Current Affairs 20th April 2022

India could meet Sri Lanka fate if freebie culture persists #GS2 #Governance

India could end up facing a Sri Lanka–type economic crisis if it doesn’t shun the “culture of freebies” and subsidies in sectors like agriculture, NITI Aayog member Ramesh Chand warned, stressing that the “mind–boggling” support measures for farmers has made agriculture extremely dependent on such crutches.

“Our policies and support to agriculture and many other sectors are going in a direction that if we do not put a check on it, I think a day is not far when our fate will be same as that of the Sri Lankan economy,” Mr. Chand said, blaming “self–anointed experts” for skewing the debate on farm subsidies and minimum support price (MSP) for crops.

Listing out several support measures that are not even quantified while calculating farm subsidies support, Mr. Chand reckoned that India has already hit the 10% limit of State support for the sector and flagged the additional costs of implementing the MSP regime.   

“The latest number is that if we are buying anything at MSP, the economic cost comes to be 30%–35% more than the MSP and the government is not able to dispose the produce even at the MSP. This means that to pay ₹100 to the farmer, it costs ₹35 to the government,” he noted, explaining that a procurement of ₹3 lakh crore would thus entail some sort of additional support of ₹1 lakh crore.

Mr. Chand, who was speaking at the annual day function of the Delhi School of Economics, pointed out that fertilizer subsidy was usually the only number considered while evaluating farm sector support measures.  

“We don’t recognise how much subsidy is going as interest subvention as if a farmer repays loan on time, he gets subvention of 4%. Some States pay the entire interest for the farmer. Then there is crop insurance, for which 70%–80% of the premium is paid by the Central government, there are internal freight subsidies.”

“Every four five months, some proposal comes to NITI Aayog to pay ₹5,000 crore or 6,000 crore for the mills to clear farmers’ arrears. If you reckon all those things, you will find that we have reached the WTO norm of 10% support for value of agriculture,” Mr. Chand said.

Calling for greater awareness about the dangers of the freebie culture in the ruling dispensation and the public at large, the NITI Aayog member said: “Sometimes, I used to feel bad money can drive out good money. Now, we are experiencing bad ideas are driving out good ideas. I consider it as a very dangerous kind of practice.”

Apart from the fiscal implications of dedicating large parts of its spending on just one sector, he also said the approach is detrimental to farm sector productivity.

“Since we are spending more and more money for support and subsidies, the measures which are needed to give a push to the growth and efficiency are not working. As a result, we are caught in a vicious cycle.

“Since infrastructure and irrigation are not improving much, no farmer leader is asking why the area under canal irrigation is declining. Everybody says there is free power so we will go for more tubewells… and increasing costs means you can keep demanding more prices.”

Recalling his time as a student of agricultural economics, Mr. Chand said price and non–price factors were considered critical but over time, non–price factors have taken a back seat and price is just the only dominant factor for policy making, “whether it is the political dispensation, farmer groups or some kind of experts”.

India’s move away from coal hampered by Ukraine war: Nirmala Sitharaman #GS2 #IR

India’s transition away from coal as a fuel would be hampered by the Russia-Ukraine war, according to Finance Minister Nirmala Sitharaman.

“One calculation which I think we had in our mind was that the transition [ away from coal] … will be enabled my natural gas,” Ms. Sitharaman said in Washington DC, at a roundtable organised by the Atlantic Council, a think-tank.

However, the price of crude has gone up due to the situation in Europe, as has the price of natural gas — a “transition fuel” for India — in addition to it being in short supply, said Ms. Sitharaman, who is in Washington D.C. for the World Bank International Monetary Fund (IMF) spring meetings.

Almost all of the world’s energy needs are met by coal, oil and natural gas, but coal releases almost twice the amount of carbon dioxide relative to natural gas, on a kilogram to kilogram basis.

India has come under pressure from the U.S. to not increase import of energy from Russia, which has been sanctioned by Europe and the U.S. for its invasion of Ukraine. Approximately 1-2% of India’s energy imports come from Russia, as per official U.S. data, and the government has begun buying oil from Moscow at a discounted price.

“The dependence on coal, and the speed with which we want to get out of it, will now be challenged,” she said, adding that, however, India’s commitment with regard to renewable energy would be met.

