CURRENT AFFAIRS Newspaper Analysis and Summarry · 2015-11-02 · lower interest rates for MSMEs...

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Newspaper Analysis and Summarry– 26th February 2015

NATIONAL

Article 370 to stay, Centre tells RS – The Hindu

Hours after the BJP announced its alliance with the PDP on government formation in

Jammu and Kashmir, the Centre informed the Rajya Sabha on Wednesday that there is no

proposal to repeal Article 370 which allows special autonomous status to the State.

The reply is significant as this is one of the assurances that the PDP had sought in the

“agenda for alliance” the details of which, nor the position on Article 370, have been

declared yet.

The agreement is to be given the final seal of approval at a meeting between Prime Minister

Narendra Modi and PDP chief Mufti Mohammad Sayeed. However, 24 hours after the pact,

there was no further movement; neither the timing for the meeting nor the swearing-in date

was announced, triggering speculation that there was a last-minute hitch in the alliance.

However, BJP sources said the Modi-Mufti meeting will be scheduled after the budget and

a popular government will be in place in Jammu and Kashmir next week.

From all accounts, the BJP has conceded the Chief Minister‟s post to the PDP and will get

the Deputy Chief Minister‟s position. While Mr. Sayeed will be the Chief Minister, BJP‟s

Nirmal Singh is in the race for the deputy‟s post.

On Tuesday, PDP leader Mehbooba Mufti and BJP president Amit Shah met here and later

declared the formalisation of their alliance. In its 2014 Lok Sabha election manifesto, the

BJP had said that it remains committed to the abrogation of Article 370.

Panel against trying juveniles as adults – The Hindu

A Parliamentary Standing Committee has taken on board civil society‟s apprehensions of

treating 16-to-18-year-olds as adults in cases of heinous crimes, and called for a review of

this provision in The Juvenile Justice (Care and Protection of Children) Bill, 2014,

introduced in the Lok Sabha in August.

This amendment to the JJ Act is among the slew of changes that the UPA Government had

initiated in various laws of the country following the huge public outcry over the Delhi

gang rape. A juvenile was among the accused and the brutality of his actions prepared the

ground for proposing differential treatment to juveniles in the 16-18 age group in case of

heinous crimes.

In its report in the Lok Sabha on Wednesday, the Parliamentary Standing Committee on

Human Resource Development recommended that all relevant clauses dealing with

Children‟s Courts, and differential treatment of children between 16 and 18 years need to

be reviewed as subjecting them to an adult judicial system goes against Articles 14 and

15(3) of the Constitution.

Nationwide MNP from May 3 – The Hindu

From May 3, subscribers will be able to retain the same mobile number on relocating to

anywhere in India. The Telecom Regulatory Authority of India amended the mobile number

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portability (MNP) regulations on Wednesday to allow users to change their service provider

in any part of the country while retaining the number.

At present, number portability within a telecom circle is possible.

To carry a number outside the home circle, a subscriber pays roaming charges plus

applicable STD call rates.

“The Telecom Regulatory Authority of India has issued the sixth amendment to the

Telecommunication Mobile Number Portability Regulation, 2009, which will facilitate Full

MNP [nationwide portability] with effect from May 3,” the regulator said in a statement.

While this is an excellent move from consumer perspective, it could lead to higher

customer churn rate for smaller players, said Hemant Joshi, Partner , Deloitte Haskins &

Sells.

He added, “Pan-India players would benefit as customer might retain operator when they

move from one circle to another.

The subscriber base reached an all-time high of 97 crore at the end of December 2014, as

per the latest report by TRAI.

Of these, 94 crore were wireless subscribers and the rest were wireline subscribers.

During the month, about 35 lakh subscribers submitted requests for changing their mobile

service provider, taking the total number of such requests under the MNP service to 14.29

crore.

‘Delhiites breathing in highly polluted air’ – The Hindu

Delhi‟s air is the worst among various cities in the National Capital Region and places

located in Rajasthan.

A Central Pollution Control Board (CPCB) report on analysis of ambient air quality,

submitted before the National Green Tribunal on Wednesday, revealed that Delhiites are

breathing highly polluted air, much worse than places like Faridabad, Ghaziabad and

Gurgaon in Haryana.

The CPCB submitted data on analysis of ambient air quality in Delhi, NCR and other areas

over a period of 68 days from December 5 to February 10. Delhi was found topping the list

in terms of highest levels of nitrogen dioxide, sulphur dioxide, and carbon monoxide.

Benzene, which is released from diesel, was also found to be the highest here. Besides,

ozone, formed by interaction of sunlight with hydrocarbons emitted by automobiles, is also

the highest in Delhi compared to Faridabad, Gurgaon and Rohtak.

Within Delhi, Punjabi Bagh has highest concentration of ammonia, followed by Mandir

Marg, Civil Lines and IGI Airport. While the NGT heard the matter concerning vehicular

pollution, a trail of cars could be seen parked outside Faridkot House which houses the

Tribunal and traffic gets affected despite an NGT ban on roadside parking.


