📰 Very severe cyclone Yaas to hit north Odisha coast
Narendra Modi reviews preparations; landfall likely on May 26 evening.
•The depression over east-central Bay of Bengal is very likely to move in a north-northwest direction and intensify into a cyclonic storm. The system Yaas is expected to cross the coast in north Odisha-West Bengal between Paradip and the Sagar islands by the evening of May 26 as a very severe cyclonic storm.
•Officials at the Regional Meteorological Centre in Kolkata on Sunday issued warnings that squally winds of 40-50 kmph gusting to 60 kmph are very likely to prevail over North Bay of Bengal and along and off Odisha–West Bengal–Bangladesh coasts from the evening of May 24.
•“It would gradually increase further becoming 90-100 gusting to 110 kmph from 26th morning and increase thereafter becoming 155-165 kmph gusting to 185 kmph at the time of landfall till 26th afternoon,“ a special bulletin issued by IMD late on Sunday evening said
PM review
•Prime Minister Narendra Modi on Sunday directed senior officers to work in close co-ordination with States to ensure safe evacuation of people from high-risk areas.
•“The Prime Minister instructed all concerned departments to ensure timely evacuation of those involved in off-shore activities,” the Prime Minister’s Office said in a statement after a review meeting to oversee the preparedness with senior officials .
•The weather office has issued an orange warning of extremely heavy rainfall at isolated places over Jhargram, Medinipur, North & south 24 Parganas, Howrah, Hooghly, Kolkata in West Bengal and Jagatsinghpur, Kendrapara, Bhadrak and Balasore in Odisha.
•Heavy to very heavy rainfall is predicted at a few places over Nadia, Bardhaman, Bankura, Purulia, Bhirbhum and heavy falls at isolated places over Murshidabad, Malda and Dakshin Dinajpur Districts on May 26.
•The Indian Air Force (IAF) has airlifted 950 NDRF personnel and 70 tonnes of load from Jamnagar, Varanasi, Patna and Arakonnam to Kolkata, Bhubaneswar and Port Blair in 15 transport aircraft, the Defence Ministry said. IAF has also kept 16 transport aircraft and 26 helicopters on standby.
•Navy and Coast Guard have deployed ships and helicopters for relief, search and rescue operations while Engineer task force units of Army, with boats and rescue equipment, are on standby for deployment.
•Navy has also pre-positioned diving and flood relief columns at Kolkata, Bhubaneswar and Chilika to aid the civil administration at short notice.
Kolkata gears up
•Chastened by the experience of cyclone Amphan which battered West Bengal almost exactly a year ago on May 20, killing more than 100 people and disrupting normal life in Kolkata for almost a week, the Kolkata Police convened a joint co-ordination meeting with representatives of the Civil Defence, Army, Kolkata Municipal Corporation and National Disaster Response Force to gear up for cyclone Yaas.
•“It was decided that a unified command centre will be set up at Kolkata Police Headquarters on and from May 24, 2021 along with the representatives of all nodal agencies. All preventive measures have been taken to minimize the sufferings of public,” a statement from Kolkata Police said. Several teams of NDRF and State Disaster Management Force has been posted in low lying areas of the State. Fishermen are advised not to venture in the sea from May 23.
Coastal Odisha alert
•Keeping the predicted path in mind, Odisha’s Special Relief Commissioner P. K. Jena rushed to Balasore to fine-tune preparedness. With the districts of Jagatsinghpur, Kendrapara, Bhadrak and Balasore likely to be impacted most by the Yaas, district administrations have been asked to make evacuation process foolproof and ensure zero casualty.
•North Odisha district Mayurbhanj and coastal Cuttack may experience heavy precipitation under influence of the cyclone. Cyclone could cause uprooting of big trees and extensive damage to Kutcha houses. The northern region of Odisha will record very heavy rain on May 26.