At the UN Climate Change Conference (the 26th Conference of Parties-COP26), held in Glasgow last November, countries agreed, after pressure from India and China, to “phase down” rather than “phase out” the use of coal. India also increased its focus on a lack of climate finance from developed countries and asked for $1 trillion in climate financing over the current decade, in order to meet its climate commitments.

Prime Minister Narendra Modi had announced on November 2 that India would have a renewable energy target of 500 GW by 2030 and meet 50% of its energy needs from renewable sources, by then. It would also achieve net zero emissions by 2070, as per Mr Modi.

“Our commitments to refashion our energy basket remains intact,” Ms Sitharaman said, adding that Prime Minister Narendra Modi’s commitments at COP26 are being “taken seriously” by India, which is moving forward on them.

India’s non-fossil energy capacity would reach 500 GW by 2030; it will meet 50% of its electricity requirements with renewable energy by 2030; reducing its total projected carbon emissions by a billion tonnes by 2030; it will reduce the carbon intensity of its economy to less than 45% and achieve net zero by 2070.

Tie-up between Indian, foreign varsities simplified #GS2 #Governance

The University Grants Commission (UGC) has simplified the procedure for an Indian higher educational institution to offer programmes in collaboration with foreign universities by entering into a Memorandum of Understanding (MoU) with each other directly if they meet certain eligibility criteria, UGC Chairman M. Jagadesh Kumar said on Tuesday.

In its 557th meeting recently, the UGC decided that an Indian higher education institution that has a National Assessment and Accreditation Council (NAAC) grading of 3.01 or above, or is among the top 1,000 QS World University or Times Higher Education rankings, or is among the top 100 universities under National Institution Ranking Framework, will be able to tie-up with a foreign education institution which too features among the top 1,000 QS or Times Higher Education rankings.

The previous regulations, known as the University Grants Commission (Promotion and Maintenance of Standards of Academic Collaboration between Indian and Foreign Educational Institutions) Regulations, 2016, which will now stand repealed, required two institutions to tie up with each other after obtaining the UGC’s approval.

The UGC Chairman said that under the new regulations to be made public soon, universities and colleges will no longer be required to seek its permission to do so, if they met the ranking criteria.

Too strict

“The earlier regulations were too strict and there were too many bottlenecks. Our simplified regulations will increase the scale at which students could benefit from such collaborations between Indian and foreign higher education institutions,” Professor Kumar said at a press conference.

Under the 2016 regulations, a foreign and Indian college or university could partner with each other to offer only “twinning” and “joint degree” programmes where Indian students received a degree only from an Indian institute along with a certificate from the foreign institute.

Dual degree

But now, they can offer a third type of programme, that is, a “dual degree” programme, where both the institutes will issue a degree. Under a twinning programme, a student can get up to 30% credit utilisation of the total course from a foreign university, whereas under a joint and dual degree programme, he or she can get more than than 30% of the total credits.

These collaborations will be permitted only for the conventional mode of learning and not for distance or online learning.

“We have four crore students in Indian higher education institutes but over a period of time, this will increase to 10 crore. While we continue to build new institutes, it is also important to provide high quality education through collaborations with foreign institutes. This will also enhance the employability of our students,” Professor Kumar said.

He said the move would also help attract foreign students to India, which will lead to internationalisation, which is an important parameter for improving global rankings of higher education institutions.

India leader in traditional medicine, says WHO chief #GS2 #IR

Prime Minister Narendra Modi on Tuesday laid the foundation stone for the WHO Global Centre for Traditional Medicine (GCTM) at Jamnagar in Gujarat in the presence of Mauritius Prime Minister Pravind Kumar Jugnauth and World Health Organization Director-General Tedros Adhanom Ghebreyesus.

A first of its kind, the GCTM will be a global outpost centre for traditional medicine across the world. Mr. Ghebreyesus described the centre as a truly global project as 107 WHO member countries have their country-specific governmental offices which means the world will come to India for its leadership in the traditional medicines.

He said traditional medicines products abound globally and the centre will go a long way in bringing their promise to fruition. For many regions of the world, traditional medicine is the first line of treatment, he said.

