Government Budgets

Shun fiscal adventurism

op-ed snap | Economics | Mains Paper 3: Government Budgeting

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- Why fiscal stimulus is not the elixir as it is made out to be?
Context

In the run-up to the budget, there was enormous pressure on the finance minister to launch a fiscal stimulus so as to pump-prime the economy. That she did not succumb to the temptation is a big relief.

Why fiscal stimulus is unwarranted?
- There is already considerable stimulus in the system.
- Excessive fiscal deficit: To her credit, the finance minister took a step towards transparency by admitting to off-balance-sheet borrowings of 0.8 per cent of GDP for both the current and next fiscal year.
  - Acknowledging that the fiscal deficit would actually be higher at 4.6 per cent and 4.3 per cent of GDP respectively. This is already excessive.
- Unrealistic projection of revenue growth: Add to this the unrealistic projections of revenue growth and disinvestment proceeds for next year and we have a potentially unsustainable fiscal situation.
  - Any stimulus on top of this would have been clearly
Possibility of undermining the RBI’s efforts

Fiscal pressure could harm the RBI’s efforts to revive the economy in the following ways-
- Harming long term investment rates: Fiscal pressures will undermine the Reserve Bank of India’s struggle to revive investment by bringing down long-term interest rates.
- Rating downgrades: It could result in a sovereign rating downgrade and jeopardise efforts to attract foreign capital.
- Increase in inflationary pressure: It can stoke inflationary pressures, something we cannot afford when inflation is above the RBI’s target rate.
- Pressure on the external sector: And most importantly, it can lead to pressures on the external sector.
- Past experiences: The balance of payments crisis of 1991 and the near crisis of 2013 in the wake of taper tantrums were, at their heart, a consequence of extended fiscal profligacy.
Counter-arguments of the supporters of the stimulus and fallacies in it
- Low Debt-to-GDP ratio: It is argued that our debt-to-GDP ratio is low in international terms.
  - Misleading comparison: The data don’t bear this out. In any case, our experience, as well as research, shows that international comparisons of debt-to-GDP ratios, without reference to other parameters, are misleading.
- Debt in domestic currency: It is also argued that we do not need to worry because our debt is mostly in domestic currency unlike that of many emerging economies.
  - The fallacy in this argument: Our debt in the domestic market didn’t protect us from previous crises, and there is no reason to believe that it will protect us from the next one, especially as our foreign debt is proportionally higher than before.
- Robust foreign exchange reserves: It is argued that our foreign exchange reserves are robust and a balance of payments crisis is improbable. Such complacency is misplaced.
  - Fallacy- No forex is large enough in bad times: We should not forget the lesson that in good times any amount of forex reserves looks like it is too large, but in bad times no amount of reserves is large enough.
Quality of fiscal consolidation
- Quality a cause for concern: As much as the headline fiscal deficit numbers are a cause for concern, the underlying quality of fiscal consolidation is a bigger concern.
- Increasing revenue deficit: Conveniently off the radar, the revenue deficit, far from coming down, is actually going up.
  - Two-third borrowing to finance revenue expenditure: This year, more than two-thirds of what the government is borrowing is going to finance current expenditures like salaries, pensions, interest payments and subsidies.
  - That ratio will rise to three-quarters next year.
  - Crowding out of the expenditure: This debt-financed revenue expenditure is simply unsustainable as it will increasingly crowd out capital expenditure.
- Red flags on the state finances.
  - Another dimension of the quality of fiscal consolidation is the combined fiscal position of states which is, in fact, the big elephant in the room.
  - Together, states spend one-and-a-half times more than the Centre.
  - Larger development impact than Centre: Studies show that how efficiently states spend their money has a much greater development impact as compared to the Centre.
  - Red flags by the RBI on states finances: The states are not doing a good job. In its latest annual report on state finances, the RBI raised several red flags on state finances-
  - states’ increasing weakness in their own revenue generation.
  - Their unsustainable debt burdens.
  - And their tendency to retrench capital expenditures in order to accommodate fiscal shocks such as farm loan waivers, power sector loans under UDAY and a host of income transfer schemes.
  - Consequences in the market: The market will penalise mismanagement of public finances; it does not care who is responsible — the Centre or states — for an unsustainable fiscal stance.
Conclusion
- The fear of one-off fiscal stimulus becoming permanent: By far the biggest fear about a fiscal stimulus is that it is tempting to plunge into a spending programme saying it is a one-off and will be withdrawn when the pressure eases. Experience shows that it is very difficult to bail out. It is good that the finance minster avoided doing any such thing.
  - As Milton Friedman famously said, there is nothing more permanent than a temporary government programme.
- Need to kick-start the private investment: What the economy needs for a sustained turnaround is kick-starting private investment.
  - Implementation of reforms: A necessary condition for inspiring investor confidence is the implementation of structural and governance reforms. This will be a long-haul.
  - That the budget did not launch the journey is a big disappointment. But, at least, the budget did not make a bad situation worse by embarking on fiscal adventurism.
  - It’s better, as Keynes said, to be roughly right than precisely wrong.
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Health Sector – UHC, National Health Policy, Family Planning, Health Insurance, etc.

A mix Indian health care can do without

op-ed snap | Governance | Mains Paper 2: Health & Education

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- Will allowing participation of private sector in the public healthcare system beneficial for India?
Context

In India, multiple policy pronouncements over the last few years have expressed an implicit intent to emulate certain features of the U.S. health system which is one of the most prodigal health systems, and it is a well-known reality that it is infamously poor-performing.

