MARCH 2017: A Shankar IAS Academy Initiative

A Shankar IAS Academy Initiative
MARCH 2017
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1. Twin Balance Sheet Problem Companies were taking on risk in anticipation of
huge growth opportunities.
Topic: Economy
Alas, growth opportunities diminished
considerably with the onset of the global financial
The highest rates of child marriage are typically crisis in 2007.
found in low or lower middle-income countries
Indian companies have also faced delays in
where millions live below the poverty line.
securing land and environmental clearances and
Indias leading corporates have too much debt on
this caused project costs to soar precisely when
their balance sheets; this keeps them from making revenues were falling.
fresh investment. Banks are weighed down by a
The Reserve Bank of India (RBI) increased interest
mountain of bad loans; this comes in the way of
rates to deal with double-digit inflation, so
credit growth.
financing costs rose.
Twin Balance Sheet (TBS) impacts growth by
The combination of lower revenues, higher project
affecting both the demand for credit and the
costs and higher financing costs played havoc with
supply of it.
companies cash flows and hence their ability to
Three points that are mentioned in the Economic
service debt.
Survey are worth highlighting.
One, the non-performing asset (NPA) problem at

PSBs cannot be ascribed primarily to This analysis should provide an antidote to
mismanagement or bad governance. narratives that see the bad loan problem at PSBs as
arising from poor governance and management.
Two, India has not faced the sort of recession that
results from TBS, thanks largely to government With the benefit of hindsight, one can say that
ownership of banks. banks should not have taken the exposures they
did. But when a boom is on, managers have to be
Three, resolution is impossible without
extraordinarily brave not to want a piece of the
significant debt write-offs.
action.
If PSBs had focused on retail loans as much as

As the world economy boomed in the mid-2000S private banks did, we would have, perhaps, ended
and the Indian economy along with it, Indian firms up with a housing bubble (as in the USA) instead
embarked on an investment spree. of an infrastructure bubble!
Much of the investment went into infrastructure The bottom line is clear enough. There may have
and related areas such as telecom, power and steel. been acts of corruption but, for the most part, the
Banks vied with each other to finance these bad loan problem has arisen on account of
projects. This resulted in a credit boom. the exuberance of investorsand factors
extraneous to banking.
Companies raised record levels of debt from the
international markets as well. As a result, the
debt to equity ratio in Indian companies shot
up above normal levels. A TBS typically results in a recession. This
has not happened in India despite the fact that the
www.shankariasacademy.com | www.iasparliament.com 3
ratio of NPAs to gross loans in India today is render the problem manageable. Unfortunately,
higher than in South Korea at the peak of the East neither has happened.
Asian crisis.
The Survey mentions three possible reasons.

First, there has been no banking crisis in India
Bank management is reluctant to write off debt for
because the banks most affected are PSBs.
fear of facing the wrath of investigating and
Depositors have the confidence that the
oversight agencies.Also, banks do not have the
government will ensure safety of deposits. Thus,
capital to make the necessary write-offs.
high NPA levels have not translated into a loss of
creditor confidence. Thus, The Survey thinks that leaving it to
individual banks to resolve the bad loan will
Second, the additions to infrastructure that have
not work.
happenedmay have created headaches for
investors and banks. At the macro-level, however, The Survey, therefore, proposes the creation of a
they have eased supply constraints and Public Sector Asset Rehabilitation Agency
helped growth. (PARA) to tackle bad loans. The government will
have a 49% stake in PARA.
Third, Indian banks did not respond to
companies woes by forcing bankruptcy. In India, This should help overcome the incentive problems
this is a time-consuming process and results in that managers at PSBs face. Moving all bad loans
poor recovery. So, wherever there is hope of a to one agency should help overcome the
turnaround, banks prefer to keep the firm coordination problems too.
afloat. But, matters are not that simple. Managers at
PARA may not have to look over their shoulders
while making write-offs.
Banks restructured existing loans and extended
fresh funds to help them cope until demand But the government, as the dominant investor,
recovered. cannot avoid scrutiny and the inevitable
controversy where large corporates are involved.
But, by 201415, restructured loans accounted for
6.4% of loans outstanding. Despite tighter checks A better course would be to create a mechanism
by the RBI, banks continue to evergreen that enables PSB management to resolve
loans. bad loans without fear of a witch-hunt.
NPAs and restructured assets are 12.6% of all The Banks Board Bureau has created an
loans. Adding unrecognised loans, bad loans are oversight mechanism for vetting loans but this is
16.6% of total loans. At PSBs, the figure is around said to be meant only for Scheme for Sustainable
20%. Structuring of Stressed Assets (S4A) resolution.
We need three changes.
So, such a financing strategy, can help under one
of two conditions. First, the authority must be empowered to
approve any type of resolution.
One, companies cash flows improve and this
enables them to eventually service debt. Second, the authority must be backed by an act of
Parliament as otherwise the vetting authority itself
Two, even if particular projects and companies do
could be exposed to investigation.
not recover, the Indian economy could, and NPAs
as a proportion of GDP could fall. This would Third, the government must infuse capital into
PSBs necessary to cover write-offs.
2. Bad Bank Proposal for India But, since there is a belief that these banks have
the backing of the government, which will keep
Topic: Economy.
them afloat, the bad loan problem has not, as yet,
become a systemic crisis.
Jubilee comes from Judaic Law. It is a clean slate However, that India needs to decisively resolve her
to be proclaimed every 49 years annulling personal banks stressed (non-performing, restructured or
and agrarian debts, liberating bond-servants to written-off) assets with a sense of urgency.
rejoin their families, and returning lands that had
been alienated under economic duress.
A bad bank is a corporation established to
Jubilee has been traced back to royal
isolate stressed assets held by a bank or
proclamations issued in Sumer and Babylonia in
financial institution, or a group of banks or
the third and second millennia BC. It used to
financial institutions.
happen quite often, and debt write-offs happen
quite regularly even these days. There have been two main proposals to tackle
the stressed asset problem of the Indian banks
since the beginning of this year.
The oldest known perpetual bond in the world that The first one was the bad bank proposal made in
still pays coupon (at an interest rate of 2.5%) was the Survey: A centralised Public Sector Asset
issued in 1624. Rehabilitation Agency [PARA] that could take
As the name suggests, a perpetual bond never charge of the largest, most difficult cases, and
pays principal. It pays coupons with some stated make politically tough decisions to reduce debt.
frequency on the stated principal only. The second proposal is to create a resolution
As crazy as the zero coupon perpetual bond idea agency. Archarya suggested two models. A
may sound, the banknotes we carry in our wallets Private Asset Management Company
are essentially zero coupon perpetual bonds. (PAMC) and a National Asset Management
Company (NAMC).
They pay neither coupon nor principal. Yet, they
have face values written on them such as Rs 100 or Under the PAMC, banks would come together
Rs 500. And, they buy things at their face value. to approve a resolution plan based on
proposals from a variety of different restructuring
agencies and this would also be vetted by rating
The non-performing assets (NPAs) of the Indian agencies.
banking sector have been on the rise since
As he (Acharya) explained, there are ways to
September 2008, with faster deterioration after
arrange and concentrate the management of these
September 2009.
assets into a single or few private asset
NPAs reached 9.3% of the total credit management companies (PAMCs), at the outset or
extended by the entire (public and private) right after restructuring plans are approved.
banking system, while NPAs of public sector banks
He also argued, the PAMC would be more suitable
were 11% of the total credit they extended.
for sectors such as steel and textiles where some
Under normal circumstances this would have sectoral recovery is in sight whereas the NAMC
threatened the banks concerned with insolvency, in which the government would play a
perhaps triggered a run on the banks, forced bank larger rolewould be more appropriate for
closure, and even precipitated a systemic crisis. infrastructure investments such as power where
the assets may appear to be unviable in the short to The Bad Bank would swap the zero coupon
medium term. perpetual bonds with reserves the RBI would
To sum up, while the finance ministry create. These reserves would be excess, because
proposed a mainly public solution, Acharya they would not back any of the deposits of the
proposed mainly private or market banking system;
solutions to the problems. The Bad Bank would swap the excess reserves with
the banks (public and private) for the bad loans.
Two things will happen to the banks (not just

