The Hindu Editorial Analysis
18 April 2020

1) Helping a lending hand: On RBI’s second lockdown stimulus 


CONTEXT:

The RBI has infused(put in) oxygen into the financial system with a second set of measures announced on Friday by Governor Shatikanta Das to combat(fight) the lockdown impact on the economy. Most are aimed at maintaining liquidity(cash), the economy’s lifeblood, though there are some regulatory proposals aimed at making life easier for banks, NBFCs and borrowers.

REASSURING THE MARKETS:

It is now clear the bank prefers to calibrate(measure) its moves based on constant feedback from the ground — the way it should be. In what should be reassuring for the markets, Mr. Das was categorical that the RBI would do what it takes to support the economy and also monitor the evolving situation.

Indeed, the RBI has been very generous in its liquidity maintenance measures in recent times and particularly so after the lockdown began in March. There will surely be consequences for the economy but that is a worry for another day. The overarching(most important) objective now should be to keep the economy afloat by deploying(using) all the instruments at the RBI’s command.

TARGETED LONG TERM REPO OPERATIONS (TLTRO):

The central bank has learnt from its experience of the Targeted Long Term Repo Operations (TLTRO) till now when banks preferred to deploy the funds in bonds of PSUs and large corporates. The RBI has called out this risk-off attitude of the banks while announcing a further ₹50,000 crore TLTRO — all of this has to be invested in bonds and paper of NBFCs and microfinance institutions.

The response to the next round of TLTRO will be interesting to watch. Similarly, by reducing the reverse repo rate by another 25 basis points to 3.75%, the RBI has made it furthermore unattractive for banks to indulge in ‘lazy banking’ by parking excess funds with the central bank rather than lend. As much as ₹6.9-lakh crore was parked with the RBI as on April 15. This is the time when banks will have to be liberal in extending help for working capital loans and overdrafts to their borrowers, including MSMEs.

(The Reserve Bank of India (RBI) on March 27 introduced the Targeted Long Term Repo Operations (TLTROs) as a tool to enhance liquidity in the system, particularly the corporate bond market, in the wake of the COVID-19 crisis.

LTRO is a tool that lets banks borrow one to three-year funds from the central bank at the repo rate, by providing government securities with similar or higher tenure as collateral. It is called 'Targeted' LTRO  as in this case, the central bank wants banks opting for funds under this option to be specifically invested in investment-grade corporate debt. This helps banks get funds for a longer duration.

Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.)

SCHEME OF CREDIT ASSURANCE COVER:

The government could help here by extending a scheme of credit assurance cover that will encourage banks to be more liberal in their risk outlook. By clarifying that there will be an asset classification standstill during the moratorium period for accounts that were not already NPAs as of March 1, the RBI has brought relief to borrowers who were worried that opting for the moratorium may turn them into NPAs.

(A non-performing asset is a loan that is in default or close to being in default. Many loans become non-performing after being in default for 90 days, but this can depend on the contract terms)

State finances have got some breathing space through the increase of WMA (Ways and Means Advances) limit to 60% over the level as on March 31. The special refinance facility of ₹50,000 crore extended to NABARD, SIDBI and NHB will help these institutions to prop up their respective constituents.

(Asset Classification: To know more about Asset Classification, open the link given below

https://www.accountingtools.com/articles/what-is-asset-classification.html

Ways and means advances is a mechanism used by Reserve Bank of India under its credit policy to provide to States, banking with it, to help them tide over temporary mismatches in the cash flow of their receipts and payments.)

CONCLUSION:

The central bank has done what it can. It is now over to the government for the fiscal support package. The RBI has made life easier for banks; it has given the govt. the cue for a fiscal support plan

 

2) A season of change: On IMD forecast system


(The India Meteorological Department is an agency of the Ministry of Earth Sciences of the Government of India. It is the principal agency responsible for meteorological observations, weather forecasting and seismology)

CONTEXT:

In the season of the abnormal, the IMD has announced that the monsoon this year would likely be normal.

TWO-STAGE FORECAST SYSTEM:

The agency follows a two-stage forecast system: indicating in April whether there are chances of drought or any other anomaly and then a second update, in late June, with a more granular look at how the monsoon will likely distribute over the country and whether danger signs are imminent(likely to happen).

NORMAL:

‘Normal’ means India will get 100% of its long period average, with a potential 5% error margin. The IMD’s April forecast, experience suggests, is not much to go by especially if the agency declares it ‘normal’ as rarely, if ever, do weather models catch signs of an impending shortfall or a large excess in April. Also being a part of a hierarchical government set-up, the agency defaults to being conservative.

