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Banks incapable to lend : PM’s Modi demonetisation led to this financial crisis

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Prime Minister Narendra Modi’s demonetisation has done an irreparable damage to the country’s economy that public sector banks are in dire need of a bailout as in future banks won’t be able to provide loans to any Indian person or even businessman while BJP government’s intention of recapitalizing the banks through RBI has legal hassles by hampering it to perform its bounden functions.

Prime Minister Narendra Modi’s worst historic disaster of demonetisation has brought the country to the brink of bankruptcy  and financial crisis at this juncture when the entire world is struggling to prevent the break out of the World War III.

The thrusting demonetisation without doing the necessary homework has let to losses in the public sector banks  and now the government is faced with the problem of cash infusion in the banks from the foreign exchange of the country. The foreign exchange is actually meant to provide import cover and  macro-economic stability to the country. Thus, Public sector banks  will become incapable of lending loans to the common man and businesses due to their severe capital crunch in the banks.  The credit growth of all banks slowed down to 8.1 per cent in 2016-17 from 10.9 per cent in the previous year. Therefore, Credit growth in the banking system has hit a multi-year low of 6.8 per cent in the fortnight ended September 15, 2017.

Further more in times of contingencies like war the Modi government  will have to mortgage its sovereignty or Gold to meet the situation.

Discussions between the Central Bank and the finance ministry to help fund bank cash infusion  has revealed a serious state of country’s finances. It is being contemplated that a mechanism for capital infusion should be in-conformity with fiscal responsibility regulations. The government is now faced with a situation that even a portion of foreign exchange could be used for capitalizing banks without adversely affecting the country’s import cover and macro- economic stability. The forex reserves comprise foreign currency assets of 377.751 billion dollars, gold of $20.69 billion special drawing rights of $7.51billion and reserve tranche position of $2.29 billion with the international Monetary Fund,the economic survey revealed in volume I in January 2017.

But the major problem is that the Fiscal responsibility and budget Management Act does not allow the government  to borrow from the RBI. Therefore government will have to provide resources through special SVP that will have to be in-conformity with law.

The government had hoped to reap significant windfall gains from the decision to withdraw Rs 500 and Rs 1000 notes. But now with over 99% of demonetised notes coming into the banks, the government has to take the path of recapitalization bonds route to fund the banks.Banks are incapable to lend due of the tough regulations and norms on bad loans which have ballooned to Rs 9.5 lakh crore as of June 2017. The situation has been aggravated by the fact that there are no fresh investments forthcoming.

It is besides the point as to who advised him but it was the Prime Minister Narendra Modi’s sole responsibility to guard against such a slippery financial situation.

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By: Arti Bali

Senior Journalist

DISCLAIMER : Views expressed above are the author’s own.

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Women, Sabarimala temple and right to equality

The Sabarimala issue is not just about entry right to the women but now has become Religion Vs Fundamental Rights. In India, there are numbers of such issues which are still keeping the females deprived of rights.

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BJP rally Sabarimala

Ages back the women folks were exploited and the same is happening in modern times. Hinduism abolished Sati — a female was forced to be burnt alive in the pyre of her husband. Raja Ram Mohan Roy started a campaign against it and it came to an end. But has this changed brought much change in the lives of the women folk in the present times!

Sabarimala temple is Ayyappa temple situated in the Sabarimal region in Kerala. Here the females of age 10 to 50 are not allowed to enter due to the menstruation problem. There has been a lot of hues and cry over this issue.

Legal battle:

In 1991, this boycott to temple section for ladies was tested under the steady gaze of the Kerala High Court in S. Mahendran Vs The Secretary, Travancore case. Kerala High court decided for the preclusion of ladies entering the temple and asserted that these confinements have existed since time immemorial and not unfair to the Constitution. This request of the High Court was executed and pursued for the following 15 years. In 2006, the boycott was tested by the Public Interest Litigation recorded by the Young Lawyers Association with the Supreme Court, asserting that rule 3(b) of Kerala Hindu places of Public worship (Authorisation of entry) Rules 1965 that states, “women who are not by custom and usage allowed to enter a place of public worship shall not be entitled to enter or offer worship in any place of public worship” is infringement of established standards of equality, non-discrimination and religious opportunity. On April 25, 2016, the representative lawyer of the Devaswom, K.K Venugopal stated: “There is a sensible grouping by which certain classes of women are excluded”. Supreme Court was concerned regarding the statement if menstruation was associated with purity of women. The case was then assigned to the Constitution Bench by the Supreme Court.