public, but also private):
Sources in the finance ministry said that the issue
is best left to banks as the government did not have They are relieved of the bad loans;
the required resources to meet the capitalisation Since the excess reserves have zero risk weights,
needs. their capital ratios go up so that there is no need to
In addition, it does not want to be seen bailing out recapitalise any of the banks.
companies and banks when the same resources Furthermore, although the base money was
can be deployed elsewhere. increased by the amount of the issued zero coupon
It is that both of the proposals operate perpetual bonds, since the existing deposits
under the implicit assumption that banks remained intact, the broad money neither
are financial intermediaries. increased (no immediate inflation) nor
decreased (no immediate deflation).
The problem is that banks are not financial
intermediaries. They are money creators. Banks In addition, this operation would cost nothing
create money either by extending credit or by either to the Government of India or to the Indian
buying government securities while in the process taxpayers, because the Government of India will
creating corresponding deposits. pay neither coupon nor principal on the issued
zero coupon perpetual bonds.
Although banks can collect deposits from each
other, when we look at the entire banking system At this point, a decision has to be made
as a single bank, there is no other place from which regarding what to do the with the bad loans.
this bank can collect deposits except the holders of One possible decision is to erase all of the bad
currency in circulation. loans against the Bad Banks equity and dissolve
That is, the banking system does not collect or the Bad Bank. This is partial Jubilee.
mobilise deposits first and then extend credit or It is partial because in a full Jubilee, all of the debts
buy government securities. It is the other way in the country would be annulled and the country
around. would start from a clean slate.
In light of the discussion so far, the Author makes Although the above proposal solves the immediate
a bad bank proposal for India and, for want of a stressed asset problem of the Indian banking
better name, we call it the Bad Bank. system cheaply, it does not solve any other
The Bad Bank would be promoted by the problems, be those economic, financial, political,
Government of India and capitalised with zero social and the like.
coupon perpetual bonds the government would
issue;
It only gives the country some breathing time so As it stands, Section 228A imposes a criminal
that she can attack and tackle all of her other liability on any person who publishes the identity
problems. of a victim of sexual assault.
3.Right to be Forgotten in Indian Law Section 23 of the POCSO Act criminalises the
publication of the identity of any child which may
Topic: Polity, Constitution.
affect the reputation or infringe the privacy of a
child victim of sexual abuse.
A recent order of the Karnataka High Court

prompted some news outlets to claim that the high
The rationale in both these laws rests on the harm
court had recognised the right to be forgotten.
that is caused to the victim of a crime of sexual
Coupled with a case pending in the Delhi High assault by having the same discussed in public.
Court that has sought such a declaration, it was
Both laws look to protect the privacy and the
presented as an innovation in Indian law.
reputation of the victims of sexual assault given the
This was an unfortunate misunderstanding of the stigma visited upon the victims of this crime in
order itself and the law in India. Indian society.
Another underlying concern could also be the

possibility that revealing the identity may affect
The Karnataka High Courts order does not
the victims ability to give evidence in court, and
actually lay down any principle. The case has
thereby affecting the trial as well.
been filed by the father of a woman who had filed
criminal and matrimonial cases against her That said, the laws do not impose absolute bans on
husband and subsequently settled the same, the publication of the identity of the victims.
continuing the relationship. Section 228A also allows the victim or her kin to
authorise a welfare institution or organisation to
It sought that the name of the woman be masked
make the identity of the victim public.
by the high court registry in the publicly available
links on the internet. This has been granted almost
summarily and there is little or no discussion of
One glaring flaw is obvious in subsection 3 of
any law or principles concerned.
Section 228A:the immunity from prosecution
The high court does conclude with a cursory for those printing or publishing the high court or
summation of the law in Western countries in Supreme Court judgments.
the context of the right to be forgotten in
While this was intended to protect the law reports
sensitive cases and offences against women.
available mostly to a limited number of practising
There being no serious dispute about the relief lawyers, it did not foresee the internet age
sought, it is not possible to say that the high court where all the information concerning a case
has laid down any principle or rule that such a reproduced in a judgment is easily available
request be granted as a matter of right. through search engines.
Two laws expressly mandate that names of certain This problem is further aggravated by the
persons will not be made public in any manner carelessness with which the appellate courts have
whatsoever: Section 228A of the Indian Penal Code revealed the names and identifiable details of the
(IPC), 1860 and Section 23 of the Protection of victims of sexual assault.
Children from Sexual Offences (POCSO) Act, 2012.
However, should the specific protections granted 4. Right to Recall Reform Experience
in these two laws be generalised to a wider set of
people through the right to be forgotten? in Madhya Pradesh
The basis for the right to be forgotten in the

European Union (EU) has been drawn from The Right to Recall (RTR) had been perceived as
provisions in the EU Charter related to data a suitable solution to enhance accountability
privacy and domestic laws of EU countries. among elected representatives, as it allows voters
Its conflict with the freedom of speech and to seek re-election of the representative before the
expression has also been noted and the approach is scheduled end of tenure of the incumbent.
very different on either side of the Atlantic. To give one example, voter surveys have found
This does not mean that a person does not have the support for the reform to be applied
right to protect her privacy and reputation in the nationally in legislative assemblies and
public eye. Parliament, with a higher degree of support
among the urban and literate youth than others.
It need not even be in extreme situations such as
sexual assault. Matrimonial disputes might involve
the revelation of very personal information to the
The RTR was introduced in MP to Sections 24
court and get reproduced in a judgment that is
and 47 of the acts that applied to recall of the
widely and instantly accessible to anyone, and
mayor of a corporation and president of a council,
might even be the first result when one searches respectively, through a secret ballot and a majority
for a persons name.
of more than half of the total votes in the area.
This is the very cause of action that prompted the This direct election was initiated through a
petitioner to approach the Delhi High Court in the proposal for recall supported by three-
right to be forgotten case currently being heard.
fourths of the elected council.
The flip side is the very real danger that this The RTR under Section 47 came with various
might be used by persons with power to safeguards like, the recall proposal would be
suppress discussions of their misdeeds.
verified by the collector and that such a proposal
would be initiated only after two years of the
mayoral election.
The right to be forgotten, cannot be discussed
without understanding the possible repercussions Following verification of the signatures on the
on the freedom of speech. recall proposal, the collector would send the
proposal to the state government, which would
No doubt, limiting the amount of private
then refer it to the State Election Commission
information about an individual being available in
(SEC) to begin the process of election on the recall
the public domain is a pressing concern, but this
question.
needs to be balanced equally with the need to
prevent people escaping consequences for their
morally and legally dubious actions in the public There have been mixed impressions about the
eye. impact of the reform in MP, where the first recall
election was held in 2001 in Anuppur in Shahadol
district.
The most recent recall elections were held in 2015 Fifth, the president should have been given a
against the Congress-backed Nagar Palika chance to counter the reasons for the no-
Parishad president in Harda district, and the confidence motion before the recall was
independent president of Nagar Parishad in proposed.
ChhaneraNew Harsud in Khandwa district.
Sixth, new voters who had not participated in the
While Harda had seen 59.7% voting, Chhanera municipal elections in 2011 when the recalled
New Harsud had witnessed 57.36%, according to candidate was elected, had now voted in the recall
media reports. elections in 2015.
The recall election for both candidates was held on Seventh, the recall campaign was targeted
4 February 2015, and while the former was against her, and all the councillors were against
removed from the post, the latter had retained it. her. She had taken the matter to the high court but
lost the legal challenge.
Since 2000, there had been 33 recall
elections held at the municipal level in the state,
of which the incumbent was recalled in 17
instances and not recalled in 16 instances.
First, the recall was facilitated because of a
However, present Election Commissioner of the sharply divided house where, of the 15
SEC since 2013, did not support the view that the members in the council, eight were affiliated with
RTR should be extended to legislative assemblies the BJP, three with the Congress and others were
and argued that RTR should be exercised only non-affiliated independents.
where executive functions are discharged
Second, the recall proposal against Bhardwaj
and not legislative functions.
(retained candidate) was signed by 12 of the 15
councillors, and was submitted to the district
collector on 23 July 2014. They signed the
affidavit that they did not trust me, he said, and
Speaking on the experience of reform, there listed
explained that there had been no investigation or
several shortcomings of RTR.
evidence to support this view.
First, the grounds for recall were arbitrary
Third, he felt that it was difficult for the collector to
as there had been no charges of corruption or
verify whether or not the councillors had signed on
irregularities against the Bansal (recalled
the recall proposal under pressure.
candidate).
Fourth, he objected to the fact that he was not
Second, the ballot paper of one vacant chair and
asked for any explanation.
one chair occupied by an image had confused the
voters. Fifth, Bhardwaj found the symbols of the vacant
and the filled chair on the ballot paper confusing
Third, the question arose on whether the president
as people were used to voting for party symbols.
of the council was to be considered a councillor or
not. Sixth, the campaign before the recall election was
dominated by the councillors united against him.
Fourth, there was political tension between the
president and the councillors, who belonged to a He believed that he survived the recall
different political party, which led to strife and mainly because of his own contribution to
facilitated the recall proposal. his constituency.
Despite the complaints, Bhardwaj felt the RTR was
an important reform and it should be extended to
The Finance Bill, 2017 was introduced in
the members of the assembly and Parliament as
the Lok Sabha as a money bill, which in our
well.
bicameral system of governance is a type of
legislation over which the lower house of
Parliament has supreme authority.
It was found that both losing and winning
candidates in recent recall elections in MP shared The government decided to make substantial and
similar views on the reform. wide-ranging amendments to various laws even as
the Supreme Court is yet to resolve a
To sum up, the experience with RTR in MP
petition by the Rajya Sabha Member questioning
revealed functional problems with the
the Lok Sabha Speakers classification of the
reform, including at the point of inception of the
Aadhaar Bill, 2016 (now Aadhaar Act, 2016) as a
recall proposal and at the point of culmination of
money bill.
the ballot.
Without the caveat of Article 110(3) of the
At the inception, the political motivation for
Constitution that authorises the Lok Sabha
recall could be neutralised if the proposal was
Speaker to have the final word on what constitutes
moved by the voters themselves seeking
a money bill, it would be difficult to justify such a
recall elections and not through a no-confidence
classification of the Finance Bill, 2017.
motion by councillors.
Article 110(1) of the Constitution states that a
At the culmination point, the ballot could be
money bill can be classified as one only if it deals
redesigned in a way in which voters are not
with taxation, government borrowings and
confused.
guarantees, government expenditures, or
The RTR is not a suitable reform in its present any matters incidental to these.
form and could be forced upon an electorate.
As a part of the annual budgetary exercise, finance
5. Parliament sans Democracy bills usually fit this classification. However, the
Finance Bill, 2017 far exceeded such a purview on
a number of counts.
After introducing a slew of last-minute