•Earlier, Odisha government had wanted deployment of 22 units National Disaster Response Force and now it sought additional 10 units. NDRF sources said units could be air-lifted for faster deployment. Odisha has kept 66 units of Odisha Disaster Rapid Action Force in readiness for imminent natural disaster.
Such significant policy measures are not applied retrospectively, say banks, NBFCs
•Banks and non-banking finance companies (NBFCs) have red-flagged a ‘retrospective’ central bank diktat on the appointment of statutory auditors as it requires many of them to get rid of auditors already appointed for this year and replace them with new firms, posing implementation challenges amid the pandemic.
•Last month, the RBI introduced new norms for auditor appointments, requiring immediate rotation of audit firms if they had completed three years at a particular entity. Joint auditors have been mandated in case of banks and NBFCs with assets of ₹15,000 crore or more, and the eligibility criteria for auditors have been tightened with retrospective effect.
•“The circular, while issued on April 27, 2021, has been made applicable for the financial year 2021-22 itself, except that the NBFCs may implement it in the second half of the financial year. It is a widely accepted principle that, to reduce uncertainty and implementation challenges, such significant policy measures are not applied retrospectively and allow a reasonable transition period for a better understanding, planning and compliance,” the Confederation of Indian Industry (CII) said in a statement on Sunday.
•In its current form, the RBI directive may require mid-term resignation of auditors, breaking the previously contracted terms in a large number of cases and creating disruption in the sector, the CII said.
•“Change in auditors in the middle of the year will not be looked at favourably by the investors including FPIs, OCBs, MFs and other institutions. This also may adversely affect the image of the country in the international market,” it said, adding that identifying suitable new audit firms is neither a quick nor a mechanical process.
•The process involves the identification and evaluation of 3-4 firms, for each vacancy, by the audit committee, followed by an approval of the shortlisted firms by the board and a final approval by the shareholders, besides an okay from the central bank itself.
•The three years’ tenure specified by the RBI is relatively short and inconsistent with the Companies Act, which specifies a minimum engagement term of five years, the CII said, urging the central bank to rethink several components of the circular’s provisions.
•“The RBI may consider deferment of implementation of the circular by at least two years for the industry to assess and prepare for its implementation,” the industry body suggested, adding that a phased operationalisation will help “avoid immediate disruption”.
📰 U.K. to unveil plans for ‘digital border’
People coming to Britain without a visa or immigration status will need an ETA
•Britain is to announce plans for a “fully digital border”, including the introduction of U.S.-style electronic travel authorisation to pre-check travellers to the U.K., Interior Minister Priti Patel said on Sunday.
•The Minister will announce the plans in Parliament on Monday as part of a wider overhaul of the country’s immigration system, which will also include the introduction of a points-based migration system.
Keeping count
•“Our new fully digital border will provide the ability to count people in and out of the country, giving us control over who comes to the U.K.,” Ms. Patel said in a statement.
•“Our new approach will make it easier to identify potential threats before they reach the border,” she added.
•Digitising the border will mean officials “can now count who is coming in and out of the country and whether they have permission to be here,” said her Home Office department.
•Ms. Patel unveiled elements of her “New Plan for Immigration” in March, calling it “the most significant overhaul of our asylum system in decades.”
•Tightening immigration rules and securing borders were key promises of those like Ms. Patel and Prime Minister Boris Johnson, who argued for leaving the EU in Britain’s 2016 Brexit referendum.
•Under the new plans to be unveiled on Monday, Ms. Patel is set to announce that people coming to the U.K. without a visa or immigration status will have to apply for an American-style Electronic Travel Authorisation (ETA).
•The Home Office expects that around 30 million ETA applications will be processed each year.
•“What I’m unveiling and proposing tomorrow is a new legal migration and border strategy..., which is based upon digitalisation of our borders, but also the simplification of our immigration laws,” Ms. Patel told Sky News on Sunday.
•“I am introducing the new borders bill, which will come to Parliament next month, where we will specifically clamp down and tackle the problems around illegal migration,” she added. “We will have not just greater checks, we’ve already got very, very significant law enforcement operations taking place in France, in Belgium... and we’re really prosecuting and arresting the people smugglers.”