“The centre will focus on data, innovation and sustainability and will optimise the use of traditional medicine.” The WHO Global Centre for Traditional Medicine is a recognition of India’s contribution and potential in this field. India takes this partnership as a huge responsibility for serving the entire humanity,” Mr. Modi said.

Speaking about the rich legacy of Ayurveda, the Mr. Modi said it goes beyond just healing and treatment, as social health, mental health-happiness, environmental health, sympathy, compassion and productivity are all included. “Ayurveda is taken as the knowledge of life and is deemed as fifth Veda,”

President gives assent to Criminal Procedure Bill #GS2 #Governance

President Ram Nath Kovind has given his assent to the Criminal Procedure (Identification) Bill, which empowers the police to obtain physical and biological samples of convicts and those accused of crimes. The Act, which replaces the Identification of Prisoners Act, 1920, was passed by the Lok Sabha on April 4 and the Rajya Sabha on April 6.

“The following Act of Parliament received the assent of the President on the 18th April, 2022 and is hereby published for general information:- The Criminal Procedure (Identification) Act, 2022 No.11 of 2022,” a gazette notification issued by the government said.

Apart from providing legal sanction to police to obtain physical and biological samples of convicts and detainees for investigation in criminal matters, the legislation also empowers a magistrate to order measurements or photographs of a person to be taken to aid the investigation of an offence.

In case of acquittal or discharge of the person, all material must be destroyed. The Act explained the types of data that may be collected, people from whom such data may be collected and the authority that can authorise such collection. It also provides for the data to be stored in a central database.

‘Star rating’ for packaged food unlikely to help, say experts #GS3 #Economy

The “health star rating” system that the Food Safety Standards Authority of India (FSSAI) plans to adopt in order to help consumers reduce their intake of unhealthy foods is “not evidence-based” and has failed to alter buyer behaviour, claim over 40 global experts in a letter to Union Health Minister Mansukh Mandaviya. They argue that “warning labels” instead have been most effective in various countries.

In a meeting on February 15, 2022, the FSSAI decided to adopt the “health-star rating system”, which gives a product 1/2 a star to 5 stars, in its draft regulations for front of package labelling (FOPL). The decision was based on the recommendations of a study by the IIM Ahmedabad the regulator had commissioned in September 2021. In the same meeting, the regulator decided that FOPL implementation could be made voluntary for a period of four years.

These experts have said the health star rating (HSR) system adopted in countries like Australia and New Zealand has not resulted into any meaningful behaviour change and that eight years after their implementation there is “ still no evidence of HSRs having a significant impact on the nutritional quality of people’s food and beverage purchases”.

The letter written on April 18 has been endorsed by Barry M Popkin, University of North Carolina; Professor Tim Lang, City University of London; Mike Rayner from the University of Oxford; and Frank Hu from Harvard TH Chan School of Public Health, among others.

Secondly, the nutrition researchers and academics argue that the HSR system “misrepresents nutrition science”. They explain that the underlying premise of the HSR is that positive ingredients such as fruits and nuts can offset negative nutrients such as calories, saturated fat, total sugar, sodium to calculate the number of stars ascribed to a product.

“This algorithm of adding and subtracting nutrients does not fit with our understanding of biology. For example, the presence of fruit in a fruit drink juice does not offset the impacts of added sugar in the body. There is no empirical evidence to suggest that adding these ingredients will lessen the negative impact of these foods on the body,” the letter asserts.

The letter has raised questions over the IIM-Ahmedabad study and called its conclusions “completely wrong from a scientific perspective”.

Danger of electoral sops flagged #GS2 #Governance

India could face the prospect of sub-national bankruptcies if States continued to dole out freebies to influence the electorate, Fifteenth Finance Commission chairperson NK Singh cautioned on Tuesday, terming the political competition over such sops a “quick passport to fiscal disaster”.

Mooting the need for issuing credit ratings to States based on their fiscal health, Mr. Singh cited the example of a highly indebted State which is expected to spend an estimated Rs. 17,000 crore to implement recently announced ‘freebies’ such as 300 units of free power per household.

Without referring to Punjab directly, the Finance Commission chief said “a classic example” of the freebie problem is of a State that has become profligate and is unable to pay its bills, so it immediately rushes to the Centre for help. Beyond the devolution of revenues to the States as per the Commission’s advice, the Centre can only help States during times of distress or disasters, he pointed out.

