CURRENT TOPICS---SHORT ESSAYS

CURRENT TOPICS

WORLD BANK’S DOING BUISNESS RANKINGS

   The Ease of Doing Business index is an index created by the World Bank Group. Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights. Empirical research funded by the World Bank to justify their work shows that the economic growth impact of improving these regulations is strong. The most recent rankings come from the “Doing Business 2017” report.

   Despite years of efforts by Govt to sweep away arcane rules and simplify procedures, Indira remains one of the planet’s toughest places to do business. In the development lender’s latest report, which ranks 190 nations on how easy it is for private companies to follow regulations in 11 areas, India comes in 130^th. In the 2016 report, India’s ranking jumped 12 positions, cheering up the govt.

   A high ranking means the regulatory environment is more conductive to the starting and operation of a local firm. The rankings are determined by sorting the aggregate distance to frontier scores on 10 topics, each consisting of several indicators, giving equal weight to each topic. The rankings for all economies are benchmarked to June 2016. This represents an improvement of one place over last year, although due to changes in how the Washington-based institution computed the rankings, India was also placed 130^th in last year’s report – four spots above the country’s position the year before that. New Zealand tops this year’s ranking, dethroning Singapore.

   India’s image as a destination for global businesses has been marred by bureaucratic red tape, complex tax structures, and restrictive foreign investment regulations. Out of 10 parameters. India’s ranking this year improved in two, remained unchanged in three and worsened in five. The govt was expecting at least a 10-spot jump on the back of several measures taken in the past two years. The report, however, recognized reforms by India in four areas: getting electricity, enforcing contracts, paying taxes and trading across borders.

   Among the new features of this year’s Doing Business report is an attempt to gauge whether business rules apply differently to female and male entrepreneurs. In 17 of the economies studied, civil courts don’t value women’s and men’s testimony equally, affecting those nations’ score. In 16 countries, women face limits on their ability to own, use and transfer property. In India, the bank found that despite yawning gender divides, the country makes doing business just as challenging for women as for men.

STRATEGIC SALES IN SEVEN PSUS

   Strategic sale in public sector units (PSUs) is set to gather pace with the govt having approved Niti Aayog’s proposals for such sales via auction. It is welcome that the Modi govt has been able to garner the political resolve to offload 100 per cent of the Centre’s stake – by way of outright sale – in seven perennially loss-making central PSUs.

   The privatization would redeploy valuable resources for more productive purposes and rid the exchequer of long-recurring losses. The way forward is to hive off the land assets of the PSUs concerned as separate entities prior to privatization, so that no unearned rents accrue to the new owners. There need to be clear-cut legal provision on this score, so that there are no claims later.

   The last strategic sale took place in Jessop and Co in 2003-04 under the National Democratic Alliance govt, when 72 per cent of govt stake was sold to Indo Wagon Engineering for  18.18 cr. In the same year, the govt had sold 18.92 per cent of its equity in Hindustan Zinc Ltd to Sterlite Opportunities & Venture Ltd for  323.88 cr. The govt aims to collect  56,500 cr through disinvestment in PSUs this financial year. Of this,  36,000 cr is estimated to come from minority stake sale in PSUs and the remaining  20,500 cr from strategic sale in both profitable and loss-making companies.

   It is scandalous that the govt has been pussyfooting on divesting and exiting, for example, Scooters India, for over two decades now. Hopefully, the bankruptcy code should soon be operational and would be able to redeploy stressed assets quickly, efficiently and with the minimum of fuss.

   It is also notable that several cement and steel units in the public sector have also been identified for outright sale to strategic investors. Such a divestment plan, with full control of plant and machinery very much on offer, would invite bids for take over at a premium; there can be no strategic case for the Centre to stay invested in sundry cement and steel units.

   The Niti Aayog needs to firm up policy on earmarking new and emerging strategic areas for the public sector, the sectors in which the private sector remains unwilling or unable to invest. In the old days, steel, rightly, was deemed as a strategic sector. It is another matter that the attendant inward orientation and absurd tariffs of up to 200 per cent led to a high-cost economy that stultified growth, for years.

   But, going forward, while we stay clear of autarky and bet on openness to modernize and step up innovation, it makes sense to identify strategic sectors like, say, next-generation telecom networks or a new breed of materials derived from nanotechnology, to augment India’s economic capability. If the public sector works in space, it can, in other sectors, too.

GST STRUCTURE FINALISED

   The country moved a step closer towards implementing the goods and services tax (GST) after the Centre and the States struck a consensus on the rates and structure of the ambitious tax reform that will for the first time economically unify the country into a common market by removing interstate barriers to trade in goods and services.