•Last year, roughly 8,500 people arrived in Britain having made the perilous crossing across the Channel, one of the world’s busiest shipping lanes, in boats.
📰 Guarantor beware: On loans to corporate borrowers
Entrepreneurs signing guarantee will have to be certain that the business will not flounder
•The Supreme Court judgment upholding creditors’ right to proceed against personal guarantors to loans provided by them to a corporate borrower helps lift the uncertainty over the extent to which banks and other financial lenders can pursue not only the corporate debtor but also the individuals who had furnished personal guarantees to enable the flow of credit to the company they had stood surety for. This ought to be of significant consequence to the financial system, already under a mountain of bad loans, by helping expedite the resolution of such stressed assets. The two-judge Bench was considering a clutch of petitions challenging the government’s 2019 notification that made personal guarantors a separate category of individuals who could be proceeded against under the Insolvency and Bankruptcy Code as part of the insolvency proceedings initiated by lenders against defaulting corporate entities. In dismissing the petitions, the judges made clear that the government was right in “carving out personal guarantors as a separate species of individuals”, given the “intimate connection between such individuals and corporate entities to whom they stood guarantee”. Banks now stand a real chance of recovering substantially more from the resolution of a stressed corporate entity, as in most cases it has been the relatively affluent promoters who have been standing as individual personal guarantors for the loans extended to the companies they promoted.
•Several corporate leaders are set to be impacted. The promoters of many defaulting corporates, which are facing action under the IBC, had furnished guarantees for thousands of crores in loans availed by the companies they ran. The State Bank of India alone had submitted in the apex court that it had served demand notices aggregating to more than ₹39,000 crore to individuals who had signed as guarantors for credit provided to corporate entities. The judges also cleared the air over another issue that is bound to strengthen the creditors’ positions in all ongoing, future and even completed insolvency proceedings. The Bench ruled that the approval of a resolution plan for the corporate debtor does not extinguish the personal guarantor’s liability, which it said “arises out of an independent contract”. Lenders can now proceed against the guarantors to enhance recovery given that most banks agree to ‘haircuts’ when negotiating a resolution plan with a new promoter for the defaulting company. The only wrinkle here is that once the resolution plan becomes legally binding, the guarantor loses the recourse to remedy from the borrower when the creditor invokes the personal guarantee. Entrepreneurs will now have to think twice before signing a personal guarantee unless they can be very certain that the business they found will not flounder.
📰 Another challenge: On the rise in mucormycosis cases
The rise in mucormycosis cases underlines the need for diabetics to get vaccination
•The second wave of the pandemic has thrown up another serious challenge. Besides, in just about three months, the number of daily cases touching 4.14 lakh on May 6 and cumulative cases crossing 15 million, mortality reaching an all-time peak of 4,529 on May 18 and the total number of deaths reaching nearly 1.5 lakh, there is now a growing number of mucormycosis cases being reported in COVID-19 patients. A concerned Health Ministry has now asked all States to classify mucormycosis, a fungal infection, as a notifiable disease under the Epidemic Diseases Act 1897; a few States have complied. As a notifiable disease, every suspected and confirmed case is to be reported to the State Health Department. While the infection is caused by a group of moulds called mucormycetes, which are commonly found in the environment, the fungi are largely harmless under normal circumstances. But COVID-19 patients with uncontrolled diabetes who are on steroid therapy face a higher infection risk. Breathing in the fungi spores can cause an infection in the lungs or sinuses which can spread. Even when blood sugar is under control, indiscriminate steroid use can cause an increase in blood sugar levels, making such patients more susceptible to mucormycosis infection.
