Healthcare 2.0: Road to Revamping India’s Health Sector

The COVID-19 pandemic has proved yet again why healthcare remains an integral ingredient for national advancement. With healthcare systems around the world having been pushed to their edge, often running with over-worked staff themselves, the fallout is discernible. In India, we are all set to hit the grim milestone of ten thousand cases of infections, a figure that has come by unimaginably quick. Could we have done better in our efforts against the pandemic raging the world? There is no denying that.

That, however, does not indicate that there remain no positives; the testing net is now being widened daily, and the treatise of ‘treat-test-track’ has been taken up on a war footing in most of the states where the virus has ravaged lives. Better preparedness is always a strategic advantage and never a burden. Our infrastructure today is woefully incompetent when juxtaposed against those in the West. In a nation of a billion people, effective implementation and planning are the two most essential components for any policy to meet its goal and find success. As the coronavirus threat surges over days, it is necessary to take stock of the challenges that lay ahead and imbibe amendments to the healthcare policy and planning in India. At this hour, our health sector presents itself as unsavoury conjunction of fledgeling infrastructure, negligence and a noticeable shortage of qualified doctors for medical practice. The government’s top-most reform agenda must now be to restructure the medical institutions in India and make it more resilient towards ghastly outbreaks as the present one.

While seeking to better our healthcare planning, it would be a beneficial exercise to take a peek into the two famed global models- that of the US (insurance-based) and the UK (NHS model). The United States spends around 18% of its GDP, a figure on the higher end when compared to global averages, on healthcare. A reputed journal calls the US system of healthcare a poorly framed “patchwork of fragmented systems and policies”. It is not universal by design, and medical treatment is often expensive. Hence, the merits of a highly educated workforce and scientific progress do not trickle down to those who require it the most. Several attempts were made to reconcile the system, but have often been overturned or disfigured beyond recognition- a classic case-in-point was that of the Patient Protection and Affordable Care Act of 2010, popularly christened ‘Obamacare’. The UK, on the contrary, has a state-sponsored model for providing primary healthcare to all its citizens. The National Health Service, institutionalised in 1948, was a prescient attempt at making healthcare accessible to all, irrespective of the social strata of those incoming. The NHS is allocated roughly around 8% of the UK’s GDP resources, but it has proven itself far beyond its Atlantic counterpart. The services of the NHS come to the aid of several people who can ill-afford otherwise expensive treatment costs. The funding comes entirely from tax collections paid for by the population. Several developmental economists agree in principle that the NHS model is superior to that of the United States’, wherein even by implanting a lesser burden on the exchequer, more people have access to quality healthcare.

A volley of committees has been established to analyse the state of health planning in India and suggest recommendations to improve upon the same. The earliest amongst these was the Bhore Committee report (1946). It was by far the most comprehensive report on streamlining the health sector, with multi-stage suggestions to act upon. The report suggested a complete integration of the preventive and curative segments of medical care at all administrative levels. It also laid its emphasis on the necessity to build a robust health infrastructure, with a particular focus on primary healthcare. The report also batted for accessible healthcare, and observed that “… no individual should fail to secure adequate medical care, because of inability to pay for it”- tiptoeing the line of the yet to be founded NHS. The Committee also displayed a remarkable sense of openness to innovative ideas, noting that sufficient provisions should be ensured to facilitate representatives from the medical, and other auxiliary fields, to contribute to the discourse and shape the public policy. It also looked at the possibility of revamping medical education and allied vocational training, to produce what it called “social physicians”.

In the era of early post-Independence, the government under Nehru fixated itself onto the cause for eradicating epidemics. Nationwide campaigns to exterminate such diseases as polio, tuberculosis, smallpox, et cetera were launched, emblematic of the colonial percept that the most effective way to combat diseases was to exterminate the germs themselves. Yet, the founding cause of all the diseases- cardinally social- was ignored. Such a singular and narrow vision concerning health policy also derailed the enactment of the recommendations made by the Bhore Committee. Recommendations made by several other committees as the Mudaliar Committee (1962), Chadha Committee (1963), Mukherjee Committee (1965, 66) and others- which echoed the sentiments of the Bhore Committee- were also neglected. The cost of such problematic prioritisation and disregard in the foundational years has reared its ugly head now. Presently, the Government of India spends a pitiable 1.29% towards healthcare, including investments on centrally-sponsored schemes. An OECD report pegged the total health spending (both out of pocket, and public expenditure) at 3.86% in India, also unabashedly low when contrasted with the OECD mean of 8.8% of the GDP.

There can remain no hitch in the mind that in a country as teeming and dynamic as India, the NHS model seems the way to look forward to. The present NDA government had framed the National Healthcare Policy (2017), which envisaged public spending worth 2.5% of the GDP. Of course, the first compulsion for the government must be to significantly prop up public health spending from the present measly allocation of 1.3%. The Kothari Commission (1966) also recommended spending 6% on education. World-class educational institutions, with a scientific bent of thought and with an innate knack for research-oriented studies, need to be cultivated. We are surely not short on merit. Public healthcare policy will triumph only when it successfully marries such talent with state-of-the-art infrastructure. This idea also resonates in complete sync with noted economist Robert Solow’s concept of ‘Total Factor Productivity’ – that human capital accumulation has a direct empirical relation with national growth. Paul Romer, with his theory of endogenous technological growth, also advocates the same- stressing on the need for self-reliance in medical science to contribute favourably to the economy in the long run.