“Governments across the political spectrum are now being increasingly attracted to this new slogan of freebie politics. The broader issue troubling me for some time is whether the politics and economics of freebies compels us to now think of what we can loosely call sub-national bankruptcy,” Mr. Singh said in an address at the Delhi School of Economics’ annual day.

Terming the Rajasthan government’s decision to revert to the old pension scheme for its employees as ‘regressive’ and “fraught with dangers”, Mr. Singh said it translated into a small fraction or just 6% of the population capturing benefits as high as 56% of the State’s revenues that go into its pension and salary expenditure.

While subsidies are needed for merit and public goods that have larger benefits, such as the public distribution system, employment guarantee schemes and greater support for education and health sectors, Mr. Singh flagged the need to distinguish these from other sops that are part of the contemporary political narrative.

The culture of excessive electoral sops for influencing voter preferences also undermines job creation and growth while denting the quality of India’s manufacturing and hurting environmentally sustainable aspirations. “Free power, free water, free fertilizers of some kinds — all distract from environmental objectives,”he said.

Indian stand on COVID death count method inaccurate #GS3 #SnT

“Inaccurate,” is how a scientist, part of a World Health Organisation (WHO) team computing the global death toll of the COVID-19 pandemic, described India’s objections to the method used. A forthcoming WHO analysis reportedly computes India’s true toll to be much higher than official estimates.

The Union Health Ministry on Saturday, in response to article, “India is Stalling the WHO’s Efforts to Make Global COVID Death Toll Public” on the same day in The New York Times ( NYT ), raised objections to the methodology used by the WHO to compute excess deaths.

So far, the WHO hasn’t officially released estimates for India, but the NYT claims the health body as having computed 15 million deaths by the end of 2021, or more than twice the official total of six million reported by countries individually. Of these, India accounts for four million deaths, or about eight times the current official toll of 5.2 lakh (as of Tuesday), the report said citing unnamed sources.

The Ministry’s detailed statement said it was in regular touch with the WHO on this issue and had shared “concerns with the methodology”, along with China, Iran, Bangladesh, Syria, Ethiopia and Egypt to the WHO six times since November 2021.

Grouping of countries

India’s core concerns are that these death tolls are computed using a statistical model that doesn’t account for the size and variation in the country. The WHO methodology classified countries into Tier 1 and Tier 2 countries, and used mortality figures from Tier 1 countries and used them on Tier 2 countries — an unjustifiable approach, India contends. It also objects to using ‘global covariates’ such as monthly temperature and monthly average deaths, income.

John Wakefield, member of the WHO’s Technical Advisory Group that’s responsible for the modelling, tweeted on Monday that the Ministry’s statement on the excess mortality method was “inaccurate” and supplied a link to a research paper describing the method employed. Wakefield is a Professor of biostatistics at the Washington State University.

For most countries that provided a national all-cause mortality rate, or the deaths by all causes monthly, the authors relied on the data provided. Argentina, China, India, Indonesia and Turkey, on the other hand, didn’t have a national all-cause mortality number and, for 2021— only data from a few months. India only had data from 17 States. Data for India, the research paper noted, was sourced from the registered number of deaths at the State and Union Territory levels that was either reported directly by the States through official reports and automatic vital registration, or by journalists who obtained death registration information through Right To Information requests.

Discrepancy in deaths

An objection that has been raised by India is that “…the model gives different mortality estimates when using data from Tier 1 countries and unverified data from 18 Indian States. Such wide variations raises concerns about validity and accuracy of such a modelling exercise,” underlining that India does not consider these State-level data as ‘verified.’

Excess deaths are the discrepancy in deaths in the pandemic years of 2020 and 2021, compared to the average deaths recorded in the pre-pandemic 2019 and 2018. The assumption is that most upward deviation from the pre-pandemic years represent COVID-19 deaths.

This isn’t the first time that India has objected to studies that estimate the scale of the pandemic’s toll in the country. The Lancet reported last month that India accounted for around over 20% of the global excess deaths as of December 31, 2021. India’s objections are that the study relies on numbers from “newspaper reports and non-peer reviewed studies.”

