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  • President’s Address

     

    Today, with the first day of the Budget Session of Parliament, Hon’ble President will address a joint sitting of the two Houses.

    President’s or Governor’s Address

    • Commonly referred to as the President’s or Governor’s Address, they are a constitutional requirement.
    • The Constitution gives the President and the Governor the power to address a sitting of the legislature. The special power is with regard to two occasions.
    • The first is to address the opening session of a new legislature after a general election. The second is to address the first sitting of the legislature each year.
    • A session of a new or a continuing legislature cannot begin without fulfilling this requirement.
    • When the Constitution came into force, the President was required to address each session of Parliament.
    • So during the provisional Parliament in 1950, the President gave an address for all three sessions. At the suggestion of Speaker G V Mavalankar, the first Constitutional Amendment in 1951 changed this position.
    • Besides being a constitutional requirement, the President’s or Governor’s Address is keenly watched as it outlines the government’s policy agenda and stand on issues.

    What procedures follow the address?

    • After the President or Governor delivers the address, a debate takes place not only on the contents of the address but also the broad issues of governance in the country.
    • This then paves the way for discussion on the Budget.

    Significance of the address

    • The President’s Address in India is mirrored on the British system.
    • During the framing of the Constitution, B R Ambedkar drew a similarity between the President and the monarch under the English system.
    • He said the President “is the Head of State but not of the executive. He represents the nation but does not rule the nation.
    • He is the symbol of the nation. His place in the administration is that of a ceremonial device of a seal by which the nation’s decisions are made known”.
    • The Constitution binds the President and the Governor to act on the aid and advice of the Council of Ministers of the Union and state governments respectively, on a majority of issues.
    • Therefore, the speech that the President or the Governor reads before the legislature is the viewpoint of the government and is prepared by it.

    Are there parallels in other countries?

    • Similar provisions exist in other democracies. In the United States, it is referred to as the “State of the Union”.
    • The phrase comes from an article in the US Constitution which specifies that the President from time to time give to Congress information of the State of the Union and recommend measures as he shall judge necessary and expedient.
    • In the United Kingdom, it is referred to as the Queen’s Speech and is part of the ceremony to mark the formal start of the parliamentary year.

    What is the content of the President’s or Governor’s address?

    • During the making of the Constitution, an unsuccessful attempt was made to bring some specificity to the content of the President’s Address.
    • The President’s speech follows the convention of the British system, where it contains legislative and policy proposals that the government intends to initiate.
    • The speech also recaps the government’s accomplishment in the previous years. The contents of the speech are put together by aggregating inputs from various ministries of the government.

    Is the text of the speech binding?

    • The President or a Governor cannot refuse to perform the constitutional duty of delivering an address to the legislature.
    • But there can be situations when they deviate from the text of the speech prepared by the government.
    • So far, there have been no instances of President doing so. But there has been an occasion when a Governor skipped a portion of the address to the Assembly.
    • In 1969, the Governor of West Bengal skipped two paragraphs of the address prepared by the United Front government.
    • The skipped portion described as unconstitutional the dismissal of the first United Front government by the Congress-ruled central government. The issue was then debated in Parliament.
    • The Opposition was critical of the Governor’s conduct and moved a motion disapproving it. But the motion was ultimately defeated.

    How have members responded to the addresses over the years?

    • The conduct of MLAs during the address has sometimes been an issue.
    • The Governor’s speech in state legislatures has routinely been interrupted.
    • In Parliament, the first instance of interruption of a President’s speech happened in 1963; President Sarvepalli Radhakrishnan was speaking when some MPs interrupted him.
    • The Lok Sabha took note of the incident and a reprimand was issued to the MPs.
    • Over the years, political parties have resolved to treat the President’s Address sacrosanct and agreed not to interrupt it.

  • Economic Survey & its significance

    With the Indian economy in the doldrums, this year’s Economic Survey will be keenly watched. The Economic Survey for 2019-2020 will be tabled in Parliament today.

    What is the Economic Survey?

    • The Economic Survey is a report the government presents on the state of the economy in the past one year, the key challenges it anticipates, and their possible solutions.
    • One day before the Union budget, the Chief Economic Adviser (CEA) of the country releases the Economic Survey.
    • The document is prepared by the Economic Division of the Department of Economic Affairs (DEA) under the guidance of the CEA.
    • Once prepared, the Survey is approved by the Finance Minister.
    • The first Economic Survey was presented in 1950-51. Until 1964, the document would be presented along with the Budget.
    • For the past few years, the Economic Survey has been presented in two volumes.
    • For example, in 2018-19, while Volume 1 focussed on research and analysis of the challenges facing the Indian economy, Volume 2 gave a more detailed review of the financial year, covering all the major sectors of the economy.

    Why is the Economic Survey significant?