Beset by logistical challenges and grappling with the outbreak of a pandemic, India’s healthcare system is in the midst of a reality check. Joseph Stiglitz wrote in his book, ‘People, Power and Profits’ that those stuck in the vicious cycle of poverty often fail to make it out of the trap in their lifetimes. This provides us, and the civil society at large, to become crusaders of the cause for responsible healthcare on the part of the government- a system wherein even the poorest and the most downtrodden have access to quality healthcare. While the results of increased attention on healthcare may not bear fruit immediately in the short term, it will bless the society with its bountiful harvests over the years- and ultimately add to India’s economic ascendancy by reaping the benefits of our yet untapped, rich demographic dividend.

Bloodbath on the Baishakhi

Jallianwala Bagh memorial — The Jallianwala Bagh Memorial

As we step onto the 101st year of commemorating the horror that was the Jallianwala Bagh massacre, it is worthwhile to discuss and debate the multitude of layers that surround the butchery by the bloodthirsty fighters under General Reginald Dyer, on that fateful day of 13th April 1919. The popular and widely accepted notion that the act was perpetrated in response to the murder and rampage trail left by the natives is only superficial at best. The Jallianwala Bagh lives on today as a grim reminder of the discord that prevailed during the British Raj and has been hailed by many as the single-most definitive moment in India’s quest for freedom. Notable historian A.J.P Taylor recalled the incident as “the decisive moment when Indians were alienated from the British Rule”. By standing up to an act as violative and wrongful as the Jallianwala Bagh, the British had lost the moral authority to reign India- and united millions in India with a strong fervent of patriotic passion. The brute display of might may as well be thought of a planned act of genocide; an act intended to impress terror upon the minds of defiant rebels who dared to question the authority of the Crown.

India’s immense contribution to the British war efforts in the First World War had inspired hope among certain sections of the society that their benefaction would not go unnoticed; many aspired for the remuneration to be some form of local self-governance. Such hopes were quickly dashed by the Montague-Chelmsford ‘Reforms’ and the punitive Rowlatt Act- which designated competent authority with impunity, and upon their whims, to search, arrest, harass or even kill civilians suspected of crimes against the empire- all without the necessity of a trial. On 6th April, Gandhi had called for a nation-wide hartal to condemn the malicious design of the Britishers. In Amritsar, too, the call for strike was religiously obeyed- and there were no reported incidents of violence. Yet, in an unprecedented act of undue aggression, the Provincial Government of Punjab arrested Dr Kitchlew and Dr Satyapal on 9 April- both of whom held sway and considerable influence over the masses. This triggered protests all over Amritsar, and in the ensuing anarchy, ten demonstrators were fired upon. The crowd, maddened by a taste of vengeance, reacted by killing five Englishmen and assaulting a woman missionary (who was later rescued and carried to safety by Indians themselves).

The British wasted no time and sent troops to cordon the holy city of Amritsar. By 11 April, over 600 fully armed troops had been stationed under the command of General Reginald Dyer. He made several arrests to stamp his mark of authority, and on the 13th, issued prohibitory orders that forbade people to leave the city, engage in demonstrations, or even meet in groups larger than three. Oblivious to such orders, some ten to fifteen thousand people from outlying districts gathered in the city to celebrate the auspicious occasion of Baisakhi- ushering in the new year. They had assembled at the confines of the Jallianwala Bagh, an enclosed walled garden that lay at the heart of the city. The spot was accessible only through five narrow passageways. When Dyer learnt of this development, without caring to know whether the attendees were indeed in defiance of his orders, he did not hesitate to park vehicles mounted with artillery outside the complex. He ordered his troops to open fire, and in a span of a mere ten minutes, the vivacious crowd was silenced by the stench of death and sorrow. 1650 rounds of bullet fire had been unleashed on those present, and by official reports, 379 were killed in the heinous act of cold-blooded mass murder!

Salman Rushdie suggests that the immediate trigger to the genocide was the assault of a lady missionary. He wrote, “the calumny… that frail English roses were in constant sexual danger from lust-crazed wogs” may also have played a part in Dyer’s mind. In retrospect, it was much more than that. No other punishment meted out by the Empire was as barbarous as the Jallianwala Bagh. The Peterloo massacre had claimed only eleven lives. Across the Atlantic, British soldiers who had fired upon the Boston Commons had killed five men- and had been accused of deliberate massacre. In contrast, figures established by an independent fact-finding committee appointed by the Congress for the Jallianwala Bagh pegged the dead at nearly a thousand, with countless many bruised beyond recovery. This was no ordinary act of retribution, but also an unabashed display of egoistic assertiveness. The establishment was up in arms to suppress the news of Dyer’s notorious act and effectively contained it for six months before all hell broke loose and the news spread like wildfire.

