News Papers EDITORIALS - 31 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  Managing risk in banks  ✌✌

The Reserve Bank of India’s biannual Financial Stability Report has once again flagged the fact that risks to the banking sector remain worryingly “high”. That the risks have stayed “elevated due to continuous deterioration in asset quality, low profitability and liquidity,” in the central bank’s assessment, is cause for concern. Given the central role commercial lenders have in the financial system — serving to harness public savings and direct the flow of crucial credit to the most productive industrial and infrastructure sectors — any systemic risk to the banking industry has the potential to ripple across the entire economy. There has been no perceptible improvement in the health of domestic banks, even six months after the RBI’s previous report had highlighted the sector’s high vulnerability on account of the increase in capital requirement and worsening asset quality, spotlighting the need for urgent policy interventions. Some measures have been initiated and others are in the pipeline, including a draft Financial Resolution and Deposit Insurance Bill to address bankruptcy situations in banks and other financial entities. Still, there is every reason to prioritise the restoration of the sector’s health as some of the risks inherent in banks may already be getting transferred to other segments of the financial markets, according to the RBI’s report. A survey, of experts and market participants, conducted by the RBI in October-November reveals that among institutional risks, credit growth and cyber risk were seen as two key “high risk factors”.
The appointment of Viral Acharya as Deputy Governor overseeing monetary policy at the RBI, therefore, comes at a crucial juncture. A former member of the Advisory Committee of Financial Sector Legislative Reforms Commission, he brings substantial expertise in both identifying and dealing with systemic risks in the banking sector. Having authored a number of papers on the risks lenders could pose to the wider financial system and even the sovereign’s credit standing, he will have his task cut out. A proponent of sequestering and separately dealing with the stressed assets and bad loans on a lender’s books, Mr. Acharya had in an interview suggested that the “unhealthy parts of the troubled banks” could be separated from the healthier assets and put into a ‘bad bank’ to prevent systemic contagion. With the RBI pointing out that banks saddled with bad loans were likely to remain “risk-averse” and find themselves lacking the capital needed to lend more to meet credit demand in the economy, the regulator and the government will need to work in close concert to expeditiously resolve this vital legacy issue.


✌✌   A new dawn for Syria?  ✌✌

The ceasefire reached between Syria’s government and Opposition, with the mediation of Turkey, Russia and Iran, could be a turning point in the country’s civil war. Unlike the two previous failed ceasefires this year — which were negotiated between Russia and the U.S. — the latest one is sponsored by countries directly involved in the conflict. The positive reaction from both the Syrian regime and rebel commanders to the announcement of the ceasefire by Russian President Vladimir Putin also suggests that the warring parties are willing to give diplomacy a chance. For the Syrian government, this is an opportunity to announce it is ready for a peaceful settlement. Though President Bashar al-Assad has repeatedly claimed that he would retake the entire territory from the rebels, a military solution appears to be illusory. A prolonged conflict will exhaust the regime forces further and multiply the humanitarian costs. On the other side, after the victory in Aleppo, the regime could now negotiate with the rebels from a position of strength. For the rebels, the momentum is gone. Their support is limited to certain parts such as Idlib, Daraa and the outskirts of Damascus. The question they face is whether they should continue fighting a never-ending war of attrition or seek to gain leverage from whatever military influence they are left with.
There is a convergence of interests for Turkey and Russia in finding a peaceful solution. Having seen the U.S. interventions in Iraq and Afghanistan, Russia doesn’t want to get stuck in Syria. By promoting a negotiated deal, it could retain its core interests in Syria while at the same time projecting itself as a power broker in West Asia. Turkey wants to limit the spillover effects of the war on its soil and stop Kurdish rebels from capitalising on the chaos in Syria. This explains why Turkey and Russia have come together now despite their bitter relations last year. But these objective conditions alone may not produce sustainable peace. It is still not clear which rebel groups have agreed to the ceasefire. Turkey supports only some of the rebel groups, while several other groups get support from Gulf monarchies. There are jihadist elements as well in the Opposition, such as Fateh al-Sham, that could play the spoiler by carrying out attacks on government positions. Besides, the Kurdish question remains unaddressed. If Kurds are invited for talks, Turkey might withdraw its support for the peace process. For now, however, if the ceasefire holds at least till next month’s Astana summit of the related parties, it could be a new beginning for Syria.


✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  The Yadavs fight to delight BSP and BJP  ✌✌

One day after the chief minister of India’s smallest state was suspended by his own party, it is the turn of the chief minister of the largest state to get expelled from his.
Pema Khandu’s predicament might or might not be a speed-breaker in the BJP’s all-conquering march in the northeast, but Akhilesh Yadav’s expulsion from the Samajwadi Party will have a decisive impact on national politics.
The split in the Yadav clan will weaken the Samajwadi Party ahead of the forthcoming UP elections and strengthen the hands of the BSP and of the BJP. Even the Congress now stands to get a chance to show that it is something more than an ISI stamp of secularism. Akhilesh’s rebellion is more than a clash of personalities.
His father Mulayam Singh — who backs his brother Shivpal Singh against Akhilesh — represents the old brand of identity politics, which believes that caste/community solidarity is the only operative element in electoral arithmetic.
Akhilesh Yadav’s expulsion from the Samajwadi Party will have a decisive impact on national politics.
Akhilesh holds another view, that a commitment to growth and development is what people want and will support.
Endorsing criminals just because they belong to the group you wish to consolidate is not acceptable to this vision of politics. The emergence of this strand of thought is welcome from a broader perspective, but will weaken the Samajwadi Party in the short term, even if father and son patch up tomorrow.
Muslim voters cannot count on the SP to block the BJP’s ascendance in UP any more.
They are likely to transfer their votes to whichever non-SP candidate stands a better chance of defeating the BJP nominee in any given constituency. The BSP would be the biggest gainer, but the Congress would get these votes in some places. How people assess demonetisation would determine the BJP’s fate.