•Patients with severe COVID-19 disease tend to develop a systemic inflammatory response leading to lung injury and multisystem organ dysfunction. While WHO “strongly recommends” that corticosteroids such as dexamethasone be used in treating patients with severe and critical COVID-19, they should not be used in non-severe COVID-19 patients. The absence of any new or repurposed drugs to effectively treat COVID-19 patients and the lack of clear guidelines in using certain drugs have led to indiscriminate drug use, including steroids. The rise in mucormycosis infection cases should be a wake-up call for COVID-19 patients and medical practitioners to use steroids judiciously for a limited period and in the right dosage, especially in diabetic patients; self-medication with steroids should be avoided at any cost. Most importantly, in COVID-19 patients with diabetes, controlling blood sugar levels using insulin can help prevent mucormycosis infection. While the availability of Amphotericin-B to treat mucormycosis was limited till recently, five manufacturers in India are in the process of ramping up production. Five more companies have also been licensed to augment supplies. Since the infection presents itself with typical symptoms, timely diagnosis is easy. The infection can be cured without even surgery if detected early. This is one more reason why people, particularly those with diabetes, should get vaccinated soon. Since complete vaccination prevents severe disease, diabetics will not need steroids, and hence will not suffer from mucormycosis.
📰 WhatsApp and its dubious claims
The claim that the new privacy policy is applicable to only the business version of the app is not comforting
•The learned senior advocates Kapil Sibal and Arvind Datar submitted to the Delhi High Court that WhatsApp’s contentious new privacy policy came into effect from May 15, 2021. Mr. Sibal raised the central question of national importance, “The question is, does India have a public policy for privacy? If a public policy of privacy is there in India, does it apply to WhatsApp policy?” This question acquires relevance due to the dominant market status of WhatsApp-Facebook-Instagram. In its affidavit to the Delhi High Court, WhatsApp defended its privacy policy and explicitly named Google, Microsoft, Zoom, Zomato, Republic World, Ola Cabs, Truecaller, Big Basket, Koo, and public companies such as Aarogya Setu, Bhim, Air India, Sandes, Government e-Marketplace, and the Indian Railway Catering and Tourism Corporation of having similar policies, of relying on collecting user data.
Advantages of WhatsApp
•In the submission, WhatsApp suggested that users who did not agree to its terms and conditions could discontinue use of its service. Apps such as Signal and Telegram provide alternate reliable communication services. While this is a reasonable option for urban users of messaging apps, researchers working with rural and disenfranchised sections have pointed out the reliance on WhatsApp’s services due to the design of the app. WhatsApp has an inherent advantage with its messaging and audio-video calling even in low-bandwidth Internet areas. This has to be seen in conjunction with WhatsApp Pay which allows users to transfer money to others. Thus, a mass migration to more privacy-respecting services appears near-impossible due to vendor lock-in. The observation of the Competition Commission of India that WhatsApp is misusing its dominant status appears relevant here.
•The claim that the new privacy policy is applicable to only the business version of the app is not comforting. This is because metadata from the non-business versions are already being exchanged with other services of the Facebook company. Profiling of individual users has already been well documented with the exposure of the Facebook-Cambridge Analytica scandal both internationally and in India. For businesses using WhatsApp, there would be a reasonable expectation that the services would be more secure than the normal version. Thus, diluting the privacy policy for the business version appears counterintuitive. Looking at the practices of large monopoly businesses wherein smaller companies are bought out or innovative services are copied in order to increase the customer base provides an answer. Thus, one would have to surmise that it is possible to extract metadata from documents that are exchanged over a communication app with a diluted privacy policy. The lessons learned from the United States v. Microsoft Corporation antitrust case from early 2000 would appear relevant in this context.
Data protection
•We would have to understand that a WhatsApp exception, as suggested by Mr. Sibal, would only open the floodgates to further privacy violations by both the state and private entities dealing with user data. There is the issue of potential violation of privacy of children through Ed-Tech apps due to the lack of both a comprehensive ethics policy and a data privacy law akin to the European General Data Protection Regulation (GDPR). In the context of services provided by the above-mentioned companies, the Personal Data Protection Bill of 2019 does not even attempt to provide a fig leaf of protection to users of services.