amendments, the governments decision to amend
40 central statutes as part of the Finance Bill, For one, it significantly amends the Companies
2017, sent out a clear message. Act, 2013, by which non-government
companiescan now donate as much as they like to
It does not believe in consultation with its political
political parties.
opponents. It does not have faith in independent
judicial oversight. The present amendments not only remove the
limit, but also the necessity to disclose the name of
Above all, being eloquent about the need for
the political parties to which a contribution is
greater transparency in political funding it has
made.
acted in precisely the opposite manner and made
Indias democracy more subservient to corporate Various committees on electoral reforms were
interests. quite clear that corporate funding of political
parties would mean that the promoters of
companies would consider their
contributions as investments from which All the amendments sought by the Rajya Sabha all
benefits could be reaped in the future. these issues were rejected by the Lok Sabha.
Such funding, it was argued, would influence

government decisions in favour of the concerned
The passage of laws by using the money bill route,
companies.
and thereby skirting the Rajya Sabha where the
The current amendment essentially takes the BJP does not yet have a majority, is now becoming
country in a diametrically opposite direction and the norm with this government.
strengthens the nexus between business
Essentially, this lays out a stratagem for any
and politics.
party with a brute majority in the Lok
Sabha to deflect the power of the Rajya
Also of concern are the amendments to merge Sabha to act as a necessary check.
certain tribunals with others. By using virtually any means to achieve their own
This change will conflate the role of specialised ends, the government is not just violating
tribunals without paying heed to their areas of democratic norms but also defiling the ethos of the
expertise while overburdening existing ones. Constitution.
The government now seeks to have an overarching 6. Right to Healthcare

involvement in the recruitment, terms of service,
Topic: Govt Policies, Health.
and termination of members of the tribunals.
This will necessarily undermine the

independence of quasi-judicial bodies that A national health policy is primarily a statement of
have similar powers and functions as the high intent. However, even in this, and the framework
courts. for implementation that it lays out, it falls short on
a number of counts.
The government is itself often a litigant before
them. It is shocking, therefore, that this
government refuses to recognise such a blatant After the Alma-Ata declaration on primary
conflict of interest. healthcare, India adopted its first NHP in 1983,
Another aspect that is worrying are the followed by the second NHP in 2002.
amendments to the Income Tax Act, 1961 Although health indicators like mortality, life
seeking to expand the powers of income tax expectancy and disease prevalence have improved,
officials in an arbitrary manner. the targets set for mortality rates, life expectancy,
Now empowered officials only need to be armed and disease prevalence have remained
with a reason to believe to conduct a search elusive.Predictably, the NHP 2017 has pushed
and seizure of property, even retrospectively from the dates to meet these targets further
1962. along.
If challenged, the official need not disclose the Indias budgetary allowance for health, among the
reasoning to any authority or the appellate lowest in the world at 1.3% of the GDP (2017),
tribunal. does not inspire confidence in these targets being
met anytime soon.
In essence, this is a draconian move by which
officials are given arbitrary powers which could be
used to selectively harass and intimidate.
The NHP 2017 intends on this being increased to While focusing on primary healthcare, the NHP
2.5% by 2025, while having states spend 8% of advocates the mainstreaming of AYUSH
their budget on health by 2020. practitioners to be integrated into the primary
healthcare centre (PHC) as mid-level service
It advocates that two-thirds or more of the health
providers and expanding the PHC to include
budget be allocated to primary healthcare, and the
wellness and preventive and promotive
rest to secondary and tertiary care.
healthcare.
The NHP talks of having assured comprehensive
The NHP 2017 also stipulates making rural
care at the primary level, while persisting with the
postings mandatory for doctors, along with
government-financed health insurance schemes
popularising MD courses in family medicine or
and direct purchasing of care from the private
general practice.
sector for the secondary and tertiary levels of care.
These policy suggestions, if acted upon in earnest,
While the emphasis on comprehensive healthcare
will go a long way in providing comprehensive and
at the primary level is welcome, it is not enough
holistic primary healthcare, especially in the rural
if the allocation for health remains as low
areas.
as 2.5%, an amount that is much lower than what
even other developing countries allocate to
healthcare.
A matter of some concern is the recommendation
Unfortunately, the NHP 2017 makes no to involve the private sector in more areas
commitment to introduce the right to of healthcare, including outsourcing elements of
healthcare on the lines of the right to education public healthcare to the private sector, and
and right to food. strategic purchasing of healthcare and insurance.
It has removed all reference to instituting a Also, while it states at the outset that general
National Health Rights Act, which was mentioned taxation will remain the principal means of
in the 2015 draft. financing healthcare, it prioritises purchasing of
Unless healthcare is viewed as a right in itself, it healthcare services from the public sector, followed
will not be able to generate either the incentive or by the not for profit, and then the private sector.
the political will to improve and bring basic health The latter could be acceptable as long as it is not
infrastructure up to threshold levels. used as an escape route to limit public
spending, without which a public health system
is not sustainable.
A positive addition in the NHP is its
recommendation for setting up public health
management cadres in all states. India still lags behind countries like Thailand and
These cadres would bring in people from diverse Sri Lanka, as well as the other BRICS countries in
professional backgrounds such as sociology, public health expenditure and access to public
economics, nursing, hospital management, etc healthcare, as well as with respect to health
unlike the current state health services, which indicators.
employ only medical professionals. They have surpassed India in achieving their
Another welcome proposal is the plan to health targets, while India is still talking of a
strengthen district and sub-district staggered approach to meeting these
hospitals and turn some district hospitals targets and providing basic healthcare to its
into teaching centres. people.
The NHP 2017 has failed to indicate a sense of Together these exacerbate their anxiety. They are
urgency in meeting these targets. also frustrated with being asked to buy medicines
and services from private agencies outside the
By ignoring the strong argument that health needs
hospital.
to be recognised as an inviolable right, the NHP is
ensuring that India will continue to lag behind
these other countries.
For doctors, especially in public hospitals, there is
7. Drawing Blood the pressure to provide emergency treatment even
as the patients family and friends surround
Topic: Vulnerable Sections, Society, Health.
them expecting miracles.
One of the doctors attacked in Mumbai recently

Doctors are under siege and patients are aggrieved. had worked for 36 hours almost non-stop when the
This is essentially what is being played out in incident occurred, their only rest is in hostels
public hospitals, most recently in Maharashtra with abysmal amenities.
where last month.
Public perception of doctors as life-givers has
In five separate incidents, doctors in public also drastically changed with the increasing
hospitals were assaulted by angry relatives of privatisation and commercialisation of medical
patients alleging negligence. healthcare.
As a result, even doctors doing their best in

difficult conditions are perceived as indifferent.
Such violence against doctors is not peculiar to
India. Lancet and the British Medical Journal Public hospitals have to bear the brunt of this lack
report increasing attacks on doctors in the Indian of trust as often patients are taken there after their
subcontinent and China. condition has deteriorated in private hospitals and
the family is resentful about the heavy expenditure
The common thread running through these
and poor treatment.
incidents is that most attacks occur in public
hospitals where the resources are stretched
thin to cover a large section of the population.
And the doctors are too overworked to deal Fourteen states have enacted laws to protect
empathetically with anxious and tense patients doctors and prevent such violence but
relatives. enforcement is uniformly weak.
An Indian Medical Association 2015 survey of 500 For example, Maharashtra Medicare Service
doctors found that nearly 75% of the Persons and Medicare Service Institutions
respondents had faced attacks and (Prevention of Violence and Damage or Loss to
intimidation. Property) Act, 2010, makes offences against
While doctors are overworked, patients and their doctors non-bailable with imprisonment up to
relatives overwhelmingly point to discourteous three years and a fine of Rs 50,000.
doctors and uncooperative hospital staff, The offender could also be asked to pay twice the
insufficient diagnostic equipment and essential amount of damage caused to the institutions
drugs and lack of information about the patients property.
condition and the prognosis.
However, in the last three years, 53 cases of Though discussions have so far concentrated on
doctors being beaten up were registered but there the macro-stabilisation aspects, nothing much has
has not been a single conviction. been said about the implications of the Union
Apart from laws, many hospitals resort to Budget 201718 on transfers to states and on
increasing security immediately after such unionstate fiscal relations.
incidents. Yet increased security is at best a
piecemeal measure.
This budget has done away with the
It could backfire and drive a deeper wedge
distinction between plan and non-plan
between the community and doctors.
expenditure. Thus, transfers under the five year
Senior doctors have also initiated steps to teach
plan have been discontinued. In the absence of the
their younger colleagues to communicate better
plan, a significant part of the total transfer has
with patients relatives.
become scheme specific.
Medical education pays little attention to this
Total transfers now comprise tax devolution
aspect and even if it did, the inability of the doctors
to understand the socio-economic backgrounds of recommended by the Finance Commission,
their patients ends up making a bad situation Finance Commission Grants, and a new
worse. category called Schemes Related and Other
Transfers.
In the Union Budget 201718, aggregate transfers