In 2018, Justice Dipak Misra, The Chief Justice of India, while addressing to the PIL, put a query to the temple’s management over denying passage to women. The case was heard by a constitution bench headed by Justice Misra alongside Justices Rohinton Nariman, Justice AM Khanwilkar, Justice DY Chandrachud and Justice Indu Malhotra. The court held that Sabarimala pilgrims couldn’t be a different group or religious division. The traditions are subjected to sacred legitimacy and preclusion of ladies passage to temple infringing upon the Fundamental Rights. Justice Chandrachud claimed, “Your entitlement to implore as a lady isn’t subject to any law, it is a constitutional right”. He additionally included that notice issued under the standards recommending the age restrictions on ladies entry as “discretionary on its essence”.

In the year 2012, a similar campaign like that of Sabarimala temple was launched by the Bharatiya Muslim Mahila Andolan (BMMA) & Bhumata Brigade to offer prayers at the Haji Ali Dargah. It is the resting place of Sayyed Peer Haji Ali Shah Bukhari on the islet of Mumbai coast. This shrine is 585 years old. The Haji Ali Dargah is administered by the Haji Ali Dargah Trust a public charitable trust enrolled under the Maharashtra Public Trust Act. The trustees of the Dargah had chosen to deny ladies access to the grave area in 2011, calling the un-Islamic. It had expressed that it was redressing it’s earlier misstep of enabling ladies to touch the actual grave. The argument by the petitioner was that the Muslims deprive their women to equal rights, they keep them suppressed and the women folks don’t have a right to raise their voice in Islam.

On 26 August 2016, Bombay High Court decided that women to be allowed to enter the sanctum sanctorum. Even the Supreme Court sealed the verdict of Bombay High Court and the women were allowed to enter the shrine sacred area on 29 November 2016. This was welcomed by all the people across India. It was stated that now the Muslim women have got their rights which were deprived of them since the advent of Islam.

Similarly, the Supreme Court has ordered that the women should be allowed in the Sabarimala temple and the old practice should be done away with.

In the case of Sabarimala temple, various Hindu groups are not accepting the decision of the Supreme Court and want a revision of the judgment. The present day’s ruling party Bharatiya Janta Party (BJP) is backing the agitation against the judgment.

Are the women not suppressed now by going against their right to enter the temple? It is not an insult to the highest court of law in India? The law of the land is above the ruling class or any religion but the BJP and other Hindu organizations are adamant for rather they are trying to show strength through mass gathering against the judgment.

Is this the respect to the law of the land?

Declaimer: The views are the sole discretion of the author...
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Analysis

Climate change will worsen disparities, may increase support for Naxals: Report

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Maoists Naxal

Bengaluru, Oct 16 : As the effects of climate change on livelihoods become more pronounced, especially for people involved in agriculture and fishing in South and South-East Asia, support for rebel groups and the Naxalite movement is likely to shoot up, according to a new report.

There is evidence that climate change will worsen socio-economic and political disparity in the region as those in power will get to decide who gets the limited resources and how much, the report, co-authored by researchers Pernilla Nordqvist and Florian Krampe while working for the Stockholm International Peace Research Institute (SIPRI), has said.

“The climate-conflict linkage primarily plays out in contexts that are already vulnerable to climate change and violence, and where income is highly dependent on agriculture and fishing,” Nordqvist told IndiaSpend in an email.

Human activities have already caused warming of 1 degree Celsius as compared to pre-industrial times, according to the latest report of the United Nations’ Intergovernmental Panel on Climate Change (IPCC). By 2030, or latest by mid-century, global warming is likely to reach 1.5 degrees Celsius.

Close to 2.5 billion people live in South and South-East Asia, where poverty rates have been declining substantially, thanks to years of strong economic growth in countries such as India. However, the region is also prone to the fallouts of climate change, with glaciers in the Himalayas melting and several island-countries facing rising sea levels. Floods, cyclones, heat waves and droughts are now a frequent occurrence and are expected to intensify in the coming years.

“The region is highly vulnerable to the impact of climate change and also has a recent history of political violence,” Krampe told IndiaSpend.

Nordqvist and Krame examined 2,000 peer-reviewed studies on the relationship between climate change and conflict and narrowed down on 21 of the most authoritative works for their report, which was published in September 2018.

Their findings from India show that rebel groups and government forces both find recruitment easier when drought is around the corner.

The IPCC report also adds that climate-related risks to livelihoods, food security, health, water supply and human security are projected to increase as the planet warms by 1.5 degrees. With a 2-degree rise, the risks will intensify.

In some areas affected by the Naxalite conflict, the worsening of livelihood conditions has been related to the increased intensity of ongoing civil conflicts. During a drought, or a potential drought, there is an increased risk that rebels and government actors recruit or cooperate with civilians in exchange for livelihood and provision of food.

Naxalites could use climate-related events to gain power in an ongoing conflict, and rebel groups more generally could increase their use of violence against civilians to ensure their groups’ food security, according to the report.