News Papers EDITORIALS - 29 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌ Disunity in opposition ✌✌  

Ever since the Bharatiya Janata Party was voted to power with a majority of its own in the 2014 Lok Sabha election, Opposition parties have been trying to find an issue that would resonate with the people, identify a rallying point that would put the Narendra Modi government at the Centre on the defensive. But when such an issue did crop up after Mr. Modi announced the demonetisation of high-value notes on November 8, opponents of the BJP found themselves unprepared and unable to tap into the public resentment at the seemingly unnecessary pain caused by the shortage of cash. The demonetisation exercise did far more than divide the Opposition parties: it left them confused on the approach to be taken against the government. They were unable to fault the stated aims of the move: to curb black money, flush out counterfeit notes from the economy, and thereby curb terror funding. And when Mr. Modi sought 50 days to ease the cash flow, his opponents had no choice but to wait it out. Other than making noises about long queues at banks and ATMs and the flip-flops in announcing new rules for withdrawals and deposits and amending them in quick time, they had little to do. They could not attack the move in principle without being seen as supporting the corrupt and the devious. And they could not attack the manner of implementation without giving Mr. Modi the time he wanted to deal with what could not but have been a crisis in cash supply.
It was probably inevitable that the Opposition parties would speak in different voices on an issue like this, but it was inexplicable that the main Opposition party, the Congress, did little to forge a united front in Parliament and outside. When Opposition parties were planning to petition President Pranab Mukherjee on the demonetisation issue, Congress vice-president Rahul Gandhi met Mr. Modi with a delegation of party leaders to request a waiver of farm loans. Leaders of the Samajwadi Party, the Bahujan Samaj Party and the Left parties were unhappy with the Congress approach. Not surprisingly, at a joint press conference of Opposition parties called by Mr. Gandhi, only Trinamool Congress leader and West Bengal Chief Minister Mamata Banerjee was at hand to attack Mr. Modi. The other participants were mostly long-time allies of the Congress. The Janata Dal (United), whose leader Nitish Kumar had nice things to say about demonetisation initially, did not participate in a maha dharna organised by the RJD against demonetisation. The JD(U) stand was that it would rather wait for the 50 days before judging the move to be a failure or a mistake. Far from bringing together Opposition parties, the demonetisation move appears to have driven apart parties already in alliance.


✌✌  Statesmanship at Pearl Harbour  ✌✌

Conspicuous gestures of reconciliation between nations to heal the deep emotional wounds of wars will have connotations that go beyond the symbolic. Japanese Prime Minister Shinzo Abe, through his visit to Pearl Harbour this week, and U.S. President Barack Obama, with his homage at the peace memorial at Hiroshima earlier in May, have undertaken this bold and difficult journey on behalf of their peoples more than 70 years after atrocities were committed against each other during World War II. That so much time should have been lost in both instances to put the painful past behind them only speaks to the powerful presence of nationalist sensibilities that invariably distort the moral force of reconciliation. That this should have occurred only now, despite the enduring economic engagement of several decades between Washington and Tokyo, merely underscores their ticklish nature and the strong political overtones involved. In the case of Japan, the conservatives have long regarded any attempt to own up the slaughter of hundreds of U.S. marines at Pearl Harbour in 1941 as nothing but a betrayal of the national interest. In fact, in comparison, earlier visits to the naval base by Japanese leaders were relatively low-key affairs.
As for Washington, veterans of the war have seen little justification in the claim that the devastation caused by the twin nuclear bombings had to be condoled. In their view, the horror in Hiroshima and Nagasaki brought the war to a close sooner than it might otherwise have been. They have also sought to repudiate the narrative that the dropping of the atom bomb was a calculated demonstration of U.S. and western military superiority in a Cold War scenario. These competing nationalistic accounts have possibly helped the current generation in the two countries to see such views with a healthy dose of scepticism. Messrs Abe and Obama have displayed a statesmanlike readiness to rise above partisan accounts, emphasising instead the need to bridge the gulf that neither history nor geography could have narrowed. President-elect Donald Trump’s pre-election rhetoric painted a picture of Japan as a nation that ought to be prepared to invest more in its own defence. The favourable public opinion in both countries towards each other will possibly prove critical in consolidating upon the current strengths in the economic partnership and weathering the uncertainties of the future. Prime Minister Abe and President Obama have shown how history can be revisited in a realistic manner. It remains for countries grappling with their own complex pasts to draw the right lessons from this.


✌✌✌✌   THE ECONOMIC TIMES   ✌✌✌✌

✌✌  Absurd to penalise holding old notes  ✌✌

The government has come out with an ordinance to extinguish the old Rs 500 and Rs 1,000 notes and to penalise possession of more than a handful of these notes after the deadline of March 31 for their surrender at RBI branches. Extinguishing demonetised notes is perfectly understandable.
That is the only way to legally remove the RBI’s liability to honour the notes in question. And that is the way to reduce liability on the RBI’s books of the notes that fail to come back to the banking system and possibly liquidate an equivalent amount of assets and transfer them to the profit and loss account, from where the government can be paid extra dividends. But why penalise possession of old notes? And why has the bar been kept at 10 notes? It suggests ignorance of numismatic practices. Collectors of currency notes have at least two notes of each kind, one to display the obverse and the other to display the reverse. Notes differ not just by denomination. A note of the self-same denomination can have multiple variants, differing in size, colour, design (that includes the number of languages listed on the note), signature of the RBI governor of the time, inset alphabet, curious numbers and errors. A casual collector might have say, 20 notes each of Rs 500 and Rs 1,000 notes. Now, the government wants to punish them for their collector’s passion. This is patently absurd and calls for at least one more of the U-turns at which the government and the RBI have become adept.
Once demonetised, these notes no longer store value, nor can they be used for transactions. But they can serve as units of account in say, a game of Monopoly. Why not let something that has been rendered a plaything serve as a plaything? If the aim were to penalise someone for having hidden income from the government in the past, the law already provides for it but the penalty has to be linked to the extent of concealment, not to some notes held in possession. Penalising possession of old notes is like penalising possession of floppy discs, old wine bottles or milk teeth. Surely, the government has better things to do than to harry collectors of quaint things.