Emulating the U.S. health system in India and problems in this approach
- Implicit intent to emulate the U.S. system: In India, multiple policy pronouncements over the last few years have expressed an implicit intent to emulate certain features of the U.S. health system like-
  - Enhance private initiative.
  - And uphold the insurance route as the way to go for health care.
- AB-NHPS scheme: These are being largely envisaged while riding on the back of the Ayushman Bharat-National Health Protection Scheme (AB-NHPS).
  - AB-NHPS aims to provide insurance cover to nearly 50 crores poor Indians.
  - The mechanism to check insurance frauds: The AB-NHPS affirmed strong mechanisms to check insurance fraud which was commonplace in its precursor programme, the Rashtriya Swasthya Bima Yojana (RSBY).
  - New of fraud in AB-NHPS: Recently, 171 hospitals were reported to have been de-empanelled from the AB-NHPS on charges of fraud.
- How are the frauds in AB-NHPS sought to be tackled? The response to these has been envisaged through an unprecedented bolstering of administratively-heavy and technology-driven mechanisms.
  - Anti-fraud units: National- and state anti-fraud units have been established and partnerships with fraud control companies conceived.
  - One would ask this question: what is wrong in all of this?
- What is wrong with this approach? Let us return to the U.S. once again.
  - Administrative intensive: Multiple layers of complex arrangements and concomitant complex regulatory provisions have made the U.S. system one of the most administratively and technologically intensive systems in the world.
  - 50% spending going for the wages: More than 50% of health-care spending in the U.S. in 2010 went into health worker’s wages, with a large chunk of the growth in health-care labour taking place in the form of non-clinical workers.
  - Very little going into improving health: What this entails is that for every penny spent on health care, very little goes into actually improving health.
What are the concerns in emulating the U.S. system?
- Sub-satisfactory operations at the large cost: The new system necessitates-
  - A battery of new structures.
  - Personnel cadres.
  - Data systems.
  - And working arrangements only in order to sub-satisfactorily operate an insurance scheme that would cover less than half the population.
  - Disregarding the death spiral that policy-driven over-reliance on private health care could lead to considerable costs which would not primarily contribute to improving health outcomes.
  - Ethical concerns over unnecessary spending: While a besottedness with cutting-edge technology and state-of-the-art systems can help garner eyes and promote businesses, each unnecessary penny incurred this way raises significant ethical concerns.
- Problems of inadequate funding
  - Funding sufficient only for a quarter of beneficiary: Gupta and Roy have shown how the allocation for the AB-NHPS for 2019-20 would have covered less than a quarter of the targeted beneficiaries.
  - Paltry increase in allocations: For 2020-21, there has been a paltry increase in health-care sector allocation (5.7% above 2019-20 RE), while the allocation for the AB-NHPS is unchanged.
  - It is very possible that the AB-NHPS continues to remain insufficiently funded and incapable of extending considerable financial risk protection to the poor.
- Diversion of limited funds to wasteful areas
  - Attractive on face: Embracing the complexities associated with robust regulation of the insurance programme and making the requisite technological and administrative investments appear attractive and commendable on the face.
  - Diversion of limited fund: However, these complexities entail diverting highly limited resources towards wasteful and dispensable high-end areas.
  - These funds could have been set aside for much more pressing and productive domains, such as public hospitals and health centres.
  - Improvements in these areas would have strongly reflected in terms of tangibly better health outcomes.
  - AB-NHPS reinforcing contradictions: Rather, the AB-NHPS appears attuned to reinforcing a stark contradiction wherein trailblazing but unproductive high-end structures thrive alongside decrepit but potentially fructuos basic structures.
Conclusion

The fanfare with which AB-NHPS was launched, can hide the pressing concerns which lie underneath. The government must ensure that every penny spent on improving healthcare is used in the most optimal way and ensure that India’s AB-NHPS won’t end up the US healthcare way.
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Foreign Policy Watch: India-China

The battle in Beijing

op-ed snap | International Relations | Mains Paper 2: Effect Of Policies & Politics Of World On India’S Interests

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much
Mains level: Paper 2- Coronavirus threat and its implications for India and the rest of the world.
Context

The coronavirus epidemic poses a challenge to China’s place in global affairs, its political leadership.