In April last year, it said the monsoon would be ‘near normal’, an arbitrary category. Private forecasters expected a shortfall, predicated (based on) on the development of a future El Niño. The IMD did account for this but said it was unlikely El Niño would strengthen enough to dampen the monsoon. It however kept its estimate on the lower side of ‘normal.’ In the end, India received excess rains, the highest in a quarter century.

( To know more about El Niño- follow the link- https://oceanservice.noaa.gov/facts/ninonina.html )

NEW WEATHER VARIABLES:

The April forecast is a vestige(remainder) of the agency’s reliance on the ‘statistical forecast system’. It is also reflective of an era when landline telephones were the state-of-the-art in personal communication. Along with connectedness, weather forecasting has metamorphosed(transformed). Climate, as well as technological change, allows new weather variables — such as surface temperatures from as remote as the southern Indian Ocean and regular updates from the Pacific Ocean — to be mapped. Powerful computers mathematically simulate(imitate/reproduce) the weather based on these variables and extrapolate(extend the application of (a method or conclusion) to an unknown situation by assuming that existing trends will continue or similar methods will be applicable) onto desired time frames. Using these dynamical models is a change the IMD has incorporated(included) and experimented with for years.

KEY CHANGES:

It made two key changes this year: reducing the definition of ‘normal’ rainfall by 1 cm, to 88 cm and, officially updating monsoon onset and arrival dates for many States. This was long due and constituted acknowledgement of the accumulated impact that global warming has been having on monsoon patterns, particularly for cities and States.

The monsoon was arriving later in many places, had long weak spells, and lingered longer. This has already heralded(indicate) thinking, in the agency, on whether India should move to a new monsoon-accounting calendar instead of the century-long tradition of June-September. This would signal a truly momentous break from the past.

CONCLUSION:

Just as COVID-19 is forcing introspection on the links that tie people, trade and ecology, it is also time for the IMD to incorporate the lessons from the new normals. It is time for the India Meteorological Department to incorporate lessons from the new normal.

 

3) A virus, social democracy, and dividends for Kerala


CONTEXT:

The global coronavirus pandemic is a natural, albeit(though) brutal experiment. Every part of the world has been impacted. The range of responses we are seeing at the national and subnational levels reveal not only existing inequalities but also the political and institutional capacity of governments to respond. Nowhere is this more so true than in India.

The national government ordered a lockdown but it is States that are actually implementing measures, both in containing the spread and addressing the welfare consequences of the lockdown. A number of States have been especially proactive, none more so than Kerala.

FLATTENING THE CURVE AND HOW:

Kerala was the first State with a recorded case of coronavirus and once led the country in active cases. It now ranks 10th of all States and the total number of active cases (in a State that has done the most aggressive testing in India) has been declining for over a week and is now below the number of recovered cases.

Given Kerala’s population density, deep connections to the global economy and the high international mobility of its citizens, it was primed to be a hotspot. Yet not only has the State flattened the curve but it also rolled out a comprehensive ₹20,000 crore economic package before the Centre even declared the lockdown. Why does Kerala stand out in India and internationally?

CULTURAL, HISTORICAL OR GEOGRAPHICAL EXCEPTIONALISM:

Kerala’s much heralded success in social development has invited endless theories of its cultural, historical or geographical exceptionalism. But taming(make less powerful and easier) a pandemic and rapidly building out a massive and tailored safety net is fundamentally about the relation of the state to its citizens.

From its first Assembly election in 1957, through alternating coalitions of Communist and Congress-led governments, iterated(repeated) cycles of social mobilisation and state responses have forged(build up) what is in effect a robust social democracy. The current crisis underscores(emphasizes) the comparative advantages of social democracy.

SOCIAL DEMOCRACY:

To begin with, social democracies are built on an encompassing (include comprehensively) social pact with a political commitment to providing basic welfare and broad-based opportunity to all citizens. In Kerala, the social pact itself emerged from recurrent episodes of popular mobilisation — from the temple entry movement of the 1930s, to the peasant and workers’ movements in the 1950s and 1960s, a mass literacy movement in the 1980s, the Kerala Sasthra Sahithya Parishad (KSSP)-led movement for people’s decentralised planning in the 1990s, and, most recently, various gender and environmental movements. These movements not only nurtured(bring up) a strong sense of social citizenship but also drove reforms that have incrementally strengthened the legal and institutional capacity for public action.

Second, the emphasis on rights-based welfare has been driven by and in turn has reinforced a vibrant, organised civil society which demands continuous accountability from front-line state actors.