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Meanwhile, the DTC told the NGT that all its buses are up to the mark. However, the NGT

did not accept the argument. “Give us one bus that has been inspected pursuant to our order.

Who checks a bus? In the DTC, if the bumper of a bus is loose, it remains loose for months

together.”

The Tribunal also asked the MCD and the Public Works Department to draw coloured line

to delineate parking space in Lajpat Nagar. The Traffic Police, represented by advocate D.

Rajeshwar Rao, submitted before the Tribunal that the police have already announced

Lajpat Nagar and Karol Bagh as „No Parking Zone‟. It said „No Parking‟ sign boards and

banners have been fixed at visible points.

Meanwhile, an interim direction by the Tribunal permitted “one-time event of the vintage

car I.T.C. rally to be held March 1.

Hopes high for ‘Make in India’ push in defence – The Hindu

With the NDA government focusing on “Make in India” and pushing for defence

modernisation, expectations of a boost to domestic manufacturing in the defence sector in

the coming general budget are high.

India has one of the largest defence budgets in the world, but it also has the dubious

distinction of being the world‟s largest arms importer. While both India and China had

similar defence expenditure of around $10 billion in 1990, China has now quadrupled its

expenditure with rapid economic growth and planned modernisation. The difference could

not be starker — while India has become the largest importer, China has graduated into the

club of top exporters.

Dr. Jaijit Bhattacharya, Partner, Government Advisory at KPMG, said: “The budget should

have funding to develop institutional mechanisms to identify technologies that need to be

developed for the Indian war fighting scenario. If we need to accelerate manufacturing in

defence, we also need to increase the FDI limit in defence from 49 per cent to 51 per cent.”

Across the board there are expectations that the long-pending One Rank, One Pension

scheme will get funds, with the Defence Ministry promising to finalise the scheme by

March this year. Defence Minister Manohar Parrikar had earlier said that the Ministry

would need an allocation of about Rs. 8,000 crore-9,000 crore for the scheme.

Tax concessions

To encourage domestic manufacturing, the industry, particularly Micro, Small and Medium

Enterprises (MSME), are expecting incentives in terms of tax breaks and concessions to

enable a level-playing field with the public sector. “I would like to see special schemes with

lower interest rates for MSMEs considering that this is a high-priority sector,” said G. Raj

Narayan, managing director, Radel Group.

Cabinet approves agreement on BRICS development bank – The Hindu

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday gave

approval for establishing the New Development Bank (NDB) and the BRICS Contingent

Reserve Arrangement (CRA).


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Heads of the five nation BRICS group — Brazil, Russia, India, China and South Africa —

decided at their sixth summit in Fortaleza in July last year to create a development bank as

well as a reserve fund to finance infrastructure projects and other sustainable development

projects.

“It would also reflect the close relations among BRICS countries, while providing a

powerful instrument for increasing their economic cooperation,” an official release said on

Wednesday.

The $100 billion BRICS CRA would help countries deal with short-term liquidity

pressures, provide mutual support and further strengthen financial stability.

The agreement will enter into force and the Bank begin operations only after all member-

countries deposit their instruments of ratification with Brazil.

The release added that signing of the agreement for the establishment of the New

Development Bank was expected to allow India to raise and obtain more resources for the

much-needed infrastructure development, the lack of which was coming in the way of

inclusiveness and growth.

Besides, the governance structure and decision-making in the Bank would be equitable

unlike the existing multilateral development banks, it added.

India will hold the Presidency of the New Development Bank for the first six years. The

Bank will be based in Shanghai, China‟s financial hub.

IRNSS-1D coming up: leg-up for regional satnav plan – The Hindu

Satellite navigation scientists in the country are eagerly awaiting the March 9 launch of

IRNSS-1D, the fourth Indian regional navigation satellite.

The reason: this satellite will complete more than half of the ambitious `Indian GPS' ring

over the subcontinent and allow ISRO's sat-nav team to prove its usefulness in location-

based applications.

Four satellites out of the constellation of seven are said to be the minimum the scientists

need to check out its signals and accuracy.

Navigation satellites give information about the location, time and velocity of moving

people, vehicles or objects.

The Rs. 1,400-crore-plus IRNSS (Indian Regional Navigation Satellite System) has been

called `India's own GPS'. It can do all that we do with GPS, a US military system, but

apparently much better and at a local level.

S.K.Shivakumar, Director of ISRO Satellite Centre in Bengaluru, told The Hindu that

IRNSS-1D would finetune the details being provided by its earlier three siblings.

The next three navigation satellites, he said, would take this to the targeted precision levels

and make it easy to pinpoint required positions for many users.


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IRNSS-1D is slated to be 'mated with' the PSLV launcher on February 28 at the Satish

Dhawan Space Centre in Sriharikota. The first one, IRNSS-1A, was launched in July 2013.

Position-based information is being increasingly used by individual cell phone users

searching for a place, by transport operators to monitor their fleet, by ships, passenger

airlines and even farmers. The military needs it for precisely aiming missiles and bombs at

enemy targets.