   It is hard to find fault with the GST Council finalizing a multi-slab rate structure for the new indirect tax, commensurate with the principle to tax the haves more and the have-nots less. The four-tier GST structure of five per cent, 12 per cent, 18 per cent and 28 per cent is so graded that it won’t upset anybody’s consumption potential.

   The exemption of half the items in the Consumer Price Index basket under the new tax regime does not entail and additional tax burden for the poor. India aims to implement GST from 1 Apr 2017, but this will be contingent on finalizing the design of GST, including the supporting legislation.

   A zero tax rate will apply to 50 per cent of the items present in the consumer price index basket, including food grains such as rice and wheat. The next tax slab will be 5 per cent, wherein items of mass consumption like spices, tea and mustard oil will be taxed.

   There will be two standard rates of 12 per cent and 18 per cent, at which a majority of the items used by the common man will be taxed. There will be a higher slab of 28 per cent, wherein items currently attracting a tax of 27-31 per cent will be taxed. However, items used by the middle class such as toothpastes, soaps and refrigerators, which currently have a high tax incidence of more than 27 per cent, will be brought down into the lower slab of 18 per cent.

   A technical committee comprising Central govt and State govt officials will finalise the allocation of items into different rate categories. The tax rate on gold will be decided after this. The decision to not levy tax on essential commodities or products or keep it all the lowest rate of five per cent would shield the common man from price rise.

   The middle classes have reason to welcome the new structure as the tax on soaps, detergents, oil, shaving kits, small cars and other products of their use is fixed at 18 per cent. The rich can afford to pay 28 per cent tax for ultra-luxury goods. The multi-layered GST distinguishes between “necessities” and “luxuries” and reflects India’s deep class divisions.

   However, the GST’s roll-out would not necessarily improve the lives of the poor. For instance, even though food grains and basic medicines have been kept out of the GST ambit, this will not tackle the problems of malnutrition and ill health. For tangible transformation, radical changes in economic policies are a must.

BOYCOTT OF MADE-IN-CHINA PRODUCTS

   Slogans are used by Internet campaigns that advocate a boycott of Chinese-made products. Commonly cited reasons for the boycott include the perceived low quality of products, territorial conflicts involving China, and support for separatist movements within China.

   Some groups of people recently tried to start a nationwide movement of banning Chinese products on social media. They portrayed this movement as a symbol of nationalism and patriotism. Some of our leaders and so called political persons also supported them. According to them, by not purchasing daily-use Chinese products, we can hamper their economy. They believe that China is using our money to support Pakistan and trying to indulge India in a proxy war. Recent steps taken by China like using veto against Masod Azhar, stopping water of a tributary of Brahmaputra River and opposing India’s bid for the United Nations Security Council (UNSC) reinforced the thoughts of these radical groups.

   No Indian govt can ban the import of Chinese goods as this will be flouting the norms of World Trade Organization. The govt at best can impose anti-dumping duty on specific Chinese goods, which churns significant amount of revenue for it. In the age of globalization and cut-throat competition, the basic yardstick should be to buy quality goods. Besides, we must accept the fact that China is not the only country that supports Pakistan and further the support is for its economic expansion rather than for promoting terror. Moreover, China is our major partner not only in trade but also in international relations. We are working together on various platforms like BRICS, ADB and UN.

   As for the trade relations existing between these two countries, every year China exports more than $60 bn of goods and services while India exports only $11 bn. Basically, we have more than $50 – bn trade deficit. Today China imports only 0.8 per cent of its total imports from India while India imports 12.4 per cent of its total imports from China. Similarly, China exports only 2.3 per cent of its total exports to India while India exports 4.3 per cent of its total exports to China. These figures can easily explain which country is on the dominating side. So by banning them or not using their products, we will hamper our economy more than their economy. Extremism is never good, be it of any side.

   However, the campaign does have some positive aspects. Like in case of decorative items for festivals like Diwali and Holi, we can buy locally produced items along with these Chinese LEDs. By this, we can give a little sum of money to native people and appreciate their skills. It will definitely boost their morale and they will tend to produce more quality products in near future. The motto of this campaign should be “A step towards economic sovereignty” rather than being “anti-China”.

AMENDMENTS TO THE HIV BILL

   The Cabinet has approved amendments to the HIV (Human Immunodeficiency Virus) and AIDS (Acquired Immunodeficiency Syndrome) (Prevention and Control) Bill, drafted to safeguard the rights of people living with and affected by HIV. The Bill seeks to prevent and control the spread of the virus, address HIV related discrimination and strengthen the existing programme by bringing in legal accountability.