Third, this constant demand-side pressure of a highly mobilised civil society and a competitive party system has pressured all governments in Kerala, regardless of the party in power, to deliver public services and to constantly expand the social safety net, in particular a public health system that is the best in India.

Fourth, that pressure has also fuelled Kerala’s push over the last two decades to empower local government. Nowhere in India are local governments as resourced and as capable as in Kerala.

Finally, all of this ties into the greatest asset of any deep democracy, that is the generalised trust that comes from a State that has a wide and deep institutional surface area, and that on balance treats people not as subjects or clients, but as rights-bearing citizens.

CHAIN OF DECISION-MAKING:

So how has this built-up capacity translated into both flattening the curve and putting broad and effective welfare measures in place? A government’s capacity to respond to a cascading(pass (something) on to a succession of others) crisis such as the COVID-19 pandemic relies on a very fragile(weak) chain of mobilising financial and societal resources, getting state actors to fulfil directives, coordinating across multiple authorities and jurisdictions and maybe, most importantly, getting citizens to comply. An effective response begins with programmatic decision-making.

From the moment of the first reported case in Kerala, Chief Minister Pinarayi Vijayan convened a State response team that coordinated 18 different functional teams, held daily press conferences and communicated constantly with the public. Kerala’s social compact demanded no less. Not only did Mr. Vijayan directly appeal to Malayalees’ sense of citizenship by declaring that the response was less an enforcement issue than about people’s participation, but also pointedly reminded the public that the virus does not discriminate, destigmatising the pandemic.

Second, the government was able to leverage a broad and dense health-care system that despite the recent growth of private health services, has maintained a robust public presence. Private provisioning of a public good has never made much sense, but as anyone watching the chaos in the United States has learned, there is nothing like a pandemic to expose the obvious coordination problems that for-profit health systems face. Kerala’s public health-care workers are also of course highly unionised and organised, and from the outset the government lay emphasis on protecting the health of first responders.

Third, the government activated an already highly mobilised civil society. As the cases multiplied, the government called on two lakh volunteers to go door to door, identifying those at risk and those in need.

A State embedded in civil society — the women’s empowerment Kudumbasree movement being a case in point — was in a good position to co-produce effective interventions, from organising contact tracing to delivering three lakh meals a day through Kudumbasree community kitchens.

PIVOT OF LOCAL GOVERNMENTS:

Fourth, you can get the politics right and you can have a great public health-care system, but its effectiveness in a crisis like this will only be as good as the infamous last kilometre. And this is where two decades of empowering local governments have clearly paid off. Whether in focalising(focussing) containment efforts in hotspots, tracking down those who have been exposed or managing the broad array of direct benefits that have been distributed to migrant workers, the elderly and the differently abled, the key has been the capacity of state actors and civil society partners to coordinate their efforts at the level of panchayats, districts and municipalities.

PHYSICAL EXAM OF THE SOCIAL BODY:

The pandemic is a physical exam of the social body, and never has public trust been put to a greater test. In democracies, compliance(aggrement) must be elicited(obtain). Asking citizens to stay at home, to give up work, and to trust that the individual sacrifices they make now are essential to preserving the well-being of the community going forward is never easy to do and especially not against an invisible enemy.

Trust is hard to measure, but survey work that colleagues and I, working with the Bengaluru non-governmental organisation Janaagraha, recently conducted in 10 Indian cities that included Kochi, shows that across a wide range of measures, and across all classes, castes and religions, Malayalees have extremely high levels of trust in both their institutions and locally elected local representatives. This, more than anything, points to the robust nature of Kerala’s social compact.

Beyond the peak, every country in the world, and especially India, will be dealing with the economic and welfare consequences of the pandemic for years. This brutal, unpredictable, external shock is laying bare the most essential as well as the most complicated challenges of democratic citizenship.

AUTHORITARIAN TEMPTATION:

In moments like these, the authoritarian temptation for some is irresistible. U.S. President Donald Trump has claimed “total” authority and is threatening to usurp the power of Governors, the Bharatiya Janata Party has exploited the crisis to communalise(differentiate between communities) the pandemic and to silence its critics, and things are as bad as they are to begin with because of China’s authoritarian DNA.

CONCLUSION:

At a time when India’s democracy was already in crisis, it is important to be reminded that Kerala has managed the crisis with the most resolve, the most compassion and the best results of any large State in India. And that it has done so precisely by building on legacies of egalitarianism (principle that all people are equal and deserve equal rights and opportunities), social rights and public trust.