The health emergency declared by the WHO can counter the risk of a global spread
Relevance: mains: G.S paper III: Health
After holding itself back on three occasions, the World Health Organization has declared the Ebola virus disease outbreak in the Democratic Republic of the Congo a Public Health Emergency of International Concern. The outbreak in Congo, officially declared on August 1, 2018, has killed nearly 1,700 people and made more than 2,500 people ill. While cases in other areas are reducing, Beni is the new hotspot. The announcement of the health emergency comes amid renewed concerns that the virus could spread to other countries. A single imported case of Ebola in Goma, a city in Congo with two million people and with an international airport bordering Rwanda, served as a trigger to finally declare a global emergency. Surprisingly, the spread to neighbouring Uganda last month did not seem to change the way the WHO assessed the situation. Even when a handful of Ebola cases were confirmed in Uganda, all the infected people had travelled from Congo and there had been no local transmission or spread within Uganda — one of the criteria used by the WHO to assess if an outbreak is a global emergency. This is the fifth time that the WHO has declared a global emergency. The earlier occasions were in February 2016 for Zika outbreaks in the Americas, August 2014 for Ebola outbreaks in western Africa, the spread of polio in May 2014, and the H1N1 pandemic in April 2009. Declaring an event as a global emergency is meant to stop the spread of the pathogen to other countries and to ensure a coordinated international response.
There have been several challenges in interrupting the virus transmission cycle and containing the spread — reluctance in the community, attacks on health workers, delays in case-detection and isolation, and challenges in contact-tracing. But compared with the situation during 2014-2016, the availability of a candidate vaccine has greatly helped. Though the vaccine has not been licensed in any country, the ring vaccination strategy where people who come into contact with infected people, as well as the contacts of those contacts are immunised, has helped . Of the nearly 94,000 people at risk who were vaccinated till March 25, 2019, only 71 got infected compared with 880 unvaccinated who got infected. The vaccine had 97.5% efficacy; a majority of those who got infected despite being vaccinated were high-risk contacts. Owing to vaccine shortage, the WHO’s expert group on immunisation has recommended reducing the individual dose to meet the demand. What is equally important is for the G7 countries to fulfil their promise to the WHO to contain the spread. The agency received only less than half of the $100 million that was requested to tackle the crisis. The global emergency now declared may probably bring in the funding.
(Source: The Hindu)
- Banking sector, economy, have transformed since banks were nationalised. Now, government needs to let go.
Relevance: mains: G.S III: Indian Economy: banking
This week marks 50 years of one of the most important economic decisions taken by a government in independent India. Like the other relatively recent move on November 2016 to withdraw high value notes of Rs 500 and Rs 1,000, the decision to nationalise 14 banks by the Congress government led by Indira Gandhi on July 19, 1969 did not quite rest on economic logic but was politically propelled. The objective, then, was to force banks, many of which were controlled by business groups, to lend to the farm and other sectors, to small firms, offer services in the hinterland and expand credit, especially in rural areas. The decades since then have seen a structural transformation — evident in the countrywide footprint of banks, channelising of savings by them to productive investment, support for industry and to the government to finance its plan investments, deliver on its social banking mandate, generate jobs in the services sector, help reduce regional disparities and broadly enhance growth. That was the start of financial inclusion.
Many metrics capture that phase of the Indian banking industry’s growth. But the loan melas of the 1980s, soon after the second round of bank nationalisation marked by coercive lending to support government programmes, dealt the first deep blow from which it took the country’s state-owned banks years to recover. Later, what hurt PSU banks severely was the foray into infrastructure financing — an area where they had little expertise, the risk of an asset liability mismatch and imprudent lending during the heady growth years between 2005-2009. The Indian taxpayers have so far picked up the tab for repairing bank balance sheets with lakhs being pumped to recapitalise banks and bolster lending over the last few decades without generating enough returns. In its first term, the Narendra Modi government missed an opportunity for governance reforms in the banks it owns. A government with a strong political mandate like NDA 2 should be better equipped to let go of many of its banks after 50 years — with a possible backstop of a 26 per cent or 33 per cent holding to be progressively divested to assuage concerns.
More political molycoddling on separation of ownership from the management of banks will impose huge fiscal costs which will have to be borne again by taxpayers. Importantly, it will also drain resources which should ideally be for delivery of public goods.
(Source: Indian Express)
- India’s bankruptcies get a dose of common sense:
Relevance: mains: G.S paper III: Indian Economy.
On Wednesday, the government said it would amend the 2016 insolvency law, a signature reform of Prime Minister Narendra Modi’s first term. Investors will cheer.
The legislation was getting mired in frustrating legal delays and bizarre judgments, threatening to scare off global investors from a $200-billion-plus bad-debt cleanup. The last straw was the recent order by the insolvency tribunal judges in the $6 billion sale of Essar Steel India Ltd. to Arcelor Mittal. The judges ruled that secured creditors would have no seniority over unsecured creditors and suppliers.
As I have noted, the order would have reduced an assured 92% recovery rate for financial lenders to just 61%. While it has already been appealed by State Bank of India and other lenders in India’s Supreme Court, it’s helpful that the government has decided to get off the sidelines. If the top court had upheld the tribunal’s verdict – on the grounds that the law wasn’t clear about how sale proceeds would be divided – banks would have had to kiss goodbye to substantial recoveries, step up bad-loan provisions and push more salvageable debtors into liquidation, leading to unnecessary job losses. New Delhi had no option but to step in before the July 22 court hearing.