“They violently remove local farmers from their land to ensure enough cropland and agricultural supplies for their own use. The risk of violence seems especially high in rural areas, where government control is scarce and the local population is dependent on the support or protection of rebels or other armed actors,” Nordqvist said.

As climate change pushes up migration, it introduces the possibility of riots in urban areas over resources, the report said. Highlighting the case of riots in Tripura in northeastern India, it said the effects will be most felt in areas where there are already low levels of socio-political stability.

“Many of the climate change problems are trans-national. The Brahmaputra, for example, flows through three countries and is seeing frequent flooding. There is no question that countries will need to cooperate and tensions like the ones between countries India and Pakistan will make this difficult,” Krampe said.

There is some research on the relationship between climate change and conflict in countries such as India, Bangladesh and Pakistan, the report said, adding that there is little understanding of how climate change could be driving conflict in places such as Afghanistan and Myanmar.

Elsewhere in South-East Asia, in some coastal areas of Indonesia the reduced income opportunities from fishing have been linked to a rise in piracy-related activities.

But the impact does not end there.

In Pakistan, for instance, the Islamist group Jamaat-ud-Dawa (JUD) was able to increase its stronghold in Sindh province after the group participated in relief activities following extreme floods.

The IPCC report also warns that those living along coasts and populations dependent on agriculture will be the worst hit by climate change, which will push up poverty rates in coastal areas and in developing countries.

However, “Not everyone affected by climate change will join a rebel group but this also relates to the failure of the governments to respond to disasters,” Krampe said.

At the same time, not all areas will see conflict in the face of climate change. Some might even see a greater cooperation in the aftermath of a natural disaster. These regional dynamics are evolving, however, and their contours will only become clearer with time.

(In arrangement with IndiaSpend.org, a data-driven, non-profit, public interest journalism platform. Disha Shetty is a Columbia Journalism School-IndiaSpend reporting fellow. The views expressed are those of IndiaSpend. Feedback at [email protected])

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Higher food prices jack up India’s September wholesale inflation

“The prevailing market price for most kharif crops at major mandis has remained lower than the MSP, suggesting procurement hasn’t picked up.”

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wholesale inflation

New Delhi, Oct 15 : India’s inflation rate based on wholesale prices accelerated 5.13 per cent on year in September, from a 4.53 per cent increase in August, as prices of primary articles and food items rose, official data showed here on Monday.

In September last year, the WPI had stood at 3.14 per cent.

“The annual rate of inflation, based on monthly WPI, stood at 5.13 per cent (provisional) for the month of September, 2018 (over September, 2017), as compared to 4.53 per cent (provisional) for the previous month and 3.14 per cent during the corresponding month of the previous year,” the Ministry of Commerce and Industry said.

“Build up inflation rate in the financial year so far was 3.87 per cent compared to a build up rate of 1.50 per cent in the corresponding period of the previous year.”

On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI’s total weightage, rose 2.97 per cent, from a decline of 0.15 per cent in August.

Similarly, the prices of food articles rose. The category has a weightage of 15.26 per cent in the WPI index.

The cost of fuel and power, which commands a 13.15 per cent weightage, increased at a slower pace of 16.65 per cent from a growth of 17.73 per cent.

The expenses on manufactured products registered a rise of 4.22 per cent from 4.43 per cent.

On a year-on-year (YoY) basis, onion prices declined by 7.88 per cent, whereas potatoes became dearer by 68.81 per cent.

In contrast, the overall vegetable prices in September rose by 39.41 per cent, against a rise of 41.05 per cent in the same month a year ago.

Further, the data revealed that wheat became dearer by 6.09 per cent on a YoY basis while prices of pulses were up 0.74 per cent, though paddy became expensive by 2.03 per cent.

The prices of protein-based food items such as eggs, meat and fish went up marginally by 0.83 per cent.

The price of high-speed diesel rose by 11.88 per cent on a YoY basis, petrol by 10.41 per cent and LPG by 17.04 per cent.

“The WPI inflation for September 2018 revealed a negative surprise, printing 30 basis points higher than our forecast. Moreover, a lagged correction in the sub-index for crude oil is likely to result in the revised print for this month, exceeding the initial 5.1 per cent,” said Aditi Nayar, Principal economist, ICRA.

“The considerable uptick in the YoY WPI inflation in September 2018 relative to the previous month was driven by primary food and non-food items and minerals, whereas the other major indices recorded a sequential dip, partly driven by the base effect.”

According to Devendra Kumar Pant, Chief Economist and Senior Director (Public Finance), India Ratings and Research, “The prevailing market price for most kharif crops at major mandis has remained lower than the MSP, suggesting procurement hasn’t picked up.”

“The future inflation trajectory would depend on the response of mandi prices with respect of new MSP, and the movement of crude oil price and value of currency.”

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