The British, who advocated themselves as crusaders of human rights and democracy, were now in a desperate bid to cleanse themselves of the unholy taint. An official commission was established to enquire into the misdeeds of General Dyer, popularly called the Hunter Commission. While deposing before the commission, Dyer had not the slightest of remorse or guilt for his actions. He claimed that the congregation was a ‘rebel meeting’, a direct challenge to his authority which had to be responded to in kind. He noted with satisfaction that it was him that had ordered the troops to fire towards the exits, where the crowd was swelled in an attempt to escape. He described with absolute iniquity, ‘… the targets [innocent civilians], were good’. When they had exhausted their ammunition and innumerable people lay writhing in pain on that harrowed compound, Dyer forbade his soldiers to provide aid to any of the injured. He consequently ordered all natives to stay off the roads for twenty-four hours, thereby denying help to even those who watched their life chipping away under the obstinacy of the General’s whims. It was perhaps not a surprise that the commission only found him guilty of ‘grave error’, and refused to accept the outrageous violation of life that had been carefully orchestrated under Dyer’s sadistic watch. This made it quite discernible that the commission was set up as an eyewash- and that homicide of the hapless was at best inconsequential to those placed comfortably away in the High Command.

When public distrust and anger against the Hunter Commission unfolded, Jawaharlal Nehru was deputed to ascertain the facts. He found several more ignominies hurled at Indians, all of which he meticulously noted. He described with a sense of utter repugnance, that Indians using the street where the missionary was assaulted were condemned to crawl on their bellies, in ‘the manner of snakes and worms’. Perhaps the greatest surprise of all lay not in the ruthless killing itself, but the reaction of the British public to such a despicable act. While being dismissed from service later, he continued to enjoy stately privileges and lapped up a handsome pension granted to him. Rudyard Kipling- who is a favourite among bibliophiles- hailed Dyer as ‘The Man who Saved India’. The Britons, in full complicity, ran a crowdfunding campaign for Dyer, and presented to him a princely sum of £26,317 – equivalent to almost a quarter of a million pounds today! In stark contrast, the kith and kin of the deceased in the Jallianwala Bagh tragedy were compensated a poorly £37. Nehru later penned, “… the cold-blooded approval of that deed shocked me greatly. I realised then, more vividly than I had ever before, how immoral imperialism had eaten into the souls of the British upper classes.”

The Jallianwala Bagh massacre hit the last nail in the coffin which reinforced the construct that the British Raj did not value Indian lives. It was not a mere exercise in saving the honour of British women or responding to defiance of authority. Rather, it was an exhibition of brute power by bloodthirsty hoodlums who donned the garb of mannered diplomats. In 1928, Sir William Hicks- Home Minister under the Conservative government led by Prime Minister Baldwin- made it amply clear: “We went with a yardstick in one hand and a sword in the other, and with the latter we continue to hold them helpless while we force the former down their throats.” The tragedy was nothing but a clear-cut case of egregious racism solidified by the British intractability and authoritative obstinance, and shoved upon helpless civilians who would go on to be framed forever in the annals of contemporary Indian history.

On Mega-Mergers, and more

Finance Minister Nirmala Sitharaman’s decision to push for the merger of ten of India’s largest public sector banking units into just four, is both a news to cheer about and a cause of worry. The good news lies in the fact that the efforts are being made to contain the structural rot which had set in across the tardy-moving governmental lines of yore. The bad news is however, quite unsavoury: unless the mega-merger achieves the objectives of cost synergy and finds the middle ground on staff rationalisation, Indian banking’s mega-merger may turn out to be yet another incident comparable to the rather infamous demonetisation phase, without any fruitful gain.

Sitharaman’s view that merging several smaller banks into larger entities stems from the belief that such a move would lead to greater credit-lending capacity and reduce operational costs of lending. This would help create ‘banks-of-scale’, which can leverage a behemoth balance sheet size to serve the needs of an aspiring $5-trillion economy by 2025. The largest of the proposed mergers is the PNB-United Bank-Oriental Bank of Commerce. The amalgamation of Indian banking’s veteran triad would expectedly lead to a net business worth of ₹18 lakh crore, and would thereby right away become the second largest banking network (after the State Bank) in India with a total of 11,437 branches. Canara and Syndicate Bank, once integrated, will render it as the fourth-largest network in India with a potential to cut operational costs heavily due to network overlapping. The last of the mergers, that of the Union Bank of India with the Andhra and Corporation Bank, would enable the coalesced firm to increase the post-merger bank business by a basal factor of two at the very least.

The idea to consolidate the collapsing public sector banking system, plagued by overwhelmingly crippling amounts of NPAs and further accentuated by a lackadaisical staff culture, is not new. The Narasimham Committee in 1990 had recommended a vision similar to that shared by the government to prop up credit-availability and boost the otherwise flailing sector. The Committee had also recommended that it would be prudent to shut down weak banks instead of merging them with stronger ones; but this has never been a politically viable option for any government at the Centre.