The sheer volume of patients thronging the
to the states have increased from Rs 9,84,764 crore
countrys public hospitals calls for deeper
structural changes. (201617 revised estimates or RE) to Rs 1,081,078
crore (201718 budget estimates or BE), an
India has a pathetically low budget allocation for
health services. increase of Rs 96,314 crore.
Also the patientdoctor ratio of 7:1 is far from While the share of Finance Commission Grants
adequate. and Other Central Transfers has declined, the
share of Tax Devolution to States has increased.
When a crisis looms, as provoked by the recent
clash between doctors and patients in It is evident that Finance Commission
Maharashtra, piecemeal measures are taken. transfer is the route through which most
However, unless the larger questions of funds are being transferred to the states.
spending on health and enhancing the This increase in unconditional flow of resources to
capacity of public hospitals to deliver more states is the most significant development after the
effective healthcare are addressed, doctors and Fourteenth Finance Commission (FFC) award.
patients will continue to be viewed as adversaries.
With respect to the outlay on major Centrally
8. Emerging Issues in UnionState Sponsored Schemes (CSS), there is an increase
Fiscal Relations in the outlay.It is interesting to note that out of

the six CCS, roughly two-thirds of the total outlay
Topic: Center-State Relations, Economy.
is on the MGNREGS.
When it comes to scheme-related transfers

In a multilevel fiscal system, the federal in the absence of five year plans, there is a
dimensions of the Union Budget cannot be need for a framework for predictability and
ignored. certainty of transfers.
In the long run, in a dynamic and competitive Given this asymmetry in the debt profile of states,
federal system, all transfers, including scheme- it is important to calibrate state-specific
related transfers require a framework. sustainable fiscal deficit targets to achieve the
targeted debt-to-GSDP ratio of 20% by the end of
The restructuring of scheme-related and other
2023.
transfers has placed a larger burden on the latter to
finance these schemes, thus reducing the untied In view of the FFC recommendation, it is pertinent
fiscal space to the states due to the higher tax to acknowledge that if the FRBM paths proposed
devolution recommended by the FFC. up to 2023 for both union and states are to be
adhered to, states may have to undertake a
larger fiscal correction than what is envisaged
Finance Minister Arun Jaitley in his budget speech in the FFC report.
mentioned that the FRBM Review Committee
has recommended a sustainable debt path which
should be the macroeconomic anchor of Targeting debt as a policy anchor instead of deficit
our fiscal policy. is certainly an improvement.
The Committee has favoured a Debt to GDP Given the subdued economic environment and the
ratio of 60% for the General Government by decline in GDP growth rate predicted in the
2023, consisting of 40% for Central Government Economic Survey 201617, realising the debt-to-
and 20% for State Government. GDP ratio targets would have to happen through
fiscal contraction.
Within this framework, the Committee has derived
and recommended 3% fiscal deficit for the next However, it needs to be emphasised that in the
three years. present context, the burden of fiscal adjustment
should squarely fall on the central government as
The Committee has also provided for Escape
states are already under the FRBM framework
Clauses, for deviations upto 0.5% of GDP, from
proposed by FFC and implementation of which is
the stipulated fiscal deficit target.
monitored by the union government.
This budget announcement relating to new FRBM
Any change in that framework in between would
framework should be studied in light of the fiscal
be ad hoc and arbitrary.
road map laid out by the FFC.
The deficit path in the cases of states, as 9. Is PAC Going beyond Its Remit by
recommended by the FFC, has provided a
Examining Monetary Policy?
flexibility of up to 0.5% of gross state domestic
product (GSDP). Topic: Polity
At an aggregate level, state debt-to-GDP ratio

for 201617 (BE) stood at 22%, well within
In an unprecedented move, the Public Accounts
the target set by the FFC.
Committee (PAC) of Parliament, unanimously
Also, the debt-to-GSDP ratio path is asymmetric decided in December 2016 to review the
across states. Among the major states, West Bengal countrys monetary policy.
has the highest debt-to-GSDP, followed by Punjab.
The PACs decision was in the light of the large-
On the other hand, Chhattisgarh has the lowest scale hardships faced by people due to PMs move
debt-to-GSDP followed by Odisha, Madhya to demonetise the Rs 500 and Rs 1,000 currency
Pradesh and Maharashtra. notes.
In doing so, the PAC did not deem it fit to wait for
the audit report of the CAG, on the
implementation of the demonetisation policy.
Though the PAC like other parliamentary
committees generally functions in a bipartisan
As per the Rules of Procedure and Conduct of way, recent reports indicate that there was an
Business in the Lok Sabha, the PAC is apparent division in the committee with the
empowered with the responsibility to examine the majority of ruling party members indirectly
accounts showing the appropriation of sums defending the action of the government. The
granted by the House for the expenditure of the table had clearly been turned.
Government of India, the annual finance accounts In 201011, the then PAC members of the
of the Government of India, and such other opposition National Democratic Alliance (NDA)
accounts, laid before the House as the committee parties were pushing for the fixation of
may think fit. responsibility on the UPA-II ministers for causing
the loss of thousands of crores of rupees to the
In scrutinising the appropriation accounts of the
exchequer.
Government of India and the report of the CAG
In India, PAC proceedings are not open to
thereon, it shall be the duty of the committee
the media nor to the public, though many
to satisfy itself
PACs in other countries keep their proceedings
that the moneys shown in the accounts as having open to the members of the public except, in cases
been disbursed were legally available for, and where they prefer to hold the meetings on camera.
applicable to, the service or purpose to which they The PAC is the most important financial
have been applied or charged; committee and the core fulcrum of the
accountability system of Indian
that the expenditure conforms to the authority
parliamentary democracy. The entire country
which governs it; and
looks up to their findings.
that every re-appropriation has been made in The committees work depends to a great extent on
accordance with the provisions made in this behalf the results of the audit and the examination of the
under rules framed by competent authority. accounts of the union government, as carried out
by the CAG.
If any money has been spent on any service during
the financial year in excess of the amount granted The present PAC has created seven subgroups to
by the House for that purpose, the Committee shall expedite the examination of subjects, which should
undoubtedly be welcomed by all stakeholders.
examine with reference to the facts of each case the
circumstances leading to such an excess and make There is, however, an urgent need to
such recommendation as it may deem fit. strengthen the PAC by extending
professional support to members, similarly
An important function of the committee is to
on the lines of the USA.
assess that the money granted by Parliament to an
In the formulation and implementation of a major
institution or to the government has been spent,
policy decision like demonetisation, a large
respectively within the scope of the
number of stakeholders are involved such as the
demand.
RBI, Ministry of Finance, Prime Ministers Office,
State Bank of India, public sector banks, etc.,
The PAC has thus, by its suo motu action to
It was, therefore, highly desirable and appropriate examine the countrys monetary policy, virtually
for the PAC to request the CAG to take up a precluded the CAG from taking the audit of the
performance audit on the implementation of the implementation of policy.
demonetisation policy expeditiously.
However, without a detailed investigation by an
And based on their report the committee could independent constitutional institution, it would be
then have examined all the major players and extremely difficult for a political body like the PAC
appropriately fixed the responsibilities on specific to conduct a review of monetary policy and fix
individuals and institutions, for the negligence and responsibility on any individual or institution
recklessness with which the policy was particularly, when the ruling coalition has the
implemented. majority in an oversight parliamentary committee.
Under the given circumstances, it is best left to the