IMF cuts global growth on Ukraine war, trims India forecast to 8.2% #GS3 #Economy

The IMF on Tuesday cut its forecast for India’s GDP growth in the current fiscal year to 8.2%, a 0.8 percentage point reduction from its previous projection, as it downgraded the outlook for global growth citing the economic impact of the Russia-Ukraine war.

The International Monetary Fund’s latest World Economic Outlook also projected India’s economy to expand by 6.9% next year, putting it on course to be the fastest growing large economy over the next two years.

World output is now projected to grow by 3.6% this calendar year and next, slowing sharply from the 6.1% expansion seen in 2021.

“The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution,” the IMF said forecasting a massive 35% contraction for Ukraine in 2022. The conflict, the Fund noted, would contribute not only to a “significant slowdown” in 2022, but also to inflation — via trade, commodity markets and financial channels.

The IMF said Japan and India were seeing “notable” growth forecast downgrades in the Asia region, partly because of lower net exports and weaker domestic demand, with higher oil prices expected to weigh down consumption and investment.

Higher food and fuel prices were impacting vulnerable populations, and interest rates were rising, as central banks tighten monetary policy, the IMF observed. Additionally, the global economy was becoming fragmented with countries cutting off ties with Russia,  the “rules-based frameworks” were being threatened, and pandemic-induced lockdowns in China were exacerbating supply-chain disruptions.

“We are seeing a significant downgrade in our growth estimates for India, of 0.8 percentage points for 2022 [ FY22-23],” IMF research director, Pierre-Olivier Gourinchas, said at a virtual press conference.  India was “suffering like many other countries as a consequence of the war and negative terms of trade shock“ due to higher food and energy prices weighing down trade balances. Additionally, external demand was also softening as the rest of the world’s growth was impacted, Mr. Gourinchas added.

The U.S. is projected to grow at 3.7% (in 2022) and 2.3% (in 2023) , a 0.3 percentage point downgrade since January’s WEO. The January forecast had already seen the Fund lowering its previous projection owing to disrupted supply chains and because the ‘Build Back Better’ infrastructure package had not been passed by the U.S. Congress. A marginal additional downgrade has now been applied as the Federal Reserve withdraws policy support and tightens monetary policy, and as the U.S.’s trading partners experience disruptions due to the war.

The Euro area is expected to grow at 2.8% and 2.3% this year and next, respectively. Most European countries will experience a negative shock in their terms of trade, through higher energy prices. Additionally, they are also feeling the effects of disrupted supply chains. Downgrades across the Eurozone are offset by fiscal expansion, as per the IMF. Russia’s economy is expected to contract at a rate of 8.5% this year and shrink 2.3% next year, under the pressure of sanctions.

China – after growing by 8.1% in 2021 – is projected to slow to 4.4% growth this year, followed by 5.1%, next. Private consumption in China has been negatively impacted by repeated lockdowns and weak recovery in urban employment. Real estate investment growth in the world’s second-largest economy has also slowed down.

The global impacts of Russia’s invasion of Ukraine are expected to work through several channels. First, the commodity price increases. Second, direct impacts to the extent that countries have trade links with Russia or Ukraine. Third, via disruptions to cross-border production networks (e.g. neon gas production, an input for silicon chips is concentrated in Russia and Ukraine as per the IMF). Fourth, sanctions.,of%20the%20Russia%2DUkraine%20war.

War to test resilience of global financial system #GS3 #Economy

Russia’s invasion of Ukraine has driven up financial stability risks “on several fronts” and will test the resilience of the global financial system at a time when interest rates are rising sharply, the International Monetary Fund (IMF) warned in its biannual Global Financial Stability Report on Tuesday.

While there has so far been no globally systemic financial event, there are several channels through which the Ukrainian turmoil could be amplified across the system, the IMF warned.

Those include banks’ and non-banks’ direct and indirect exposures to Russia; commodity market disruptions and increased counterparty risk; poor market liquidity and funding strains; and cyberattacks and the acceleration of crypto asset use, it said. “While the financial system has proven resilient to recent shocks, future shocks could be more harmful,” the IMF said.

“A sudden repricing of risk resulting from an intensification of the war and the associated escalation of sanctions may expose vulnerabilities built up during the pandemic, leading to a sharp [dip] in asset prices.”