News Papers EDITORIALS - 28 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  Passport to reform  ✌✌

The progressive changes introduced by the Centre to the rules governing grant of passports were long overdue. They simplify, in great measure, the paperwork needed for an Indian citizen to get the document. In order to screen applications to prevent impersonation, some of the earlier rules may have made sense at some point of time, but over the years the bureaucratic impediments that the cumbersome requirements posed to genuine applicants were so severe that many had to knock on the doors of high courts for remedy. Some rules were targeted at women. The most specious form of harassment of women passport applicants related to those who were either separated or divorced. Even something as routine as renewing a passport without any change of name or detail or getting a passport in the name of a child was a laborious process, as passport officials insisted on either the father’s consent or demanded a divorce decree. Following the recommendations of an inter-ministerial committee comprising officials of the Ministries of External Affairs and Women and Child Development, crucial changes have been introduced. The application form now requires only the name of one parent, not both. This will enable single parents to apply for passports for their children without the name of either the father or the mother being printed in the document. The stipulation that marriage certifications and divorce decrees should be provided has been removed; the obsolete concept of getting documents attested by notaries or magistrates has also been jettisoned, and self-declarations on plain paper would now be accepted.
A key reform is that a birth certificate is no more the main proof of date of birth, and other official documents, including Aadhaar number and PAN card, which contain the date, can be utilised. In the case of orphaned children, actual proof for date of birth has been dispensed with and a declaration from the head of a child care home or orphanage confirming the date is enough. In keeping with the times, adopted and surrogate children can be issued passports even in the absence of the relevant documents, based on a declaration on plain paper. Sadhus and sanyasins have been allowed to mention their gurus in lieu of the names of their parents. The new rules address many irritants in the process of getting a passport, but also make one wonder why these were not introduced long ago. Ultimately, a passport ought to be every citizen’s right. Simplifying the procedures in obtaining one should be an ongoing exercise.


✌✌  Behind Pakistan’s CPEC offer  ✌✌


Days after a senior Pakistani General suggested that India should shun its “enmity” with Pakistan and join the $46 billion China-Pakistan Economic Corridor project, the Chinese foreign ministry has called the offer a “goodwill gesture”, exhorting India to take it up. At face value, the suggestion is odd. India has no dialogue with Pakistan at present, and has opposed the project, bilaterally with China “at the highest level” as well as at the UN. Relations with China have deteriorated considerably since President Xi Jinping’s visit to Pakistan to announce the project in April 2015. Initially, New Delhi sought to play down its significance, as it was made just weeks before Prime Minister Narendra Modi travelled to China, and the government would have hoped to dissuade Beijing from pushing the more objectionable projects that run through disputed territory. However, not only has the corridor taken shape rapidly, China and Pakistan have been drawn into a closer embrace, with Pakistan investing considerable resources in securing Chinese officials working on CPEC, and China redrawing its plans for the One Belt One Road to Central Asia to incorporate Pakistan’s interests. China has defended Pakistan against India’s efforts to pin it down with regard to support to terror groups, and to draw an obstructionist equivalence with India’s Nuclear Suppliers Group membership application. Given all this, the General’s suggestion can only be understood to have been made rhetorically, especially as it was accompanied by allegations of India’s “anti-Pakistan activities and subversion” in Balochistan.
While there can be little expectation of any room for India in CPEC at present, there is space for India to step back and see where China and Pakistan want to go with it. The offer to India was made along with offers to other “neighbouring countries”. Already, Iran wants Gwadar to be a “sister” port to Chabahar, and Turkmenistan and other Central Asian republics have shown interest in the warm-water port that will be a nodal point for goods through Pakistan to the Chinese city of Kashgar. Further north, despite its problems on terror from Pakistan, Afghanistan is becoming a nodal point for China’s connectivity projects to Iran. The meeting among Russian, Chinese and Pakistani officials on Afghanistan this week, and Russian engagement with the Taliban, indicate much more is changing in the region than just the alignment of highways and tunnels. While India has done well to shore up relations with others in the region, it cannot afford to be blindsided by their involvement with the OBOR project and Chinese plans. CPEC is no longer a project in Pakistan, but one that runs through it, a project that will link 64 countries.

✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  Tax dividends in the shareholders’ hands  ✌✌

Taxation of dividends has become a vexatious issue, needlessly. It should be taxed in the hands of the investor at the rate applicable to the investor’s income bracket. The finance minister has indicated that the rate would be lowered in the interest of economic efficiency and that is welcome. The dividend distribution tax should be scrapped. To make sure that dividend income does not go under-reported, companies can be mandated to deduct tax at source at the highest marginal rate of 30%, leaving it to individuals whose incomes warrant a lower rate of tax to claim a refund while filing returns. The government has to make the processing of claims and refunds fast and efficient, that is all.
At present, companies pay a dividend distribution tax at the rate of 15%. Individuals who receive dividend income in excess of .`10 lakh pay a dividend tax of 10%. So dividends bear a tax of 25% at most. This is not an equitable way of taxing people. Company promoters who get the bulk of their income as dividends pay a lower proportion of their income as tax as compared to employees who receive the bulk of their income as salaries taxable at the highest marginal rate. Taxing dividends in the hands of the shareholder would both be fairer and more revenue-efficient than the current arrangement.
The debate that should begin on taxing dividends is whether to allow the cost of equity capital the same deductible expense status as interest, the cost of debt capital. This would do away with artificial demand for debt — borrowing is tax-efficient, even if you do not really need that loan — and encourage companies to retain only as much earnings as they have use for. Uninvested cash surpluses on company books are a drag on the economy. This, of course, is a global debate.