•To ensure that the privacy of the Indian citizen is protected in the digital sphere, the data protection Bill needs to be reformulated to ensure that it focuses on user rights with an emphasis on user privacy. A privacy commission would have to be established to enforce these rights. The government would also have to respect the privacy of the citizens while strengthening the right to information. There is an overarching need for a strong data protection Bill.
📰 Deflating India’s COVID black market boom
An independent vigilance system and an administrative machinery capable of affirmative outputs are solutions
•In the gloomy battle against the novel coronavirus pandemic, what has emerged as most reprehensible is the brazen attempt by profiteers in filling the gap following the desperation of many patients and families. With the second wave of infections and the rise in COVID-19 positive cases in India, the necessity for integral medicines, hospital beds and oxygen supplies has gone up incrementally. For example, we come across information about government helpline numbers being circulated widely. The Twitter handles of politicians and administrative executives often reiterate the dependability of these helplines. These helpline numbers ought to be not just ‘ray of hope’ delivery systems but also a clear demarcation between what is legal and officially authorised, and what is not.
Flourishing market
•Remdesivir and tocilizumab have been the most sought after drugs ever since the pandemic set in. In July 2020 a racket of selling fake and spurious tocilizumab injections in Surat and Ahmedabad was unearthed by the Gujarat Food and Drugs Control Administration. Almost a year later, things do not seem to have improved. Recently, the police in Ahmedabad arrested a few people for preparing fake remdesivir vials for sale using a mixture of glucose and salt and affixing them with fake brand labels. In Mumbai’s drug black market, citizens have had to pay huge amounts ranging from ₹35,000 and ₹50,000 for remdesivir vials. In Kanpur, Uttar Pradesh, a racket to market oxygen cylinders in the black market was uncovered after raids on a godown. The Haryana police have registered at least 21 FIRs in connection with the blackmarketing of many of these medical essentials.
•The desperate need for vital medical supplies has forced many hapless citizens to pay more than the market price to procure these medicines. There are reports of many having been tricked into believing fire extinguishers to be oxygen cylinders and saline water bottles to be remdesivir vials after parting with huge sums of money. However, clamping down on these cases and the culprits is dependent on having an efficient multi-dimensional preventive model rather than a control mechanism that functions much after the damage has been already done.
•India is in the middle of its second year in the battle against the COVID-19 virus and the persistent challenges many citizens face in medical aid is a wake-up call to revisit the administrative mechanism and map its limitations. In India, the distribution of remdesivir in the States is mostly controlled by the local governments, while decisions about oxygen supplies to the States are predominantly decided by Union bodies. Yet, citizens have been approaching alien sources to procure medical supplies.
The pressures
•A major reason behind why many are in the situation they are facing is because administrative organisations are being overwhelmed and helpline numbers inundated with calls and difficult to connect to. Even if citizens are fortunate enough to have their requests entered in records, they may not be able to procure the products they need due to the inadequacy of resources or probably not receiving a closure communication from helplines, which keeps them at a loose end without knowing where else to go and what else to do. This inaccessibility, a redundant and long communication process flow, and a delay in rendering responses are what have affected the reliability of these helplines as far as people are concerned.
•Any market, black or otherwise, is a dynamic hemisphere which is consumer-driven. There is public demand for what the products these black markets or rackets have to offer and which is why they thrive. A patient and their attendants face challenges of resource availability and significant constraints of time within which they need a solution, resulting in tremendous mental pressures. Alleged hospital bed-booking scams, the unnecessary hoarding of COVID-19 essentials by the elite, and possible VIP culture practices have contributed to the erosion of trust. These elements have all combined to force the public to look elsewhere for sources beyond the probability of the government rendering them assistance.
