Daily News Mail - News of 09/04/2015

India ranks lower than even Nepal

• Out of 133 countries rated on indicators of well-being such as health, water and sanitation, personal safety, access to opportunity, tolerance, inclusion, personal freedom and choice India has secured the 101th place. This is lower than India’s rank, of 93, for GDP per capita income. Even Nepal and Bangladesh rank higher than India on the Social Progress Index (SPI) ratings to be released globally on March 10. Norway has bagged the first rank; the U.S. is at the 16th place.
• On the parameter ‘Tolerance and inclusion’ India ranks 128th and is at the 120th place on ‘health and wellness’ that, says economist and executive director of the SPI, Michael Green, is the toughest parameter for a country to excel at. As a country becomes richer while tackling sanitation and water becomes easier, tougher challenges emerge such as air pollution and obesity, Dr. Green told. The U.S. despite its high levels of spending on health and wellness ranks 68th.
• Even harder to tackle are freedom and tolerance, he says. “The most striking findings for India are the worst performance on the tolerance and inclusion front…It’s a complex problem in a diverse country…another thing I will be watching for as India grows economically is when obesity as a crisis will start hitting.” 
• The SPI was launched in 2013 and is based on 52 indicators of countries’ social and environmental performance. It includes no economic indicators and measures outcomes. The UN’s Human Development Index and Bhutan’s Gross National Happiness Index are also alternate measures for well being but they use GDP or other economic measures.
• Focusing exclusively on GDP implies measuring progress in purely monetary terms and failing to consider the wider picture of the real things that matter to real people, Dr. Green says. “GDP isn’t bad but it’s not the whole story… alongside economic growth social progress is more important for policymaking.”

PM announces enhanced input subsidy

• Prime Minister Narendra Modi on March 8 announced enhanced input subsidy relief for farmers in distress.
• Farmers will now be eligible for input subsidy if 33%of their crop has been damaged, as opposed to 50%or more, which was the norm till now, the Prime Minister said at the launch of the Pradhan Mantri Micro Units Development and Refinance Agency Ltd (MUDRA) Yojana.
Further, the input subsidy given to distressed farmers will be enhanced by 50% of the existing amount.
• The Prime Minister expressed concern over the problems faced by farmers due to the abnormal weather in the past year. “Helping farmers in this time of distress is our responsibility, and therefore, the government has sent teams of Central Ministers to affected areas to assess the extent of the damage,” Mr. Modi said, according to an official release.
• He also gave the assurance that the Centre, State governments, banks and insurance companies would do their utmost to provide relief to the farmers.
• Mr. Modi said banks had been asked to restructure loans of farmers hit by unseasonal rain and insurance companies had been advised to pro-actively settle claims.

MUDRA bank launched

• He also launched the MUDRA bank with a corpus of Rs. 20,000 crore and credit guarantee of Rs. 3,000 crore.
• The bank will be responsible for refinancing micro-finance institutions in the business of lending to small entities.
• While big industrial houses provide jobs to only 1.25 crore people, small entrepreneurs have given employment to nearly 12 crore people, Mr. Modi said. The postal network would be used for increasing access to the formal financial system.
• Union Finance Minister Arun Jaitley said the MUDRA Bank was a step in the right direction for “funding the unfunded.” He had proposed the MUDRA Bank in his budget speech in February.
• MUDRA will be set up through a statutory enactment. It will be responsible for developing and refinancing all micro-finance institutions (MFIs) which are in the business of lending to micro and small business entities engaged in manufacturing, trading and service activities.

Bank’s role

• It will also partner with State and regional-level coordinators to provide finance to last-mile financiers of small and micro business enterprises. Its proposed role includes laying down policy guidelines for micro enterprise financing business, registration, accreditation and rating of MFI entities.
• The agency will also lay down responsible financing practices to ward off over-indebtedness and ensure proper client protection principles and methods of recovery, according to an official release.
• These measures are targeted towards mainstreaming young, educated or skilled workers and entrepreneurs, including women entrepreneurs, the release said.
• “A vast part of the non-corporate sector operates as unregistered enterprises and formal or institutional architecture has not been able to reach out to meet its financial requirements. Providing access to institutional finance to such micro, small business units, enterprises will not only help in improving the quality of life of these entrepreneurs, but also turn them into strong instruments of GDP growth and employment generation,” the release said.