News Papers EDITORIALS - 27 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  Fire in the sky  ✌✌

The successful test-firing of the long-range ballistic missile Agni-V for the fourth time is a significant step towards building a credible nuclear deterrence. With this test and the recent commissioning of the indigenously built nuclear submarine INS Arihant, India is inching towards creating a robust and world-class second-strike capability. For a nation sworn to no-first-use of nuclear weapons, a reliable second-strike capability is an absolute necessity. In the worst-case scenario, the country should have the ability to withstand an enemy nuclear strike on its key locations and launch a successful second strike. Agni-V rose up from a canister mounted on a truck stationed at Dr. Abdul Kalam Island, Odisha, and went up a few hundred kilometres before following a ballistic trajectory and splashing down near Australian waters, some 20 minutes after the launch. This was the fourth test of the Agni-V missile, but the second from a canister mounted on a road mobile launcher. With the four tests, Agni-V is now ready for induction into the Strategic Forces Command, which already operates other Agni missiles with a target range from 700 km to 4,000 km, besides Prithvi-II.
However, despite the impressive strides made by the security establishment in developing nuclear weapons and delivery platforms, there is still a long way to go before the nuclear triad is complete and competent. Just a few days ago, the Nirbhay land attack cruise missile meant to carry nuclear warheads failed for the fourth time during a test. On December 21, it veered off its designated flight path within a couple of minutes of launch, and it had to be destroyed mid-air. There are several such gaps to be filled to ensure a foolproof nuclear triad. A credible second-strike capability should also be complemented by a modern, powerful military. The Indian military is in crying need of modernisation across its three arms. The Air Force has a huge shortage of fighters; the Navy’s submarine arm is far from meeting multiple challenges; and the Army needs an array of new platforms. Most importantly, India also needs to consistently showcase itself as a responsible nuclear power, and not just through a no-first-strike policy. India has a mature political and military leadership today. In a complex global strategic environment, where nations issue nuclear threats based on fake news and global powers threaten to add to their already bulky arsenal, it is important to be recognised as a responsible democracy.


✌✌  Congo’s political battles  ✌✌


The ongoing political crisis in the Democratic Republic of Congo is a reminder of the country’s turbulent past. Since it became independent in 1960, no head of state has left office peacefully after an election. By refusing to hold an election, which was due in November, and clinging to power even after his term officially came to an end on December 19, Joseph Kabila, the President of the DRC, risks repeating the mistakes of his predecessors. Congo’s Constitution, which Mr. Kabila himself helped write after his 2006 election, bars the President from seeking a third term. But Mr. Kabila later changed his mind and sought to amend the rules to stay on in power. After failing in such attempts, he simply refused to hold elections, citing “logistical problems”. A court has allowed him to remain President until the next elections are held, which the ruling party says will only be in 2018. It is now evident that the President wants to delay the process for as long as possible. But the going is not easy for Mr. Kabila, who was seen in his early years in power as a young and energetic leader who could democratise the polity, offer stability and lift the living standards of millions of its citizens. Not any longer.
Mr. Kabila’s decision to delay the elections has triggered massive protests across the country, in particular turning Kinshasa, the capital, into a battleground between security personnel and protesters. Dozens of opposition activists have been shot dead and hundreds arrested since September. The President is so unpopular in the capital that the ruling party’s headquarters in the city was burned down during Christmas week. As of now, the army and the police stand behind the President and show no qualms in shooting down protesters. But the question now is how long Mr. Kabila can stay on in power by suppressing mass protests. Significantly, the weeks-long violent repression has not turned the protesters away from the streets. Besides, the opposition has rejected outright any bid by Mr. Kabila to stand for another term. If this stalemate continues, Congo will plunge into a greater crisis, at a time it faces several other economic and security challenges, including frequent cross-border attacks on civilians by Uganda-based rebels. Mr. Kabila should draw lessons from the country’s past. After the dictator Mobutu Sese Seko was ousted in 1997, Congo was plunged into a deadly civil war, leaving hundreds of thousands of people dead. Mr. Kabila’s father, Laurent Kabila, who spearheaded the protests against Mobutu, was assassinated. President Kabila should call early elections and hand over power peacefully, thereby setting a precedent for his successors.


✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  Outsiders are not to blame for Karnataka’s employment problems  ✌✌


The Karnataka state government’s decision to institute mandatory 100 per cent reservation in the private sector for Kannadigas, the state’s native Kannada-speaking population, is unconstitutional, retrogressive and dangerous. Rather than take real steps to improve employability and employment options, the state’s Congress government is taking the easy way out: blame the outsider as the source of the problem. Stoking nativist sentiment is a dangerous Plan B.
Private enterprises that fail to implement the reservation provision will forfeit all concessions under the state’s industrial policy. The aim is to boost blue-collar employment among sons of the soil. When it comes to hiring decisions, the key consideration is getting the best-qualified person. The Karnataka government is making the case that private enterprises are discriminating against Kannadigas, it needs to back up their claim with data.
All companies prefer to hire locally, and if they are not, it is likely because of a skills gap. Rather than issue a fiat, the government needs to consider ways to improve the employability and the employment opportunity of the local populace. The state government needs to focus on ensuring skills and relevant education, and increasing employment opportunities by attracting more industries. The 100 per cent reservation policy will only succeed in driving out companies, resulting in a further reduction in job opportunities.
Chief minister Siddaramaiah is playing a dangerous, cynical political game. He knows that the Supreme Court will strike down this provision, and is pandering to nativist sentiments. In doing so, he paints a bull’s-eye on non-Kannadigas in the state. This could lead to retaliatory action by other states, resulting in deep social unrest and economic disruptions.