Volunteers as a resource
•Therefore, administrative mechanisms need to be expanded qualitatively and quantitatively. India is blessed with numerous volunteer organisations trying to tackle the various challenges of the pandemic. Unfortunately, in many instances, they do not enjoy governmental support. The state machinery needs to identify such groups, train them, optimise them and deploy them on a priority basis and ensure that there is no concentration of human resources in a single vertical. We need to operationalise technological knowledge in order to ease the communication processes which could reduce the burden on data entry operators and the management information systems to induce better responsive behaviour. We need an expert planning model which not only allocates the resources judiciously but also allows a follow-up of the entire process flow to ensure that there are no illegal deviations. In oversight, we need a strong, decentralised and independent vigilance system which promotes transparency in this desperate situation to ensure quality in the performance of administrative set-ups.
•At the end of the day, what has been listed above ought to be matched with confidence-building mechanisms. It is only when the government’s performance is high and the administrative machinery is capable of large-scale affirmative outputs that the public will not have to look for third party resources. And with no dependency subsisting on them, profiteering would not have a dimension and play its game.
📰 Recalibrate growth, reprioritise expenditures
Protecting total expenditures at the budgeted level and mass vaccination are important in India’s pandemic situation
•The second wave of COVID-19 currently sweeping India is forcing States into successive lockdowns, in turn eroding economic activities. The growth projections of different national and international agencies and the fiscal projections of Centre’s 2021-22 Budget require recalibration.
COVID-19-induced erosion
•The International Monetary Fund (IMF), the Reserve Bank of India (RBI), and the Ministry of Finance’s Economic Survey had forecast real GDP growth for 2021-22 at 12.5%, 10.5%, and 11.0%, respectively. Moody’s has recently projected India’s GDP growth in 2021-22 at 9.3%. This is close to the benchmark growth rate of 8.7% which would keep India’s GDP at 2011-12 prices at the same level as in 2019-20. This level of growth may be achieved based on the assumption that the economy normalises in the second half of the fiscal year. If the lockdowns come to an end earlier, the growth rate may be higher, but that is perhaps unlikely.
•The 2019-20 real GDP was ₹145.7-lakh crore at 2011-12 prices. It fell to ₹134.1-lakh crore in 2020-21, implying a contraction of minus 8.0%. If even the growth rate of 8.7% for 2021-22 comes under challenge because of a prolonged lockdown, not only will India see a fall in the real GDP in the current year as compared to 2019-20 level but the nominal GDP numbers assumed in the Budget will also be belied adversely affecting the fiscal aggregates in the Centre’s 2021-22 Budget. At 8.7% real growth, the nominal GDP growth would be close to 13.5%, assuming an inflation rate of 4.5%. This would be lower than the nominal growth of 14.4% assumed in the Union Budget. At 13.5% growth, the estimated GDP for 2021-22 is ₹222.4-lakh crore at current prices. This will lead to a lowering of tax and non-tax revenues and an increase in the fiscal deficit as compared to the budgeted magnitudes.
Budget magnitudes
•The budgeted gross and net tax revenues for 2021-22 were ₹22.2-lakh crore and ₹15.4-lakh crore, respectively. The assumed buoyancy for the Centre’s gross tax revenues (GTR) was 1.2. Even if this buoyancy is achieved, the lower nominal GDP growth would imply a GTR growth of 15.7% as compared to the budgeted growth of 16.7%. If, however, the buoyancy of 1.2 proves optimistic and instead a buoyancy of 0.9, which is the average buoyancy of the five years preceding the COVID-19 year, is applied, the nominal growth of GTR would be 12.2%. This would lead to the Centre’s GTR of about ₹21.3-lakh crore. The corresponding shortfall in the Centre’s net tax revenues is estimated to be about ₹0.6 lakh crore.
