Daily Editorial Analysis for 3rd April 2020

Opportunity in the crisis

Paper: II

For Mains: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation.

Context of News:

• The current crisis is so terrible in its toll of life and livelihoods that the need of the hour must be minimising the health, humanitarian and economic costs, especially for the most vulnerable. Rising public expenditures to help tens of millions of workers and their families alongside plummeting resources will inevitably force hard choices.
• Corona virus pandemic offers a trigger to fundamentally strengthen the Indian economy, and protect the vulnerable. This requires cooperation between the Centre and states.

How to utilise this Pandemic as opportunity?

• Revamp macro-fiscal framework:
• If the pandemic follows the exponential trajectory seen in other countries, the crisis is going to entail massive fiscal expenditures, perhaps up to 4-5 per cent of GDP, much more than what the government has announced.
• The basic macro-fiscal framework for example, the Centre’s FRBM target of 3.5 per cent of GDP, and the revenue and deficit estimates for 2020-21 has been fundamentally overtaken by events. The Centre should immediately announce that even the states will be allowed to exceed their fiscal responsibility legislation targets because they will be in the front line of taking action against the pandemic. The crisis is an opportunity to revisit the entire framework.
• Remake finance: 
• Going into the crisis, India’s corporate and financial sector were under severe stress the so-called Four Balance Sheet problem. This crisis will unfortunately add consumers and small and medium enterprises to that list. This will be an extremely hard but critical problem to address.
• To allow banks to revert to normalcy, a large-scale takeover of their bad loans will be unavoidable not least because the current bankruptcy process will be severely inadequate. In addition, this crisis opens the door for the new lending model proposed by Nandan Nilekani — technology-driven lending that uses data rather than collateral, allowing the 10 million-odd businesses with deep digital footprints (for example, based on GST invoices), to get loans from the thriving ecosystem of new financial players.
• Complete JAM: 
• One of the major achievements of this government was to create the plumbing Jan Dhan, Aadhaar and Mobile (JAM)  to augment weak state capacity. In the current crisis, it is proving to be an important part of the social safety net that is helping to cushion the most adversely affected groups. But the JAM plumbing is still incomplete because there is a “last mile problem”. Not all those with bank accounts can access money either because of difficult geography or because bank functionaries give incomplete or misleading information.
• This crisis is an opportunity not just to leverage JAM to enhance cash transfers, but to empower citizens. This will require the government to identify remaining weaknesses on a war footing and fix them.
• Re-shape Indian agriculture:
• The need to preserve supply chains in agriculture in times of crisis reinforces the need to create one market for agriculture across India. This requires eliminating legislation like the Essential Commodities Act and the panoply of resulting restrictions. Second, the crisis has shown the possibilities created by JAM and direct transfers. Building on PM-Kisan and various state level schemes, pernicious subsidies, especially for fertilisers and power, could be phased out over 5-6 crop cycles.
• Make in India: 
• A macabre joke referring to the origins of the corona virus was that everything, even death, was made in China. But the critical source for almost all the essential Active Pharmaceutical Ingredients (API) used to manufacture drugs, the ability also to fight death, is largely made in China.
• India was once a major producer of such APIs but lost ground to China. The crisis should be the opportunity to go on war footing to do intelligent industrial policy incentives, regulatory help, trade policy  that would resurrect India’s manufacturing capability. Previous Make in India attempts have shown lackadaisical results. The crisis creates the momentum to focus the effort on one sector, pharmaceuticals. As a result, the ability to save lives could be Made in India, again.
• Upgrade Health:
• State capacity over 70 years in India has been weakest in the areas of education and health. The COVID-19 pandemic must lead to a serious strengthening of the health infrastructure for dealing with pandemics. To start with, India needs an apex institution like the US’ Centers for Disease Control with a network across all the states.
• They should invest in disease surveillance systems, set up diagnostics labs, be able to gather real-time data and analyse them etc. The Taiwan model, which has been so successful in this pandemic, could be studied. More fundamentally, the crisis is a wake-up call to address India’s severe limitations in the provision of basic health. Creating tertiary health facilities must be subservient to strengthening basic public health and early childhood care.
• Build National Solidarity Fund:
• The severe downturn in economic activity ahead will savagely hit the informal poor. But it will also reveal how much they are central to the comfortable lives of the salaried classes and wealthy. If there was ever a time for the latter to demonstrate their solidarity with those providing the essential services they so depend on — from maids to drivers and farmers to construction workers — it is now.