Supreme Court to perhaps request the CAG to
The chairman of the PAC was right, when he
conduct a performance audit of the
demanded to know on whom the responsibility of
implementation of the demonetisation policy
the death of 100 odd individuals (during
expeditiously in a time-bound manner and submit
demonetization) should be fixed. a report by the end of the year so that the country
Was it due to negligence by the PMO or the finance could fix responsibilities for the gross negligence
ministry, in approving the scheme? and at least acknowledge and learn some lessons
from this huge exercise.
A performance audit of the implementation of the
demonetisation policy by the CAG of India, with its 10. Land Tax, Reservation For Women
branches throughout the country, could be
And Customary Law In Nagaland
commissioned with the following objectives like:
Topic: Indian Society, Constitution, Women
Whether the policy was formulated after the
Empowerment.
examination of all the pros and cons related to the
policy;
Whether the prime objective of the policy to Article 371A of the Constitution, which reads:
eradicate black money and eliminate fake and Notwithstanding anything in this Constitution, no
counterfeit notes has been achieved; Act of parliament in respect of religious or social
practices of the Nagas, Naga customary law and
Whether any member of the board of the RBI
procedure, administration of civil and criminal
highlighted the issue of reconfiguration of
justice involving decisions according to Naga
2,20,000 ATMs and the time required for it;
customary law, ownership and transfer of land and
Whether the Central Board of Direct Taxes or, the its resources, shall apply to the State of Nagaland
Enforcement Directorate and other investigative unless the Legislative Assembly of Nagaland by a
agencies were put on alert, in advance, to have resolution so decides.
real-time oversight over the ATMs/bank branches
More than five decades later, the legal implications
during the demonetisation exercise; etc.,
of this amendment continue to be debated with
some insisting that, to the letter, Article 371A
almost makes Nagaland a foreign country within ancestral land. They are now calling for change and
the Indian Union,. gender justice within the Naga landholding
system.
However, the benevolence of this Naga genius, as
reflected here through its customary laws and But not only are women landless, so-called late-
practices, is now contested by female voices within comers in several villages, that is, those Naga
Naga society, claiming that, deep down, Naga villagers and clans thought to have settled in the
customary law is shaped by a culture of village after its initial establishment, may be
subjugation and gender inequality. restricted in owning land.
Such sentiments are hardly new, but recently But if such qualifications undermine the singular
erupted in full force in relation to the proposed notion that every Naga is a landowner, they do not
implementation of (an amended version of) the negate the deep triangular connection between
Nagaland Municipal Act 2001. Nagas, land and identity, as well as the
longstanding apprehensions over imposition of
At issue, are taxes on land and 33% reservation for
taxes on land. True, the Nagaland Municipal Act
women, as proposed by the 2001 act. The question
only applies to urban settlements, of which
is whether these provisions contravene and
traditionally Nagas had none, but where exactly
encroach on the spirit and jurisdiction of Naga
the urban ends and the rural begins is not always
customary law, as safeguarded by Article 371A.
clear.
It is further feared that once taxes on urban lands

While most people hate taxes, Nagas seem to hate are in place, this system might gradually be
these more than most. They hate taxes in the fear extended to villages, in the process forever altering
that the imposition of taxes on land signals Nagasabsolute ownership over their land and its
the beginning of the end of Nagas absolute resources.
control over their land and its resources.
For A Z Phizo, who captained the Naga National

What is advocated by Naga womens organisations,
Council (NNC) into its struggle for independence
is that customary law not just privileges Naga
crucially hinged on Nagas unconditional
males, but is deeply patriarchal in its outlook, and
ownership over their land and its resources, cattle
so prevents women from receiving their dues.
and other possessions, and communitarian ethics.
For them, it is the dark side of customary law
It was the urgency for Nagas to protect their age-
that restricts and restrains women from
old landholding systemas evident in the
inheriting land and from acquiring
popularlocal axiom Ura Uvie! (our land is
positions of public and political leadership.
ours)that Phizo preached.
What can nevertheless be argued is that in various
While the sonority of Phizos voice has now
domains Naga women outdo their counterparts
dwindled, treatises detailing the Nagas intimate
across India.
connections with their ancestral land have
flourished since. Data from the National Crime Records Bureau,
declared Nagaland as the safest state for women in
But while land and identity are everywhere
India. Nagaland also enjoys a female literacy rate
intimately connected, not every Naga, under
that is well above the national average, while the
customary law, has equal access to land.
female workforce participation rate is fairly better
To begin with, roughly half of the Naga populace than the National average.
comprising women are proscribed from inheriting
Statistics, however, can conceal as much as they However, any suggestion today of having a culprit
reveal; female literacy, after all, does not beaten, killed, stamped upon in the mud, or sold as
necessarily equate empowerment, while the a slave would be immediately objected to by village
female workforce participation rate does not tell us and tribal bodies, precisely because this would
about levels of job seniority, equal pay, and contravene the spirit of Naga customary law.
prevailing gender divisions on the work.
Clearly, something has changed, and, most would
If, in the past, Naga women, while not actually part agree, for the better. What drove these alterations
of customary bodies, at least possessed the agency were changing perceptions of the cosmos, and of
to influence decisions, present views that Naga what constitutes the good moral and social life.
women are wholly excluded from decision-making
Naga customary law, then, was never frozen in
bodies, would suggest that, in recent decades,
time. In fact, it seems its very capacity to adapt and
patriarchy has strengthened.
change explains Naga customary laws remarkable
It was amidst the IndoNaga conflict, the resilience as well as reveals its genius.
spiralling violence, and the militarisation of the
At this juncture, with the call for inclusion of
hills, women became the main targets of
women in public and political life, Nagas have been
State oppression. This led to the shrinking of
given yet another opportunity to invoke their
the social space for women.
genius in deciding the present and future outlook
What remains evidently clear is that in the post- of customary law.
statehood era, Naga women have had little or no
11. What Does the Rural Economy
role to play in Nagalands political arena.
Need?
Female voices within Naga society now insist that
reservation for women is the only way to Topic: Welfare schemes for vulnerable sections
improve womens public and political
power and standing, as the spirit of Naga
customary law is unlikely to adapt to modern Like the previous budget, this years budget has
times. This view is understandable. also been seen as giving a push to the rural
economy.
Is there a vision implicit in the budget

Another angle to this debate, however, is that, if
commensurate with the challenges that the rural
anything, history shows that Naga customary
economy is facing?
law is not necessarily rigid and
conservative, but willing to adapt and change Two major prongs can be recognised in the budget
albeit only gradually soover time. to raise rural incomes and create employment
opportunities: raising agricultural
While British colonialism transformed the
productivity and creating non-farm
workings of Naga customary law, the entrance of
employment.
Christianity, from the late 19th century onward,
altered its character and substance.
Naga customary law is inherently plural. It Three salient features are immediately
differs not only from tribe to tribe, but also from apparent in the aggregate data.
village to village, and, as such, Naga customary First, the primary sector has performed much
law, as a singular body of law, does not exist. worse than the other two sectors consistently for
the past several years.
Second, the shares of non-agricultural crore), National Social Assistance Programme
employment and output have increased steadily. (Rs9,500 crore), and National Rural Livelihoods
And third, there is an ongoing severe crisis of Mission (NRLM) (Rs4,500 crore).
quality of livelihoods in the rural sector to the The big-ticket items are green revolution
extent that 70% of agricultural households cannot (Rs13,741 crore, a 40% increase over 201516
meet their consumption needs even given diverse
spending), irrigation (Rs7,377 crore), and crop
sources of income.
insurance (Rs9,000 crore).
Consistent with the poor performance of
It is to be noted that the allocation for the
agriculture, there has been a significant shift in
Pradhan Mantri Krishi Sinchayee Yojana
the rural occupational distribution away
while increasing, has actually barely been restored
from this sector.
to 201516 levels. The crop insurance scheme has
But despite diversification of income sources, total also seen a substantial increase in allocation.
income still falls short of total consumption.
The finance minister chose to headline the rural
Absolute levels of income as well as expenditure
section of the Budget Speech with the substantially
remain very low.
increased target for agricultural credit in 2017
Nearly 90% of rural households, most of them
18 at Rs 10 lakh crore.
skilled farmers, artisans, and other workers, earn
This together with the modernisation of the
less than what the GoI considers a minimum living
wage. rural credit system proposed at a budget of Rs
1,900 crore does suggest that the government is
Thus, it is very clear that whether in the farm or
serious about credit for agriculture.
the non-farm sector, the rural economy is not a
remunerative one. Finally, the rural emphasis is also seen in the fact
that spending on the National Rural Health
Two large salient facts emerge about the
Mission (Rs 21,189 crore) and the NRLM
process of structural change in India.
(Rs4500 crore).
First, the movement of workers from the primary
to secondary and tertiary sectors, though
occurring, remains slow. Thus, for the farm sector one sees major
commitment to credit, insurance, and green
And second, whatever occupational change and
revolution technologies, but not enough on
diversification of livelihoods have occurred are of
irrigation.
the kind that have left the vast majority far below
even the minimum government standards. In addition to raising agricultural productivity and
ensuring remunerative prices, robust growth in
rural non-farm employment opportunities,
The total allocation for the rural sector is Rs and in particular, livelihood generation in
1,87,223 crore in 201718, 24% higher than the manufacturing and public services (health and
previous year. education) are important to raising rural incomes
The major items in the rural development budget and breathing life into the rural economy.
are MGNREGA (Rs48,000 crore), Pradhan Mantri One clear lacuna is a bold vision for rural
Awas Yojana (PMAY) (Rs23,000 crore), Pradhan industrialisation. The broad picture from rural
India is one of diversification of livelihoods from
Mantri Gram Sadak Yojana (PMGSY) (Rs19,000
agriculture to construction (including MGNREGA) Paying inordinate attention to ratings is consistent
and other low-paying service jobs. with the insistence on foreign domestic investment
Manufacturing job growth has been comparatively as a path to development. But India is capable of
weak and as we saw, its share is declining. financing its own development path.
12. Employees State Insurance

