05 Oct 2019: The Hindu Editorial Analysis
1) On RBI rate cut: Moderate expectations
- After the unconventional 35 basis points cut in interest rates in August, the Reserve Bank of India (RBI) returned to a normal 25 basis points cut on Friday.
- While a rate cut was a foregone conclusion, the speculation was over whether it would be 25 or 40 basis points, going by the August experience. With this, the central bank has pruned rates by 135 basis points in just seven months since the rate cut cycle started in February.
- Of this, until August, banks had passed on 29 basis points to borrowers. But with the shift to an external benchmark by major banks recently - mostly linked to the repo rate - the transmission could be quicker from here onwards.
- The RBI has also sharply marked down the GDP growth projections for the current fiscal to 6.1% from the 6.9% that it had projected in the August policy.
- This was inevitable after the shocking 5% growth reported in the first quarter but it could be argued though that even the revised estimate is a trifle optimistic. If the projection of 6.1% for 2019-20 is to be met, the economy has to grow by about 7% in the second half which does not look very likely.
- If the high frequency data of the last couple of months are any indication, the second quarter may well end up mirroring the first in terms of GDP growth. The basis for RBI’s optimism, therefore, appears unclear at this moment.
- The central bank has done the heavy lifting in the last few months and monetary policy may well be nearing its limits in so far as its ability to influence growth prospects is concerned.
- Inflation is well within the target giving space to the RBI to focus on growth. Crude oil prices are back in the comfort zone, retreating from the spike in mid-September, and food prices are projected to remain soft on the back of a good monsoon.
- The monetary policy statement is unambiguous that the RBI will continue with its accommodative stance “as long as it is necessary to revive growth”. While this statement is credible, the problem is that the central bank can only facilitate lower rates and push banks to lend.
- It cannot force borrowers to borrow and this is evident from the soft trends in credit offtake in the last few months. As per latest available data, bank credit is growing at just 10.3%.
- The onus, therefore, is on fiscal policy which alone can prod borrowing and investment. There are limits to what RBI can do with rates; the government needs to prod investment.
- To be fair, the government has been engaging the levers, and the corporate tax cut last month is a major move to get private investment going. However, the ₹1.45 lakh crore giveaway has set off fears in the market of a fiscal slippage and higher borrowings by the government.
- These concerns also explain the unenthusiastic response of the stock and bond markets to Friday’s rate cut. The ongoing festival season consumption holds the key to revival of the economy this fiscal.
2) On NEET impersonation scam: Web of deception
- What the embittered relationship between Tamil Nadu and the National Eligibility-cum-Entrance Test (NEET) required was a salve, but instead things just got more complicated and murkier.
- The recent expose of what has come to be known as the NEET examination scam has placed further stress on the State’s experience with the exam in more ways than one.
- A couple of mails sent to the administrators of the Theni Government Medical College in south Tamil Nadu blew the lid off a scam with far-reaching consequences.
- A student of the college had gained his seat through subterfuge - by having someone impersonate him at the NEET. This turned out to be only the tip of the iceberg, and as investigators began unravelling the spool, more skeletons tumbled out.
- A number of students and their parents were investigated for possible impersonation fraud in the NEET, for operating with the help of middlemen to hire a medical student to write the test for them, for a hefty consideration.
- This, no doubt, required spinning a careful web of deception, right from submitting photos of the impersonator in the NEET application forms, to actually appearing for the examinations and single-window counselling for admissions, to submitting the application with the original student’s photo at the allotted college.
- Further probe cast a shadow on the admission of more students, including in private medical colleges. With the CB-CID tasked with investigating the case, bits and pieces of the puzzle are falling in place, revealing a multi-State operation.
- While the larger picture, with all its many nuances, is not yet clear, it is evident that fraud has been committed, and serious lapses in procedures and processes were exploited by students eager to score a medical seat by hook or by crook.
- They might have got away with it, but for an anonymous tip-off. Given that NEET was intended to standardise testing for admission into medical colleges and ensure a certain minimum quality, such lapses erode the very core of its raison d’étre.
- The MHFW - Ministry of Health and Family Welfare and the NTA - National Testing Agency, which conducts the examination, must exhibit zero tolerance to such attempts to frustrate the integrity of the test.
- Both these agencies must immediately set their energies to identifying lacunae in the existing system and ensure that a foolproof testing methodology is in place.
- Using biometrics to identify students taking NEET has been suggested, and its value in adding a further layer of checks and balances is indisputable. Parents and students too would do well to temper their vaulting ambition for an MBBS seat with a measure of rationality.
- There are only a limited number of MBBS seats available, and while that number is slowly growing, it will never equal the demand. Therefore, the government must monitor the NEET admission process to guard against fraud.