6. New BRICS bank set to fund green energy projects

Topic: International Relations

Category: Important International institutions

Location: The Hindu, Page 16

Key Points:

• The New Development Bank (NDB) , which is a multilateral lender with a focus on the Global South of the of the Brazil-Russia-India-China-South Africa(BRICS) grouping, is all set to fund more than a dozen projects this year, which will focus on renewable energy.
• NDB President K.V. Kamath revealed at a media conference that the “initial focus” of the bank would on green energy projects.
• The New Development Bank (NDB) is however was not geared to issue soft loans.
• Kamath explained that NDB would include market borrowing to raise capital, but stressed that bonds in local currency, rather than hard currency, would be favoured. “We will be resorting to bond issues. As has been said earlier, we will raise it in local currencies where it is feasible and of course we will supplement where it is required in with dollar bond issues.”
• The NDB’s initial capital has been fixed at$50 billion, and the total paid in capital would be $ 10 billion, according to a NDB press statement.
• Analysts point out that following the 2008 financial crisis, the NDB and the China-led Asian Infrastructure Development Bank (AIIB) — both geared towards infrastructure development in Asia and the Global South — are reshaping the global financial architecture, a field that had been monopolised by western backed International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB).
• With Africa also one of its focal points, the NDB is set to open an African Regional Center (ARC), headquartered in Johannesburg, by the second-half of this year.
• It would aim to develop a “project pipeline” for the continent.
• The NDB “will soon become a strong and well-respected international financial institution, playing a leading role in the changing international financial architecture”.
• On the eve of its operational launch, the NDB has bagged a AAA institutional rating from domestic credit rating agencies in China, where the China Development Bank (CDB) and the Bank of China have been appointed as rating advisers.

7. ‘Democracy at stake in Maldives’

Topic: International Relations

Category: India and its neighborhood- relations

Location: The Hindu, Page 16

Key Points:

• Maldives is “steadily sliding” towards authoritarianism with “flagrant disregard” to the rule of law, human rights and good governance, according to the Commonwealth Human Rights Initiative (CHRI), a non-governmental organisation based in New Delhi.
• The CHRI has concluded that “the survival of democracy itself is at stake in the Maldives”.
• Since coming to power in November 2013, the government of President Abdulla Yameen Abdul Gayoom “has curtailed human rights, democracy, and rule of law in violation of the Maldives Constitution, UN and Commonwealth standards,” the NGO stated in its report, “Searching for a Lost Democracy”.
• The CHRI urged the government to respect the principle of separation of powers and constitutionally protected human rights; cease assaults on civil society, journalists and activists through “repressive” laws and practices; ensure “impartiality and accountability” of the police; release all political prisoners; and rectify the “poor state” of the judiciary.
• Another NGO, Amnesty International, said in its annual report that the government of the Maldives had failed to defend the independence of the Human Rights Commission in the country. It had also failed to address the issue of judicial impartiality, which remained a “serious concern.”

C. GS3 Related

1. Fund crunch hits Indian drug trial

Topic: Indian Economy, Science and Technology

Category: Health, Bio-technology

Location: The Hindu, Page 15

Key Points:

• Three years ago, the Council of Scientific and Industrial Research (CSIR) said that it would conduct a drug trial to test a novel drug-regimen for tuberculosis (TB). However, lack of funds has throttled the project.
• “The project is in the ICU (intensive care unit),” said an officer , “and unless the CSIR takes a decision it is likely to die.”
• In January 2014, the Drug Controller General of India — the referee for drug trials in the country — approved a phase 2b trial (a limited test of a prospective drug in humans to prove its potency) to test a combination of three TB drugs to treat multi-drug-resistant tuberculosis (MDR-TB).
• The promise of this combination — called PaMZ (PA-824 + moxifloxacin + pyrazinamide) — is to cut treatment time by at least a third. Moreover, it was purportedly effective even when tested on HIV patients.
• This drug, which was developed in collaboration with the international Global Alliance on Tuberculosis, was to enter phase 3, or large-scale trials last year in South Africa. However, there are reviews that are reconsidering these trials on the grounds that it hasn’t worked as well as it was supposed to in HIV patients.