   The amendments made by the Govt to the draft Bill include the provision that Anti Retroviral Treatment (ART) would be available to People Living with HIV(PLHIV) “as far as possible.” The govt understood the fallacy of that expression and deleted the same. The Bill now provides that treatment would be provided to all PLHIV as needed. Indian generic companies supply ARVs to all PLHIV in developing countries. It would have been ironical not to do that in India.

   Informed consent before tests, treatment, and research of patients’ conditions has been made mandatory per the amendment. Patient records are now required to adopt stringent data protection methods. Court proceedings of cases pertaining to people living with HIV have also been guaranteed privacy in different ways.

   The Bill lists various grounds on which discrimination against HIV-positive persons and those living with them will be prohibited, including denial, termination, discontinuation or unfair treatment with regard to employment, amongst others. Under the proposed Bill, organizations with 100 employees must have a complaint officer to look into the grievances of the persons with HIV and ADIS, while every state has been mandated to have an ombudsman who will look into the violations under this Act once it has been passed. Under the proposed law, even the insurance companies cannot discriminate against an HIV-positive person and deny them the facility of insurance.

   While this bill and amendment represent important steps in the war against the HIV/AIDS epidemic, there are still long strides to be made. Testing is still not at 100 percent – with high-risk groups having significant room for improved testing rates. For female sex workers, it is at 72 per cent, for drug users it is at 71 per cent, and for gay males at about 70 per cent. Implications of this bill for at-risk members of the LGBTQI (Lesbian, Gay, Bisexual, Transgender, Queer and Intersex) community can also only be properly analysed once it is in place, given the multiplicity of stigmas they face in Indian society.

   The National AIDS Control Program in India is attempting to stem cases of new infections as part of its target of ending the epidemic by 2030. Currently they estimate that about 2,170,000 people are living with HIV and 6.54 per cent of them are children under the age of 15.

SMOG IN DELHI

   The burning of crackers before and during Diwali, vehicular pollution and burning of crops led to an increase of particulate matter in Delhi air, thus contributing to the Delhi smog, which was at the worst level in two decades. The smog affected the health of the people living in the city and hampered their ability to do their jobs efficiently. The HR experts informed in a survey that they faced 5 to 10 per cent staff crunch with growing number of employees falling sick.

   New Delhi is the 11^th most polluted city in the world, with an annual average PM2.5 measurement of 12. PM2.5 levels have been rising in the city over the past five years. In some areas PM2.5 levels increased from 60 in 2011 to 119 in 2015, yearly data from the country’s Pollution Control Board shows. The World Health Organization recommends that PM2.5 is kept below 10 as an annual average. It says exposure to average annual concentrations of PM2.5 of 35 or above is associated with a 15 per cent higher long-term mortality risk.

   Minor reductions in pollution do not reduce health risks significantly. The Global Burden of Disease finds that health impacts of pollution are non-linear. This means that significant declines in adverse health outcomes for Delhi and other polluted Indian cities will only be realized when pollution levels reach National Ambient Air Quality Standards. Therefore, any strategy requires us to understand the portfolio of policies (across transport, energy, waste and trans-boundary issues), which will help us meet our air quality modeling and economic analyses.

   Yet, few reports from the Central or State Pollution Control Boards (CPCB, SPCBs) have attempted this kind of analysis. Most studies stop at a source-apportionment analysis. Without this perspective, we would be tempted to go with populist (often unscientific) solutions to control pollution. Simply vacuuming roads and sprinkling water will not cut it.

   According to a survey done by Assocham, the toxic smog in New Delhi, that made it the world’s most polluted city, was to soon affect the city’s economy. The rising discontent over air pollution could result in new attempts at banning diesel cars, which would hit car-makers in Asia’s third largest auto-market. Sectors like tourism, real estate, automobile and construction will get hampered if the govt fails to curb the level of pollution in the capital. The World Bank calculates that air pollution – which has spiked as developing countries rapidly urbanise – now costs the world more than $5 tn in welfare losses. The cost of air pollution in South Asia equates to about 7.4 per cent of the regional gross domestic product. Some businesses, however, are carving a niche through the smog: air purifiers, air-filtering face masks, and bottled air are doing a roaring trade.

THERESA MAY VISITS INDIA

   India and the UK have many reasons to have close relations. They are two pillars of the Commonwealth, sharing democratic values and a world view on many political issues including terrorism. The Indian community that has settled in Britain has helped deepen ties. Today India is the third largest investor in the UK, and the UK is the largest G20 investor in India. It stands to reason that for her first foreign visit outside Europe after taking over as Prime Minister, Theresa May chose India.