A.S.Ganeshan, ISRO‟s SatNav Programme Director at ISAC, said, "This is a significant

milestone. For the first time we will be able to demonstrate or give proof of concept of the

regional navigation system."

With four spacecraft, ISRO expects to get a positional accuracy (latitude, longitude and

height) of 15 metres within the orject or person for most part of the country for about 18

hours in a day. The full IRNSS can cover a 1,500-km radius 24x7 around India and give an

accuracy of up to 20 m.

These will be far better than what GPS or Russia's GLONASS gives, as their values are

often deliberately distorted by those countries. Mr.Ganeshan said it was expected be a

game-changer for the Railways, transportation, farming, bank transactions and power grid

management.

Manufacturers of IRNSS receivers could take their cue and use the `signal in space‟ details

given by ISRO earlier, he said.

Dr. Shivakumar said the next three would be launched at roughly three-month intervals so

as to complete the IRNSS ring in early 2016. IRNSS-1E is getting ready at ISAC's second

unit.

‘Future of genomic medicine depends on sharing information’ – The Hindu

Eric S. Lander, one of the principal leaders of the Human Genome Project that mapped the

entire human genetic code in 2003, said on Wednesday that the “real genome project” is

about studying huge samples of genomic data to identify disease genes.

While phenomenal technological advances had helped reduce the cost of genome

sequencing by a million-fold over the last decade, allowing researchers to map thousands of

human genomes, the future of genomic medicine depended on “sharing information”

between organisations and countries — including India — Professor Lander said.

In order for therapy to emerge from genetic research, “health systems around the world

need to turn into learning systems” that share information, said Prof Lander, delivering a

lecture on “The Human Genome and Beyond: A 35 year Journey of Genomic Medicine” as

part of the three-city Cell Press-TNQ Distinguished Lectureship Series.

Prof. Lander envisaged a “DNA library” where genes can be cross-referenced to detect

“spelling differences” and disease genes. The goal before the scientific community now

was to find targets for therapeutic intervention, he said, to a packed auditorium comprising

a large number of medical students. There was much to be learnt in the course of clinical


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care, said Prof. Lander, founding director of the Broad Institute of MIT and Harvard

University.

While the “breathless hype” created around the Human Genome Project suggested that it

would cure all disease in a couple of years, he said much progress had indeed been made

over the last decade with the discovery of several genes responsible for diabetes,

schizophrenia and heart attacks.

Prof. Lander will be speaking next on Friday at the JN Tata Auditorium in Bengaluru as

part of the lectureship series.

SCI-TECH How aerosols affect tropical rainfall - The Hindu

The inter-tropical convergence zone (ITCZ), a belt of precipitation (caused by northeast and

southeast trade winds coming together) has been shifting southwards in Central America

since 1900, when the industrial revolution and associated atmospheric pollution began in

real earnest, notes a paper published recently in the journal Nature Geoscience.

The reason for this shift, according to the study, is the cooling effect of aerosols that were

produced in large quantities due to industrialisation.

Cooling of the atmosphere results in less rainfall and dry conditions while warming leads to

evaporation, convection and rainfall. The study found that since 1900 there has been a

steady increase in rainfall in the southern tropics, in contrast to a steady decrease in the

northern tropics.

The researchers analysed a stalagmite found in a cave in Belize (a Central American nation)

to construct a record of rainfall patterns in the region over the past 450 years. This site is

near the northernmost extent of the ITCZ, a remarkably sensitive location for

reconstructing even minor variations in ITCZ position. The team measured Carbon-13

isotope levels over this period in the various layers of the stalagmite. Carbon isotope serves

as a good proxy for rainfall as recorded in the stalagmite over the thousands of years of its

formation. Stalagmites grow incrementally as drops of water seep through the overlying

rock.

The growth of the stalagmite is therefore linked to the amount of water reaching it, which is

in part controlled by rainfall. Furthermore, every drop of water reaching the cave has a

unique chemical signature which is controlled by the prevailing climate, most often

temperature and rainfall amount.

This chemical signature is then incorporated into the stalagmite layers as it grows. By

„chemical signature‟ in this case, is meant oxygen and carbon isotopes. One can see how

rainfall has changed over the years by measuring the change in Carbon-13 isotope value

through time.

The stalagmite portions were dated by measuring uranium-thorium isotope ratios over the

past centuries.


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“A key factor in the method is that uranium is soluble in water while the daughter products

are non-soluble. This means that uranium is present in water which seeps into limestone

caves and is incorporated into stalagmites but its non-soluble daughter products (thorium)

are not. Daughter isotopes present in the sample increase through time as the uranium

decays and the ratio of the uranium to the thorium is measured to provide an age estimate,”

Dr. Harriet E. Ridley from the Department of Earth Sciences, University of Durham, U.K.,

and the first author clarified in an email to this correspondent.

The authors point to increased aerosol concentrations in the northern tropics of Central

America as the likely cause. There have been drying events even before 1900, but these

coincided with northern hemisphere volcanic eruptions which sent aerosols into the

atmosphere causing cooling and therefore, dry conditions.

