1.Relooking education sector in India (Live Mint)

2.Path to cashless India (Live Mint)

1.Path to cashless India (Live Mint)

Synoptic line: It throws light on the issue of making India cashless and concerns associated with it. (GS paper III)

Overview

  • NITI Aayog chief executive officer Amitabh Kant recently spoke of debit cards, credit cards and ATMs becoming redundant in the next three to four years. Since demonetisation, the government has been working to make India a cashless economy.
  • With the ubiquity of Aadhaar, smartphones and the new unified payments interface (UPI)-based apps, it wants to move on from cash to a digital payments economy where everything from payment to receipt is done online.

Prediction to be cashless

  • Prediction about debit and credit cards has the potential to come true because the infrastructure to replace physical cards, as well as the momentum in the adoption of alternative payment mechanisms, is well under way. While debit and credit cards continue to dominate retail digital payments, the UPI and prepaid payment instruments (PPIs) are catching up.
  • Between 2014-15 and 2016-17, the share of PPIs in total volume of card transactions increased from 18% to 36%. PPIs caught on when customers didn’t want to authenticate recurring transactions through the two-factor authentication process. That is why they linked their prepaid wallets with cab-hailing, mobile-recharge and grocery-shopping services. Then, in August 2016 came UPI, based on banks’ immediate payment service (IMPS).
  • It linked the user’s various bank accounts to a single mobile application, doing away with the need to recharge a wallet. UPI transaction volumes have increased from 4.2 million in January to 30 million in September 2017 (growing 85% between August and September itself). While PPIs still have much higher volumes (87 million) right now, UPI is eating into their share as well as that of cards.
  • This is expected to continue with the launch of UPI 2.0, which will bring the ease of pre-authorized deductions for recurring payments, like cab rides, to UPI, along with a possible increase in the transaction limit from the present Rs1 lakh. Major PPIs have already integrated UPI into their service so as to not lose customers to competing UPI-only apps.
  • With regard to offering a point of sale (POS) payment solution, Samsung is the first mover in India, offering a mobile payment mode that works on all existing terminals whether contactless or not with Samsung Pay; the technology is available on select handsets. Samsung’s entry is likely to be followed by that of Google and Apple, which can lead to wider adoption.
  • Thus, cards might well be on their way out. But making ATMs redundant is a task of vastly different proportions. An ATM’s role is to dispense cash, and reducing the dependence on cash requires a massive increase in the adoption of bank accounts, mobile wallets and payment platforms.

Persistent challenges

  • A prerequisite to a less-cash economy is financial inclusion. The Economic Survey, 2015-16 reported that the basic savings bank penetration was 46% across states, on average. The Jan Dhan Yojana (JDY) had laudably managed to open 294 million bank accounts as of August 2017, increasing access to the formal banking system for the unbanked masses, but a quarter of them remain zero-balance inoperative accounts.
  • If people received income in their bank accounts and could spend digitally, they could go cashless. But most people work in the informal economy and get paid in cash. Then there is the scarce use of mobile payment platforms. Most product vendors still don’t use a mobile platform to receive payments because there are limited use-cases for digital money.
  • Take the case of Thane’s Dasai village, which was touted as India’s first cashless village last year,but has gone back to its old ways. The village doesn’t have a reliable internet service, which hampers the functioning of POS devices and even ATMs. All applicants haven’t been issued ATM cards and since cash has become available, people have had little reason to use them anyway.
  • Finally, mobile wallets are largely designed for use on smartphones, and 56% of Indians still use feature phones. Given the frequent power outages, poor connectivity and low income, smartphones have limited utility for most people. Moreover, recent offers have reduced the acquisition cost of handsets to near-zero; and survey data from Kantar IMRB shows that only 15% of the current feature-phone users intend to buy a smartphone. UPI does work with feature phones, but it was used for just 0.19 million transactions out of the 9 million that happened in May.

Way ahead

  • One of the reasons why they have not been able to address the issue of bad debt in a meaningful way till now is because of the fear of investigative agencies in case of a large haircut. Although it looks unlikely that they will face similar problems under the insolvency process as the resolution plan will be approved by a committee of creditors and accepted by the adjudicating authority, it still remains to be seen if public sector bankers will be confident enough to take bold decisions.
  • Overall, the changes will make the insolvency resolution process more robust and make things difficult for unscrupulous promoters. At a broader level, while the IBC will now be addressing the resolution part of stressed assets, and efforts are being made to strengthen the framework, Indian policymakers now also have an opportunity to work towards minimizing the origin of bad loans. The government is working on a massive Rs2.11 trillion bank recapitalization plan.
  • It will be important that capital find a way to more efficient banks and be accompanied by structural reforms. Reckless lending by banks was one of the significant reasons for the accumulation of bad debt in the system. Public sector banks should have the capability to properly evaluate risks in lending to a particular company. This will reduce pressure on the system at the aggregate level.