Scheme for Domestic Workers
A beginning can be made using MGNREGA
Topic: Govt Intervention, Social Justice
itself. While many problems of implementation
exist, the scheme has been a success. It may be
time to consider expanding it beyond public
On 14 August 2016, the Union Minister of Labour
goods like roads, ponds, and so on.
and Employment, announced the plan to extend
Indeed there is already a provision under the Employees State Insurance (ESI) facilities
programme for farmers to undertake construction
for domestic workers on a pilot basis in Delhi
of private goods (such as wells on private land).
and Hyderabad.
In such cases the government pays for the labour
This was positioned as a part of the central
input. This idea can be carried forward to an
governments commitment to provide social
extended wage subsidy programme for the rural
private sector. security, especially health insurance for all.
This will allow people to workin occupations that

they are already trained for, rather than on The ESI scheme has been known for its egalitarian
construction and other putatively unskilled work.
approach, where every worker is provided with
This also brings to light a relatively social security benefits according to individual
underemphasised aspect of MGNREGA, the output needs without distinction, despite the variations in
side. their contributions.
This government has always stressed the asset Paid domestic work is largely a female-dominated
creation aspect of MGNREGA and rightly so. There
one, and those engaged in domestic work are
are now studies to indicate that at least a few states
not yet recognised as workers.
have succeeded in creating functional assets that
will aid the growth of productivity in agriculture. The disproportionate presence of women in this
occupation and the non-recognition as workers is
The clear challenge now is how MGNREGA can
be expanded to become a more meaningful rooted in the special features of the work they
employment guarantee programme that perform, that is, housework.
utilises the skills widely available in rural India There is another layer to this undervaluation which
and enables workers to build on those skills. comes from the profile of workerspoor, migrant
Apart from the usual objections of corruption, and mostly belonging to the lower castes.
leaky buckets, etc, an immediate objection to the
Of the various benefits assured in the ESI scheme,
above suggestion is likely to be that this will run
domestic workers are only eligible for
afoul of fiscal consolidation.
medical benefits, that too in a partial manner.
This of course begs the question that should be
raised every budget season: why are we so The present government has reinforced its
obsessed with the fiscal deficit and international predecessors stand of not ratifying
ratings? International Labour Organization (ILO)
Convention 189 on domestic workers.
Reflecting the states continuing attempts to free But the decision to nullify the whole process, if the
employers from any legal commitments, the worker moves from one state to another, which is a
domestic workers are classified as self- common feature among domestic workers, is just a
employed in the notification. measure to prevent many domestic workers from
accessing even the limited benefits.
Designating domestic workers as self-employed
has long-term implications for this category of Though the benefits are meagre, the worker
workers in terms of their ongoing fight for contribution is kept high which is sure to
minimum wages and other basic rights at work. dissuade many from accessing even the scanty
facilities.
The notification clearly specifies that no
reimbursement of medical expenses will be The contribution is much above the payment that
provided when the treatment is undertaken in other comparable workers covered under the ESI
other hospitals, even during an emergency. are currently paying, and does not take into
account the wide variations that exist in the wages
The notification also puts the upper age limit
of domestic workers across different localities.
for domestic workers to register with ESI as
59 years and 6 months.
While for all other beneficiaries, medical care is A social security scheme which is designed and
provided even after retirement, domestic workers framed for the organised sector cannot be
are completely excluded from this benefit. tweaked to meet the needs of domestic
There is little clarity on the procedure and process workers.
of registration for ESI facilities too. Rather than introducing such unwilling and
To make matters worse, the application is required indiscriminative moves, what is needed first is to
to be uploaded electronically at the appointed ensure minimum wages to domestic

registration offices. workers.
This category of informal workers is still outside

the scheduled list of employment under the
Given the fact that it is a worker-based right, it Minimum Wages Act in many states, including
would surely require identity cards that Maharashtra, Tamil Nadu, Madhya Pradesh and
establish the persons status as a paid Delhi.
domestic worker.
13. Neither Moral Nor Policing
What is the nature of this identity card? Who will
issue this card? These are questions that come to Topic: Society
our minds.
In the absence of any identity as a worker, and

Indeed, if there is anything that is characteristic of
acknowledged aversion of employers to accept
Keralas moral policing, it is its very normality, its
workers and provide record of their employment,
commonplace it is certainly not something that
what documents would make their claim genuine
follows in the wake of a moral panic.
is unclear.
So common, so normal, were these acts that they
There is enough rhetoric floating on the
were even counted as evidence for the goodness
portability of social security benefits, given
of rural people, rescuing others and their localities
large-scale employment-related migration.
from vice.
Also, moral policing need not involve the state at is indicated by the fact that the police had even
all, though both the police and judiciary here are code-named this swoop Operation Gurukulam.
enthusiastic proponents of moral policing, even in Clearly, moral policing in Kerala seems to be
violation of the law. triggered by perceived boundary violations
Typically, the perpetrators are gangs of men who offending the hetero-normative order that
accost couples or groups, allege sexual underlies both society and politics in the state.
impropriety, and go on to publicly humiliate, Young people, who challenge these boundaries,
assault, or threaten them. especially are rendered abject.
Often they incarnate as naattukaar (local people)
civil society, so to say, zealous of protecting
The broader context, definitely, is of the post-
decency and even the security of women in
demographic-transition scenario, combined with a
their localities.
heavily migration-dependent economy.
The number of children per family has fallen

It is common to find non-Keralites express across communities and classes, but the costs of
surprise that social life can be so constrained in a raising them have increased enormously,
society where literacy is nearly universal and the especially in the context of declining welfare and
penetration of the media is very high. the shift of education and healthcare from social
sectors to profit-making sectors of the economy
What they fail to see is that Keralas fabled
since the early 1990s.
communal road to secularism had an ugly
underside, and it is precisely that clearly-drawn At the receiving end of such enormous investment,
social borders that made for its stability. youth in Kerala across gender, caste and class
today are among the most politically oppressed
These borders had to be constantly policed, and for
sections of the population.
that, strict endogamy and curbs on romantic
interaction of young people across communities In the recent decades, the Malayalee family as an
were surely necessary. institution has been drawn closer to the global
market: the affective labour of parents, along with
Conditions at present are such that sexual
their material investment in education and
surveillance and moral policing are
training, plays a central role in shaping
acquiring virulent dimensions, leading to children from raw labour power to
suicides by young people. saleable labour.
Nearly a year ago, police action against cannabis Also, here are enormously powerful vested
users focused on attacking wearers of Bob Marley interests that would actively work to suppress
T-shirts and other accessories, explicitly arguing young peoples citizenship impulses through an
that Marley was a promoter of drug use. array of instruments and turn them into docile
This campaign was supported by the Kerala State bodies and tamed procreative beings, saleable
Youth Commission, which, according to news labour power.
reports, called for a complete ban on Marley Social surveillance was always gendered in Kerala,
accessories. with young women subjected to it from very early
in life. There are fears now, with the growing
Police in Kerala now also actively monitor teenage
influence of satellite television, the internet and
students, rounding up truants and reporting them
the new possibilities of consumerism, that young
to school authorities. That this was a serious affair
women are increasingly sexualised and greedy for technology is not a panacea for corruption
money and luxury. and inefficiency in the delivery of services, but is a
While these tendencies seem to be unabated in the sure way of excluding those who are socio-
present even as young women increasingly resist economically the most vulnerable.
and counter it, the tendency to set up the young
Yet, in 2017, several ministries have issued
person wronged by the law as the infantile citizen
seems to be fading. notifications that will co-opt over 30 schemes on to
the Aadhaar bandwagon, including the
MGNREGA, pension even the compensation
These micro-fascisms only reveal the growing provided to the victims of the 1984 Bhopal gas
weakness of the pillars of 20th century Malayalee
leak.
social disciplining, but the outcomes are not
predictable. These notifications are in contravention of the
many Supreme Court orders over the years
Surely, there are possibilities: it is up to the
politicised youth to turn this into an opportunity that Aadhaar cannot be made mandatory for
for democratic transformation. people availing government benefits to which they
are entitled.
14. Force-feeding Aadhaar
But, the government states that till Aadhaar
Topic: Government Intervention
number is assigned to any individual, the benefit
will continue to be given based on alternate means
The recent notification by the government of identification.
mandating the possession of an Aadhaar
However, beneficiaries will also have to provide
number for receiving benefits under the
proof of Aadhaar enrolment.
Mid-Day Meal Scheme has created a
furore.Placing conditions on access to food Given this, and the tight deadlines set for
entitlements is not a marker of a welfare state. providing this proof, it is clear that Aadhaar has
Such a step is extraordinary given that the havoc effectively been made mandatory.
caused by the introduction of mandatory Aadhaar
authentication in some states for the PDS has not
yet died down. The government says that the Aadhaar would curb
leakages and bring in transparency while excluding
fake beneficiaries and saving huge sums of public
The aim is to make Aadhaar mandatory for all 84
money.
schemes covered by the direct benefit transfer
programme. What it does not project is that the Aadhaar
Reports from Andhra Pradesh and other states scheme involves the collection and control of big
describe the exclusion of genuine data, enabling dataveillance (the practice of

