Mitras Analysis of News : 28-04-2017

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1.New fiscal roadmap: FRBM committee and its challenges (The Hindu, Live Mint)

2.Way to clear oil spills via hot springs (Down to earth)

3.In four doses: On malaria vaccines (The Hindu)

4.India’s population story (The Hindu)

 

1.New fiscal roadmap: FRBM committee and its challenges (The Hindu, Live Mint)

 Synoptic line: It throws light on the need of cooperation at all levels to achieve the fiscal consolidation recommended by FRBM review committee.(GS paper III)

Overview

  • FRBM review committee was constituted recently to study FRBM act and to recommend the pathway for more effective and practical fiscal consolidation.
  • The report submitted by committee holds huge prospects for the nation’s fiscal stability. But there are certain prerequisites such as fiscal prudence of states, without which path for fiscal consolidation may be difficult to achieve.

Background

  • The Government appointed a five-member Committee in May 2016, to review the Fiscal Responsibility and Budget Management (FRBM) Act and to examine a changed format including flexible FRBM targets.
  • The Committee had wide ranging Terms of Reference (ToR) to comprehensively review the existing FRBM Act in the light of contemporary changes, past outcomes, global economic developments, best international practices and to recommend the future fiscal framework and roadmap for the country.  Subsequently, the Terms of Reference were enlarged to seek the Committee’s views on certain recommendations of the Fourteenth Finance Commission and the Expenditure Management Commission.

Key Recommendations by the committee:

  1. The committee has recommended reducing the Centre’s debt to GDP ratio from 49.4% in 2016-17 to 40% by 2022-23.
  1. The states’ debt ratio is targeted to remain at around 20%. The combined debt of the Centre and the states is targeted to go down from 68% in 2016-17 to 60% by 2022-23. The 60% debt target for the Centre and the states combined is an improvement from 68% in 2016-17, but it is still much above the average of about 40% for similarly rated emerging market.
  1. The committee had recommended a fiscal deficit trajectory which is a step by step function, with the deficit coming down from 3.5% in 2016-17 to 3% in 2017-18 and staying at that level for the next two years, and then declining steadily to 2.5% by 2022-23.

Challenges with respect to states

  • The committee has preferred a debt to GDP ratio of 60% for the general government by 2023, comprising 40% for the Central government and 20% for the State governments. Given the recent track record, there is a reasonable probability of the Central government achieving the 40% debt to GDP ratio. The focus now is on the States.
  • For the sake of international investors and rating agencies, what matters is the fiscal position of the country as a whole. The challenge of States achieving a debt ceiling of 20% by 2023 is hence a daunting task.

First Issue:

  • The committee has not spelt out any state-specific fiscal deficit trajectory, consistent with the aggregate target of keeping the total states’ debt at the present level of around 20% of GDP. They have recommended referring this to the next Finance Commission, which will in any case decide the extent of transfers from the Centre to the states.
  • The difficult issue here is whether fiscal deficit targets for individual states (which determine the extent of borrowing they are allowed) will be set equal to the average for all states, as has been the case thus far, or whether each state will have its own target reflecting (a) its initial debt/GDP ratio and (b) its growth potential.
  • A state-specific target is more rational, and creates incentives for good behaviour, but it does mean that states with relatively high debt/GDP ratios, and those that have lower growth prospects, will have to accept sharper reductions in their fiscal deficit. This will be a politically sensitive issue and the Finance Commission, being a constitutional body, is best equipped to handle it.

Second Issue:

  • A key issue in assessing long-run fiscal sustainability is the future trend of the differential between the interest paid to service government debt (r) and the growth rate of the economy (g).
  • For highly indebted countries, an increase in this differential of a couple of percentage points, if sustained, could lead to a change from a declining to an explosive path for the debt-to-GDP ratio.
  • However, a negative interest rate-growth differential (i.e. r-g, growth rate greater than the interest rate) causes debt to GDP to decline over time.

Third issue

  • Task may be challenging as there is considerable deterioration in fiscal health of the States. The Fourteenth FC enhanced the borrowing limits up to 0.5% of GSDP for the States. This was conditional on debt to GSDP ratio being less than or equal to 25% and/or interest payments being less than or equal to 10% of the revenue receipts in the preceding year.
  • The fact that only six States in FY17 were eligible for enhanced borrowing is indicative of States’ decaying fiscal prudence. Moreover, the recent spate of farm loan waivers is episodic and symptomatic of deteriorating State finances.

Way ahead

  • Fiscal Discipline of a state should be considered in determining the allocation of tax shares of different States. Fiscal discipline as a criterion for tax devolution was used by Eleventh, Twelfth and Thirteenth Finance Commissions for incentivising the States in prudent management of its finances. However, the Fourteenth FC dropped this indicator and accommodated ‘Population (2011)’ and ‘Forest Cover’ in its devolution formula. Given the deteriorating condition of State finances, the Fifteenth Finance Commission could consider restoring fiscal discipline as a determinant for horizontal devolution of funds.
  • There should be wise use of powers defined in the Constitution of India under Clause (3) of Article 293. This makes it mandatory for a State to take the Central government’s consent for raising any loan if the former owes any outstanding liabilities to the latter. Hence, states can be made more disciplined with it.
  • Transparency should be adopted in accounting practices. t is being increasingly acknowledged that the current stock of State debt at 21% of GDP could be underestimated owing to fallacious budgetary practices and operational intricacies. The Comptroller and Auditor General of India (CAG), while appraising States’ finances, has repeatedly censured such practices. The Fourteenth Finance Commission’s (FFC) recommendation of adopting “a template for collating, analysing and annually reporting the total extended public debt in their respective budgets as a supplement to the budget document” must be implemented.