News Papers EDITORIALS - 26 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  A goods and services tangle  ✌✌


Soon after the seventh meeting of the Goods and Services Tax Council last week, Finance Minister Arun Jaitley said only one difficult issue remains pending to enable the implementation of the new indirect tax regime. The Centre is determined to introduce the GST from April 1, 2017, and given the time constraints posed by that deadline, Mr. Jaitley expressed hope that States would rise to the occasion and help resolve the issue. It can be safely assumed he was referring to the turf battle between the Centre and States on sharing administrative powers over taxpayers in the new system, even if this is not the only hurdle left to cross. This was the first time the Council met after the washed-out winter session of Parliament, with no movement on four enabling GST legislations. Over two days last week, the Council managed to clear the current drafts of the Centre and State GST Bills and agreed on a two-monthly compensation payout to States, instead of a quarterly one, for revenue losses they might incur after the switch. The trickiest tangle of cross empowerment or dual administrative control will now be taken up in the first week of 2017, along with the model integrated GST Bill and the legalese around compensation payments to States.
Even though an April 1 roll-out now looks increasingly unlikely, the Council’s next meeting is critical to enable the GST laws to make it to the Budget session of Parliament. States have mooted a July 1 start for the GST regime, and that date could be pushed as far as September 16, 2017, following which all existing indirect taxes will lapse. Since it is a transaction tax, the GST can technically be started any time of the year. Although that would be an accounting headache for firms, industry may be better off with the extra time to prepare for the new order. Between now and then, the Centre’s self-imposed 50-day deadline for reducing the pain caused by the demonetisation of high-value currency notes would have passed too. States may harden their stance on GST negotiations if the remonetisation process hasn’t picked up by December 30. The Centre has so far brushed aside demands from Tamil Nadu and West Bengal for additional compensation to make good the revenue losses triggered by the slump in demand in the ongoing currency crisis. But even BJP allies have begun to raise concerns. It is unlikely to be a coincidence that soon after the Andhra Pradesh Chief Minister spoke out about the implementation of the demonetisation exercise, his representative in the GST Council said the State would not accept the levy of a cess by the Centre in order to reimburse States. The Centre may need to rise to the occasion as much as States do to steer the GST regime forward.

✌✌  Indictment by abstention  ✌✌


In what is yet another diplomatic blow for the two-state principle, the UN Security Council, on Friday, passed a resolution with a 14-0 majority urging Israel to halt its illegal settlements programme in the occupied Palestinian territories. The vote is notable as Israel’s pre-eminent backer, the United States, chose to abstain. By doing so, the Barack Obama administration bucked its earlier record of vetoing a similar resolution in 2011. U.S. President-elect Donald Trump was prompt in promising a different response once his tenure commences on January 20. He had sought to work behind the back of Mr. Obama in trying to scuttle this resolution by reaching out to Egypt, which originally drafted it but backed down from its nomination due to “intense pressure”. But it will be difficult for the Trump administration to have this resolution overturned, passed as it was without a veto. That said, the resolution, by way of its adoption under Chapter 6 of the UN Charter, is not binding and comes only with recommendations. It therefore does not affect the status quo in the occupied territories. Even so, its unambiguous language stating that the settlements constitute a violation of international law offers hope for the Palestinians who have filed a suit (that includes the construction of settlements) against Israel in the International Criminal Court.
Israel’s reaction has been predictable. It has refused to comply with the terms of the resolution. It has repeatedly sought to create “new facts on the ground” by continuing to build settlements, imposing a blockade on Gaza, forcing international censure to only keep apace with its latest violations. This outrageous behaviour has been made possible by the unrelenting support provided by the U.S. in the past. While Mr. Obama has had a testy relationship with Israeli Prime Minister Benjamin Netanyahu, his administration continued to fund and arm Israel despite, for example, the atrocities in Gaza. The U.S. had also recently worked out a deal that provides $38 billion in military aid over 10 years to Israel, cementing long-established strategic ties. Seen in this light, the administration’s decision to abstain in the most substantive resolution on Israeli settlements since 1980 is even more remarkable. It is also a possible parting shot by the outgoing administration before the unambiguously partisan Trump team takes charge. Either way, it is up to the international community to take the cue and find ways to check and censure Israel’s brazen rule-breaking, and forge a fair solution for the Palestinians.

✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  Government must accelerate the remonetisation pace  ✌✌

The pace at which new notes are being introduced is too slow. The government has to accelerate the pace, to avoid major harm. At midnight, November 8, around 2,300 crore high-value currency notes, amounting to 86.5 per cent of India’s cash in circulation, were rendered worthless.
A month and a half later, the government’s attempts to replace extant high-value notes with new paper with face values of Rs 500 and Rs 2,000 rapidly, are flailing. With less than a week to go before the 30 December deadline for swapping old notes for new, there are long queues in front of bank branches and automated teller machines (ATMs) are starved for cash, despite cash withdrawals per day or week being capped by fiat.
Demonetisation has already dented agriculture and construction — the two largest employers in India.
The finance ministry and the Reserve Bank of India (RBI) together run four presses — located at Nashik, Dewas, Salboni and Mysuru — that print all legal tender in the country.
Data released by the RBI on December 21 show that in the 41 days between November 10 and December 21, 220 crore ‘high denomination’ notes were distributed, an average of less than 161crore new notes of Rs 500 and Rs 2,000 per month. At this rate, to replace the 2,300 crore notes with face value of Rs 500 and Rs 1,000, it will take the government-RBI team 14 months.
That is late January 2018. Can India afford to wait that long to get fully monetised, with banks and ATMs flush with new tender and the economy back on track? Only 53 per cent of Indians have a bank account; more than 90 per cent of its workforce is designated as ‘unorganised’.
They work for cash. Demonetisation has already dented agriculture and construction — the two largest employers in India.
A failure to distribute new notes faster could have dire consequences for employment, growth and social stability. If this calls for printing money abroad, that must be done.