    • The Economic Survey is a crucial document as it provides a detailed, official version of the government’s take on the country’s economic condition.
    • It can also be used to highlight some key concerns or areas of focus — for example, in 2018, the survey presented by the then CEA Arvind Subramanian was pink in colour, to stress on gender equality.

    Is it binding on the government?

    • The government is not constitutionally bound to present the Economic Survey or to follow the recommendations that are made in it.
    • If the government so chooses, it can reject all suggestions laid out in the document.
    • But while the Centre is not obliged to present the Survey at all, it is tabled because of the significance it holds.

    What are the expectations from Economic Survey 2020?

    • At a time when India’s growth has plummeted to a six-year low, the Economic Survey ahead of the Union Budget is expected to offer key insights into the path ahead for the government to revive growth.
    • The conundrum of remaining fixated on deficit targets or making a concerted push towards more expenditure to kickstart growth is one of the key challenges the government is facing.
    • The Survey is expected to shed light on the crucial gaps that the Budget will aim to fill in terms of unemployment, private investment, and a slump in consumption.

  • Public Health Emergency of International Concern (PHEIC)

     

    The World Health Organization (WHO) has declared the novel Coronavirus infection a Public Health Emergency of International Concern (PHEIC). In the past decade, WHO has declared public health emergencies for outbreaks including swine flu, polio and Ebola.

    What is PHEIC?

    Definition: Under the International Health Regulations (IHR), a public health emergency is defined as “an extraordinary event which is determined, as provided in these Regulations: to constitute a public health risk to other States through the international spread of disease; and to potentially require a coordinated international response”.

    What criteria does the WHO follow to declare PHEIC?

    • PHEIC is declared in the event of some “serious public health events” that may endanger international public health.
    • The responsibility of declaring an event as an emergency lies with the Director-General of the WHO and requires the convening of a committee of members.

    Implications of a PHEIC being declared

    • There are some implications of declaring a PHEIC for the host country, which in the case of the coronavirus is China.
    • Declaring a PHEIC may lead to restrictions on travel and trade.
    • However, several countries have already issued advisories to their citizens to avoid travelling to China, while others are airlifting their citizens from it.

  • IMO Sulphur regulations for Shipping

    The International Maritime Organization (IMO), the shipping agency of the United Nations issued new rules aiming to reduce sulphur emissions, due to which ships are opting for newer blends of fuels.

    What do the new IMO rules say?

    • The IMO has banned ships from using fuels with sulphur content above 0.5 per cent, compared with 3.5 per cent previously.
    • Sulphur oxides (SOx), which are formed after combustion in engines, are known to cause respiratory symptoms and lung disease, while also leading to acid rain.
    • The new regulations, called IMO 2020, have been regarded as the biggest shake up for the oil and shipping industries in decades. It affects more than 50,000 merchant ships worldwide.
    • The new limits are monitored and enforced by national authorities of countries that are members of the International Convention for the Prevention of Pollution from Ships (MARPOL) Annex VI.

    Cleaner options

    • Under the new policy, only ships fitted with sulphur-cleaning devices, known as scrubbers, are allowed to continue burning high-sulphur fuel.
    • Alternatively, Ships can opt for cleaner fuels, such as marine gasoil (MGO) and very low-sulfur fuel oil (VLSFO).
    • Of the two cleaner fuels, ship-owners were expected to opt for MGO, which is made exclusively from distillates, and has low sulphur content.
    • However, many are reportedly choosing VLSFO, which has better calorific properties and other technical advantages.

    Issues with the rule

    • There are complaints against VLSFO as well, as testing companies have claimed that high sediment formation due to the fuel’s use could damage vessel engines.
    • VLSFO, with 0.5 per cent sulphur content, can contain a large percentage of aromatic compounds, thus having a direct impact on black carbon emissions.
    • Black carbon, which is produced due to the incomplete combustion of carbon-based fuels, contributes to climate change.

  • Plantation Corporation of India

    The Union government is likely to announce the setting up of a Plantation Corporation of India in the upcoming budget.

    Plantation Corporation of India

    • The PCI will subsume all afforestation-related schemes currently underway in India including the Green India Mission, National Afforestation Programme and compensatory afforestation.
    • The corporation will use Compensatory Afforestation Fund (CAF) money to undertake the plantations and investment will also come from the global pension fund.
    • CAF is a huge corpus of money collected from projects proponents for diverting forest land to be used for non-forestry activity.

    Issues with PCI

    • Critics have raised concerns over the move’s impact on the federal structure of forest governance in the country.
    • While forests are a concurrent subject, land-related issues are the responsibility of the states.

  • [pib] Exercise SAMPRITI-IX

    As part of the ongoing Indo-Bangladesh defence cooperation, a joint military training exercise SAMPRITI-IX is being conducted in Meghalaya.