Question– What are the problems associated with making India cashless? What should be done in this regard?

2.Relooking education sector in India (Live Mint)

Synoptic line: It throws light on how to reform the education sector in India. (GS paper II)

Overview

  • The World Bank’s recent flagship World Development Report, 2018 addressed some immediate challenges of quality education. One of the ways that it broke new ground was on the issue of provision for private education. Growing private school enrolment is a global trend and the phenomenon must be taken seriously and discussed on evidence. 

Level of education system

  • Education systems in many countries are not performing up to expectation and many families have been turning to private schools since they feel that the latter deliver better education, especially when public schooling itself is not fully free. India too fails to provide free secondary public education.
  • However, the report highlights that research across 40 countries finds no difference in the learning outcomes of children with similar family backgrounds in both public and private schools. Private schools appear better since they enrol children from relatively advantaged backgrounds who are able to pay, not because they deliver better quality.
  • The World Bank report thus challenges a popular perception in India and finds no consistent evidence that private schools deliver better learning outcomes than public schools. Indeed, of the 1.27 million untrained teachers teaching in India, 925,000 are in private schools, pointing to the massive historic neglect of quality.
  • States’ capacities to fully monitor and enforce adherence to quality standards, mitigate against negative equity impact and ensure contract compliance must be enhanced if justice is to be done to those who already study in private schools.

Revelations by report

  • The report warned that some private schools’ quest for profit “can lead them to advocate policy choices that are not in the interests of students”. In some instances, private schools may indeed deliver comparable learning outcomes with lower input costs, but this is achieved largely through lower teacher salaries.
  • The report reiterated that while this may make education cheaper, it does not make it better, and has the additional disadvantage of reducing the supply of qualified teachers over time. The quality of education can only be improved if steps are taken to ensure children come to school prepared to learn, teachers have the skills and motivation to teach effectively, inputs reach classrooms and management and governance systems are strengthened in schools that serve the poorest.
  • Other research on the issue, such as the recent report by the Global Campaign for Education, suggests that learning outcomes are poor in both.
  • There are also clear risks as private schools skim off higher-income students that are easiest and most profitable to teach, leaving the most disadvantaged within the public system. The reliance on private schools risks segregating the education system on family income and deepening existing social cleavages; it also undermines the political constituency for effective public schooling in the long run.
  • This has particularly dangerous outcomes in India where caste, gender and class inequalities dominate. Indeed, recent research from India suggests that the gender gap in private enrolment may be on the rise, even as it is reducing in government schools. Data for relatively richer countries also shows that systems with low levels of competition have higher social inclusion and that upward social mobility is higher in government systems.
  • Despite this evidence, and given the scale of the challenge of delivering quality education for all, governments have progressively looked to the private sector for support. However, mechanisms to track the quality of education in private schools have historically tended to be weak or absent, even in developed countries. Building this regulatory capacity requires significant financial and human resource investments. The report concluded that “overseeing private schools may be no easier than providing quality schooling” and that “governments may deem it more straightforward to provide quality education than to regulate a disparate collection that may not have the same objectives.

Way ahead

  • India has taken some steps in the direction of developing regulatory frameworks for private schools, with several states enacting fee-regulation legislation and the courts intervening to challenge private sector failures. Last month, the Supreme Court intervened to direct states to enforce guidelines on safety in schools; in January, it had to enforce fee regulation.
  • Building regulatory capacities, however, is only one solution. The long-term solution lies in strengthening the public education system in its complexity and ensuring that all of India’s children receive quality education.
  • The government is set to unveil the first New Education Policy in 25 years in December 2017. It needs to address the key concerns and should focus on equity in quality ensuring universal access to free, quality, equitable and safe public education for all of India’s young citizens.
  • This alone would help achieve India’s aspirations of global leadership by tapping into the demographic dividend that India still enjoys. This must be backed by adequate resources. India is committed to the global and domestic benchmark of allotting 6% of gross domestic product to education, but has never crossed the 4% threshold.
  • Failing to invest in the best education for the poor will only widen the social inequalities that exist in India today. The road to reform is fraught with challenges but the cost of inaction will be much higher.

Question– What should be the govt.’s approach to reform the education sector in India?