EDITORIALS Strategic patience on nuclear liability - The Hindu

A month after the “breakthrough understanding” on the nuclear liability issue was

announced by U.S. President Barack Obama and Prime Minister Narendra Modi, its

practical value now looks diminished, while its symbolic importance as indicating the

willingness of the two sides — India and the U.S. — to start a new chapter in the

relationship comes to light. It was a willing suspension of disbelief on both sides to move

on to new areas of cooperation, which have revitalised a defining relationship of the 21st

century.

The irony of the announcement on the progress in the nuclear liability issue is that its

architects were once the arch enemies of the nuclear deal. As a Senator, Mr. Obama had

moved killer amendments to the deal in its early years. Mr. Modi‟s party supported the

liability bill to kill the deal, which they could not defeat on the floor of Parliament. Neither

of them could have their heart in finding a way to open nuclear trade with each other. Mr.

Obama would rather sell sophisticated weapons and technology to India to restore balance

in bilateral trade. Mr. Modi has not listed nuclear trade in his list of priorities.

A test for India

A conspiracy of circumstances, however, made it imperative that Mr. Obama and Mr. Modi

should make progress on the liability law. According to American commentators, the

liability law was a test of the new Indian government‟s strategic global outlook and

willingness to fulfil its commitments. For Mr. Modi, the solution to the liability issue was

necessary to revive the bilateral relationship in order to secure his primary objectives of

“First Develop India” and enhancing defence technology. For both of them, it became a

symbol of a new beginning, marked by a demonstrated ability to overcome impediments,

even if it has left issues unresolved for the time being. A show of solidarity was more

important than the commencement of reactor imports. It was the legal solution for a

political issue.

The resolution of the liability issue was on the wish lists of both the U.S. and India and it

became the litmus test of the success of the visit. Apart from the business community of the

U.S., the other suppliers, such as Russia and France, were also keen to have the issue

resolved. Even the Indian manufacturers of components were nervous about the liability

issue and its potential to wipe out their profits. The sense of euphoria that was created by


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the announcement that “the deal was done”, whether by design or otherwise, did more good

than harm to the whole visit.

The liability issue has not been resolved and many loose ends remain even after the

announcement of the details. But the announcement of the understanding created the

atmospherics on the first day of the Obama visit, leading to the historic declaration on the

Asia-Pacific and Indian Ocean Region Vision statement, the real breakthroughs in India-

U.S. relations. The solution of working around the liability issue gave fresh confidence to

both countries to move to strategic cooperation and defence co-designing and co-

production under the Defense Technology and Trade Initiative (DTTI).

Political significance

Many lawyers and analysts in both countries list deficiencies in the new arrangement by

arguing vigorously that the law cannot be bypassed by administrative action. The intention

of the liability law was to impose liability on the suppliers, and letting the suppliers off the

hook would be morally and legally unacceptable, they contend. Some in India characterise

the arrangement as totally against public interest and as a concession with no tangible

benefits for India. They predict, not without reason, that it might be struck down by courts.

They are not wrong in law, but they miss the political significance of the move.

What should not be forgotten in such analyses is that the liability law was introduced in

Parliament by evoking the horror of the Bhopal tragedy, but the real purpose was to block

the implementation of the nuclear deal at least with regard to the U.S. The tears that were

shed in Parliament by some speakers on account of the Bhopal tragedy could well be

crocodile ones because they knew that it was not the absence of a liability law that resulted

in poor compensation to the victims. The ineptness with which India reacted to the Bhopal

tragedy was shameful, to say the least. It was also intended to make India breach the

promise it had made to the U.S. government that it would purchase nuclear material worth

$10 billion. In other words, it was a political move to drive a wedge between India and the

U.S., and not to increase the possibility of higher compensation for the victims. The lament

that the present arrangement will reduce compensation is, therefore, deceptive. Those who

have been nervous about India getting closer to the U.S. are voicing it. They first expressed

cynicism about a U.S. President being powerless, were then silent over the success of the

visit, and then took recourse to denigrating the liability arrangement.

Potential obstacles

Those who express concern over the imperfections of the arrangement should seek solace

in the fact that nothing will change in a hurry. The liability bill is not the last obstacle to

India-U.S. nuclear trade. Many provisions of the export control laws will raise their heads

along the way even if companies in the U.S. accept a settlement on liability, which

contradicts international law. Mr. Obama is in no hurry to sell reactors to India and incur

the wrath of the non-proliferation hawks for strengthening India‟s nuclear capability even

under safeguards. I was told by a senior White House official in 2009 that the U.S. had

nothing to lose by not having nuclear trade with India. The U.S. had not manufactured

reactors for several years and these would have to be specially fabricated. India was free to

buy reactors from Russia or France.