The possible implications of coronavirus crisis
- The Chines leadership might not be able to escape the blame: If the epidemic turns into a pandemic, as some analysts bet, China’s all-powerful leader Xi Jinping might not be able to escape the blame.
  - And will likely come under considerable political pressure.
- It could also turn into a systemic threat: Some also speculate that the backlash against the government’s mishandling of the crisis could turn into a systemic threat against the dominance of the Chinese Communist Party.
- Speculations as perennial hope among China’s critics: Sceptics, however, dismiss above speculation as merely reflecting the perennial hope among Beijing’s harshest critics who can’t wait to see a China without the CCP.
  - Realist’s stand: Realists point to the massive mobilisation of state power by President Xi in limiting the spread of the virus.
Handling of the crisis by China
- Initial faltering response: To be sure, there were major failures in the initial faltering response to the crisis.
  - Cover-up attempts from the lower level: The attempts at the lower levels to cover-up or underplays the crisis and the inadequate appreciation at the higher levels of the potential consequences are common to all large bureaucracies. The party-state in China is not an exception.
- Praise for handling the crisis: China’s handling of the crisis had drawn much respect, grudging or otherwise, from the international community.
  - Whether it is the lockdown of Hubei province and its capital Wuhan, from where the virus began to spread.
  - Or in deploying thousands of doctors and health workers in the province and building massive hospitals for treating the infected.
- Possibility of some political impact: Yet, there is no question that a crisis of this magnitude -will have some political impact.
  - The party-state is certainly having some difficulty in containing the public outrage against the initial failures.
- Efforts to shield top leadership from blame: The CCP, however, is bound to shield the supreme leader from any damaging criticism and in fact, celebrate a triumph in containing the spread through a determined effort.
  - Responsibility will be affixed on provincial officials in Hubei and a purge of some kind may have already begun.
Addressing the economic consequences of the crisis
- International dimension: Nearly two decades after the SARS epidemic -China is now a much larger economy and its interdependence with the world has only deepened.
  - This interdependence, in turn, lends a strong international dimension to China’s crisis.
- Optimist’s hope of future uptick: Optimists hope that a sharp drop in economic activity in the current quarter will be followed by a steep uptick in growth in the next when the virus is contained and normalcy returns.
- Pessimist’s fear of economic disruption: Pessimists suggest that the economic disruption — in terms of the impact on internal and external trade and the breakdown of the global supply chains- could have lasting effects.
  - Reinforcing the disruption: Some suspect that the disruption could reinforce the slowdown driven by a number of other internal and external factors including the trade war with the US.
China’s response to the rest of the world
- Channelling of resentment against the West: Some in the West hope that a prolonged economic crisis might turn the people against the CCP. For now, though, Beijing is channelling the resentment against the West.
- Terming evacuation as an over-reaction: Beijing has criticised the advisories from various countries against travel to China and the cancellation of flights as over-reaction.
  - Lukewarm response to evacuation efforts: China has also been lukewarm to efforts of various countries to evacuate their citizens from Wuhan and Hubei.
  - India evacuated students: India has managed to convince Beijing to let India airlift its students from Wuhan.
  - Pakistan has declared that it will not evacuate its students as a gesture of political solidarity with China in a time of crisis.
  - South Asian neighbour’s response: Many of India’s other South Asian neighbours are torn between the reluctance to offend Chinese sentiment and the mounting domestic pressures to bring students back.
  - Cooperation with the US: While being critical of the US travel restrictions against China, Beijing has certainly been open to cooperation with the US in dealing with the crisis.
- India’s offer to help other countries in evacuation: The external affairs minister Subrahmanyam Jaishankar said last week that India has been willing to bring back students from all the neighbouring countries.
  - Balancing between Delhi and Beijing: The logic of balancing between Delhi and Beijing has prevented most of the smaller neighbours from requesting Indian assistance.
  - The Maldives has been the only exception.
- The response of the East and Southeast Asia: Beyond South Asia, many countries in East and Southeast Asia have been hesitant to be seen as rushing to cut themselves from China.
  - What is making these countries hesitant: Deep economic interdependence and massive flows of Chinese tourists led to much dithering among the East Asian countries in their early responses to the crisis.
Conclusion

India must explore all potential cooperative engagement with Beijing as well as its other international partners on pandemics-an important but the under-addressed challenge for national, regional and international security.
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Mother and Child Health – Immunization Program, BPBB, PMJSY, PMMSY, etc.

Seeking a more progressive abortion law

op-ed snap | Governance | Mains Paper 2: Health & Education

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- Shortcomings in the Medical Termination of Pregnancy Act 1971 and need of the more progressive abortion law in the country.
Context

The Medical Termination of Pregnancy Bill doesn’t do enough to secure women’s choices and interests.