A dreaded disease

• According to the World Health Organisation, TB kills an estimated 1.5 million people annually, and is one of the world’s deadliest diseases.
• There were also approximately 190,000 deaths from MDR-TB in 2014 and more than half of these patients were in India, China and the Russian Federation.
• Currently, people with MDR-TB require 18 to 24 months of treatment, with several pills and daily injections for at least six months.
• Apart from the health benefits, the drug trial would have been the first such attempt by the CSIR-led Open Source Drug Development (OSDD) consortium — an initiative to discover and test new drugs for infectious diseases that are widespread in poor countries by using expertise outside the confines of traditional pharmaceutical companies — to test a new drug in India.
• Experts Opine that most drugs that are available in India are reverse-engineered versions of drugs developed in Europe or the United States.
• Since 2015, however, the OSDD has been shut down as a CSIR project.

2. Only 5.5% who earn are tax payers: Economic Survey

Topic: Indian Economy
Category: Indian Economy and issues relating to planning, Government Budgeting.
Location: The Hindu, Page 17

Key Points:

• India is far from being a full tax-paying democracy with about 5.5 per cent of the people who earn paying tax and only 15.5 per cent of the net national income being reported to the tax authorities, according to the Economic Survey tabled in the Parliament
• The survey estimated that just four per cent India’s voters are taxpayers, though it should be closer to 23 per cent, and 85 per cent of the net national income fall outside the tax net.
• The tax to GDP ratio at 16.6%, as a result, is well below that of the emerging market economies of 21 per cent and OECD average of 34 per cent. The survey, however, pointed out that the democracies with higher ratios took a long time to strengthen tax capacity. “Any harsh judgement of India’s performance must be tempered by historical differences in the evolution of India compared with other democracies.”
• On the expenditure side, India’s spending on human capital, education and health, to the GDP ratio is the lowest among BRICS and lower than the OECD and emerging market economies averages. They are in fact, lower than those of comparable per-capita GDP economies such as Vietnam, Bolivia and Uzbekistan.
• To widen the tax net and raise revenue for spending on India’s human capital development, the survey called for bringing rich farmers into the tax net, raising property tax rates and phasing out tax exemptions.
• There should be “reasonable” taxation of the better-off, regardless of the source of their incomes, whether it is from industry, services, real estate, or agriculture, Chief Economic Advisor Arvind Subramanian told reporters after the survey was tabled.
• The survey also seeks to address the question French economist and author of best-selling book, ‘Capital in the Twenty-First Century’, Thomas Piketty, raised during his recent trip to India: Should not Indian elite pay more taxes to provide for greater spending on health and education?

• The top one per cent, 0.5 per cent and 0.1 per cent of people in the overall income distribution (the three highest income groups) accounted for 12.4 per cent, 9.4 per cent and five per cent of the entire income of the Indian economy.
• At these levels, inequality in India, it said, is comparable to that in the U.K. and lesser than in the United States.

3.  Slow labour reforms hurt ‘good’ jobs

Topic: Indian Economy
Category:  Changes in industrial policy and their effects on industrial growth
Location: The Hindu, Page 18

Key Points:

• The economic survey criticised the slow pace of reforms in labour laws, arguing that firms “negotiate” regulatory hurdles imposed to protect employees who get poor quality jobs as a consequence and suggested easier retrenchment norms and lower statutory deductions from salaries to create ‘good’ jobs.
• “India’s most pressing labour market challenge going forward will be to generate a large number of good jobs. These jobs tend to be formal sector jobs. Two obstacles to formal sector job creation are regulation-induced taxes on formal workers and spatial mismatch between workers and jobs,” the survey said, defining ‘good jobs’ as safe, productive and well-paying jobs.
• “The slow pace of labour reform has encouraged firms to resort to other strategies to negotiate “regulatory cholesterol.” One popular strategy is to hire contract workers,” the survey said highlighting how “managing” inspectors to the contract labour firm has become a normal exercise for factories.