Although the nuclear deal was hugely significant for bringing India into the nuclear

mainstream, grey areas remain when it comes to its implementation. The extent of “full”


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civilian nuclear cooperation is yet to be defined. Does such cooperation cover the

enrichment of uranium and reprocessing of spent fuel? The ghosts hidden in the Hyde

Amendment will emerge in the future if the U.S. finds it necessary to report that certain

aspects of Indian foreign policy are contrary to the vital interests of the U.S. The most

optimistic prediction is that a U.S. nuclear reactor could be operationalised in India in about

10 years. Many economic, political and scientific developments would take place in the

interregnum, including changes in leadership in both countries.

The nuclear picture

A major factor to remember is the gloomy prospect of nuclear power itself in the post-

Fukushima world. Many countries have either abandoned nuclear power or are in the

process of reducing their dependence on it. Even today, there is no clear estimate of the

lasting damage in Fukushima or the cost of a clean-up, because of the extreme

secretiveness of the Japanese authorities. Those evacuated from the affected areas are still

in temporary shelters, without realising that they would not be able to move back to their

homes in their lifetime. India has decided to carry on with business as usual, but it cannot

but review its position when it makes progress on alternative sources which may become

substantially cheaper. The price per unit of electricity generated with nuclear power will

increase when the insurance costs and the costs of safety are added on account of the latest

developments.

The Kudankulam experience, of operating imported reactors, is far from encouraging and

the popular movement against such reactors will only grow in the future. The first reactor at

Kudankulam reached 97.68 per cent criticality in January this year and not in December

2008, as originally envisaged. The criticality of the second reactor has been delayed again.

Russia has already fired the first salvo against Westinghouse (U.S.) and Areva (France)

reactors by claiming that the cost of electricity generated in the U.S. and French reactors

would be double the production cost at Kudankulam. The cost of additional investments for

insurance and installation of safety equipment might make them unaffordable. The nuclear

picture would change by the time negotiations begin under the new arrangement. Perhaps,

India‟s nuclear power policy may change before the new rules on liability come into force.

Teresita Schaffer of „South Asia Hand‟ has characterised the nuclear understanding as “a

leap of faith” to gain a degree of comfort between the two countries. “At this point, it is

significant that the two governments are trying to go together into uncharted territory in

dealing with a knotty issue.” In other words, it is a declaration of intent to resolve difficult

issues; not a solution to the liability imbroglio. The final settlement may come at a different

time under different leaderships. For the present, it is important to keep the dialogue going

for the greater good of the two countries. The understanding may have value which goes

beyond nuclear trade. It was an ice-breaker between Mr. Obama and Mr. Modi, which

enabled them to wade into more vital issues.

India is playing on several chessboards at the same time. Every move may not appear

logical or productive and there may even be setbacks. Some moves may have to be

abandoned as the situation dictates. Mr. Obama‟s strong pronouncements on religious

intolerance in India may have already muddied the waters. The election results in Delhi

may be another dampener. The move on the liability law may be tentative and

unsatisfactory, but it was absolutely necessary for gains in other areas. It may still be a


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liability, but other assets may well be on their way. Strategic patience is required to exercise

strategic autonomy.

Empowering the States – The Hindu

The broad contours of a cooperative federal polity where the Centre and States engage as

equal partners in development is now emerging after the government on Tuesday accepted

the recommendations of the Fourteenth Finance Commission. The FFC, headed by former

RBI Governor Y.V. Reddy, has broken new ground by recommending a move away from

scheme and grants-based support to States to a greater devolution of funds from the

Centre‟s divisible pool of tax revenues. Thus, it has recommended that the Centre share 42

per cent of the divisible pool with the States, which is 10 percentage points higher than

what is the case now. By accepting the recommendation despite the fact that it would lead

to a sharp drop in its own share of revenues at a time of fiscal pressures, the Centre has sent

out an unequivocal signal of its commitment to the principle of „cooperative federalism‟.

The phrase was first mentioned by Prime Minister Narendra Modi in the context of his

decision to replace the Planning Commission with the NITI Aayog. Indeed, the FFC‟s

report, along with the setting up of the NITI Aayog and the consensus on the

implementation of the Goods and Services Tax, are important components of the emerging

federal landscape where the Centre confers greater freedom and responsibility on the latter

by devolving greater resources to them.

Consequent to the higher devolution of funds, the Centre is likely to re-evaluate several

schemes that it sponsors for the States. This is a natural consequence as the Centre needs to

offset its loss of revenue even as States devise their own spending programmes tailored to

their needs. It is a fact that some States have been weighed down by the need to cough up

their share of funds for Centrally sponsored schemes even if such schemes are not relevant

to their needs. For example, for a State such as Kerala with its high literacy levels, a

scheme to promote primary education is not relevant, just as one promoting power

generation is not relevant to a power-surplus State such as Gujarat. The key to the success

of this experiment in cooperative federalism lies in how well the States use the higher

revenues and the accompanying freedom to frame their development priorities. Some of the

better-developed States such as Tamil Nadu might feel aggrieved at a reduction in their

share of devolved funds, ironically because of their better development metrics relative to

other States. But this is federalism at work, because the resources freed up thus go to

support another State that might be lagging behind on development parameters and per

capita income. What is important is whether the FFC has adopted logical and fair measures

while designing the allocations — which it indeed has done.