Deaths due to unsafe abortion and previous attempts to legislate
- Deaths due to unsafe abortions: Recent reports have shown that more than 10 women die every day due to unsafe abortions in India.
  - And backward abortion laws only contribute to women seeking illegal and unsafe options.
- The Cabinet has recently approved the Medical Termination of Pregnancy (Amendment) Bill, 2020 (MTP Bill, 2020) which will soon be tabled in Parliament.
  - It seeks to amend the Medical Termination of Pregnancy Act, 1971 (MTP Act) and follows the MTP Bills of 2014, 2017 and 2018, all of which previously lapsed in Parliament.
Provisions of the current law
- Foetus-age based division: The MTP Act divides its regulatory framework for allowing abortions into categories, according to the gestational age of the foetus.
  - Up to 12 weeks: Under Section 3, for foetuses that are aged up to 12 weeks-
  - Only one medical practitioner’s opinion is required to the effect that the continuance of the pregnancy would pose a risk to the life of the mother or cause grave injury to her physical or mental health.
  - Or there is a substantial risk that if the child is born, it would suffer from such physical or mental abnormalities as to be seriously handicapped.
  - Between 12 weeks and 20 weeks: But if the foetus is aged between 12 weeks and 20 weeks-
  - At least two medical practitioners’ opinions conforming to either of the two conditions are required.
  - What beyond 20 weeks? Beyond 20 weeks, termination may be carried out where it is necessary to save the life of the pregnant woman.
- Definition of grave injury: The MTP Act also specifies that ‘grave injury’ may be explained as
  - The anguish caused by a pregnancy arising out of rape, or the anguish caused by an unwanted pregnancy arising out of the failure of a contraceptive used by a married woman or her husband.
What are the issues with the current law?
- Several issues arise from the current framework under the MTP Act.
- First-Lac of autonomy of women: At all stages of the pregnancy, the healthcare providers, rather than the women seeking an abortion, have the final say on whether the abortion can be carried out.
  - It is true that factors such as failure of contraceptives or grave injury are not required to be proved under the MTP Act.
  - However, to get the pregnancy terminated solely based on her will, the woman may be compelled to lie or plead with the doctor.
  - Thus, at present, pregnant women lack autonomy in making the decision to terminate their pregnancy and have to bear additional mental stress, as well as the financial burden of getting a doctor’s approval.
  - On request abortion in 67 countries: Indian’s law is unlike the abortion laws in 67 countries, including Iceland, France, Canada, South Africa and Uruguay, where a woman can get an abortion ‘on request’ with or without a specific gestational limit (which is usually 12 weeks).
- Second-Prejudice against unmarried women: The MTP Act embodies a clear prejudice against unmarried women.
  - According to ‘Explanation 2’ provided under Section 3(2) of the Act, where a pregnancy occurs due to failure of any birth control device or method used by any “married woman or her husband”, the anguish caused is presumed to constitute a “grave injury” to the mental health of the pregnant woman.
  - While the applicability of this provision to unmarried women is contested, there is always the danger of a more restrictive interpretation, especially when the final decision rests with the doctor and not the woman herself.
- Third-Restriction of 20 weeks’ limit: Due to advancements in science, foetal abnormalities can now be detected even after 20 weeks.
  - Danger to mother’s life only condition after 20 weeks: The MTP Act presently allows abortion post 20 weeks only where it is necessary to save the life of the mother.
  - Problem with this restriction: The above restriction means that even if a substantial foetal abnormality is detected and the mother doesn’t want to bear life-long caregiving responsibilities and the mental agony associated with it, the law gives her no recourse unless there is a prospect of her death.
What does the bill fail to address?
- While the MTP Bill, 2020, is a step in the right direction, it still fails to address most of the problems with the MTP
- First, it doesn’t allow abortion on request at any point after the pregnancy.
- Second, it doesn’t take a step towards removing the prejudice against unmarried women by amending the relevant provision.
- And finally, it enhances the gestational limit for legal abortion from 20 to 24 weeks only for specific categories of women such as survivors of rape, victims of incest, and minors.
  - This means that a woman who does not fall into these categories would not be able to seek an abortion beyond 20 weeks, even if she suffers from a grave physical or mental injury due to the pregnancy.
What are the provisions for the case of foetal abnormality in the bill?
- Limit irrelevant if the foetal abnormality is diagnosed by the Medical Board: The Bill does make the upper gestational limit irrelevant in procuring an abortion if there are substantial foetal abnormalities diagnosed by the Medical Board.
  - This means that even if there is no threat to the mother’s life, she would be able to procure an abortion as soon as a substantial foetal abnormality comes to light.
  - While this is an important step and would have in the past helped many women who fought long battles in Court without recourse.
  - Rules against unnecessary delays: It is crucial that this provision is accompanied by appropriate rules for the Medical Boards that guard against unnecessary delays, which only increase the risks associated with a late abortion.
Conclusion
- Recognition of women’s right: The Supreme Court has recognised women’s right to make reproductive choices and their decision to abort as a dimension of their personal liberty (in X v. Union of India,2017) and as falling within the realm of the fundamental right to privacy (in K.S. Puttaswamy v. Union of India, 2017). Yet, current abortion laws fail to allow the exercise of this right.
- The bill does not do enough: While it is hoped that MTP Bill, 2020 will not lapse in Parliament like its predecessors, it is evident that it does not do enough to secure women’s interests, and there is still a long road ahead for progressive abortion laws.
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Important Judgements In News

Victim justice is two steps forward, one step back

op-ed snap | Polity | Mains Paper 2: Executive & Judiciary

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- Making the justice system more victim-centric.
Context

The recent judgment in Rekha Murarka vs The State Of West Bengal, the SC has held that the victims’ private counsel cannot orally examine or cross-examine the witnesses.

Place of the victim in the present criminal justice system
- Removed from the proceedings: Under our criminal justice system, victims find themselves removed from the proceedings.
  - Their identities are reduced to being mere witnesses.
  - The harm they suffer is reduced to being aggravating or mitigating factors at the time of sentencing.
  - Stage props in a larger scheme: With the state appropriating their victimisation, the actual victims become mere stage props in a larger scheme.
- Need of The victim-centric notion of justice-Law Commission suggestion: In 1996, the 154th Law Commission Report suggested a paradigm shift in India’s criminal justice system towards a victim-centric notion of justice.
  - Partial acceptance: The Code of Criminal Procedure (Amendment) Act, 2009 partially accepted the Law Commission suggestion and granted some rights to the victims of crime.
  - The Act introduced victims’ right to a private counsel under Section 24(8).
  - Move toward victim’s participation: The Code of Criminal Procedure already allowed for pleaders engaged by private persons to submit written arguments with the permission of the court under Sections 301(2) and 302 allowed a person to conduct the prosecution with permission of the court.
  - These sections were read together to partially secure the victims’ right to participation.
Steps take towards securing justice for victims
- Right to legal assistance to victims of sexual assault: In the case of Delhi Domestic Working Women’s Forum v. Union of India (1994), the SC called for the extension of the right to legal assistance to victims of sexual assault at the pre-trial stages.
- The SC opinion over asymmetry in rights of victims and the accused: In Mallikarjun Kodagali (Dead) … vs The State Of Karnataka (2018), the Court accepted that under the criminal justice system, the rights of the accused far outweigh the rights of the victim.
- Introduction of victim impact statement right to appeal against the adverse order: The Supreme Court not only called for the introduction of a victim impact statement in order to guarantee the participation of the victim in the trial proceedings.
  - The SC also reinstated the victims’ right to appeal against an adverse order.
Provisions on the international level for the victim’s participation
- Despite these advances, the scheme of victim participation remains far removed from the ideals embedded in the Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power; India is a signatory.
  - What does the declaration require? It requires that the views and concerns of victims should be allowed and considered at all appropriate stages without prejudice to the accused.
- Need to increase the victims’ advocate’s role: Presently, the victims’ advocate has an extremely limited role to play wherein he “assists” the prosecutor rather than represent the interests of the victim before the court.
  - The only substantial opportunity provided to a private counsel is after the closing of evidence when written arguments may be submitted to the court only after seeking the permission of the court.
- Contrast with ICC: In contrast, the International Criminal Court (ICC) provides for victim participation at the stage of-
  - First, a challenge to the jurisdiction of the ICC.
  - Second, framing of charges.
  - Third, opening and closing statements.
  - Fourth, making a written submission wherever the personal interests of the victims are affected.
  - And finally, for presenting witnesses to give evidence on issues relating to the personal interests of the victims.
What the SC judgement means
- Missed opportunity: The Supreme Court in Rekha Murarkahas missed the opportunity to forward the jurisprudence on victim justice and rectify the lacunae in our laws.
  - Instead, the judgment goes against the jurisprudential current specified above.
  - Indeed, the victim’s right to participation cannot be secured by restricting the rights of the accused.
- Why the victim’s advocate is not allowed the right to participate in the SC’s opinion: According to the judgment, a victim’s advocate cannot be allowed the right to participate because-
  - First- Insistence by the victim’s counsel to examine a witness deliberately left out by the prosecution may weaken the prosecution’s case;
  - Second– The trial will derogate into a “vindictive battle” between the victim’s counsel and the accused.
  - Third- A lack of experience on the part of the victim’s counsel may lead to lapses.
- The problem in the SC ruling: The judgment further assumes that prosecutions effectively take the victim’s needs into account.
  - SC ignored why the need for private counsel arise: The judgement ignores the fact that the need for a private counsel arises precisely because intentional or unintentional prosecutorial lapses directly lead to injustice to the victims.
  - The court expects the victim’s counsel to make the prosecutor aware of any aspects that have not been addressed in the examination of witnesses or the arguments advanced by the public prosecutor.
  - In the process, it assumes that the prosecutor will address such lapses.
Conclusion