    Exercise SAMPRITI

    • It is an important bilateral defence cooperation endeavour between India and Bangladesh and will be the ninth edition of the exercise which is hosted alternately by both countries.
    • During the joint military exercise SAMPRITI-IX, a Command Post Exercise (CPX) and a Field Training Exercise (FTX) will be conducted.
    • For both the CPX and FTX, a scenario where both nations are working together in a Counter-Terrorism environment will be simulated under the UN Charter.
    • The FTX curriculum is progressively planned where the participants will initially get familiar with each other’s organizational structure and tactical drills.
    • The training will culminate with a final validation exercise in which troops of both armies will jointly practice a Counter Terrorist Operation in a controlled and simulated environment.

  • India’s first ‘fruit train’

     

    A ‘fruit train’, said to be the first of its kind in India, was flagged off from Tadipatri Railway Station in Anantapur district of Andhra.

    About the fruit train

    • This is the first time in India that an entire train is being sent to the gateway port (JNPT) for export.
    • This helps save both time and fuel as 150 trucks would have been required to send a consignment of this size by road to JNPT, which is over 900 km away, before the temperature-controlled containers are loaded on ships.
    • The bananas are being exported under the brand name ‘Happy Bananas’.
    • Farmers from Putlur region in Anantapur and Pulivendula in Kadapa district are exporting ‘Green Cavendish’ bananas to many international markets.

  • [op-ed of the day] Time to prioritise education and health

    Context

    The policy currently being pursued is intended primarily to incentivise potential investors while social objectives and help in indigenisation are being jettisoned.

    Call for more liberalisation and its possible impacts

    • What reforms are asked for?
      • Reforms such as labour market liberalisation and removal of constraints on the acquisition of land for industrial purposes are demanded.
    • What could be their possible impacts?
      • The negative impact such reform measures are likely to have on the incomes, living conditions and the economic security of the workers and the agricultural class.
      • Counterproductive labour policy: The policy of freedom of hiring and firing of labour will be counterproductive as it would squeeze demand further in a situation of huge demand deficit.

    Social sector and demand

    • Neglect of human infrastructure: While talks of economic revival focus on infrastructure there is little talk of investment in human infrastructure, particularly in education and 
      • Conditional expenditure: On the contrary, the expenditure in social sectors is made conditional upon a higher rate of growth. 
      • The flawed premise of long term impact: Most mainstream economists believe that public expenditure in social sectors can only have a long- term impact on growth. Which is not entirely correct.
    • The benefit of investment in human infrastructure:
      • Increases demand in short-run: Investment in social sectors results in creating demand in the short run by way of opening avenues for large-scale employment.
      • Competitiveness and sustainability: It imparts competitiveness and sustainability to the Indian economy in the medium and long run.
    • Example of RTE, teacher employment and demand creation
      • The recruitment of 5.7 million additional teachers over a period of, say, five years, can create huge scale demand.
      • And, this is only one factor essential for universalising quality school education.
      • There is also a large gap between the requirement of infrastructure in the schools and that available and built recently.
      • The gap between requirement and availability: According to government data, only 12.5% of the schools covered by the RTE Act were compliant with RTE norms.
      • Meeting these norms has the potential of creating employment on a large scale.
    • Importance of health and education
      • Education has a crucial role to play for an individual in gaining employment and retaining employability.

    Conclusion

    The gestation period of projects in social sectors is not as long as it is made out to be. It is, therefore, time for reprioritising education and health in the scheme of development strategy and the allocation of budgetary resources.

     

  •  [op-ed snap] Don’t be deterred by the ‘crowding out’ effect of the fisc

    Context

    Market borrowings of the government do not always squeeze credit for the private sector in India.

    What is ‘crowding out’ effect?

    • Increased government spending and borrowing: It refers to how increased government spending, for which it borrows more money, tends to reduce private spending.
      • Why does private spending reduce? This happens because when the government takes up the lion’s share of funds available in the banking system, less of it is left for private borrowers.
      • Relationship with interest rate: Higher borrowing by the government and subsequent crowding out also impacts interest rates in the economy.

    How the Government borrowing works and the role of RBI

    • Local borrowing local spending: Typically, the government funds its fiscal deficit by borrowing from the domestic bond market.
      • Its expenditure is also local in nature.
    • Overdraft from RBI: The Reserve Bank of India (RBI) is the official banker to the government-which spends money by first taking an overdraft from the central bank.
      • This overdraft gets repaid through bond market borrowings.
    • Why overdraft? The understanding is that any such government spending should ideally not affect the availability of funds to other borrowers in the market.
    • Excessive borrowing and effects on the interest rate: Excessive government borrowing from the bond market, many cautions, could lead to a rise in interest rates for the government itself and consequently for everyone else in the economy.