   For the past few months, British ministers, including key advisers to May, have emphasized that the Brexit movement would benefit India – UK ties. Given this backdrop, it remains a mystery why, in the event, May’s visit turned out to be devoid of any substantial measures that would put India-UK ties on a new trajectory. This  trip was primarily about the UK govt seeking areas in which India and the UK could get open access to each other’s companies.

   While the UK cannot begin any Free Trade talks before it triggers Article 50 of the Lisbon Treaty, it is keen to get informal trade talks underway with major non-EU states, including India. The two MoUs signed in the presence of Prime Minister Narendra Modi and Theresa May, on improving the ease of doing business and on intellectual property rights, did little to add any shine to the lack luster visit.

   Britain could expand growth if it looks beyond the EU to strengthen ties and sign free-trade deals with emerging markets like India, Brazil and China. But clearly Theresa May’s half-measures did not catalyse the process of change. She indeed showed that she valued friendship with India by choosing this country for her first non-Europe overseas visit after becoming prime minister but there is more to the push in ties than mere tokenism.

   While the UK can’t finalise any details so long as it is still a member of the European Union, British officials were looking at initial possibilities for a free-trade deal. In the short term, the UK was also looking to break down existing barriers to try and gain improved access to India for Britain’s legal services.

   Since Prime Minister Modi came to office in 2014. Britain and India have sought to reboot relations. Last year the two countries pledged to intensify collaboration in a range of sectors, including energy, defence and health. But Britain’s visa regime for Indians has been a major sticking point in the relationship. The Indian govt has blamed the system for a sharp drop in the number of Indians studying in Britain in recent years.

   May’s visit led to a few business deals and joint declarations on security cooperation but is unlikely to yield a long-term and much-needed boost in the UK-India trade relationship.

MODI VISITS JAPAN

   The Nov summit in Japan between our PM and Japanese Prime Minister Shinzo Abe, and the deals between the two countries are reflections of the concerns of India and Japan with respect to China’s assertiveness for Asian hegemony and muscle flexing in South China Sea. The success of the six-year-tug-of-war Civil Nuclear deal against China’s intransigence and Japan’s sale of US-2 amphibious planes to the Indian Navy, pledging for Defence Framework Agreement and Joint Working Group for defence equipment and cooperation, joint cooperation for development of Chabahar Port in Iran and reiteration of commitment for maintenance of peace in South China Sea in the Joint Statement, all reflect the new directions of the India-Japan relations with a focus on China in Asia.

   There was a paradigm shift in India-Japan relations from economy to defence. A new twist in the India-Japan relation was observed in the aftermath of Japan introducing new defence guidelines in Dec 2013. The era of India-Japan defence cooperation began with Modi’s first visit to Japan as PM in Sep 2014. The summit made a turnaround in the bilateral relation focusing on defence cooperation after Japan lifted the ban on six Indian entries, including HAL (Hindustan Aeronautical Limited) – the only Indian company producing Indian defence aircraft – in the hope of selling US-2 amphibious planes. Thus, India became the first country in the world after World War II to acquire military systems from Japan.

   As the joint statement showed, the two leaders were able to project a strong shared view on international terrorism, which is a prime current concern for India. After the attack on a military base in Uri, Indian govt has stepped up both military action and diplomatic initiatives against Pakistan. Japan, known for maintain a balanced view on the India-Pakistan conflict, for the first time has not only condemned terrorist activity the 2016 joint statement but also urged Pakistan to take punitive actions against terrorist groups operating from its territory.

   Japan and India also expressed their views on the CTBT, where the joint statement suggests that while there was shared ground between them, the meeting of minds was not all-inclusive: senior officials from the two sides had somewhat different interpretations of what could be the consequences should India decide to test a nuclear device. This is no more than a remote contingency today.

   Japan has been one of the big foreign investors in India. During 2015-16 and the first six months of 2016-17, Japan was the third biggest investor in India. Japan’s ODA (Official Development Assistance) was the backbone of India’s infrastructure development, such as power, transport and environment-related projects. Delhi Metro – a marked breakthrough in India’s transport – was largely financed by Japanese ODA.

DUTERTE’S FOREIGN POLICY

   The announcement by the administration of Rodrigo Duterte, the president of the Philippines, that it would adopt an independent foreign policy in line with the constitutional mandate dropped like a bombshell. Many took this as a pivot to China at the expense of the US.