•The budgeted magnitudes for non-tax revenues and non-debt capital receipts at ₹2.4-lakh crore and ₹1.9-lakh crore, respectively, may also prove to be optimistic. In these cases, the budgeted growth rates were 15.4% and 304.3%, respectively. The excessively high growth for the non-debt capital receipts was premised on implementing an ambitious asset monetisation and disinvestment programme. The COVID-19-disturbed year may not permit any of this. The budgeted growth in non-tax revenues is largely dependent on an assumed growth of 60% in revenues from communication services and of 44.1% in dividends and profits from non-departmental undertakings. We consider that a shortfall of ₹1.5-lakh crore in non-tax revenues and non-debt capital receipts together may not be ruled out. Together with the tax revenue shortfall of nearly 0.6 lakh crore, the total shortfall on the receipts side may be about ₹2.1-lakh crore.
•Two factors will affect the fiscal deficit estimate of 6.76% of GDP in 2021-22. First, there would be a change in the budgeted nominal GDP growth. Second, there would be a shortfall in the receipts from tax, non-tax and non-debt sources. The budgeted magnitude of fiscal deficit is ₹15.06-lakh crore. Together, these two factors may lead to a slippage in fiscal deficit which may be close to 7.7% of GDP in 2021-22 if total expenditures are kept at the budgeted levels. This would call for revising the fiscal road map again. Protecting total expenditures at the budgeted level is, however, important given the need to support the economy in these challenging times. There is a case for reprioritising these expenditures.
Other steps, vaccination
•The second wave of the novel coronavirus has put a spotlight on India’s serious under-capacity in health infrastructure. Given the likelihood of a third COVID-19 wave, there is an urgent need to ramp up health and related infrastructure by enhancing the number of hospitals and hospital beds, sources of oxygen supplies, and the manufacture of COVID-19 vaccines and drugs. The Centre’s 2021-22 Budget has provided for ₹71,269 crore for the Department of Health and Family Welfare. This included a budgeted capital expenditure of ₹2,508.7 crore. In contrast, in 2020-21, the total health and family welfare expenditure (RE) was ₹78,866 crore, implying a fall of ₹7,597 crore in 2021-22. In the budgeted capital expenditure for health also, there was a fall of ₹1,724.8 crore as compared to the RE of 2020-21 at ₹4,233.5 crore. Clearly, these magnitudes are quite inadequate for an economy challenged by COVID-19 for two successive years. The allocation for the health sector should be increased substantially by reprioritising expenditures.
•Construction activities within the health sector will have high multipliers. There may also be higher expenditure on inducting a larger workforce of doctors, nurses and paramedics and other hospital-related administrative staff. Furthermore, strong support is needed for the vulnerable groups of the society including migrant labour and the rural and urban unemployed population.
•Speedy and larger vaccination coverage of the vulnerable population is key to minimising economic damage.
•The Centre’s Budget had allocated ₹35,000 crore for vaccination as shown in the Budget for the Department of Finance (demand for grant number 40) as an amount to be transferred to the States. India’s population aged 12 years and above is 109 crore. Total vaccination doses (at two doses per person) adds to 218 crore. At an average price of ₹300 per dose, this would require an amount of ₹65,108 crore. This is a rough estimate.
•The cost to the government would be less if the coverage is less than full. COVID-19 vaccination is characterised by strong inter-State positive externalities, making it primarily the responsibility of the central government. The entire vaccination bill should be borne by the central government. Rather than having individual State governments floating global tenders for vaccines, if the central government is the single agency for vaccine procurement, the economies of scale and the Centre’s bargaining power would keep the average vaccine price low. The total vaccination cost would go up if the unit cost goes up. The central government may transfer the vaccines rather than the money that it has budgeted for transfer. Some of the smaller States may find procuring vaccines through a global tender to be quite challenging.
📰 The many benefits of an eco tax
Environmental fiscal reforms will reduce pollution and generate resources for financing the health sector
•The Indian government announced a pandemic-related stimulus package in FY 2020-21 though there was large decline in tax revenue. The fiscal deficit for FY 2020-21 (revised estimates) is projected to be 9.5% of the GDP; for 2021-22, it is pegged at 6.8%. The focus is on maintaining fiscal discipline. In this peculiar scenario, sustained health financing in India remains a challenge.