Some may argue about the FM’s timing with respect to the sudden need for the introduction of the bank merger proposals. While the government has been a painting a glossy portrait of the economy by cherry-picking data, all is clearly not well. Economic parameters have been telling an alternative story from the government’s propaganda of an economic blossom, revealing the pitiable state that the Indian economy has got itself into. The government’s own admission that the growth in GDP for the first quarter of 2019 has come down to 5%, the lowest in a span of eight years, is only pointer to the riddle at large. The stagnation had set in from last year, with a vicious cycle of falling private investments and job cuts threatening to eat away the precious balance in the delicately organised and inter-dependent sectors. When the investments falls over a consistent period, along with a decline in job growth and opportunities, private players tend to take decisions that remain mostly under the hood. Foreign investors, on whom surcharges were placed shortly after the introduction of the Union Budget, had drawn out their funds in droves, sparking concerns of an impeding recession-like scenario. The worst-hit of these sectors was clearly the automotive sector, which has seen a 35% downfall in sales for July 2019 compared to the same period last year, in consonance with an estimated job loss of around 2.30 lakh positions, data released by the Society of Indian Automobile Manufacturers (SIAM) cautions.

In times of such a deluge, it is often best to hunt down the root of the problem at large. The twin balance sheet problem, in which both the industry and the banks are in the red, can be eliminated by a merger of banks alone, along with government’s capital infusion programmes. The drive comes at a time when the government has received a bonanza from the RBI in the form of a dividend transfer worth ₹1.76 lakh crores- out of which the government has promised a upfront capital infusion of ₹70,000 crores into banks to improve their lending positions already. In a slew of reforms that were announced a week back, the government has also been exploring the possibility of fast-tracking loan applications from Micro, Small and Medium Enterprises (MSMEs) by taking advantage of the liquidity with the PSBs with the last-mile connectivity of the non-banking financial corporations (NBFCs).

While it is clear that the mergers were much required and quite clearly the need of the hour, the question of whether the government would be able to contain the ramifications of the fallout of the simultaneous mergers, each of panoramic proportions, remains unanswered. Consolidation of the ten banks into four is certain to upset industry parameters, but the uncertainty can be contained by putting buffers in place wherever essential. In a bid to mop up the banking sector, the government should also look at the hard choice of terminating the service of under-performing employees over phases to help reduce operational costs in the long run. This may prove politically costly, but such a hard decision would also ensure the due efficiency of the lenders. For now, however, the FM has ruled out job losses due to the proposed mergers. The biggest hurdle is however something that is entirely the ballgame of the government: managerial boards. It would be in the country’s (and the government’s, of course) interests to put in people with a repertoire of financial knowledge and banking experience to lead the consortium of merged mega-banks. After all, dummies can lead well in times of profligacy, but such political compromises only results in diffused accountability when in crisis; and the government has only learnt of it the hard way.

Revitalizing the Infra Sector

India’s annual budget for the FY2019-20 was presented on the 5^th of July by the first woman Finance Minister of India, Nirmala Sitharaman. She aimed to make a sweeping change across a range of sectors, and introduced several measures and methods to contain India’s deficits and maximize growth and output. Amidst a host of other ventures that she (and the government) envisages over the course of the next decade, the numero uno spot is occupied by the dream to scale up India’s physical and social infrastructure. While the latter has had considerable success in the form of an affirmative social sector framework, the former has been found lagging.

The FM introduced a brand of new schemes that will pump in fresh life to India’s wailing infrastructure development story, to the tune of approximately $300 billion dollars a year. A great amount of work needed to be done to bridge the rural-urban gap, and physical connectivity was an essential cogwheel attainment of the objective. The Pradhan Mantri Gram Sadak Yojana (PMGSY), with an ambitious target set to cover 125,000 kms worth of rural roads in the country, has had a budgetary allocation worth Rs ₹80,250 crores and is presently in its third phase. In earlier phases, 30,000 kilometres of new roads in rural areas were constructed, and the construction in all such phases were through applications of green technology. The Highways department was infused with a remarkable ₹83,016 crores for the present fiscal year, its highest ever. The increased spending however, is not misdirected. The Railways, which serves as the lifeline of the nation, was also accorded the limelight, with FM Sitharaman promising to ramp up investment in the Railways to ₹50 lakh crores before 2030. State investment in infrastructure in the long run is almost always beneficial to the economy. Several studies over the course of decades have corroborated the fact.

In India, with private investments falling and several economic indicators in the red, an impetus to the otherwise neglected infra sector will help bring about a transform in the economy. The development of this sector will have an instantaneous cascading effect on other ancillary sectors, and help propel a bullish trend to look out for. Projects such as the UDAN scheme, or the dedicated freight corridor, industrial corridors, Bharatmala and Sagarmala were touted as key highlights with respect to the renewed thrust on such a spending. The government also intends to exploit the riverine advantage unique to India; cargo transporation through the Ganga is set to expand four-fold in volume. The creation of transport hubs will be initiated at Varanasi, Sahibganj and Haldia. This will amplify inter-State trade volumes and help de-congest the arterial highway networks that are overly burdened.