In search of quality fiscal adjustment – The Hindu

Ever since Reserve Bank of India Governor Raghuram Rajan talked about it, “high-quality

fiscal adjustment” has become the buzzword for expectations surrounding the contents of

this year‟s budget. One can‟t argue against high-quality fiscal adjustment. It‟s like

motherhood and apple pie. But it isn‟t clear what it means. We know it doesn‟t mean

meeting the deficit target by squeezing expenditures in the last quarter of the fiscal year;

running arrears with oil and fertilizer companies; or getting public sector companies to

cough up additional year-end dividends. In the last few years, this has been the sad tale of

fiscal consolidation. This year, too, the deficit target will likely be met by using some or all

of the above tactics despite a massive respite from the oil price collapse, large ad hoc

increases in excise tax on petroleum products, and an all-time-high equity market.


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But all this is in the past. More relevant for next year‟s budget is what the government

makes of the need to make quality fiscal adjustments. If one goes by the exhortations of

corporate leaders and analysts, it is essentially increasing capital and lowering social

spending (subsidies) as much as possible. Prima facie, the argument sounds fine. Capital

(infrastructure) spending is good because it delivers higher and better-quality economic

growth. If doing so requires running a higher deficit, it is still not a bad thing because the

added expenditure goes into creating productive capacity, rather than being wasted in

higher consumption.

No convincing evidence

But there are a couple of problems with this argument. First, it is very hard to find any

convincing evidence, either in India or elsewhere, that an injection of public investment

increases medium-term growth. The only discernible effect is that it raises growth in the

year the spending occurs, which is exactly the effect that one would expect if the

government increased social spending or raised the wages of civil servants.

Does this mean that the government shouldn‟t undertake infrastructure projects? Of course

not. For a long time now, India has talked about the need for spending a trillion dollars on

building infrastructure. The price tag has probably risen quite a bit with the new

government adding ambitious river-linking, renewable energy and smart cities projects. The

erstwhile Planning Commission, based on the pre-2008 global financial world, had divided

the implementation between public and private sectors and how much was to be financed

by domestic banks, the corporate bond market, FDI, portfolio inflows, and Central and

State budgets. In turn, getting the implementation and funding going would require

structural and regulatory reforms, including changes in environmental laws, land

acquisition procedures, corporate bond markets, public sector undertaking (PSU) banking

operations, FDI and portfolio investment limits.

The world has changed dramatically since then, and it is doubtful whether the pre-2008

calculations would work now. So, to get capital spending right, the government needs to

revisit these issues, reformulate the medium-term spending and funding plan, and

implement the needed structural and regulatory reforms. That‟s the right way to recast

public infrastructure spending, and not merely as a way to boost near-term growth,

especially when there isn‟t any compelling reason to do so. If anything, the global

headwinds of the last few years have turned into tailwinds for India. Growth in the G-3

economies is expected to rise, oil prices are forecasted to remain very low, and global

financial conditions are expected to remain easy. Under such conditions, it is hard to justify

any fiscal boost to growth.

The second problem lies with conflating subsidies with social protection. Subsidies hide the

true cost of resources. This leads to inefficiencies. Consider the use of fertilizer: If it

weren‟t subsidised, farmers would use less of it, instead adopting different and perhaps

better farming techniques. So, eliminating subsidies can be a good thing. But the

government isn‟t planning to do so. Instead, it is aiming to reduce the overall subsidy bill

by better targeting through direct cash transfers. This is a welcome step, but it doesn‟t

improve efficiency much. The government needs to eliminate subsidies while

simultaneously expanding targeted and demand-driven social and unemployment protection

programmes and untied income transfers, not out of the kindness of its heart, but because


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such programmes are efficient. They provide fiscal policy the ability to respond quickly to

growth booms and slowdowns without going through delays caused by the inevitable lags

when government machinery has to identify the need to change policy, decide on the best

ways of doing so, and then implement them. Often, by the time the government manages to

implement such discretionary changes, the economic conditions alter dramatically.

Four constraints

But economic growth has stalled in India (notwithstanding recent GDP revisions), and at

the centre of this slowdown is languishing corporate investment. There are broadly four

binding constraints holding back investment that haven‟t changed much in the last few

years. In no particular order, India‟s environmental laws, land acquisition framework, the

structure of public-private partnership (PPP) projects and the high indebtedness of

infrastructure companies (the counterpart of which lies in the very high and rising stock of

restructured and nonperforming loans among PSU banks) appear to be the constraints.

India‟s pre-2008 growth miracle was driven largely by corporate investment, not public

investment. Unsurprisingly, the growth collapse was also caused by plummeting corporate

investment. So, in an obvious way, reigniting corporate investment is the key to getting

India back on a sustained high-growth path. Of the four binding constraints, the first two

are legislative. But the latter two lie in the purview of the government alone. So, instead of

boosting infrastructure spending by a few percentage points, the economy would be much

better served if budgetary resources were directed to easing the latter two constraints, either

by the government‟s taking higher direct stakes in already-approved PPP projects or by

increasing PSU bank recapitalisation.