Economic ties high on Narendra Modi’s agenda

• Economic ties are at the top of Prime Minister Narendra Modi’s agenda as he begins a nine-day three-nation tour of France, Germany and Canada.
• While in France, the Prime Minister will focus on technology development and tourism cooperation, in Germany he will pitch the government’s “Make in India” theme, and in Canada he will focus on investment potential and engage with the Indian diaspora that numbers more than 1.2 million.
• “If I were to pick a common theme, then it is that all three G-7 nations are industrialised democracies. We have considerable economic interests with them, and politically as democracies, we have convergence of views,” said Foreign Secretary S. Jaishankar, announcing the visit from April 9-17.

11 Indians rescued by Pakistan reach Delhi

• The crisis in Yemen ended up bringing India and Pakistan together in a rare display of goodwill and mutual cooperation. Eleven Indians evacuated from Yemen by Pakistan reached India on March 8 night in a special aircraft of the Pakistani Air Force.
• The evacuees were received at the Indira Gandhi International Airport here by Pakistan High Commissioner Abdul Basit.
• They had reached Karachi on March 7, where, along with other evacuees, they were thrown a grand reception party at Kiamari.
• Earlier in the day, Pakistan Prime Minister Nawaz had offered a special plane to bring them to India.
• “Prime Minister Sharif had directed that the special Indian guests should be flown to Delhi in a special plane...it shows how strongly the PM feels about Indians,” Mr. Basit told mediapersons at the airport.
• Prime Minister Narendra Modi thanked Pakistan for the special gesture. “I welcome our 11 citizens who’ve returned from Yemen with assistance from Pakistan. Thank you PM Nawaz Sharif for your humanitarian gesture” he tweeted. Foreign Secretary S. Jaishankar termed it “a very generous gesture.”

Seeking reaction by no action

• In the face of virtual non-cooperation from banks, the Reserve Bank of India (RBI) has decided to maintain the status quo in policy rates, in the first bimonthly Monetary Policy Statement for 2015-16. 
• The “heads I win, tails you lose” attitude of the banks has not really gone down well with the RBI and also the fiscal bosses. The Raghuram Rajan-led RBI appears to have taken a tough stance. It has every justification to do so. Since the beginning of 2015, the RBI has cut policy rates by 50 basis points in two doses of 25 points each, and that too outside the usual policy cycle. On both occasions the banks had chosen to look the other way without effecting similar cuts in lending rates. They refused to pass on the benefits to customers. 
• This time around when the RBI kept the rate unchanged, some leading banks such as SBI, HDFC Bank, ICICI Bank and others have reluctantly come forward to cut lending rates, albeit only marginally. It is difficult to fathom the logic behind their behaviour — of the blatant refusal to cut rates earlier and opting for a voluntary reduction in lending rates now. 
• Governor Rajan has time and again referred to the lag in rate cut transmission. Often in the past, banks acted with alacrity in passing on rate hikes to borrowers. When transmitting rate cuts, however, they have taken their own sweet time. Rather, they have used rate cuts to shore up their bottom line. Thus, the twin cuts in rates only served the banks whose collective NPAs (non-performing assets) were a cause for considerable anxiety. With variable loan rates becoming the norm in the banking sphere, the refusal to reset lending rates in line with the RBI policy rate is indeed hurting the cause of borrowers, especially of the retail kind.

Fiscal consolidation should be assessed differently: CEA

• The path to fiscal consolidation should be assessed by looking at the consolidated finances of Centre and State, India’s Chief Economic Adviser Arvind Subramanian said.
• He said that an assessment of 17 State budgets along with centre showed a decline in two metrics — fiscal deficit and revenue deficit.The capital expenditure is going to go up in centre, but when it is combined with the states, the increase is almost 0.5%, from 4.6 to 5.1%. “For me, this is a kind of Eureka moment. If you look at centre and state finances as a whole it will give better quality of fiscal consolidation, because revenue expenditure and defecit are coming down and you get desire towards shifting to capital expenditure.”
• Mr. Subramanian was speaking at an interactive session on the Economic Survey 2014-15 at Madras School of Economics. He also said the ray of hope for India came from the acceptance to 14th Finance Commission recommendation on giving more funds to the states, which was a ‘watershed’ departure from an order of centralised decision-making and directives on investments. He said it would spur more competition among States in terms of governance and attracting investments. “Recently, I heard a car company moved out of Tamil Nadu to Gujarat because the state had not sorted out its power problem. Not sure if it is true,” he added.