As a matter of fact, it is the apex court that is largely responsible for the current mess. Its Sarbananda Sonowal judgment (2005), which struck down the Assam-specific Illegal Migrants (Determination by Tribunal) Act (IMDT), was the turning point of the debate on ‘illegal migrants’. Some observations made in the ruling bordered on the xenophobic and were filled with paranoia about ‘outsiders’. Now, some of these ‘outsiders’ will become beneficiaries if the court does not rule against the CAA.
•In the Sonowal judgment (2005), the Supreme Court struck down the Assam-specific Act that had put the burden of proof on the state rather than on the person alleged to be a foreigner. Without providing any evidence, the court went on to say that “unabated influx of illegal migrants from Bangladesh into Assam [had] led to a perceptible change in the demographic pattern of the State and reduced the Assamese people to a minority in their own State.” The National Register of Citizens (NRC), monitored by the Supreme Court itself, has proved these fears to be exaggerated. Even if all the 19 lakh excluded people are considered ‘illegal migrants’, their composition as a proportion of Assam’s population is just 4%.
CAA is territory-specific
•The CAA, just like the IMDT that was deemed unconstitutional by the Supreme Court, is territory-specific and exempts certain Northeastern States from its scope. The IMDT had created a separate regime for the determination of citizenship for Assam while a different regime would operate for the rest of India. The court in the Sonowal verdict had said that such geographical differentiation is admissible only if it has a rational nexus with the Act’s objective. The court also ruled that the IMDT’s objective, to reduce illegal immigration, was not served by enacting such a criterion for Assam alone, and hence the Act violated Article 14. It can be argued that in the case of the CAA also, the geographic differentiation — exclusion of Inner Line Permit States/areas from its ambit — has no nexus with the overall objective of the Act, i.e., helping persecuted people. This makes the Act fall short of the criterion laid down in the Sonowal case.
•The court had then said that the territory-agnostic Foreigners Act was far more effective than the IMDT in the identification and exclusion of foreigners who had entered India illegally and had no authority to remain. It needs to be stated here that the Foreigners Act deals with ‘foreigners’, not with those whose names may have been excluded due to lack of documentation, for instance in the Assam NRC. Many of them could indeed be ‘citizens’. We must create separate citizenship tribunals under the Citizenship Act to examine such cases, placing the burden of proof on the state to justify their exclusion. A denial of citizenship, which is a ‘right to rights’, must be through a process that fair, reasonable, just and non-arbitrary. Foreigners’ tribunals are nothing but kangaroo courts.
•It also becomes pertinent here to examine different types of awarding citizenship and the history of India’s Citizenship legislation. Citizenship by birth, or jus soli , embraces all those who identify with a country. In contrast, jus sanguinis , citizenship based solely on descent, recognises that some races or ethnicities as ‘national’ and others are ‘outsiders’.
•In postcolonial nations, such citizenship laws have provided grounds to render whole populations without rights and produced a constant stream of refugees into neighbouring countries. Myanmar’s 1982 Citizenship Act was one such example that classified only some ethnicities as ‘national’, effectively outlawing the Rohingya people. While jus sanguinis is premised on a country harking back to an arbitrarily-determined past, jus soli looks at the future, enabling a country create a pluralistic and inclusive society.
Citizenship by birth and descent
•While discussing citizenship in the Constituent Assembly (CA), the drafters were very conscious of how they wanted to build the India of their dreams. Sardar Vallabhbhai Patel, now an icon for the Narendra Modi regime, rejected citizenship based on racial principle. His enlightened views, and those of the other CA members, were reflected in the Citizenship Act of 1955 which provided for citizenship by birth. This changed in 1987 when, for the first time, India made jus sanguinis applicable after the then-Prime Minister Rajiv Gandhi buckled under pressure from Assamese nationalists and signed the Assam Accord.
•The Accord created a framework-graded citizenship, depending on a person’s parentage and when he/she had migrated to India. The constitutionality of Section 6A of the Act, which reflects the provisions of the Accord, is still pending before a five-judge bench of the Supreme Court. Ideally, the court should have disposed off this petition before insisting on an Assam NRC.
•The Assam Accord and the Sonowal verdict laid the grounds for the Supreme Court-directed NRC. Now, when the CAA has made the inclusion of NRC-excluded migrants belonging to certain communities possible, Assam Chief Minister Sarbananda Sonowal, who was the petitioner in the 2005 case, has himself expressed doubts about the final list. He has also assured the Assamese people that their culture and language will be preserved. None of the 19 lakh excluded people have been issued orders that would enable them to appeal to a Foreigners’ Tribunal. Interestingly, the apex court had said nothing about the process after its conclusion.
•There is little doubt that the Assam Accord implicitly targeted Bengalis in general and Muslims in particular. The CAA has made this discrimination more explicit by offering citizenship to persecuted minorities from certain communities who came from Afghanistan, Pakistan and Bangladesh before a specified date. It is obvious that the Act intends to exclude Muslims, including those of persecuted religious denominations from these nations. To make a related point, the CAA could possibly also enable people to convert to one of the listed faiths and seek citizenship. They could well say that they adopted Muslim names due to a well-founded fear of persecution in these countries.