News Papers EDITORIALS - 24 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  Back to Class X Board exams  ✌✌


The excellence of a school education system must be assessed by the creative individuals it produces. That principle can be the only meaningful guide for the Central Board of Secondary Education, as it once again tweaks its testing system to make the Class X Board examination compulsory for all students from 2018. It is wrong to believe that students in the CBSE system are not being assessed with sufficient rigour: the Continuous and Comprehensive Evaluation (CCE) method that it follows is aimed at identifying learning difficulties periodically and instituting remedial measures, rather than raising stress with a make-or-break public examination at the secondary level. This philosophy helps students master various topics and discover their aptitude in the course of a year, eliminating the chances of a single rote-learning test that could produce an aberrant result. The gains of such a system should not be thrown away in the quest to bring about ‘uniformity’ in the Class X education pattern across the country. If anything, it is learning outcomes and creative brilliance assessed through non-ritualistic aptitude tests that should rate the capacity of an educational board. Such an approach would also encourage teachers to innovate conceptually, rather than drill students to face an examination.
The argument in favour of a compulsory Class X Board examination made by Union Human Resource Development Minister Prakash Javadekar is that its absence discriminates against candidates of State boards. In fact, the Minister announced his intent of returning to a compulsory Board examination well before the CBSE governing body formally announced it. The logic, however, is flawed. Uniformity militates against creative educational methods, and a test that is no more than a straitjacket crushes the initiative of teacher and student. The CBSE would, therefore, do well to avoid homogenisation, and retain sufficient scope for true learning. This can be done by giving the CCE system — which the Board calls a balance between incessant tests and a single annual assessment — equal weightage, even if all students take a Board examination for Class X. As the CBSE puts it, over-dependence on a single examination deprives the learner of motivation and opportunities for reflection on his or her work. It also does not find favour with the National Curriculum Framework 2005 that emphasised greater flexibility for teachers to decide on how to train students in concepts and help them learn at their own pace. What India needs is a school-level assessment method to identify actual learning that would remove barriers to students freely migrating across State boards.


✌✌  Well spun by Ashwin  ✌✌

Ashwin has never been one to hide his ambition. When his international career was still young, Ashwin said in an interview that he wanted to dominate the game. There was no hint of braggadocio, just an unnerving earnestness. On Thursday, the realisation of this dream was formally recognised. Ashwin became the first spinner to win cricket’s biggest individual prize, the Sir Garfield Sobers Trophy, since the award was instituted 12 years ago. He is just the third bowler, after Dale Steyn and Mitchell Johnson, to be named ICC Cricketer of the Year. He was also adjudged Test Cricketer of the Year, only the second Indian after Rahul Dravid to sweep both awards. Indeed, the voting period — September 14, 2015 to September 20, 2016 — does not fully describe his phenomenal ascent to the top. In that time, he took 48 wickets at 15.39 and made 336 runs at 42 from eight Tests. He has added another 55 wickets (24.12) and 377 runs (37.70) in the eight Tests since. His influence was not limited to one format; in the voting period, Ashwin had 27 T20I wickets in 19 games. By any measure, Ashwin stands alone, an extraordinary comeback after being dropped for the Adelaide Test in early 2015.
Ashwin’s success has been instrumental in India becoming the premier Test side this year. There has been a perceptible change in culture and intent. Virat Kohli announced it when he acknowledged that bowlers were “the bosses” in Test cricket. He has backed it up, leading the batting group in shaping contests and empowering his bowlers to win them. There was a minor storm on social media when Kohli did not make the ICC’s Test Team of the Year. But his exclusion was easily explained: his magnificent run with the bat did not coincide completely with the voting period. He certainly stepped up a level against England, lifting his career average from the mid-40s to the high-water mark of 50. The context in which the runs came was more impressive than the volume: every time a game needed seizing or settling, Kohli attended to it. Teams tend to form themselves in the image of their captains — so, perhaps, it was not entirely surprising that India found a hero equal to nearly any task. The experienced cricketers pulled their weight. Those of more recent vintage — K.L. Rahul, Jayant Yadav and Karun Nair — appeared to make the transition without missing a beat. The side had to deal with injuries, which did not permit a settled playing eleven. But the momentum was unaffected. India will face stiffer challenges, especially overseas, as it seeks to build a legacy as a world-beater. For now, 2016 has been a good launch pad.


✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  Kudos, Election Commission! These parties just had to go  ✌✌

The Election Commission (EC) has done well to delist 200-odd political parties that have not contested any elections since 2005. Some parties are floated mainly to launder money. They can be used both to avoid tax — make a contribution by cheque, the amount being tax-deductible for the donor and receive it back in cash, political parties not being amenable to scrutiny as to how precisely they spent their money — and to convert black money into white — give a party money in cash, it will pay you by cheque for some fictitious service.
There are 1,786 registered, unrecognised parties now, besides seven national political parties and 58 state parties. Uttar Pradesh, Delhi and Tamil Nadu house the bulk. Only a quarter of the registered parties participated in the 2009 and 2014 general elections. So, the case for delisting parties that exist merely on paper and withdrawing their incometax exemptions is compelling. However, delisting alone will not halt the practice of all political parties mopping up huge amounts of poll funds through unaccounted contributions that, in turn, drives businesses to generate black money. Fund mobilisation and spending of political parties must be made transparent. Registered parties are supposed to file their returns along with their audited accounts, but compliance to tax laws alone will not suffice. Every political party must mandatorily reveal its spending and sources of financing those expenses.
Declaring their monthly expenses and showing their sources of income — disaggregated and combined is the way to go. Other political parties and watchdog bodies must be free to challenge the figure — from the local to the national level. The EC must do the last leg of scrutiny to finalise the spending, and quiz political parties for their source of finance.