FISCAL INTERPRETATION:

While budgetary announcements are easier said on paper, implementation makes the real difference. The fiscal interpretation to deliver on such high power promises rests on how and when the projects are to be financed. The Economic Survey estimates that an investment of the order of $4.5 trillion over the course of the next twenty-five years would put India in a phase of robust growth and development.

The government is in urgent need of heavy private investments in the infra sector if it is to achieve its agenda. Yet, with structural difficulties embedded in every nook and corner of the legal corridor, and with a generally negative investor sentiment, getting such a high quantum of investments is an uncertainty in itself. The IL&FS’s ₹91,000 crore debt botch-up, an ongoing liquidity crisis in the NBFC sector, and the bank’s NPA woes have only marched ahead to compound the problem.

Sitharaman’s primary thrust was to ease the liquidity crisis that the NBFCs find themselves embroiled in, which would consequently go a long way to provide relief to the strained banking system. While bank credit had increased in the past fiscal year, the credit obtained from banks fell considerably from ₹9.64 lakh crore in March 2016 to ₹8.90 lakh crore in March 2018. The government has devised a panorama of ways to come up with the numbers required for the behemoth capital funding that the infrastructure sector urgently requires. One of the key takeaways from the budget speech was the proposed establishment of the Credit Guarantee Enhancement Corporation (CGER), which would act as an interface for borrowers with assurances and guarantees of repayment to the lenders, and at the same time provide the borrowers with lowered interest rates. The vision to deepen the market for long term bonds, including that for corporate bond repos, credit default swaps, and the like, were extensively discussed. In a watershed moment, the government also permitted investments made by the Foreign Institutional Investors (FII) and the Foreign Portfolio Investments (FPIs) in debt securities, that has to be sold or transferred to domestic investors within a fixed lock-in period.

ON THE ROAD TOWARDS PPP:

In consonance with PM Modi’s dream to turn India into a $5 trillion economy, FM Nirmala Sitharaman divulged investment figures required to take India up the ladder. That is when she highlighted that India’s investments would have to scale up to ₹20 lakh crores a year ($300 billion). The Railway Budget alone would have the lion’s share, clawing into a sizeable ₹50 lakh crores for infrastructural upgrades and system designs between 2018 and 2030.

The FM put forward the idea of modelling the investments on a Public-Private Parnership (PPP) structure. This would, in the eyes of the government, reduce bureaucratic delays, maximize profit, and turn ailing ventures into lively setups that focused on long run benefits and outputs. She proposed to unveil a blueprint for completion and fast-tracking of several projects under the PPP model for works under the NHAI, gas grids, waterways, regional airports and more.

Despite such bullish trends, all that glitters is not gold. Several analysts feel that if the government does not take concrete steps to implement changes in the PPP model on the lines of the Kelkar Committee, the dream to attract investments worth ₹20 lakh crore would only be a dream. Arun Jaitley, a lawyer by profession and the former Finance Minister of India, lamented the fact that despite India being the largest market for PPPs with almost 900 projects, PPP contracts were riddled with “rigidities”, and the failure to develop quick grievance redressal systems plagued their effectiveness. For 2019-20, the PPP component of the extra budgetary resources (EBR) is projected to be 33%. The share of PPP in railways’ EBR in 2016-17 was 51%. Clearly, share of private investors in India’s infra sector is on the decline. A report by rating agency Icra Ltd paints the dismal picture of NHAI, whose debt has risen from ₹25,000 crores in 2014-15 to ₹1.7 lakh crores in 2018-19. The primary cause of the unbelievable rise in debt can be attributed to the linear focus on entirely publicly funded engineering, procurement and construction (EPC) projects.

THE WAY FORWARD:

The Kelkar Committee made a smorgasbord of recommendations that were aimed at simplifying the PPP model, and actually encouraged private players to take interest in State-sponsored projects. Certain recommendations were striking. Model PPP agreements need to be re-drafted to ensure an optimal share of risk-taking among all stakeholders and full disclosure of associated benefits and revised costs must be prominently included. It also proposed to set up independent regulators that are going in for PPPs. It also established four mechanisms to combat operational losses suffered by private players when the project timespan extends for around 20-30 years. In a nutshell, the Kelkar Committee Report on PPP was pro-private investment, and its timely acceptance and implementation can help smoothen out the rough edges of policy-making in this regard.

All in all, unless the government hits the right note and builds an air of confidence in the infrastructure sector, India’s $5 trillion dream would be very difficult to take off. The drive to open the floodgates for increased expenditure on infra investments will pay off in the long run, when the benefits become quantifiable and more visible. It is important that stress is laid on reforming the PPP model, and direct hordes of investments to the infra sector. This would also have parallel benefits, as it would push employment statistics up and support ancillary industries in the process. Tentative benefits are all around, but when do we catch the train to sustainable long run growth?