Doing so is likely to get growth going more quickly than the limited sops the government

may have planned for corporates and households by way of modest cuts in taxes here and

there or a few percentage points of higher public spending that may or may not materialise.

Senselessness in censorship – The Hindu

Film producer Pahlaj Nihalani, a self-confessed Narendra Modi fan, is in the news again

after a list of 28 cuss words devised by the Central Board of Film Certification (CBFC) was

leaked on social media. This list of 13 English and 15 Hindi words embarrassed the

government, and Bollywood filmmakers saw in it another version of Swacch Bharat

Abhiyan.

The controversy comes days after similar cuss words in the AIB Roast show offended

many; yet, the video uploaded on YouTube had amassed over 4 million hits in a short span

before it was removed voluntarily by AIB‟s team of stand-up comedians. Defending

himself, Mr. Nihalani, whose own body of work consists of Hindi masala films with all the

intrinsic bawdiness, said the cuss words list was his attempt to pre-empt controversies, and

inform film producers that they should self-regulate and keep these words out of their films

before CBFC does it. He also claimed that this list of words was not devised by him, but

was part of the guidelines issued by the Information and Broadcasting (I&B) Ministry, and

it was his job to simply implement the guidelines, not formulate them.

The controversy

Ashoke Pandit, another Modi fan whose right-wing views earned him a place in CBFC last

month, strongly opposed the cuss words list, and said no Bollywood filmmaker would be

able to make any realistic cinema if such restrictions are imposed. Mr. Pandit was the


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principal critic of the AIB Roast video, accusing it of being a “porn show.” Mr. Nihalani

swiftly pointed out the dualism in Mr. Pandit‟s comments — first against the cuss words

and now for the swear words — and asked Bollywood filmmakers to approach the I&B

Ministry if they don‟t like it.

Shravan Kumar, the CEO of CBFC, was away in Berlinale when the controversy erupted.

On his return, Dr. Kumar, along with Mr. Nihalani, met a group of filmmakers to reassure

them that the CBFC would not play the moral policeman. Following this, on February 23,

CBFC put the cuss words list on hold.

Now the ball is in the court of the I&B Ministry. The Ministry scheduled a meeting with

filmmakers, which includes Anurag Kashyap whose work is freely interspersed with cuss

words, in New Delhi on February 25. The Board‟s move to put the list on hold is seen as an

attempt by the I&B Ministry to calm down ruffled filmmakers who clearly see this as moral

policing and an assault on their creative freedom. On February 23, Vidhu Vinod Chopra, the

maker of Bollywood‟s biggest hits like the Munnabhai series, “3 Idiots” and “PK,” accused

CBFC of asserting its power over filmmakers.

“This is nothing but an attempt to tell [the] film fraternity that „we are the bosses.‟ How will

banning such words help [the] film industry? If this goes unchallenged, soon a day will

come when half of the theatre screen will carry statutory warnings instead of showing the

film,” Mr. Chopra said at a film event.

In the raging controversy and war of sound bytes, what is forgotten is the fact that Mr.

Nihalani is right — the guidelines were not created by him, and he is only implementing

what has been formulated by the government.

However, at the root of many controversies related to the CBFC are the 19-point guidelines

formulated by the I&B Ministry in 1978 and subsequently amended in 1991. It is these

guidelines that an advisory panel member, who views films and certifies them, goes by

while suggesting cuts or certifying films.

Under the guidelines, rule 2(vi)a. states that “scenes tending to encourage, justify or

glamorise consumption of tobacco or smoking are not shown.” How the viewing panel uses

this is completely subjective. According to a provision of the Cigarette and Other Tobacco

Products Act(Prohibition of Advertisement and Regulation of Trade and Commerce,

Production, Supply and Distribution), the Centre had directed CBFC to make it mandatory

for filmmakers to show a disclaimer during smoking scenes. Mr. Kashyap challenged this

rule as “illegal, arbitrary, and unconstitutional,” but lost the battle in the High Court.

Guideline 2(vii) which states that “human sensibilities are not offended by vulgarity,

obscenity or depravity” makes a powerful combination with guideline 2(viii) which states

that “such dual meaning-words as obviously cater to baser instincts are not allowed.”

Guideline 2(ix) states, “scenes degrading or denigrating women in any manner are not

presented” — and all these would be applicable to the cuss words list.

One issue, different decisions

Similarly, the clutch of guidelines that censor scenes or words that question national

sovereignty and integrity, jeopardise or endanger the security of the state, endanger public


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order, or could impact friendly relations with foreign states were used to order cuts in

documentary filmmaker Pankaj Butalia‟s film “The Textures of Loss” which examines the

impact of two decades of violent insurgency on Kashmiri people.

Mr. Butalia has now challenged the decision by the Film Certification Appellate Tribunal

(FCAT) in a petition before the Delhi High Court. Apart from the cuts and their rationale,

the petition challenges the very role the guidelines play, and also demands that they be

quashed as they go beyond the freedom of expression right guaranteed by Article 19(1) of

the Constitution, as well as the reasonable restrictions contained in Article 19(2).