beneficiaries because of problems with the monitoring digital data relating to personal details
Aadhaar records and authentication issues, besides or online activities).
technological and infrastructural failures.
The Aadhaar idea was first conceptualised by the
This experience ought to have taught the BJP-led NDA government after the Kargil war as a
government that the mere adoption of security and surveillance project.
Additionally, the state has circumvented 15. Quarterly GDP Estimation
constitutional procedures and safeguards by
Topic: Economy
launching the scheme without putting in place
a privacy law or a law regulating biometric data,
by passing the Aadhaar Act, 2016 as a According to the Central Statistics Offices (CSO),
money bill, and by continuing to defy the 28 February 2017 press release in Q3, in real
Supreme Courts orders disallowing making terms, gross domestic product (GDP) grew at 7%
along with a 11.2% rise in private final
Aadhaar mandatory.
consumption expenditure (PFCE). The Q3 growth
For the ordinary citizen, the most worrying aspect rate is only marginally lower than that in Q2, but
of Aadhaar is control, about who can access their consumption expenditure witnessed a huge
biometric data. jump.
The Aadhaar enrolment form has a field that These numbers surprised many with predictable
vaguely asks for consent: I have no objection to responses viz the government claiming vindication
the UIDAI sharing information provided by me to of its policy stance with critics questioning the
the UIDAI with agencies engaged in delivery of official estimates.
public services including welfare services.
So the puzzle is in Q3, how could a cash and
Also, there exists a way to lock ones biometric credit-starved economy clock a growth rate of 7%
data (unlocked by default) on the resident portal and consumption growth of an incredible 11%?Is
of the UIDAI website through OTP authentication. the methodologyunderlying the quarterly
The feature is not highlighted and is also out of estimation appropriate to pick up the ground
reach for those without access to the internet or a reality?
mobile phone. Many now predict that the true effect of the
These issues are not even touched upon by the demonetisation will be evident in the next
Aadhaar Act, which adds to the imbroglio by way quarters (Q4) estimates.
of Clause 57.
The clause clearly allows non-state entities to National income is estimated by 3 different
use Aadhaar authentication and gain access to methodsoutput(value added), expenditure, and
data, which has already happened. incomeall of which, in principle, should yield
All this raises many troubling questions about identical values of domestic output.
control and access to such big data; not just Ideally, if all enterprises followed a double entry
demographic, but also biometric data. bookkeeping method, and periodic households
income and consumption survey results are
available, then estimating domestic output would
Through the promotion of Aadhaar, the Indian
be pretty straightforward.
state is behaving like a corporate entity that
provides services on the condition that it gets But the real world is messy, with households
access to our information and can potentially keep engaged both in production and consumption in
us under surveillance. self-employed enterprises; with a large informal
sector where enterprises do not (or cannot)
Clearly, a state that wants transparency from its
maintain audited books of account.
people is not trying very hard to be transparent
itself.
In the national accounts, output of this sector is
estimated indirectly, as balance-sheet data are
GDP in Q3 of 201617 was 7% and PFCE was
unavailable for a direct estimation of output.
11.2%, over the same quarter, the previous year.
The indirect method of estimation is, the product These estimates are expected to show the impact of
of benchmark estimates of value added per worker demonetisation announced on 9 November 2016.
(based often on dated sample surveys) and an
But, the quarterly GDP estimates are not based on
estimate of the number of workers employed in a
quarterly primary data on output, and
year (or a quarter).
consumption (as widely assumed), hence the Q3
Similarly, there is no direct estimation of growth estimates may in fact not reflect the
household consumption in National Accounts ground reality.
Statistics (NAS). Therefore, production is taken as
In the NAS, for lack of primary data, no direct
a proxy for consumption (after netting out
estimates of production and consumption
consumption by other sectors), by what is known
are available on a quarterly basis.
as commodity flow approach.
Therefore, the much debated Q3 estimates for
Matters get worse for the quarterly estimates as
assessing the impact of demonetisation remain
there are no quarterly primary data that go
hypothetical since the methodology underlying the
into such estimation. These are mostly derived
estimation of quarterly data is seriously flawed and
from the annual estimates, based on some
may not pick up the underlying reality of
advance information and assumptions.
production and consumption.
So, it is abundantly clear that quarterly GDP
estimates really lack suitable primary data, and
16. CPEC and the Future of Gilgit
hence may not truly reflect the ground reality. Baltistan
This could be a possible reason for the recent Q3 Topic: India & Neighborhood
growth estimates failing to pick up the potential
effect of demonetisation.
Gilgit-Baltistan (GB), which is an integral part of
The quality and veracity of MCA database
the Indian state of Jammu and Kashmir but
has been too widely debated to bear repetition
currently under Pakistani occupation, has come
here.
into prominence with the announcement of the
It suffices here to raise a simple empirical query. China-Pakistan Economic Corridor (CPEC).
As the press release shows, GDP grew at 12% in
CPEC, a part of Chinas broader One-Belt-One-
real terms during Q3, which seems way too high
Road (OBOR) initiative, is widely hailed in
compared to what most corporate quarterly results
Pakistan as a game changer that is destined to
show.
bring considerable economic benefits.
To illustrate, ICRA, the credit rating agency, has
But amidst the debate in Pakistan focused on the
reported Q3 sales growth of a mere 4.4% in
economics and politics of CPEC, the aspirations
nominal terms for about 1,100 (relatively large)
of the people of GB are largely being
companies, implying very meagre output
ignored.
expansion in real terms.
Any voice raised against CPEC is muffled by the
How credible are the GDP estimates which are
media. Nobody in Pakistan is clear as to where GB
based on seemingly shaky numbers obtained from
stands in the larger narrative on CPEC.
the MCA database?
region as a province so that the disputed tag is
removed and CPEC can go ahead without
When it comes to development, GB remains the
diplomatic complications vis--vis India.
most neglected region under Pakistani control.
There has not been any serious effort by successive Such a step, however, likely to adversely impact the
governments to mainstream the region either India-Pakistan equation and escalate tensions and
through connectivity or political and social consequently have a detrimental effect on CPEC
reforms. itself.
Due to its geographical location, GB shares a Pakistans contemplation of the idea of

border with Pakistans all-weather friend China. designating GB as its fifth province has
China is credited with increasing the geostrategic already drawn flak from separatists in the Indian
value of the region by developing the Karakoram state of Jammu and Kashmir who otherwise
highway (KKH). welcome every move by Pakistan pertaining to
Kashmir.
Estimates and forecasts show that the region
itself is likely to gain very little from CPEC The people of GB tend to compare their region
despite a projected total investment of about USD with Ladakh, which, according to them, enjoys
50 billion. There has been talk of Punjab province democratic rights and has seen much better socio-
cornering a major portion of the planned political and economic development.
investment. They also demand hill councils for GB,
Many economists and analysts have argued that modeled after the hill council of Ladakh. On many
Pakistan does not have the absorptive capacity for occasions during protests against the Pakistani
the huge infrastructural development envisioned state, they walk to the LoC and evince a desire to
and may unwittingly walk into a huge debt cross over to Ladakh for the purpose of leading a
trap. better life.
They caution that the Chinese are not particularly

charitable, with the interest rates charged for loans In GB, some demand greater rights and
pegged very high. representation within Pakistan, while others
There are reports in the media that land is being demand outright independence.
forcibly acquired and without paying Here, unemployment rates are soaring, leading to
compensation by the local administration. Such an exodus of youth from the region to different
arbitrary actions under the banner of development areas of Pakistan as well as to the Persian Gulf and
is adding to the misery and discontent of the locals. other regions.
Although GB is the entry point for CPEC, initially