Question: FRBM provides a road map to reach out the fiscal discipline for the country. What measures can be adopted to abide the fiscal prudence of states as well as centre?

 

2.Way to clear oil spills via hot springs (Down to earth)

 Synoptic line: It throws light on the prospects to clear oil spills via bacterial action. (GS paper III)

Overview

  • Apart from being a tourist attraction, hot springs are important for various purposes such as energy generation and hosts a lot therapeutic qualities.
  • However, in the light of recent findings, hot springs can hold a key to clear a huge environmental menace of oil spills

How it works

  • The study of living organisms like bacteria that survive in extreme conditions in hot springs can throw up huge possibilities to clear the oil spills without any negative consequences to the environment.
  • Scientists from the Indian Institute of Science Education and Research (IISER), Bhopal, have studied bacterial samples drawn from hot springs at Anhoni (near Pachmarhi in Madhya Pradesh) and Tattapani (in Chhattisgarh) in central India.
  • The Anhoni hot springs have a temperature between 43.5 to 55 degrees, and Tattapani has an extremely high temperature ranging between 61.5 to 98 degrees.
  • They have uncovered microbial community in these hot springs and their results reveal presence of bacteria which can survive using hydrocarbons such as toluene, benzene and xylene at Anhoni. This means these bacteria can be used to control oil spills naturally, and also for other industrial applications.
  • This study is the largest exploration of extreme environments in India carried out with seven distinct samples from three major hot springs. The complete genetic sequencing of these samples was carried out on using sophisticated sequencers and by analysing several billion bits of data with advanced computational tools. This research was supported by the Center for Research on Environment and Sustainable Technologies at IISER Bhopal.

Utility of such bacteria (Way ahead)

  • Future research on the bacteria from Anhoni can enable their utilisation to address oil spills such as the one reported recently from Chennai which led to death of many marine animals and difficulties for the people living nearby. Bacteria isolated from Anhoni can be utilised to clear the oil naturally in case of such hazardous incidents.
  • Moreover, presence of many thermophilic genes and enzymes observed at Tattapani hot springs could have industrial applications in processes which are carried out at high temperatures.

Question: Oil spill is a curse of increased trade outreach through oceans. Such a menace is very hard to resolve and it often leads in destruction of marine ecology. What sustainable methods can be adopted to clean oil spills?

 

3.In four doses: On malaria vaccines (The Hindu)

 Synoptic line: It throws light on how an effective vaccine for Malaria will be a milestone in the fight against the disease. (GS paper III)

Overview

  • Despite many decades of intense research and development effort, there is no commercially available malaria vaccine at the present time. Malaria is a life-threatening disease caused by parasites that are transmitted to people through the bite of anopheles mosquitoes or infected mosquitoes. More than 429,000 people lost their lives to the mosquito-borne illness in 2015, and hundreds of millions get sick with a malaria infection every year.
  • Though there has been enormous progress in fighting the disease, according to the WHO from 2000 to 2015, there was a 62% reduction in malaria deaths and a 41% reduction in the number of cases. There have been fewer deaths in large part because of better mosquito control and disease awareness, as well as sustained effort to get the right medicine to the right populations.
  • But an effective vaccine for Malaria will have huge potential to save more than thousands liver every year.

Vaccine for malaria

  • On the eve of World Malaria Day, the World Health Organization announced that it has the go-ahead to try the first malaria vaccine in the field in real world settings next year.
  • According to WHO estimates, Africa is the continent that sees the highest number of malaria cases. The WHO will begin pilot tests of the injectable malaria vaccine RTS, S (or Mosquirix) on children aged 5-17 months, new vaccine will be tested in Kenya, Ghana and Malawi starting in 2018.
  • The vaccine has been successfully put through a Phase III trial, in which the drug is tested for safety and efficacy. Any decision on wider use will be taken based on the results of the pilot tests in the three countries.
  • According to the WHO, there are gaps in prevention coverage, particularly in regions such as sub-Saharan Africa, where about 43% of people at risk for the disease do not have access to mosquito protection like bed nets or bug spray.
The vaccine, RTS, S also known as Mosquirix, was created by scientists at GSK in 1987. It was developed in a public-private partnership with the PATH Malaria Vaccine Initiative and with support from the Bill and Melinda Gates Foundation along with local health organizations from seven African countries.

Why a vaccine?