Conclusion:

• If India is forced into a lockdown for too long, the economic costs will be very large and the recovery will crucially depend on whether the pilot-light of the economy is kept lit through this period. This critically requires income transfers to vulnerable households and SMEs. India cannot complain that it does not have the fiscal space or the infrastructure to provide it.
• As demand collapses, firms’ cash inflows will fall, impairing their ability to service their loans, pay their employees, suppliers. Thus some sort of regulatory forbearance, relaxation of classification norms of loans as NPA, a moratorium on interest payments, and a sort of a bridge loan to help the more vulnerable businesses will be required. The funding of such measures should be borne jointly by the Centre and the states even as they continue to implement measures to limit the spread of the virus, and mobilise and strengthen capacity to treat the infected.

Central government defines domicile for J&K

Paper: II

For Prelims: About Domicile.

For Mains: Government policies and issues related to it.

Context of News:

• The Centre has spelt out the rules of domicile in the Jammu and Kashmir region, opening avenues of employment to non-Kashmiris as well. The move comes almost eight months after the revocation of Article 370, which was followed by the division of the then state into two Union territories.

What is Domicile?

• A Domicile/Residence Certificate is generally issued to prove that the person bearing the Certificate is a Domicile/Resident of the State/ UT by which the Certificate is being issued.
• Domicile is defined as the place where you make your permanent home and where you are considered to be a permanent resident. An example of your domicile is the home state where you live. Domicile is a legal construct used to determine where you vote, file lawsuits, pay taxes, claim benefits, and oblige governmental authority.

Details of Central Government’s New Rule of Domicile for J & K:

• Centre has notified a law, defining domiciles of the Union Territory, and opening up various categories of jobs in the region to people from across the country. According to new rule, a person who has resided in J&K for 15 years or has studied for seven years and appeared in Class 10 or Class 12 exams in an educational institution located in J&K will be deemed to have ‘domicile’.
• Children of central government officials, All India Services officers, officials of public sector undertakings and autonomous bodies of the central government, public sector banks, officials of statutory bodies, officials of central universities and recognised research institutes of the centre who have served in J&K for a total period of 10 years or children of parents who fulfil any of the conditions in the rule will also get domicile status.
• Children of residents of J&K who reside outside the Union Territory in connection with employment or business or for other professional or vocational reasons, but whose parents fulfil any of the conditions provided in the latest gazette notification will also be entitled to domicile status.
• A person registered as a migrant by Relief and Rehabilitation Commissioner (Migrants) can also apply for domicile benefits, as per the section 3A of the J&K Reorganisation (Adaptation of State Laws) Order, 2020, issued by the Union home ministry.

Vacancies in posts:

• All posts that are up to the rank of junior assistant and below are open only to domiciles, the entire non-gazetted services has been reserved. Only few positions such as police sub-inspectors are directly recruited at a higher level than junior assistants.
• The Jammu and Kashmir State Legislature Members’ Pension Act,1984, has been amended by the MHA. It fixes the pension for former legislators, councillors at Rs 75,000 a month.
• The MHA order has also made amendments to the PSA, 1978. It changes the criteria for appointing the PSA advisory board on the recommendation of a search committee headed by the Chief Secretary instead of the Chief Justice of the J&K High Court.

Criticism from Parties of J & K:

• Former chief minister and National Conference (NC) vice president Omar Abdullah described it as “an insult being heaped on injury”. “The law offers none of the protections that had been promised. It’s hollow.
• A party spokesman Aga Syed Ruhullah Mehdi said several States like Himachal Pradesh have land rights that are adequately safeguarded by domicile laws but no such provision is included in J&K’s domicile law. “It’s shocking, a tehsildar has been empowered to dole out domicile certificates.

WAY Forward:

• New domicile rules introduced by Centre for Jammu and Kashmir are a let-down both in substance and timing. The rules setting out new domicile criteria in Jammu & Kashmir have done nothing to reassure the people of the erstwhile state on the issue of demographic change.
• The timing of the order is equally disquieting. At a moment when the entire nation, including J&K, is focussed on the fight against COVID, it was inappropriate and insensitive to push in new rules that will directly impact the lives of the people of the former state.