    Analysis of the effects of borrowing on other variables

    • Analysis of the data reveals the following trends.
    • No impact on other variables: Local borrowing and spending by the Indian government does not impact any other macroeconomic variables like-
      • The availability and cost of funds for other participants in the economy.
      • Inflation.
      • Deposit growth, at the current deficit level—that is, with the state and central combined figure above 6% of GDP.
    • What impacts the interest rate the most?
      • The two most important variables that impacted interest rates were inflation and the repo rate. Which tend to move together.
      • What does it indicate? This clearly indicates that RBI is extremely proactive in the way it manages interest rates.
    • Effects of funds on inflation: Such borrowings that are funded by the central bank could lead to inflation, the same is true for large external inflows to domestic money markets.
      • The foreign borrowings finally get reflected in the country’s foreign exchange reserves, which have a very strong relationship with inflation.
      • Effects on interest rates: Technically, any large inflow of a foreign currency sterilized by RBI does have the potential to move the inflation needle up, thus placing upward pressure on interest rates.
    • Relationship between borrowing and growth: It is clear that government borrowing and spending actually drives GDP growth.
      • Government borrowing should not impact bank lending to companies, as the sums borrowed return to the market almost immediately.
    • How RBI controls bond yield?
      • RBI ensures that bond yields don’t shoot up because of the excessive borrowing, by taking bonds onto its books to be released back into the market in good times.

    The uniqueness of the Indian money market

    • Why is it unique? India market is a unique money market, different from the rest of the world, for the following reasons-
      • We have investors who are explicitly required to invest in government debt.
      • Banks, non-banking financial companies, insurers, provident funds, and pension funds are all forced to invest in government debt as a condition for their licence to operate in India.
      • We also find that RBI works towards aiding the government borrowing programme rather effectively, ensuring that interest rates do not change too adversely.

    Conclusion

    The government should not be excessively worried about the government living beyond its means at this juncture. Government spending being the main driver for the country’s GDP growth, it could be a good way to put the economy on a higher growth trajectory. Perhaps it is time to revisit the entire FRBM framework.

     

     

  • [op-ed snap] A road map for robust trade ties

    Context

    The challenge for India and Australia is to transform people-to-people ties into a trade relationship.

    People-to-people the two countries

    • Soft power: Soft power rather than hard economics has traditionally been the driving force behind India-Australia relations.
      • Cricket is a dominant theme that connects the two countries.
      • The Indian diaspora in Australia is a vibrant community that plays a robust role in connecting their country of adoption with their country of origin.

    Trade relationship scenario

    • $31 bn bilateral trade: The trade between the two countries has been at a modest $31 billion, largely composed of resources like coal and other minerals.
    • No progress on FTA: Negotiations on a Free Trade Agreement, which began in 2011, have not moved forward significantly.
    • No progress on coal mining projects in Australia: The problems faced by the Adani Group to begin work on a coal mining project in Queensland did not go down too well with investors from India.
    • India Economic Strategy 2035 by Australia: One of the most widely commended initiatives has been the Australian government’s release of an India Economic Strategy 2035 Report.
      • It observes that no single market over the next 20 years will offer more growth opportunities for Australia than India.
      • It lays down a comprehensive road map for strengthening Australia’s trade engagement with India.

    Development in digital technology and the role of youth

    • Development of new architecture: Meanwhile India-Australia trade has been steadily evolving into a new architecture underpinned by developments in digital technology.
      • There is a rise of a younger generation of entrepreneurs and a noticeable shift in the trade basket from resources to services.
      • Technology and young entrepreneurship make a formidable combination and should set the agenda for the future of bilateral trade relations.
      • About 80% of the Australian small and medium-sized enterprises are managed by young professionals.
      • The young can see issues like immigration and outsourcing with far more equanimity than the older generation.
      • An important role of young Australians: Young Australians are thus emerging as great champions of India-Australia trade relations.

    Scope for engagement in innovation and trade relations

    • Tech. expertise of  Australia: There is also recognition that Australia is a laboratory of ideas, innovation, technology-led growth and university-industry partnerships.
    • Scope for India in innovation and trade: India is a large and demographically young market with a love for innovation and an appetite for new products and services.
      • These synergies should add momentum to a growing engagement in trade relations.

    India’s weakness and Way forward

    • Weakest link and way forward: The weakest link in India’s exports to Australia is in merchandise. India needs to look at three broad areas.
    • First-Focus on Market Research:  Despite globalisation, markets are country-specific and culturally sensitive.
      • Indian companies will need to invest a little more in market research on Australian consumer expectations and lifestyles.
    • Second-Brand creation: Australia is a brand-conscious market while India has not created a single consumer brand of international acceptance.
      • Only when products are visible across the world’s shopping malls and supermarkets displaying their own brands that India will be recognised as a major player in the global markets.
    • Third-Innovation: Innovation is emerging as the single-most-important factor for sustained success in every sphere. Global trade cannot be different.