Under the role currently envisaged in our criminal justice system, the public prosecutor cannot sufficiently take into account the interests, needs and requirements of the victims. The cause of victim justice would be greatly served if the Supreme Court decided to revisit its reasoning and assumptions to appropriately amend this provision in light of the above.
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RBI Notifications

RBI’s growth push

op-ed snap | Economics | Mains Paper 3: Indian Economy

Note4Students
From UPSC perspective, the following things are important:
Prelims level: LTRO-Long Term Rero by the RBI, what is it?
Mains level: Paper 3- Novel approach adopted by the RBI to push the growth.
Context

February signalled a new dynamic-Monetary policy is no longer driven by MPC.

What changed after December MPC review
- Pause in the rate cut by MPC: In its December policy, the Reserve Bank of India suddenly paused on cutting rates, putting the ball in the government’s court to support growth.
- Conservative union budget: With last week’s Union Budget belying expectations of short-term growth boosters, the ball was back in the RBI’s court.
  - The Budget opted for fiscal conservativism over activism, consolidating the fiscal deficit to 3.5 per cent of GDP in 2020-21 from 3.8 per cent in 2019-20– bypassing any ambitious expenditure boost or significant tax cuts.
- Rise in the inflation in Dec-Feb interval: Meanwhile, the policy arithmetic turned more complicated for the MPC.
  - At the time of the December policy meeting, CPI inflation was trending close to 5 per cent (the October reading was 4.6 per cent).
  - Since then a combination of supply-side shocks, which led for example to unseasonally high vegetable and protein prices, buoyed inflation to over 7 per cent, nearly 140 basis points above the RBI’s upper bound comfort zone of 6 per cent.
  - As a primarily inflation-targeting central bank, this effectively stopped the MPC from easing further.
Key takeaways from February MPC meeting
- The February policy meeting removed two key uncertainties in the current policy scenario.
- First, the RBI is still very concerned about growth and the burgeoning negative gap between the current growth trajectory and potential growth.
- Second, monetary policy is no longer strictly limited to the MPC’s decision-making.
  - Because of the risk of supply-side shocks hitting inflation, it is understandable that the RBI has summarised its outlook on inflation as “highly uncertain”.
  - Hence, of the policy measures that the RBI has at its disposal, the MPC’s “conventional” arrow of rate cuts was left unused.
  - Instead, the RBI has opted for macroprudential intervention, unveiling two other “unconventional” policy arrows.
RBI opting for macroprudential intervention in two ways
- Policy transmission via LTRO-the first arrow: The primary macro challenge has been transmission via the credit channel — banks are not lowering their deposit rates.
  - Why? This is due to competition from the small savings rate and to protect saver, and in turn are keeping lending rates high.
  - How it impacts economy: Sectors considered higher risk (real estate, MSMEs) find themselves credit-starved.
  - In a move that seems inspired by the European Central Bank’s quantitative easing in 2011, the RBI’s announcement on long term repo operations (LTROs) has been aimed at promising banks longer-duration liquidity at the repo rate, which is cheaper relative to their current deposit rates.
  - The aim is to nudge them to kick-start the credit cycle.
  - The exemption of cash reserve ratio for incremental loans to MSMEs and the retail sector is also aimed at lowering costs for banks, which ideally should be passed onto these sectors.
- Managing the stress in financial system-the second arrow: It is aimed at managing the looming stress in the financial system from bad loans, especially as deleveraging becomes more difficult during an economic slowdown.
  - Extension to restructuring durations: The extension of the restructuring scheme on MSME loans and projects in the commercial real estate sector is aimed at releasing capital for banks in the short term.
  - Though banks will ultimately need to recognise loans that are non-performing.
  - Easing guidelines on the classification of loans: Similarly, easing guidelines on the classification of loans for projects in the commercial real estate sector that have been delayed is essentially designed to provide some breathing space to banks.
What does this mean for the macro outlook?
- Recovery in demand is a must: The RBI’s new macroprudential measures, its “unconventional” policy arrows, while well-meaning, are ultimately supply-side measures.
  - For the RBI to attain its goals, be it on asset quality or transmission, there eventually needs to be a recovery in demand conditions.
  - ECB’s LTRO experience: To be fair, even the ECB’s LTRO programme has had mixed success — a central bank can flood the market with liquidity, but the ultimate onus on releasing it to the real economy rests with banks.
  - So far, excess liquidity has not benefitted segments considered high risk (real estate developers, MSMEs).
Conclusion