News Papers EDITORIALS - 22 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  A chance for peace in Syria  ✌✌ 

The coming together of Russia, Turkey and Iran to discuss a diplomatic solution to the Syrian crisis is a welcome development. That they decided to go ahead with Tuesday’s Moscow summit despite the assassination of the Russian ambassador to Turkey, Andrei Karlov, the previous day, demonstrates their commitment to stay the course, something that was missing in previous efforts. The summit also marks a shift in Russia’s approach, which initially involved negotiations with the United States about possible diplomatic options for Syria. Washington has been kept out of both the deliberations on the Aleppo evacuations and the Moscow conference. The last time Russia and the U.S. reached an agreement, in September 2016, there had been great hope that they could mentor a sustainable ceasefire. But within days of U.S. Secretary of State John Kerry announcing the deal, the American-led coalition killed dozens of Syrian soldiers. Though the U.S. later “regretted” the strike, the peace process had been hit. The wider bilateral tensions between Moscow and Washington were also an impediment to finding a breakthrough in Syria.
The current initiative appears to be more promising. Russia and Iran have direct leverage over the regime in Syria, while Turkey still helps several militant groups. Besides money and arms, the militants need Turkey’s help for any communication with the other side. And there is a reason for Turkey coming forward for talks. President Recep Tayyip Erdogan appears to have realised that his anti-regime Syria policy has backfired. Turkey faces severe security challenges, from both Islamic State jihadists and Kurdish militants. If Syria remains at war and the instability spawns more radical militia groups, it could worsen Turkey’s security problems, while Kurds on the Syrian side could grow in strength. Russia, on the other side, has pursued a ‘war and talk’ approach since its intervention — it will continue to defend the regime militarily, while looking for avenues to deal with other stakeholders. The recent improvement in relations between Ankara and Moscow, which had hit a low after Turkey shot down a Russian aircraft last year, has also helped get the peace process going. But this convergence of interest for both sides in stabilising Syria doesn’t mean that peace is within reach. Turkey is only one of the countries backing the rebels. The others include Saudi Arabia, Qatar and Jordan, all allies of the U.S. The Saudis were instrumental in ending the civil war in Lebanon in 1989. Like Lebanon, Syria too is a regional problem that needs a regional solution. For this, Arab stakeholders may have to give up their ‘Assad-must-go’ precondition and join the peace process, as Turkey did.


 ✌✌  Ending the Manipur blockade  ✌✌ 


The blockade of the national highways leading to the Manipur valley, called by the United Naga Council (UNC), has been in place since November 1. This has severely affected life in the State, with shortages and escalating costs of essential supplies such as fuel and food, even as demonetisation has exacerbated problems. Blockades like this are not new to Manipur. In 2011, there was initially a hundred-day-plus blockade enforced by Kuki-led groups, and countered later by Naga groups, which together had a debilitating effect on life in Manipur. This time the blockade is in place to oppose the creation of new districts by the Okram Ibobi Singh government. On December 9 it issued a gazette notification for the creation of seven new districts by bifurcating seven (of a total of nine) districts. This decision had as much to do with long-pending demands — in particular, for a new Kuki-majority district to be carved out of the larger Senapati hill district — as with easing administrative access to far-flung areas from the district headquarters. With State Assembly elections around the corner, the decision by the Congress-led government was also a desperate measure to woo the hill residents. While residents and groups in the new districts have welcomed the decision, the UNC has protested, alleging that areas with a Naga population have been divided and that the lack of consultation is a violation of commitments made by both the Centre and the State in various memoranda of understanding.
Already, just as in 2011, counter-blockades have been called by other groups, this time in the Meitei-dominated valley, and there has been violence both in the hills and in the valley. The State government last month sought the Centre’s assistance to end the blockade, given that New Delhi has been in peace talks with the National Socialist Council of Nagalim (Isak-Muivah) group that supports the UNC. While the Centre has sent paramilitary forces to both Nagaland and Manipur, the inaction in clearing the blockade of the national highways is puzzling. Efforts to impose a political solution through blockades that cut arterial routes supplying essential goods to various areas of Manipur are a cynical ploy. Such action heightens ethnic polarisation and threatens, once again, the fragile peace in the State. Ideally there should be a dialogue that involves all major stakeholders — the State government, groups that support redistricting, the UNC and the Centre. But first, there should be zero tolerance towards all such blockades.


✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  When radical ideas bury official duty  ✌✌ 


Two things stand out about the assassination of Andrei Karlov, Russia’s ambassador to Turkey, at a public event by a 22-year-old off-duty Turkish policeman: one, Russia’s mature recognition of the attack as an attempt to strain bilateral ties that should not be allowed to succeed, and two, the vulnerability of diplomats and other high-profile individuals to people least expected to turn hostile, such as security personnel of the host country. Ideologies of transnational religious solidarity, hypernationalism, political instability, war and isolationist views in industrialised democracies all contribute to this. The probability of countries seeking to send their own security personnel along with official representatives to foreign countries has gone up.
The gunman in Ankara, Mevlut Altintas, shot the Russian ambassador as retribution for Russia’s role in anti-rebel military strikes in Aleppo and its support for Syrian President Bashar al-Assad. Given Turkey’s support for rebel forces in Syria, Altintas could well be representative of a more popular sentiment — that Russia is pro-Shia and anti-Sunni, and thus an enemy. Pak Punjab governor Salman Taseer had been shot dead by his bodyguard in 2011 on religious grounds. A Sri Lankan sailor had attacked the visiting Indian prime minister Rajiv Gandhi in 1987, driven by a sense of affronted nationalism.
When a nation’s security forces contain rogue elements that can turn on the nation’s vital guests whom they are deployed to protect, it means a malaise runs through the nation. This is one of the dangers of identity politics that political leaders practise to get elected to office, only to find they no longer control the fallout. Security personnel must watch their own ranks better, and politics turn more responsible.