•The CAA, in essence, not only violates the constitutional values of secularism and freedom of religion, but also negates the principle of equal protection and non-discrimination.
•Finally, if the purpose of the CAA is to preserve the spirit of Vasudhaiva Kutumbakam (‘The world is one family’), why does the government not enact a comprehensive refugee law that would provide for a fair and objective procedure to determine ‘persecution’ and allow eligible refugees to seek asylum? By conflating asylum with citizenship, the CAA sadly prioritises politics over persecuted people.
📰 Guaranteeing healthcare, the Brazilian way
Its success in getting universal coverage has lessons for India
•As Brazilian President Jair Bolsonaro visits New Delhi this Republic Day, one interesting field of cooperation to explore in the strategic partnership is healthcare. Achieving universal health coverage is a very complex task, especially for developing countries. Here, the example of Brazil, the only country where more than 100 million inhabitants have a universal health system, is worth studying. It can also provide lessons for Ayushman Bharat, currently the world’s largest and most ambitious government health programme.
•Following the end of military rule, the Brazilian society decided to achieve universal coverage by establishing a government-funded system. The Unified Health System (SUS), which guaranteed free health coverage that included pharmaceutical services, was written into the new Constitution in 1988.
Progress over 30 years
•In the last 30 years, Brazilians have experienced a drastic increase in health coverage as well as outcomes: life expectancy has increased from 64 years to almost 76 years, while Infant Mortality Rate has declined from 53 to 14 per 1,000 live births. In terms of service provision, polio vaccination has reached 98% of the population. A 2015 report said that 95% of those that seek care in the SUS are able to receive treatment. Every year, the SUS covers more than two million births, 10 million hospital admissions, and nearly one billion ambulatory procedures.
•This has been made possible even amidst a scenario of tightening budget allocation. While universal health systems tend to consume around 8% of the GDP — the NHS, for instance, takes up 7.9% of Britain’s GDP — Brazil spends only 3.8% of its GDP on the SUS, serving a population three times larger than that of the U.K. The cost of the universal health system in Brazil averages around $600 per person, while in the U.K., this number reaches $3.428.
•A study conducted by the Brazil-based Institute for Health Policy Studies (IEPS) forecasts that public health spending in Brazil will need to increase by nearly 1.6 percentage points of the GDP by 2060 in order to cover the healthcare needs of a fast-ageing society.
•Achieving universal coverage in India, a country with a population of 1.3 billion, is a challenge of epic proportions. Hence, the advances in this field should be seen not in binaries but judged by its steady growth and improvement. For instance, India must record details of improvement in terms of access, production and population health on a year-by-year basis. A starting point for this daunting task is funding. Public health expenditure is still very low in India, at around 1.3% of GDP in the 2017-2018 fiscal year.
Establishing wellness centres
•The Brazilian experience can also inform the design of the expansion of primary care that underlies Ayushman Bharat, that is, the creation of 1,50,000 wellness centre by 2022. The Family Health Programme ( Programa Saúde da Família ), which relies on a community-based healthcare network, is the backbone of the rapid expansion of coverage in Brazil. The strategy is based on an extensive work of community health agents who perform monthly visits to every family enrolled in the programme.
•These agents carry out a variety of tasks. They conduct health promotion and prevention activities, oversee whether family members are complying with any treatment they might be receiving, and effectively manage the relationship between citizens and the healthcare system. The strategy works: a large body of research shows that the programme has drastically reduced IMR and increased adult labour supply. Equally impressive has been its expansion, from 4% of coverage in 2000 to up to 64% of the overall population in 2015; it was able to reach even the rural areas and the poorest States of the country.
•Both Brazil and India are composed of large States with a reasonable degree of administrative autonomy. This fact implies great challenges and opportunities. The major challenge is that a one-size-fits-all approach for such heterogeneous regional realities is inconceivable: Tamil Nadu, Sikkim, and Bihar differ in so many ways and this diversity must be met by an intricate combination of standardised programmes and autonomy to adopt policies according to their characteristics. Moreover, regional disparities in terms of resources and institutional capabilities must be addressed. This diversity, nevertheless, can be a powerful source of policy innovation and creativity.
📰 Redesigning India’s ailing data system
The present national accounting and analytical framework misses out on many key dimensions of a complex economy
•The new series of Gross Domestic Product (GDP) figures with 2011-12 as base, released in 2015, has not gone well with analysts; the withholding of employment-unemployment data for some time and consumer expenditure data, which is not released, added to this unease. Bringing the National Sample Survey Office (NSSO) under the fold of National Statistics Office, altering its long-standing arrangement under the Governing Council and then National Statistical Commission, triggered suspicion. As official statistics is a public good, giving information about the state of the economy and success of governance, it needs to be independent to be impartial.
Wide-ranging impact
•GDP covers all productive activity for producing goods and services, without duplication. In effect it adds apples and oranges, tractors and sickles, trade, transport, storage and communication, real estate, banking and government services through the mechanism of value. The System of National Accounting (SNA) is designed to measure production, consumption, and accumulation of income and wealth for assessing the performance of the economy. GDP data influence markets, signalling investment sentiments, flow of funds and balance of payments. The input-output relations impact productivity and allocation of resources; demand and supply influences prices, exchange rates, wage rates, employment and standard of living, affecting all walks of life.