  • A vaccine would be an essential tool in stopping malaria because:
  • The current fight against the disease is being waged on a variety of fronts, including the distribution of bed nets, the promotion of indoor spraying, and the development of new medicines and insecticides. A vaccine would help close the gap left by these interventions.
  • Malaria routinely develops resistance to drugs. Mosquitoes routinely develop resistance to insecticides.
  • From smallpox to polio to whooping cough, vaccines have offered a cost-effective and efficacious means of preventing disease and death.
  • Even a modestly efficacious malaria vaccine could protect hundreds of thousands of people from disease each year.

Effectiveness of vaccine

  • The vaccine will have four doses; the first three doses of the vaccine will be administered with a minimum interval of one month between each dose, followed by the fourth dose 15 to 18 months after the third dose.
  • The first dose will be administered at about five months of age and the third dose has to be completed by nine months of age. While the drop-out rate increases as the number of doses increases, the biggest challenge is the fourth dose, which warrants a new immunization contact to be made 15 to 18 months after the last dose.
  • In Phase III trials, the efficacy of the vaccine was around 30% when children received all the four doses; the vaccine also reduced the most severe cases by a third. But there was a significant drop in these benefits when children did not receive the fourth dose.
  • The vaccine, given in four doses protects against Plasmodium falciparum, which is the most prevalent malaria parasite in Africa.

Malaria cases in India

  • Malaria has been a problem in India, Unbridled urbanization, drought, migration of workers, and lax control efforts are all contributing to the resurgence of malaria in India and the problem is expected to exacerbate in the years to come.
  • As per World Malaria Report 2015, South East Asian region (SEAR) contributes to 10 per cent of the global malaria burden. India contributes to 70 per cent of the total malaria burden in SEAR.
  • Recently the National Framework for Malaria elimination in India 2016-2030 has been launched. The framework has been developed with a vision to eliminate malaria from the country and contribute to improved health and quality of life. It encourages all Indian states, with different levels of malaria transmission, to interrupt indigenous transmission of malaria in all states and UTs ahead of 2030.

Way ahead

  • The prospect of a malaria vaccine is great news; information gathered in the pilot program will help in making decisions on the wider use of the vaccine. Unlike other vaccines, the less-than-optimum protection offered by this vaccine would mean that existing malaria intervention measures will have to be used in conjunction to reduce the incidence of the disease.

Question: How eradication of disease such as malaria and TB will help India in meeting its commitments under SDG goals?

 

4.India’s population story (The Hindu)

 Synoptic line: It throws light on issue that how India’s population reaching to replacement level will stabilize population growth to some extent. (GS paper II)

Overview

  • India is moving towards population stabilization with the latest Census data showing a drop of 0.3 points in the Total Fertility Rate (TFR), India’s census in 2011 and data from the recent National Family Health Survey 2017 (NFHS-4) shows that fertility in India is fast approaching replacement levels. This means that couples will have children who will essentially replace their number, to stabilize population growth.
  • The NFHS-4 shows that in the past decade, the average number of children per family has come down from 2.7 to 2.2. With replacement fertility being 2.1 children per woman, this is good news for the land and the people.

Analysis

  • Unlike most other countries or parts of the world, India and China has always been a heavily populated country. Even as far back as the 1800s, the Indian sub-continent (including Bangladesh and Pakistan) had about 200 million people. The population grew quite slowly due to famines and epidemics that killed millions during the colonial period but increased steadily following independence in 1947.
  • Even after fertility rates drop to replacement levels, the total population will still grow and is likely to reach 1.7 billion by 2050. The thrust of this growth will come from the youth bulge, with 365 million (10-24 years old) already in, or soon to enter, their reproductive ages. The challenge of providing health, education and employment for its bulging youth population is a daunting one and this bulge also portends that India will soon have to start dealing with an ageing population. By 2050, an estimated 330 million Indians will be over 60 years.
  • Even if they have children only in numbers that replace themselves, the resultant growth due to such a large base of young people, called “demographic momentum”. For India as a whole, 75% of population growth in the coming decade will be due to this momentum.
  • In States like Assam, Gujarat and Haryana, which are about to reach replacement levels, it would be more effective to adopt policies for delaying childbearing rather than limiting births.

North- south gap (demand and supply of working population)

  • The southern states are showing faster decline in the population growth rate as compared to the northern states. Most of the current and future demographic potential is locked in the northern States and largely located in Bihar, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, and Uttar Pradesh. As a result of this, there is scarcity of unskilled labour in the south which is currently filled in by migration from other parts of the country.
  • Investing in young people in the north to realize the demographic dividend will be a win-win situation for all India, north and south. This means for India as a whole, it is time for the emphasis to be on momentum focussed policies and programmes.

Way forward

  • The National Health Policy 2017 emphasizes quality of care and commitment to sustainable development and positions improved access, education and empowerment as the basis for population stabilization. There is need of States to align their own health and population policies to the national ones.
  • Government policies to take stock of the situation and chart out the path ahead, especially keeping population stabilization in mind will be a welcome step. Fertility reduction, where it still needs to take place must come from increased availability and use of quality family planning services. Awareness programme especially in rural areas will be highly beneficial toward stabilization programme.

Question: What are the challenges of ever rising population and how it can convert the demographic dividend into the demographic burden?

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