Union Budget 2019-20: An Analysis

The annual Union Budget is a subject of unique importance in the working of any parliamentary democracy such as India’s. The Budget, with one sweep, has the potential to churn out a stronger economy, and yet on the other hand, an ability to carve out a bearish effect on the markets. 2019’s interim budget was a departure from tradition in more ways than one; the general principle that an interim budget must not bring about macroeconomic instability was thrown up for a toss. The interim budget drew widespread condemnation for pushing populism over fiscal prudence. This time, however, Nirmala Sitaraman did not leave gaping voids, and played a spectrum of cards that could potentially have long-term ramifications on the economy as a whole.

The 2019 budget presents many positives to take away, which would over time simplify and streamline operations. The government’s pet project, Aadhaar, was in particular highlight. Sitaraman’s maiden budget proposed to make the Aadhar and PAN interchangeable when it comes to filing tax returns. As such, those who do not have access to a PAN card can quote the Aadhaar number wherever deemed necessary. Furthermore, NRIs who arrive in India will from henceforth be issued an Aadhaar card without the existing mandatory waiting frame of 180 days. This would both reduce the bureaucratic hurdle and provide Aadhar-linked benefits to the NRIs without a rather long cooling period. Yet, in its drive to push the Aadhaar as a proponent of unity, the government must ensure that all deserving citizens are provided with an Aadhaar card, and not ostracized from public records. At present, several inconsistencies with the Aadhaar have been earmarked. The administration would do well to lend a ear to the concerns and fix the issues as early as possible.

A focus on a greener India was also on the government’s mind, as it proposed to slash the higher taxation slab of 12% on Electric Vehicles to the base 5%. Sitaraman claimed that the government had moved the GST council to put into effect the change as was mandated above. In consonance with the decision, it was also announced that tax rebates upto ₹1.5 lakh would be awarded for interest paid on loans to buy the electrically-operated vehicles. The move is commendable as it puts India at a head-start when it comes to ensuring cleaner mobility. However, it will not solve India’s auto-sector woes. Neither does it seem pragmatic to throw in bonanzas when the average cost of an electric vehicle is beyond the means of the Indian middle class, which for long has been burdened. India, like the European Union, has decided to not put a compulsory cap on manufacturers to dole out a percentage of their products in the electric vehicles sector. The decision to provide a sudden impetus to electric vehicles proved to be a jolt for many leading analysts and businessmen, who had expected sops elsewhere.

When it comes to the banking sector, there were several eye-grabbing headlines that poured in throughout the day. The government announced a ₹70,000 crore capital fund to replenish public sector banks. This was done to boost credit availability in the midst of an ongoing liquidity crisis. Non-Banking Financial Companies (NBFCs), which were in a difficult spot, in essence got a breather from the budget. The government agreed to provide a partial guarantee to all the State banks for the acquisition of ₹1 trillion worth of highly-rated assets from NBFCs. A revival in the fortunes of NBFCs would cascade into higher credit facilities for the MSME sector, ultimately equating to a stronger output and growth potentialities. Additionally, Sitaraman hailed the Insolvency and Bankruptcy Code (IBC 2016), the promulgation of which had led to the recovery of over ₹4 lakh crore worth of bad loans over the course of the preceding four years. Yet, the issue of a ₹70,000 crore dividend brought up passionate sentiments of the issue of the RBI’s independence as a central bank, which might possibly be under threat for the first time in decades.

The Modi 2.0 government fulfilled its electoral emphasis on the social sector, with capital outflows in other sectors not hampering the grants alloted for the sector. The total expenditure on Centrally-sponsored social sector schemes was pegged at ₹3.31 trillion. A marginal increase in allocations on all fronts were observed in comparison to the interim budget that was presented earlier this year. Subsidies in LPG cylinders and houses for the poor were retained. Under the Pradhan Mantri Awas Yojana (PMAY), spending on rural housing has been valued at ₹25,853 crores. Pradhan Mantri Gram Sadak Yojana (PMGSY), which was a feature mention in Sitaraman’s speech, was alloted ₹19,000 crores for the purpose of establishing rural connectivity through a better road network. Pradhan Mantri Shram Yogi Mandhan Yojana, a new scheme that was shown the red carpet in the interim budget, would now cover 30 lakh workers, each of whom are eligible to receive ₹3,000 as a monthly pension after they turn sixty.

The 2019 Budget also drew a fair share of flak and criticism for a wide number of reasons. Start-ups and investors, however, were left a tad bit disappointed. The speech declared that “… start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums”. The Budget mentioned that a mechanism of ‘e-verification’ would be put in place to establish the identity of the investors and the source of their funds, without providing an approximate timeline for its rollout and implementation. This provided little clarity and was ambiguous, at best. Furthermore, in what could possibly signal bureaucratic interference, the government spoke of a ‘special administrative arrangement’ for prompt redressal of grievances and pending assessments of newfangled firms.