The region does not have any place in the there was hardly any attention given to this region.
constitutional framework of Pakistan and Given the historical neglect of the region as well as
has been kept under the tight control of the central land grabbing and other exploitative measures, the
government. people of the region are sceptical about the
Even the grant of national representative prospects of economic improvement from CPEC.
governance in 2009 has not altered the ground It has to be noted that GB hardly finds a
reality in any significant manner. mention in statements related to CPEC.
It appears that China has lately been advising
Pakistan to explore the possibility of absorbing the
The fact of the matter is that the people of GB have Extending the idea of the use of local currencies in
no say on CPEC projects. Nor are the rights of the trade, this article proposes a scheme for
locals protected as evident from forced land setting up a possible clearing account in
procurement for the corridor project. local currencies of the BRICS countries.
Minus the upgradation of the KKH, CPEC will only This will provide avenues for generating additional
lead to a sprinkling of development, with much of demand within the region while avoiding shocks
the benefits going to the interiors of from exchange rate volatility, especially for
Pakistan. member countries like China with its large trade
balances in US dollar.
Given an already upset population and the
presence of anti-establishment factions, the The possibilities of settling payments in local
unequal distribution of the benefits of CPEC is currencies have already been tried by some of the
likely to ignite protests and cause a setback to the BRICS nations on a limited scale by using
initiative as well to the Pakistan establishment. bilateral swap deals among themselves.
17. BRICS and the New Financial However, the limited scale and the absence of
multilateral settlements across the region
Architecture
have often hampered their endeavours to protect
Topic: Multilateral Institution, Economy. themselves from currency market fluctuations.
Most of the resultant problems are related to the

dependence on the US dollar which is used in most
The initiatives taken by the member nations of
international transactions.
BRICs to set up a new financial architecture at its
eighth summit held in October 2016 in The setting up of a possible clearing account
India have recently been under the spotlight. among developing countries has been suggested
before.
In order to avoid the IMF type of loan
conditionalities and tackle the dominance of the While we expect that the new system of having a
United States (US) dollar in global finance, the clearing account would generate additional
new institutions set up by the BRICs are demand for goods as well as investments
expected to provide a much needed change in the within the BRICS, it will also restrain China, the
global financial architecture. major creditor nation within the region, from using
her trade surpluses (within the BRICS) to invest in
These institutions include the New Development
dollar denominated US Treasury bills.
Bank (NDB),the BRICS-led Contingency
Reserve Fund (CRF), and the Asian
Infrastructure Investment Bank (AIIB). A clearing account system in local
currencies of the BRICS nations, can be
used for inter-country payments within the
An important idea which emerged at the summit
region.
was the possible use of local currency in the
intra-BRICS trade which would cut back the Each country within the group can settle her
costs of trading by 6% or more. bilateral trade surpluses and deficits with the other
four members without involving the use of non-
It could lead to trade and demand expansion
BRICS currencies (like the US dollar, etc.,).
within the member countries.
For example, Chinas exports to India will be paid
for by the latter in rupees, and the renminbi
(RMB) will be used by China to pay for imports Trade surpluses earned by individual members
from India. will remain within the BRICS as investment
The net balances (in this case Chinas trade and will not be used as assets in US dollar,
surplus) will remain in rupees as a credit for China. avoiding sources of vulnerability.
Thus exports from any of these countries to
BRICS may devise ways and means to channelise
another BRICS member will be paid for in the local
currency of the importing country. capital flows in a manner which strengthens its
institutions and generates real demand, say with
The net balances, comprising a pool of individual
local currencies, will remain within the BRICS and infrastructures via the newly formed AIIB, rather
be deposited with the NDB. than be used in activities of a speculative nature.
The sum, a pool of individual currencies, can be 18. The many imponderables in
utilised by the respective creditor nations to
import from deficit countries, thus creating more
sharing the Teesta waters
trade within the region. Topic: Bilateral Relations
Alternately, the sum can be lent out by the NDB to
one or more of the five members, subject to the
consent of all members and consistent with the The Teesta River water sharing issue has loomed
norms specified. large over India-Bangladesh relations for over a

decade.
The BRICS financial institutions, along with the

clearing account proposed in this article, can The issue did not excite public opinion at
herald a new financial architecture which the grass-root level in the north Bengal districts
has the potential to be beneficial not just for through which the river flows before entering
BRICS but for global financial system at large. Bangladesh.
Of these benefits, five important ones are outlined.
The views of the ruling party, Trinamul Congress
Since those settlements will no longer rely on the (TMC), have, however, been articulated by the
dollar as unit of transactions, the exchange rate chief minister who wants issues impinging on the
fluctuations across major currencies will agricultural interests of these districts to be
not impact the cross rates between the individual carefully considered before finalizing a water
BRICS currencies as long as these are kept frozen
sharing deal.
with forward contracts renewed over time.
It is necessary to highlight the fact that Sikkim
Arrangements to use the bilateral trade surpluses
where Teesta originates, and flows through for a
within the BRICS by those with trade deficits
major part,has not made much of an issue or
would generate additional demand within
taken a decisive stand on what should be done to
the member nations by creating new channels
protect its interests in the water sharing bargain.
for intra-BRICS trade.
The transfer of surpluses to meet deficits can even The Sikkim government seems to be presently
be treated as a loan, to be adjusted by other dealing with the matter at a low key, for tactical
transactions of the NDB. reasons.
The operation of TBP and water diversion through
the Teesta-Mahananda irrigation canal has
As against the above-stated position, public
changed the hydrological character of Teesta river
opinion in the Teesta water-flow affected districts
south of Gajoldoba.
in Bangladesh have been articulated at various
platforms. These developments have contributed to a decline
And their opinion favours a fair sharing of the in the area occupied by the active river by more
Teesta waters between the two countries. than 50 per cent during the 1991-2014 period.
Notwithstanding the above, there is a view in some All these developments have had their
official circles in Bangladesh for some time now consequences on the water flow to Bangladesh.
that Teesta waters are now only a supplementary Unless these are mitigated, an agreement on
source of irrigation. Teesta river water sharing between the two
With the cultivation cycle changing, the impact of countries cannot be realistically expected.
water scarcity on the country`s agriculture would
be relatively less in the future.
A comprehensive river basin management
While failure to conclude the Teesta deal has
approach is a sine qua non for optimum gains,
disheartened the ruling Awami League and its
allied circles, the opposition Bangladesh not only for both India and Bangladesh, but also
Nationalist Party, as expected, has used the failure for the riparian regions and states along the
to criticise the Sheikh Hasina government. Teesta.
Both in India and Bangladesh, a broad consensus

involving the political parties and other stake-
An easy resolution may not be feasible under the
holders in the catchment and command areas of
hydrological conditions prevailing at present.
Teesta river and its tributaries will be necessary.
The dams upstream on the Teesta and its
tributaries in Sikkim are creating a substantial Attempts for a solution should be initiated
reduction in water flow downstream, owing to involving hydrological and agro-climatic
periodic landslides, siltation, etc., experts of both countries with a proper mandate
entrusted to them.
Unless an integrated view of Teesta basin
management is adopted, the water and power A final agreement may be based on the
needs of Sikkim and Bengal cannot be attended to recommendations of experts, followed by a
in juxtaposition to the needs of Bangladesh in the political compromise.
Rangpur command area.
The scenario envisaged can only be realised,
Furthermore, the Teesta Barrage Project (TBP) however, with adequate will of all concerned,
at Gajoldoba in Jalpaiguri district of Bengal particularly at the political and administrative
constructed at a cost of more than Rs. 1300 crore
levels.
may be deemed as another de facto bottleneck in
the resolution of the water sharing process.

MARCH 2017: A Shankar IAS Academy Initiative

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A Shankar IAS Academy Initiative

EPW MARCH 2017

One, the non-performing asset (NPA) problem at

If PSBs had focused on retail loans as much as

The Survey mentions three possible reasons.

proposed mainly private or market banking system;

Two things will happen to the banks (not just

A recent order of the Karnataka High Court

Another underlying concern could also be the

The basis for the right to be forgotten in the

After introducing a slew of last-minute

Such funding, it was argued, would influence

expertise while overburdening existing ones. Constitution.

The government now seeks to have an overarching 6. Right to Healthcare

This will necessarily undermine the

strengthen district and sub-district staggered approach to meeting these

One of the doctors attacked in Mumbai recently

As a result, even doctors doing their best in

In the Union Budget 201718, aggregate transfers

Fiscal Relations in the outlay.It is interesting to note that out of

When it comes to scheme-related transfers

At an aggregate level, state debt-to-GDP ratio

Under the given circumstances, it is best left to the

It is further feared that once taxes on urban lands

For A Z Phizo, who captained the Naga National

Is there a vision implicit in the budget

12. Employees State Insurance

This will allow people to workin occupations that

There is little clarity on the procedure and process workers.

to be uploaded electronically at the appointed ensure minimum wages to domestic

This category of informal workers is still outside

In the absence of any identity as a worker, and

The number of children per family has fallen

describe the exclusion of genuine data, enabling dataveillance (the practice of

Due to its geographical location, GB shares a Pakistans contemplation of the idea of

They caution that the Chinese are not particularly

Although GB is the entry point for CPEC, initially

Most of the resultant problems are related to the

be deposited with the NDB. than be used in activities of a speculative nature.

norms specified. large over India-Bangladesh relations for over a

The BRICS financial institutions, along with the

transactions of the NDB. reasons.

to criticise the Sheikh Hasina government. Teesta.

Both in India and Bangladesh, a broad consensus

reduction in water flow downstream, owing to involving hydrological and agro-climatic

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