The ECB introduced the LTRO programme when growth was weak and the euro area was struggling with a severe sovereign debt crisis. With the RBI embarking on something similar, albeit on a smaller scale, the niggling concern is if there is more financial instability lurking around the corner but not yet evident in the current data.
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Electoral Reforms In India

A weak rebuke: It’s unfortunate EC didn’t punish hate speech in Delhi campaign

op-ed snap | Polity | Mains Paper 2: Constitutional Bodies,Representation Of People’s Act

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- Efficacy of Model Code of Conduct to ensure free fair and pure elections
Context

Campaign for the Delhi Assembly election in which the development debate was overshadowed by hate-mongering and outpouring of communal vitriol underscores need to do more.

Understanding the Model Code of Conduct (MCC)
- Behavioural guidelines: It is a set of behavioural guidelines for political parties and candidates for-
  - The peaceful conduct of elections.
  - To prevent hate speech.
  - Malpractices.
  - Corruption and
  - Misuse of government machinery by the ruling party.
- Not judicially enforceable: Since it is not an Act passed by Parliament, the Code is not judicially enforceable.
  - The action against a violator usually takes the form of an advice, warning or censure.
  - No punitive action can be taken.
  - No wonder, many consider the Code as toothless.
- Moral authority: It is not toothless though. Its moral authority far outweighs its legal sanctity.
  - Political leaders worth their salt are scared of inviting a notice for a violation, as it creates negative public opinion.
  - Besides, unlike the legal processes, its impact is instant.
The legality of the MCC
- Test of legality in the courts: The legality of the code has been judicially tested.
  - First legal acceptance: Its first judicial acceptance came in 1997 when the Punjab and Haryana High Court gave the EC the power to enforce the code.
  - “Such a code of conduct when it is seen that it does not violate any of the statutory provisions can certainly be adopted by the Election Commission for the conduct of free and fair election, which should be pure as well,” the Court said.
  - The SC has repeatedly held that this must be enforced strictly.
Parallels between the MCC and other legal provision
- The first section of the MCC lays down that-Part 1 (1) “ No party or candidate shall include in any activity which may aggravate existing differences or create mutual hatred or cause tension between different castes and communities, religious or linguistic.”
- “…Criticism of other parties or their workers based on unverified allegations or distortion shall be avoided.”
- Parallels with RPA: The Representation of the People Act (1951) categorically defines the above two as corrupt practices in Section 123 (3A) and Section 123 (4) respectively.
  - Section 125 of RPA provides for punishment for similar violations.
- Parallels with IPC: It is important to note that Section 153A of the Indian Penal Code has a similar provision:
  - Promoting enmity between different groups on ground of religion, race, place of birth, residence, language, etc., and doing acts prejudicial to maintenance of harmony.
Refreshing change
- Prompt action: It must be appreciated that the EC was prompt in its action against the leaders accused of hate speech in Delhi election campaign.
  - While it instantly, suo moto, deprived the two leaders of their star campaigner status, it also punished them with a gag order, using the ultimate weapon provided by Article 324.
  - The EC flexing its muscle outside the so-called “toothless” MCC and invoking Article 324 is indeed a refreshing change.
  - In earlier instances, it often had to let the culprits go with a mere “warning, caution or censure”.
  - In its notice to a leader, the EC cited Sections 123 and 125 of the RP Act.
Conclusion
- Historically, the EC has always taken simultaneous action under the Model Code of Conduct and the other two provisions. While the MCC produces instant results, the penal provisions involve endless judicial processes. Not taking action under the IPC encouraged violators to commit repeat offences.
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Foreign Policy Watch: India-Sri Lanka

Keeping the southern neighbour engaged

op-ed snap | International Relations | Mains Paper 2: Bilateral, Regional and Global Groupings and agreements involving India

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much
Mains level: Paper 2- India-Sri Lanka relations, issues involved-Tamil minority, Chinese growing influence etc.
Context

During Mahinda Rajapaksa’s India visit, New Delhi is likely to talk to Colombo on the Tamil issue and counterbalance Beijing’s influence in the Indian Ocean.