The tweak it proposes “to fill critical gaps in the corporate insolvency resolution process” will explicitly hand power over distribution of proceeds to creditors’ committees. That should return some common sense to a process that would have required financial creditors to share the money from any new buyer of a bankrupt business equally with sundry suppliers and other unsecured lenders.
As for urgency, delay tactics by large business families loath to lose their prized assets have pushed bad-debt resolutions such as Essar to more than 600 days; the intent was to wrap up cases in 270 days. Now the Modi government wants the clock to keep ticking even during appeals. Cases have to be admitted speedily and concluded in 330 days flat.
It’ll be interesting to see if India’s overburdened judiciary can actually dispose of legal challenges in 60 days. The good news is that any branch of the government, or any tax authority, won’t be able to hold up in-court bankruptcies to recover their dues. Mergers and de-mergers can also be considered alongside outright sales, allowing creditors to extract the most value from unworkable capital structures.
Homebuyers, who get equal recognition under the bankruptcy law as financial lenders, are now on creditors’ committees of builders that have gone belly up without delivering the homes they took payments for. Yet having a large and dispersed class of creditors weigh bids from buyers was leading to stalemates. The government is now proposing to streamline the decision-making: If half of the creditors present and voting say yes, plans will move forward. Those not in favor will receive what they would’ve gotten – according to seniority – in liquidation.
The changes are bold, practical and badly needed for India to turn the page on a brutal and long downward phase in its credit cycle. Three out of four of the economy’s engines – private investment, consumption and exports – have stalled, while government spending, the overworked last option, is sputtering. Amending the bankruptcy code won’t revive animal spirits overnight, but it would at least prevent a bad situation from getting indefinitely worse.
(Source Livemint)
- How MGNREGA transformed into a monument of failure:
Relevance: mains: G.S Paper II: Government planning and budgeting
There is now a plethora of evidence that the economy has been cooling down over the last three years. Official data was slow to pick up the trend, but data from private sources on indicators such as sales of consumer durables and automobiles clearly show that it is largely a result of declining demand, particularly in rural areas. The Union budget presented on 5 July was expected to address some of these concerns. However, it was a missed opportunity, with no effort being made to increase spending in rural areas, except for the electoral promise of cash transfer to farmers.
Also disappointing was the government’s approach in dealing with most rural development programmes. These not only directly contribute to creating rural infrastructure and assets, but also indirectly help increase rural demand and employment. For most of these programmes, the budget expenditure was kept constant or lowered. Of particular importance is the all-India scheme under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Its budget allocation has fallen compared to the revised expenditure of last year, and is insufficient, given the wage-payment arrears.
The National Democratic Alliance (NDA) showed apathy towards the rural and agricultural sectors during its first term in government, and in many ways is continuing the flawed policies of the second term of the United Progressive Alliance (UPA) government. The UPA, which enacted MGNREGA and reaped political dividends for its successful rollout during its first term, contributed to the weakening of the programme as well as the changing of its basic character. The government kept the budget allocation low and created administrative bottlenecks that stifled the programme. This trend has continued under the NDA. This alliance also altered the basic character of the scheme. MGNREGA was envisaged as a provider of rural employment to casual workers at government-mandated minimum wages set above market wages. This was the case at its 2006 launch.
The National Sample Survey Office (NSSO) has been tracking wages received by casual workers employed under MGNREGA and private markets since 2007-08, when it introduced a separate category for MGNREGA work. This has been retained even in the Periodic Labour Force Survey (PLFS), the report of which was released recently. In 2007-08, the second year of MGNREGA implementation, wages under the programme were 5% higher than market wages for rural male workers and 58% higher for rural female workers. This was one of the reasons that the programme attracted almost 50% female workers, in contrast to the trend of declining female workforce participation since 2004-05. By 2009-10, MGNREGA wages were only 90% of market wages for males, but 26% higher than market wages for females. By 2011-12, they were lower than market wages for both category of workers, but for females, they were close to market levels. The 2017-18 PLFS estimates show that private market wages for males were higher than MGNREGA wages by 74%, and female market wages were higher than MGNREGA wages by 21%. Clearly, no male worker is going to demand MGNREGA work when he can get a much higher daily wage with the same effort . However, women continue to demand and work under MGNREGA, though market wages are higher, because of non-availability of work and discrimination as well as exclusion from the private labour market. A peculiar result of this is the overwhelming participation of women in MGNREGA in southern states, where casual wages are higher in general, with Kerala reporting only female workers. However, many states, including Gujarat, did not report any MGNREGA work in 2017-18. Keeping MGNREGA wages significantly lower than market wages is a deliberate attempt to finish the programme.
MGNREGA wages are less than half of the national minimum wage of ₹375 per day (as on July 2018) proposed by an expert group. Even the Economic Survey presented on 4 July has a chapter on minimum wages, which argues in favour of keeping minimum wages at a sufficiently high level to reduce poverty and inequality.
At a time when the government is pushing for a minimum wage code, the largest government-run programme has been violating state minimum wages for almost a decade.
MGNREGA could have been the lifeline to revive the rural economy, which is in distress. However, the political slugfest and flawed policies of the government have led to a situation where MGNREGA, bereft of its original character, is unable to provide a stimulus to the rural economy, despite the strong evidence of it having pushed up rural wages and incomes during the first five years of its implementation. It also created rural infrastructure and provided much-needed employment to the country’s rural population.
On 27 February 2015, Prime Minister Narendra Modi said in Parliament that he would like MGNREGA to be a monument of failure, though he would not finish the programme for political reasons. This objective has been achieved, with the trend having started under the UPA-II regime.
(Source: Livemint)