   Duterte’s foreign policy is difficult to comprehend because it seems to favour China, which has violated the country’s rights in the South China Sea, and casting aside the US, a long-time ally of the Phillipines. His resounding victory in the presidential elections in May had shaken up the political landscape of the Philippines. His administration is vastly different from that of his predecessor, President Benigno Aquino.

   Three key policies that involve significant foreign country support have changed substantially. The Duterete administration follows the Muslim Mindanao peace process, military modernization, and maritime rights disputes with China differently. The US, Japan, and Australia are the Philippines’ three most important security partners. Each relationship has deepened and broadened during the Aquino presidency in relation to these three security policies. Despite the signalled changes, more support from security partners is needed and new opportunities for deepening and broadening relationships have been realized. Much has changed with Duterte’s presidency. Duterte appears to be cosying up to China while launching a series of tirades against its treaty ally, the US, threatening to sever ties with them and end joint military training for its criticisms of his bloody illegal drugs crackdown.

   The Duterte administration’s battle cry of an independent foreign policy only echoes the sentiment of Filipino statesmen  since independence. In 1943, while still under Japanese occupation, the Philippines declared independence from the US. Washington dismissed this as an act of collaboration and supported the govt-in-exile of President Quezon. The US only granted the Philippines independence with strings three years later. But it was not full independence since the US would insist on establishing its military bases, exacting citizenship rights for its nationals and controlling its currency. It was only a decade later that this anomalous extra-territorial exaction was removed.

   A solution to the Philippine security dilemma in case this country finally gets rid of the American bases would be the revival of a robust reserve officers training programme and of the citizen army concept. The National Security Council should enlist private manufacturing firms on a PPP basis to manufacture the requirements of an armed forces modernization plan. This would discourage the Philippines’ culture of dependency, the biggest obstacle to an independent foreign policy.

MARRAKECH CLIMATE CHANGE CONFERENCE

   The 22^nd­­ session of the Conference of the Parties (COP 22), the twelfth session of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP 12), AND THE FIRST SESSION OF THE Conference of the Parties to the Paris Agreement (CMA 1) were held in Bab Ighli, Marrakech, Morocco 7-18 Nov 2016. The Conference successfully demonstrated to the world that the implementation of the Paris Agreement is underway and the constructive spirit of multilateral cooperation on climate change continues.

   The Proclamation took note of the “extraordinary momentum on climate change worldwide” in the last one year, including the finalization and early ratification of the Paris Agreement, and emphasized that this momentum was “irreversible”, since it was being driven not just by govts but also by “science, business and global action of all types at all levels”. A major achievement of the talks is that the spirit of unity and flexibility demonstrated by all parties helped rebuild the international community’s confidence in global cooperation on climate change, which has been overshadowed by uncertainty caused by the election of Donald Trump. After years of negotiations, at least 195 countries in Dec 2015 adopted the first-ever universal, legally binding global climate deal, dubbed the Paris Agreement, aimed at reducing global warming to below 2 degree Celsius. Another significant achievement of the Marrakech talks is that negotiators managed to agree on a two-year programme to prepare the rulebook for the implementation of the Paris Agreement.

   47 of the world’s poorest countries, which have grouped together as the Climate Vulnerable Forum, committed to generating 100 per cent of their energy from renewable sources as soon as possible. They also pledged to update their nationally determined contributions before 2020 and to prepare long-term strategies.

   However, developing countries were disappointed about lack of substantive progress on such issues as climate funding and the enhancing of climate action by developed countries before 2020. At Marrakech, some 80 mm dollars has been pledged by developed countries to the Adaptation Fund, compared to 56 bn to 73 bn dollars of the estimated annual adaptation finance needs of developing countries. Developing countries’ concerns did not get adequate attention in the decisions. Negotiators agreed to keep the Adaptation Fund which was set up in 2010 under the Kyoto Protocol. Developing countries have been worried that the fund may no longer exist after the Protocol is replaced by the Paris Agreement in 2020. As to long-term finance, however, developed countries only reaffirmed their promise to mobilize $100 bn annually by 2020 to help developing countries combat climate change.

@@

Measures of inflation in India

The RBI (Reserve Bank of India) considers the CPI (consumer price index) as its primary gauge of measuring inflation. Prior to the RBI adopting the CPI in India (PIN) (FINGX), another measure of inflation—the WPI (wholesale price index)—was the key gauge of inflation and it’s still considered for reference. To learn more about these measures of inflation, read India’s different inflation measures—WPI versus CPI.

The RBI has CPI growth targets to adhere to while deciding its monetary policy stance. By January 2016, it was supposed to keep inflation below a target of 6%, which it was able to do. Its next target is to keep inflation at or below the 5% mark by March 2017.