Background of the current politics in Sri Lanka
- Sri Lankan Prime Minister official visit to India is taking place a few months after he assumed office and his brother was sworn in as president
- Nationalist wave after attacks: The brothers were voted to the office on a Sinhala nationalist wave, a sentiment that is a fallout of the Easter attacks on Christian shrines, including the Saint Anthony’s shrine, in April last year.
  - The attacks had killed more than 250 people, six months before the elections.
  - The polarisation worked in favour of the Rajapaksas vis-à-vis Sri Lanka’s 10 per cent Muslim population, mostly Tamils, who are especially numerous on the country’s east coast.
Tamil issue in Sri Lanka
- No engagement with Hindu Tamil: While Muslims have become the number one scapegoat for the Easter tragedy, the Rajapaksas have not tried to engage the Hindu Tamils
- LTTE background: Hindu Tamils, who make about 11 per cent of Sri Lanka’s population, have had an acrimonious relationship with Mahinda Rajapaksa ever since he wiped out the LTTE in 2009.
  - Many members of the community became collateral victims in the process.
- Implications for India-Sri Lanka relations: Gotabaya was the defence secretary at that time. The Hindu Tamil factor may complicate India-Sri Lanka relations.
- No inclusion minorities from Sri Lanka in CAA: In the Citizenship Amendment Act the Indian Parliament passed in 2019, the persecuted minorities of Sri Lanka are not taken into account.
  - However, the Hindu Tamils of Sri Lanka are feeling insecure again.
China-Sri Lanka axis
- The China factor is likely to aggravate the complication: The Rajapaksas are known to be pro-Sri Lanka. Mahinda Rajapaksa was largely responsible for opening Sri Lanka to massive — and strategic -Chinese investments.
- The Hambantota port issue: The Hambantota Port and 15,000 acres have been conceded to China on a 99-year lease, causing considerable consternation in New Delhi, which apprehends that this deep seaport could be used for military purposes, and not just trade.
  - The deal was put on a hold by former PM but the present dispensation wants it to be restored.
- China’s growing clout in the Indian Ocean: India’s efforts were also designed to thwart China extending its influence in Sri Lanka at a time when the Narendra Modi administration is trying to counter Beijing’s clout in the Indian Ocean.
- Modi’s visited on May 30, 2019, just after beginning his second tenure as PM.
Past engagement events
- New Delhi has tried to engage the new Sri Lankan government after the Rajapaksas assumed office.
  - India’s foreign minister S Jaishankar, landed in Sri Lanka on November 20, 2019, to invite Gotabaya for his first visit to India — rather than to China.
- Gotabaya visited New Delhi for three days in late November last year.
- Tamil issue discussed: Jaishankar is said to have told Gotabaya that India expects his government to treat Tamils with dignity in the process of reconciliation.
  - There is speculation that India might appoint an ambassador of Tamil origin to Colombo.
- Cooperation against terrorism: The Indian PM went further when Gotabaya Rajapaksa visited New Delhi: He announced a $50 million line of credit for security and counter-terrorism
- Line of credit for Infra: India also announced another $400 million for development and infrastructure projects in Sri Lanka.
  - That the counter-terror fund would further strengthen cooperation against terrorism.
- Allaying the fears over China: Gotabaya allayed India’s fears on China by saying that Sri Lanka would not allow a third country to affect Sri Lanka-India ties.
Conclusion

While addressing the issue of minority and growing Chinese influence in Sri Lanka both countries need to focus on the other areas of cooperation like counter-terrorism, trade, security, development, technology etc.
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Cashless Society – Digital Payments, Demonetization, etc.

The billion standard

op-ed snap | Economics | Mains Paper 3: Indian Economy

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 3- How UPI is transforming payment and settlement, what makes UPI a success.
Context

India has crossed the target of a billion monthly digital payments. Now, to a billion transactions a day.

The story of payment revolution and financial inclusion in India
- Progress on the financial inclusion: India was long a financially excluded nation –only 17 per cent of Indians had a bank account in 2011.
  - 50 more years estimate: The World Bank suggests it would have taken 50 more years for 80 per cent of Indians to get a bank account at the pre-2011 speed.
  - Yet, we reached that milestone in 2018.
  - How? A magical combination of
  - Political will (Jan Dhana Yojana and Aadhaar embedding).
  - A proactive central bank (creating a non-profit market participant entity and levelling the playing field between non-banks and banks).
  - And a technology stack with three layers (identity, payments, and data).
- The rise of UPI
  - The swift rise in use: The digital payment transactions on the Universal Payment Interface (UPI) platform rising from 0.1 million in October 2016 to 1.3 billion in January 2020.
  - Result of working together: This represents the magic of entrepreneurs, nonprofits and policymakers working together.
  - And gives us a new target — a billion transactions a day.
- India’s Payment revolution
  - What are the components of the payment revolution: India’s payment revolution comes from-
  - A clear vision: Shifting the system from low volume, high value, and high cost to high volume, low value, low cost.
  - A clear strategy: Regulated and unregulated private players innovating on top of public infrastructure.
  - And trade-offs balanced by design: Regulation vs innovation, privacy vs personalisation, and ease-of-use vs fraud prevention.
- What consumers wanted?
  - Consumers wanted a payment experience that was mobile-first, low-cost, 24/7, instant, convenient, interoperable, fintech friendly, inside banking, and safe.
- Answers lies in UPI.
  - What did UPI achieve?
  - Interoperability: UPI created interoperability between all sources and recipients of funds -consumers, businesses, fintechs, wallets, 140 member banks.
  - Instant settlement: UPI settles instantly inside the central bank in fiat money -state-issued money declared by the sovereign to be legal tender.
  - Blunted data monopolies: Big tech firms have strong autonomy but weak fiduciary responsibilities over customer data, it was taken care of by UPI.
5 Policy lessons from the success of UPI
- First- how the India stack: Interconnected yet independent platforms or open APIs — are a public good that-
  - Lowers costs, spur innovation and blunts the natural digital winner-takes-all.
  - Replication in other areas: Replicating this in education, healthcare, and government services are likely to be a harbinger of large scale multi-domain collaborative innovation.
- Second-collaboration: Collaboration can create ecosystems that overcome the birth defects of its constituents–
  - The execution deficit of government, the trust deficit of private companies, and the scale deficit of nonprofits.
- Third-policy intervention: Complementary policy interventions are important.
  - Demonetisation and GST are changing the stories that firms and individuals tell themselves around cash and informality.
- Fourth-human capital and diversity matter: This revolution needed career bureaucrats to partner with academics, tech entrepreneurs, venture capitalists, global giants and private firms.
- The final lesson-Western model is not needed always: India doesn’t need to be Western or Chinese to be modern. If our policymakers had copied Alipay or US banks, we wouldn’t have leapfrogged their birth defects.
Way forward
- Fix the deadline: The central government must deadline digitising all its payments.
- RBI implement 100+ action items: The RBI must implement the 100-plus action items arising from its own Vision 2021 document and the Nandan Nilekani Committee for Deepening Digital Payments.
- UPI for inward remittances: RBI must also make UPI and RuPay fit for use in our $70 billion inward remittances that currently come through exploitative financial institutions which don’t have clients but hostages.
- Replication of UPI in bank credit: The RBI must replicate the core design of UPI — fierce but sustainable private and public competition in bank credit-
  - Our 50 per cent credit-to -GDP ratio is one of the reasons India is poor.
  - China’s 300 per cent is the wrong number, but reaching the OECD average of 100 per cent needs the RBI to do many things-
  - Raising its human capital and technology game in regulation and supervision.
  - Catalysing an ecosystem for lending against the rapidly expanding digital exhaust of small firms and individuals.
  - Issuing more private bank licences, facilitating management changes in old private banks with market caps that signal questions about book value, and shepherding governance and human capital revolution at PSU banks.
Conclusion