Mr. Butalia‟s petition draws parallels with Vishal Bhardwaj‟s “Haider” — which was also

made on the sensitive Kashmir issue — and questions why cuts were ordered in his

documentary when similar scenes were cleared in “Haider” for mass viewing. In an unusual

gesture, the Centre‟s counsel tried to oppose the petition at the admission stage itself and

were ticked off by the court.

This court battle is important for filmmakers who want to protect their creative liberties

against unreasonable censor cuts, and directors like Mr. Kashyap should support 65-year-

old Butalia in this fight. The legal battle will also be crucial as filmmakers increasingly

demand that CBFC should be made simply a certifying agency with no powers to impose

cuts. Unless the government rethinks the guidelines and its role, CBFC will continue to be

in the eye of such controversies.

Iran nuclear talks coming to a head – The Hindu

Prussian King Frederick the Great offered this rebuke to those who refused to allow any

concessions: “If you try to hold everything, you hold nothing.”

President Barack Obama might make a similar retort to Israeli Prime Minister Benjamin

Netanyahu‟s attack on the alleged “bad deal” the U.S. is contemplating with Iran. Mr.

Netanyahu rejects any concessions that allow Iran to enrich uranium; he thinks the U.S.

goal of a one-year “breakout” period before Iran could build a bomb isn‟t enough.

To which several leading administration officials respond: Okay, then, what‟s a better

practical idea for controlling Iran‟s nuclear programme? They see in Mr. Netanyahu‟s

maximalist goals an air of unreality — of fantasy, even. They grant that their solution isn‟t

perfect. But they argue that it‟s far better for Israel and the West than any other plausible

scenario.

The Iran nuclear talks, arguably the most important diplomatic negotiations of the last

several decades, will come to a head next month. Mr. Netanyahu will take his case against

the agreement to Congress on March 3 in an unusual speech organised by the GOP House

speaker. His own political leadership will be tested in Israeli elections on March 17. The

Iran negotiations will reach a March 24 deadline for the framework of a final

comprehensive accord.

Israel‟s Minister of Intelligence Yuval Steinitz made the case against the Iran agreement in

an interview with me last week. “From the very beginning, we made it clear we had

reservations about the goal of the negotiations,” he explained. He said President Obama‟s


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effort to limit the Iranian nuclear programme for a decade or so, in the expectation that a

future generation of leaders wouldn‟t seek a bomb, was “too speculative.”

The administration‟s response is that the agreement is better than any realistic alternative.

Officials argue it would put the Iranian programme in a box, with constraints on all the

pathways to making a bomb. Perhaps more important, it would provide strict monitoring

and allow intrusive inspection of Iranian facilities — not just its centrifuges but its uranium

mines, mills and manufacturing facilities. If Iran seeks a covert path to building a bomb, the

deal offers the best hope of detecting it.

If the current talks collapsed, all these safeguards would disappear. The Iranians could

resume enrichment and other currently prohibited activities. In such a situation, the U.S.

and Israel would face a stark choice over whether to attack Iranian facilities — with no

guarantee that such an attack would set Tehran back more than a few years.

The deal taking shape would likely allow Iran about 6,000 IR-1 centrifuges at Natanz. The

Iranians apparently wouldn‟t install IR-2s, which operate twice as fast, and they would

limit research on future models, up to IR-8s, that are on the drawing board. How these

research limits would be monitored and enforced is a key bargaining issue. Another critical

variable is the size of the stockpile Iran could maintain; U.S. officials want a very low

number, with additional enriched material shipped out of Iran.

One official argues that the U.S. would be better off with 9,000 IR-1s and a small stockpile

than with 1,000 IR-2s and a large stockpile. Mr. Netanyahu probably won‟t address this

issue in his speech to Congress, since he insists the only acceptable number of centrifuges

is zero.

Another key technical issue is how non-permitted centrifuges would be dismantled. There

is a range of options, from simply unplugging the equipment to pulverising it altogether.

The U.S. wants a formula that would require at least a year for the Iranians to restart the

shelved equipment. As for the planned Iranian plutonium reactor at Arak, negotiators seem

to have agreed on a compromise that will halt construction well before Arak becomes “hot”

with potential bomb fuel.

The length of the agreement is a crucial variable. U.S. officials have always spoken of a

“double-digit” duration period, somewhere between 10 and 15 years. Negotiators are also

exploring the possibility of different phases of the timeline, with inspection provisions

having a longer lifespan than, say, limits on the number of centrifuges.

The deal-stopper for the administration is if Iran balks at U.S. insistence that sanctions will

only be removed step by step, as Iran demonstrates that it‟s serious about abiding by the

agreement. In the U.S. view, Iran has to earn its way back to global acceptance.

The Iran deal is imperfect. As Count Metternich observed in 1807 about negotiations with

the rising powers of his day, “Peace does not exist with a revolutionary system.” But U.S.

officials make a compelling case that this agreement is a start towards a safer Middle East.

— © 2015. The Washington Post


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