When it came to corporate tax, the government said that companies with an annual turnover of ₹400 crore or less would now fall under the 25% tax slab, as compared to the ₹250 crore cap earlier. Many critics slammed the government for providing reliefs to a specific pie in the industry rather than bringing about significant changes in the tax structure for the corporate world. For a government that relies on hyper-nationalistic sentiments and openly flaunts jingoistic tendencies, no specific mention of the Defence sector was indeed a surprise. Also, when the job distress is at its peak (CMIE, December 2018 report), there were no specific measures that were adopted by the present dispensation to ease the aching pain that jobseekers across the country felt. In what could generate a lot of political friction, additional levies were planted on diesel and petrol supply to the tune of ₹1 per litre. Most interesting of all, however, was the government’s “expectation” of a higher dividend payout from the RBI- bringing back the thorny topic on the autonomy and independence of the RBI into the forefront.

The annual budget that was presented on the 5^th of July seemed more expedient when it comes to governmental spending and providing sops. However, contentious issues and fears were not allayed by the government, thus evoking several questions. The fiscal deficit target was set at 3.3%, and the government has stated fiscal consolidation as one of its primary agendas that it seeks to pursue. The deficit margin is in close proximity to the NK Singh Committee’s recommendations on the FRBM Act, 2003, which proposed a fiscal deficit of 3% till 2020. In all probability, though, the deficit will exceed 3.3%, and it will be an extremely hard job for the men in North Block and beyond to contain the deficit at the proposed figure. The 2019 budget, which was expected to be a high-octane event, was rather meek by its standards. Amidst the fanfare of the cricketing season, perhaps Anand Mahindra adeptly summarised it when he remarked that all that Nirmala Sitaraman took was ‘steady singles’, when all were looking forward for the ball to be hit out of the park!

10 ka Dum: On the Quota for the Forward Class

India’s remarkable demographic diversity has often been a subject of awe; and its track record as a pluralistic State enshrined on the focal principles of mutual harmony and respect serves as a fantastic example to the world. Quantitatively, more than two thousand ethnic groups lie within the political territory of India. Appreciable variation in social indices, such as income distribution and education levels also lends a great degree of heterogeneity amongst the population. However, over the due course of time, certain groups of the populace were found to be left out of the bandwagon of national progress– or socially backward, with causes ranging from historical subjugation to exploitation and vulnerability post-Independence. Reservations by means of providing quotas in higher educational institutions and in public jobs have been adopted to provide an equitable platform to the societal castaways. On 8^th of January, 2019, the Lok Sabha passed unilaterally the bill to introduce a 10% reservation quota among the forward classes, on top of the existing fifty-percent reservation limit demarcated for the Scheduled Castes, Scheduled Tribes and other backward classes.

Historical Context

The idea of preferential treatment for the socially disadvantaged is very old in India. India was the pioneer of affirmative action, or ‘positive discrimination’ for the backward classes, holding the belief that bringing the handicapped masses to the forefront would require State effort via reservations. In medieval India, the caste system was conceptualized so as to segregate people on the basis of their occupation. The Brahmins were delegated the responsibility of administration and worship, the Kshatriyas that of warship, and the Vaishyas generally looked after business affairs. The sudras were the supposed ‘untouchables’. As time passed and orthodox sentiments took predominance, the walls constricted enough to make the system divide the people with narrow barriers. In 1949, Article 17 of the Constitution was thereby introduced as a measure to counter the practice of untouchability. The British Raj had also used reservation as a policy measure to counter social evils widely prevalent in the time through the Government of India Act, 1909. In 1921, the Madras Presidency introduced the Communal GO, which brought into force a reservation of 44% for non-Brahmins, while 16% was for earmarked for the Muslims, Anglo- Indians & Christians, and 8% for Scheduled Castes to combat Brahminical preponderance.

Legal Background

The 124^th Constitutional Amendment bill will certainly run into legal hurdles, and more so because the Supreme Court had already capped the maximum ceiling for reservation limits at 50% vide the 1992 Indra Sawnhey judgement
From the section, On the Road Ahead

There have been several cases in the legal world wherein the idea of reservation, and associated procedures, was put to test. I will restrict our scope of discussion to four important judgements, each delivered by the Supreme Court of India, yet highly relevant in shaping the public policy as regards reservation in India. It was through the judicial route that the Constitutional void on the distinction between caste and class was evaluated closely. All of the judgements refer to Articles 14, 15 and 16 of the Constitution, which deals with the equality before law, prohibition of discriminatory practices on the basis of race, caste, religion, sex, or place of birth; and equality of opportunity in matters relating to public employment, respectively.