Converting the collective independence our citizens got in 1947 to individual freedom surely involved universal financial inclusion. The gap between this aspiration and reality was not a lie but a disappointment because our capital got handicapped without labour and our labour got handicapped without capital. Change has begun -the RBI, the finance ministry, and many individuals deserve our gratitude and dues for a billion digital payments a month. We now ask you for a billion digital payments a day.
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Mother and Child Health – Immunization Program, BPBB, PMJSY, PMMSY, etc.

[op-ed of the day] Amendments to Medical Termination of Pregnancy Act are a mixed bag

op-ed snap | Governance | Mains Paper 2: Health & Education

Note4Students
From UPSC perspective, the following things are important:
Prelims level: Not much.
Mains level: Paper 2- Medical Termination of Pregnancy Act amendment and issues involved.
Context

The Union Cabinet’s approval of the amended Medical Termination of Pregnancy (MTP) Bill 2020 was reported on January 29. This amendment was long due and has made some anticipated changes demanded by women’s groups and courts, including the Supreme Court.

Why the amendment was necessitated?
- Abortion (unsafe) accounts for almost 10 per cent of maternal deaths in India.
- No provision to avoid unsafe abortion: The amended Act doesn’t have any new substantial provisions to avoid unsafe abortions.
  - The right to safe abortion (at least till 12 weeks, when it is safer) would have made the state responsible to provide safe abortion services.
- Reduce the burden on judiciary: The proposed amendments will definitely reduce the burden on the judiciary, especially given the plethora of cases seeking permission for abortion beyond the prescribed duration of 20 weeks.
- Two types of Court cases: The court cases are broadly two types.
  - The first group of cases: These are pregnancies that extend beyond 20 weeks of gestation as a result of rape, incest or of minor women.
  - The new Act rightly addresses these by extending prescribed period abortion to 24 weeks.
  - However, such cases form a minuscule proportion of the total number. For such cases, even the 24-week cap can be done away with, provided the abortions can be safely done.
  - The second group of cases
  - These are of pregnancies that become unwanted after congenital foetal anomalies are found upon testing.
  - With advancements in prenatal foetal screening/diagnostic technologies, more such cases are knocking at the doors of courts.
  - Marginal interval under the current act: Anomalies detected at 17-20 weeks provide only a marginal interval to conduct an abortion under the current Act.
  - The extension to 24 weeks seems to give cover to these cases for abortion services, reducing the burden on courts.
How the law could be misused?
- Possibility of using any anomaly as a ground for abortion: The amendments have opened up the possibility for any congenital anomaly to be used as grounds for abortion.
  - Anomalies which are incompatible with life provide grounds for access to abortion at any time during pregnancy -not just 24 weeks of gestation-as long as the woman desires it and it doesn’t endanger her health.
  - But with advancements in diagnostic technologies, more anomalies will be detected, including those which are compatible with life.
- Social acceptability and anomaly: What constitutes an anomaly changes depending on what is considered socially desirable.
  - Issue of raising children with disability: Technology-aided detection of “undesirability” could now find social support, as has been the case with female foetuses.
  - This raises concerns that raising children with disability, especially in the absence of state support and poor social attitudes, could go down a similar path.
The risk to the life of women
- Abortion beyond 12 weeks carries serious health risks.
  - 12 weeks provision under current law: Current law requires the expert opinion of two registered medical practitioners for the abortion beyond 12 weeks.
    
    Extending the limit to 20 weeks and risk involved: 12-week requirement has been delayed till 20 weeks, though the physiology of pregnancy and risks associated with procedures for second-trimester abortions haven’t changed significantly.
    
    Possibility of more complications: Without the strengthening of public services, easing second-trimester abortions between 12-20 weeks opens the possibilities of more complications and endangers the life of the woman.
Conclusion

With congenital anomalies as a ground for abortion, the eugenic mindset of having socially desirable children could push more women into risky late abortions. The approach of medical boards advising courts in cases of late abortions under this Act will be critical to balancing women’s right to choose with risk to the woman and the motives for abortion. The rules framed under the Act must address this in no uncertain terms.
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Type: op-ed snap