Household spending on health
•The World Health Organization (WHO) provides data on the percentage of the total population where the household expenditure on health was greater than 10% and 25% of the total household expenditure or income in India in 2011. This provides a clear picture of the status of spending on health by the rural and urban populations. As far as health expenditure above 10% is concerned, 17.33% of the population in India made out-of-pocket payments on health. The percentage was higher in rural areas compared to urban areas. Globally, the average was 12.67%, which means that 12.67% of the population spent more than 10% of their income (out of their pocket) on health. In Southeast Asia, 16% spent more than 10% of their household income on health. The Western Pacific region came second in the list of regions that saw a rate higher than the global average. Similarly, 3.9% of the population in India made more than 25% of out-of-pocket payments on health, with 4.34% in the rural areas.
•The Economic Survey of India 2019-20 has outlined the fact that an increase in public spending from 1% to 2.5-3% of GDP, as envisaged in the National Health Policy of 2017, can decrease out-of-pocket expenditure from 65% to 30% of overall healthcare expenses. This is where the importance of alternate sources of health financing in India needs to be stressed. The COVID-19 pandemic has also forced countries all over the world to rethink climate change and the need for preservation of the environment. Fiscal reforms for managing the environment are important, and India has great potential for revenue generation in this aspect.
Fixing the eco rax rate
•Environment regulation, in turn, may take several forms: command and control; economic planning/urban planning; environmental tax (eco tax)/subsidies; and cap and trade. India currently focuses majorly on the command-and-control approach in tackling pollution. The success of an eco tax in India would depend on its architecture, that is, how well it is planned and designed. It should be credible, transparent and predictable. Ideally, the eco tax rate ought to be equal to the marginal social cost arising from the negative externalities associated with the production, consumption or disposal of goods and services. This requires an evaluation of the damage to the environment based on scientific assessments. This would include the adverse impacts on the health of people, climate change, etc. The eco tax rate may, thus, be fixed commensurate to the marginal social cost so evaluated. The Madras School of Economics had already undertaken extensive studies in this regard.
•Environmental tax reforms generally involve three complementary activities: (a) eliminating existing subsidies and taxes that have a harmful impact on the environment; (b) restructuring existing taxes in an environmentally supportive manner; and (c) initiating new environmental taxes. Taxes can be designed either as revenue neutral or revenue augmenting. In case of revenue augmenting, the additional revenue can either be targeted towards the provision of environmental public goods or directed towards the overall revenue pool. In developing countries like India, the revenue can be used to a greater extent for the provision of environmental public goods and addressing environmental health issues.
•In India, eco taxes can target three main areas: one, differential taxation on vehicles in the transport sector purely oriented towards fuel efficiency and GPS-based congestion charges; two, in the energy sector by taxing fuels which feed into energy generation; and three, waste generation and use of natural resources. Tax revenues can be generated through eco taxes. There is also a need to integrate environmental taxes in the Goods and Service Tax framework as highlighted by the Madras School of Economics in its studies.
Negligible impact on the GDP
•The implementation of an environmental tax in India will have three broad benefits: fiscal, environmental and poverty reduction. Environmental tax reforms can mobilise revenues to finance basic public services when raising revenue through other sources proves to be difficult or burdensome. Revenue from environmental tax reforms can also be used to reduce other distorting taxes such as fiscal dividend. Environmental tax reforms help internalise the externalities, and the said revenue can finance research and the development of new technologies.
•Environmental regulations may have significant costs on the private sector in the form of slow productivity growth and high cost of compliance, resulting in the possible increase in the prices of goods and services. However, the European experience shows that most of the taxes also generate substantial revenue and there is no evidence on green taxes with sustainable development goals leading to a ‘no growth’ economy. Most countries’ experiences suggest negligible impact on the GDP, though such revenues have not necessarily been used for environmental considerations. Thus, the negligible impact on the GDP may be a temporary phenomenon.
•Hence, this is the right time for India to adopt environmental fiscal reforms as they will reduce environmental pollution and also generate resources for financing the health sector.