The very first of these was in the form of State of Madras v. Smt. Champakan Dorairajan (1951). As already discussed earlier, under the Communal GO, seats in State run Medical and Engineering colleges were reserved for the backward classes. The plaintiff pointed out that the State’s policy to refuse her admission despite the higher marks, in favour of some other person from a notified backward class, was violative of her rights under Article 15(1) and 29(2) of the Constitution. While clause 1 from Article 15 provided that a State could not discriminate between any two or more person(s) on the grounds of race, religion, caste or gender, Article 29(2) spelt out that a person could not be denied admission into any State sponsored educational institute on aforementioned grounds of race, caste, and the like. A seven-Bench jury ruled the verdict in the plaintiff’s favour, pointing out that while Article 16(4) permitted reservations for depressed communities in employment opportunities, no such Constitutional provision existed in Article 15. Pursuant to the judgement, the Parliament soon amended the Constitution with a clause 4 in Article 15, which made it clear that exceptions could be made in order to facilitate the upliftment of socially and educationally backward communities.
The second case, M.R. Balaji and Ors. v. State of Mysore came up in 1963. In Karnataka, reservations were in force even before the adoption of the Constitution, which continued thereafter. The State of Mysore considered that all non-Brahmin communities were socially and educationally backward, and introduced quotas upto 75% in educational institutions for the SEBCs, SCs and STs. The SEBCs were further categorised into backward classes and more backward classes. In a particular order, reservation for 68% of the seats in the State’s technical education institutions was put into effect, which was challenged in the Court under Article 32 of the Constitution. The court unilaterally declared that for the consideration of Article 15(4), backwardness must be both social and educational. The court further held that reservation for such classes cannot continue in perpetuity, and the government should consider periodic tests to ascertain whether such reservation would be justified. It also recommended a reasonable rate of reservation (around 50%) so as to ensure the fair access for the forward castes. The court also made it clear that further clarification of the SEBCs into two categories was redundant, and had to be done away with.
The Indra Sawhney v. Union of India (1992) had a considerable impact on the general idea on policymaking for reservations. The apex court proclaimed after considerable analysis that economic status could not be the sole parameter to judge the backwardness of a particular group. It also made note of the fact that there was a Constitutional vacuum on the definition of ‘backward class’ of citizens. It clarified that by backward classes, the Constitution meant the class of people who served the forward castes. The top court also recommended the setting up of a commission to examine the requests for inclusion of communities into the OBC lists and also for timely exclusion of any pseudo OBC communities that might have crept into the list. The Mandal Commission undertook the task to define other backward classes by objectively assessing each new inclusion under social, educational and economic parameters. Under the new definition, the OBCs included people for whom either per-capita income was 25% less than the State average (economic), or the percentage of those who have never attended, or dropped out, is twenty-five percent above State average (educational), and those whose main source of livelihood is manual labour, and whose females engaged in active work is 25% more than the corresponding State figures (social).
Ashok Kumar Thakur v/s Union of India (2008) was a unique legal battle. It was a PIL that challenged the Constitution (Ninety-third Amendment) Act, which legitimized 27% reservation for OBCs- thereby reducing the seats for a general candidate to 50% only. The Court found that the Ninety-third amendment Act did not violate the “basic structure” of the Constitution in cases relating to State run institutions. The Court did not allow the “creamy layer” concept to be applied to the SCs and STs, while it was applicable to the OBCs. This was perhaps, with all due respect, an anomaly; a case wherein reservation could continue unchecked despite social advancement of the already-benefited.

The Road Ahead

The Government’s bid to introduce a 10% quota cut for the poor amongst forward classes is a fallacious idea to start with. Reservations are meant for the socially downtrodden and historically neglected, and should never be based on the economic status. Demarcating a portion of the quota-pie for the poor is nothing but an anathema to social justice. The move on part of the Government to introduce the upper cast quota bill has the potential to unearth new faultlines; and can single-handedly re-define the very purpose for which the policy instrument of reservations are used.

The 124^th Constitutional Amendment bill will certainly run into legal hurdles, and more so because the Supreme Court had already capped the maximum ceiling for reservation limits at 50% vide the 1992 Indra Sawnhey judgement (see point 3, legal background). What is even more worrying is, despite widespread acceptance of the fact that such an introduction of quota goes against the very spirit of social justice, not a single national party has opposed the passage of the bill- a no-brainer for populistic legislature. In a nation where 11 million people lost their jobs in 2018 (CMIE) and unemployment figures are at a twenty-seven month high, squeezing existing, stagnant jobs through a ten percent quota cut makes no sense. Poverty eradication must be achieved through economic reforms, in which case the engine of national growth pulls out the impoverished from their state of misery. Bypassing the question of introducing much needed reforms through the use of the reservation short-cut may seem like a clever ploy for the time being; but has fundamental ramifications in the long run.

The present dispensation has a smorgasbord of choices if it genuinely intends to go hard on alleviating poverty. It could, for one, take the route of subsidy through low educational loan rates. It should also revert its focus back on generating jobs and wealth creation so as to strike at the heart of the disease of unemployment. In theory, capital-starved states can be witnesses to an exponential influx of capital provided local policies are supportive and political alignment is favourable. However, last-mile bureaucratic red-tape and grassroot level hindrances deter high investments. The Government must, therefore, redress these concerns before setting out on a mission to crack down on poverty, Rambo-style.