•The data on GDP are initially estimated at current price and then deflated for constant price for comparability of data over time. It is necessary to separate out price effect to adjust value for real volume for comparison over time and sectors. There is a way of adjusting price effect through appropriate price index. The present series encountered serious problems for price adjustment, specifically for the services sector contributing about 60% of GDP, in the absence of appropriate price indices for most service sectors. The deflators used in the new series could not effectively separate out price effect from the current value to arrive at a real volume estimate at constant price. Price indices going into a low and negative zone in 2014-17 distorted real growth.
•The shift from establishment to enterprise approach, replacing Annual Survey of Industries (ASI) with Ministry of Corporate Affairs MCA21 posed serious data and methodological issues. The use of MCA21 data and blow up factors thereof without weeding out defunct enterprises, and then insufficient work on mapping of comparable ASI data, followed by similar survey on services sector enterprises were another major lacunae.
Unchanged approach
•The approach for collection of data remains largely the same for long: price and production indices are constructed using a fixed base Laspeyres Index, yield rate for paddy is estimated by crop cutting experiments, and the organisation of field surveys for collection of data on employment-unemployment, consumer expenditure, industrial output, assets and liabilities continue. When productivity and remunerative price of output are major concerns for agriculture, it is necessary to collect data on factors such as soil conditions, moisture, temperature, water and fertilizer use determining yield, impact of intermediary and forward trade on farm gate price and so on. For example, Israel collects these data for analysis to support productivity. The initiative under e-governance enabled the capturing of huge data, which need to be collated for their meaningful use for production of official statistics. The process for collection and collation of data needs modernisation using technology.
Data logistics
•Along with GDP, we need data to assess competitiveness, inclusive growth, fourth-generation Industrial Revolution riding on the Internet of things, biotechnology, robotics-influencing employment and productivity, environmental protection, sustainable development and social welfare. Hence GDP data needs to be linked with a host of other data for deeper insight. We need to re-engineer the existing system, creating an integrated system populated with granular data. The country is vast, heterogeneous. There are non-linearities and path dependence, which should be considered while setting goals for development, reducing regional imbalance. To pursue the goal of a $5-trillion economy by 2024-25, harnessing demographic dividend, we must tap underused resources for demand creating investment, which require data to pursue policy right from a district and evaluate performance for efficiency including governance.
•We cannot reconcile data inconsistencies by setting up committees alone. We need systems which have the capability to sift through a huge volume of data seamlessly to look for reliability, validity, consistency and coherence which, I am afraid, will be difficult without the aid of a versatile data warehouse as a component of big-data technology. Also such committees should have the support of a dedicated team for audit, and the ability to implement decisions by cutting red tape. This is what has been wanting as thoughtful and well-meaning key recommendations of the Rangarajan Commission and subsequent recommendations from 2006 onwards by successive National Statistical Commissions, faced stumbling blocks in implementation. What is the guarantee that the recently constituted committee will succeed in its effort to restore credibility? It is as much a system and has implementation capability as the expertise behind it.
The present and future
•The present national accounting and analytical framework misses out on many important dimensions of the economy and its complex character as an evolving economy that is constantly experiencing technological and institutional transitions and power plays in a market economy. We need a new framework for analysis for such a complex system and evolutionary process. There is a question of growing market power, automation, robotisation and other labour-replacing technologies affecting profitability, structural change and general welfare.
•We need to find alternative avenues for the unemployed and jobs lost. In order to inject efficiency and stability, we need to have detailed data on how: markets clear, prices are formed, risks build up, institutions function and, in turn, influence the lifestyle of various sections of the people. We also need to know in greater detail about market microstructure and optimality therein, the role of technology and advanced research, changing demand on human skills, and enterprise and organising ability, which are all complex. The growing inequality and concentration of wealth in a few hands to the detriment of social welfare needs to be arrested at the earliest. The deadweight loss caused to the economy through monopoly power, inefficient input-output mix, dumping, obsolete technology and production mix must be contained.
•The consensus macroeconomic framework of analysis assumes symmetric income distribution, and does not get into the depth of structural issues, as it focuses on a trend-cycle decomposition of GDP for growth and stability in market parlance and a trickledown effect for percolation of income. This framework is questioned by many. The alternative to be realistic for the real world must rest on two pillars: the micro-behaviour of individuals, and the structure of their mutual interactions. In the changed situation of availability of micro data, we need to build a system to integrate the micro with the macro, maintaining distributional characteristics.
•Data is the new oil in the modern networked economy in pursuit of socio-economic development. The economics now is deeply rooted in data, measuring and impacting competitiveness, risks, opportunities and social welfare in an integrated manner, going much beyond macroeconomics. We have a commitment to produce these statistics transparently, following internationally accepted standards, tailor-made to suit local conditions, for multi-disciplinary analytics. As these statistics reflect on the performance of the government, it is necessary that its independence is maintained scrupulously.