• Noting that contract labour hiring grew faster in states with relatively more rigid labour laws, the survey said medium-sized formal sector manufacturing firms reported labour regulations as a significant barrier to growth, “specifically the dismissal norms under the Industrial Disputes Act.”
• The Industrial Disputes Act 1947 requires firms with more than 100 workers to seek government’s approval before retrenching workers. The law has encouraged factories to employ contract workers to stay out of the rule books even though entrepreneurs feel ‘contract labour is not the ideal solution’ for them.
• Only 35 per cent of the 10.5 million new manufacturing jobs created between 1989 and 2010 were in the formal sector. Also, in the total number of establishments that rose by 4.2 million from 1989 to 2010, the formal sector growth stood at only 1.2 per cent. Though the informal sector kept unemployment levels low, these jobs were “much worse than the formal sector ones,” according to the survey.
• Citing a recent survey conducted at the finance ministry’s request, the survey said 70 per cent workers’ prefer receiving cash instead of the money going into their EPF account. The workers said they preferred spending the money “sooner, suggesting either that workers are liquidity constrained or impatient.”
• At present, 24 per cent of a formal sector worker’s salary is deducted – with 12 per cent counted as employer’s share and 12 per cent as employee’s contribution towards EPF. This is compulsory for employees earning Rs. 15,000 a month. The survey suggested that 12 per cent share of employee’s contribution be made optional to “allow the poor to optimise as per their own personal requirements.”
• “Policymakers should consider whether lower earners should be offered the same choice – of whether to contribute part of their salaries to the EPF – which the rich have,” it said.

4. Direct Benefit Transfer “jammed” by last-mile challenge: Economic Survey

Topic: Indian Economy
Category:  Government Budgeting
Location: The Hindu, Page 18

Key Points:

• Scaling up Direct Benefit Transfer of subsidies using the JAM trinity (Jan Dhan Yojana, Aadhaar and Mobile number) is unlikely to work in rural India in the short to medium term, said the Economic Survey 2015-16 .
• “The JAM agenda is currently jammed by the last-mile challenge of getting money from banks into beneficiaries’ hands, especially in rural India,” said the survey.
• The Survey further added there is still some way to go before bank-beneficiary linkages are strong enough to pursue Direct Benefit Tranfer (DBT) without “committing exclusion errors”, despite the huge improvements seen in financial inclusion due to Jan Dhan Yojna.
• It suggests that the Centre invest in last-mile financial inclusion via further improving banking correspondent (BCs) networks and promoting the spread of mobile money.
• “The recent licensing of banks will help. Regulations governing the remuneration of BCs may need to be reviewed to ensure that commission rates are sufficient to encourage BCs to remain active,” it added.
• To measure states’ preparedness to implement JAM-based DBT, an index has been constructed based on factors such as Aadhar penetration, basic bank account penetration and BC density.
• The Urban DBT preparedness index finds there is significant variation across states. Some states like Madhya Pradesh and Chattisgarh show preparedness scores of about 70 per cent, while others such as Bihar and Maharashtra, have scores of only about 25 per cent.
• “The binding constraint here is basic bank account penetration-paying beneficiaries is the issue, not identifying them,” the Survey stated.
• The DBT rural preparedness scores are “significantly worse” than the urban scores, with an average of 3 per cent and a maximum of 5 per cent.
• The Economic Survey suggested incentivising states by sharing fiscal saving from DBT to help fully implement JAM.
• It added that policy areas that appear most conducive to JAM are those where the central government has significant control and where leakages are high. “At present, the most promising targets for JAM are fertiliser subsidies and within government fund transfers,” it pointed out.
• The example of MGNREGS highlights that delivering within-government transfers via JAM can help other centrally sponsored schemes reduce idle funds, lower corruption and improve the ease of doing business with government, the Survey stated.
• While BC network is developed and mobile banking spreads, the Survey recommends use of Biometrically Authenticated Physical Uptake (BAPU), wherein beneficiaries verify their identities through scanning their thumbprint on a POS machine, to reduce leakages.
• BAPU preparedness is much better than Rural DBT preparedness with average state preparedness being 12 per cent. “In the meantime models like BAPU offer the prospect of lower leakages without the risk of exclusion errors, and therefore merit serious consideration,” the Survey concluded.

To be Updated