News Papers EDITORIALS - 21 DECEMBER 2016

✌✌✌✌  THE HINDU   ✌✌✌✌

✌✌  Demonetisation — an unkind postscript  ✌✌

In November, the Governor of the Reserve Bank of India, Urjit Patel, said there was a ‘confluence of thought’ in the government and the central bank to deal with black money by removing existing Rs.500 and Rs.1,000 notes as legal tender. Now, just about ten days before the deadline to deposit these bank notes into accounts, a similar confluence of ideas has led to a stunning decision to make it harder for people to do so. The new caveats, announced on Monday, restricting deposits over Rs.5,000 (roughly $70) are not just difficult to fathom but also constitute an unfair change in the rules of the game. Those opting to disclose unaccounted income under the new amnesty scheme, the Pradhan Mantri Garib Kalyan Yojana, face no restriction on depositing old notes. But anyone depositing Rs.5,000 or more into a bank account will have to satisfactorily explain to two bank officials why this was not done earlier. However, the Finance Minister has suggested that such explanations will not be required for anyone making a deposit for the first time. Apart from the human tendency to act only when a deadline nears, there could be genuine reasons for people not to have queued up at banks till now — including their faith in the Prime Minister, as well as the Finance Minister’s statements that they had till December 30 to do so.
Overstretched bankers may somehow cope with this latest diktat. But implementation is likely to be arbitrary as each bank branch may come up with its own ground rules, just as they are doing in the case of cash withdrawal limits. Nevertheless, tasking them to record and flag for audit purposes deposits amounting to just 1.66 per cent of the personal income tax threshold is tantamount to outsourcing the taxman’s job to the banker for no ostensible revenue pay-off. Initially, the Centre said deposits up to Rs.2.5 lakh would not be questioned, but later held that all deposits could be scrutinised — even though the Income Tax Department will struggle to complete scrutiny of lakhs of accounts within the legally stipulated two-year deadline. The Prime Minister had said exchange limits for old notes would be enhanced from November 25; instead, the exchange facility was stopped altogether. By December 10, Rs.12.44 lakh crore, or 80 per cent of the old notes, was back in the system, and by December 30 most, if not all, could well return. Perhaps spooked by that prospect, the Finance Ministry suggested that double counting may have skewed the numbers, but bankers have dismissed that possibility. The latest flip-flop to make deposits difficult appears to suggest that the government is itself in panic mode over its bold gambit.


✌✌  Angela Merkel’s challenge  ✌✌ 

It is hard now to remember a time when German Chancellor Angela Merkel was not in the thick of a political storm in Europe. However, Monday’s suspected terror strike in Berlin that claimed at least 12 lives along with a spate of incidents in July, all with a bearing on Germany’s liberal immigration policies, present a qualitatively different challenge to Europe’s most powerful politician. As she seeks election for a fourth term next September, Ms. Merkel’s political and diplomatic acumen could be put to the toughest test yet in a world still coming to grips with the implications of Britain’s vote to leave the European Union (EU) and the U.S. presidential election result. Her measured approach to the deepening debt crisis in the eurozone saw her being pilloried by some of her conservative colleagues as indulgence of a profligate Greece, even as the German-backed multilateral mission that negotiated the bailouts was greeted by angry Greek protesters carrying placards bearing the swastika. But the Chancellor, seen hitherto as cautious if not indecisive, was spontaneous and firm in her response to the tragic drowning of many Syrians at the height of the refugee crisis in 2015. Her open-hearted open-doors policy towards the hundreds of thousands who managed to cross the choppy waters of the Mediterranean, describing Islam as integral to Germany, may have alienated even some of her closest European allies.
Paradoxically, Ms. Merkel’s continued leadership of the 28-nation EU seems ever more critical given the rise of xenophobic and anti-immigrant forces across the continent. Matters are not helped by the fluid political scenario in the other staunchly integrationist founder-member of the EU, France, which is headed for presidential election in 2017. The prospects of Ms. Merkel rallying the forces of the political centre at home will depend on her capacity to counter the populist Alternative for Germany party, anxious to cash in on tragedies such as the Berlin attack. As for the European and international stage, there are clear signs of the Chancellor’s moderate political instincts to uphold the values of a pluralistic democracy underpinned by the rule of law. In a letter she wrote to congratulate Donald Trump, Ms. Merkel remained unequivocal. Among the values Germany and the U.S. shared, she wrote, were “democracy, freedom, as well as respect for the rule of law and the dignity of each and every person regardless of their origin, skin colour, creed, gender, sexual orientation or political views.” It is hardly surprising that Ms. Merkel’s views resonate across the Atlantic alliance, and much beyond.

✌✌✌✌  THE ECONOMIC TIMES  ✌✌✌✌

✌✌  Destination NPS: Let the migration begin!  ✌✌


The Employees’ Provident Fund Organisation (EPFO) did the right thing by lowering the interest rate on provident fund savings to 8.65% for 2016-17. Retaining the current 8.8% interest would have created a deficit. The trouble is that the EPF earns too little. The EPFO invests the bulk of its corpus — of over Rs 10 lakh crore — in government bonds, the rest in securities issued by banks, public sector enterprises and a minuscule 5% of its incremental deposits in equities. However, returns have been suboptimal compared to the National Pension System (NPS) that has lower assets under management but offers superior returns to its subscribers.
Areport on the performance of private sector pension funds shows that the seven fund managers have consistently delivered higher returns to their subscribers compared to the EPFO. The one-year average return on government bond fund stood as high as 16.88%, and the return on corporate debt fund at about 15.52%. So, the case for the government to swiftly fulfil its Budget promise, to let workers leave the EPF and join the NPS if they choose to, is compelling. Prudent fund management is warranted, given that a cut in the interest rate to let the economy grow will impact bond yields and lower the returns for workers, if asset management means holding on to bonds till maturity.
The NPS has the lowest asset management fees. The NPS corpus will grow, as more workers join, enabling more diversification and risk-taking. Both the EPFO and the NPS must diversify across asset classes that include private equity, real estate and startups to distribute risk and maximise returns. The government should also ensure parity in the tax treatment of the EPFO and the NPS. Reform to allow workers build a decent retirement nest brooks no delay.