Urban devolution, now

Devolving more resources to the states is the trend now, as outlined by the Fourteenth Finance Commission or FFC. One hopes the states also will respect this principle and both empower the urban local bodies, or ULBs, and provide more resources to them since under the Constitution, only state legislatures have the discretion to assign functions to local bodies.

While interacting with the FFC, the states appreciated the fact that the Thirteenth Finance Commission had acknowledged the need for providing local bodies with a predictable, buoyant source of revenue and had recommended a grant which was equivalent to a specified percentage of the divisible pool. That FC had brought in a regime which was in the direction of strengthening urban governance in India, when it made a departure from the previous Commissions and divided the grants to be distributed to the states for local bodies into two parts - namely, a basic grant and a performance-linked grant.

It is gratifying to note that the FFC has continued this line and again provided for grants in two parts, the division between the basic grant and the performance grant being 80:20.

While the 80:20 ratio has been maintained for the basic and the performance grant, this Commission has advocated that it is for the state governments to work out a detailed procedure for the disbursal of the performance grant to ULBs. This is a deviation from the recommendation made by the previous FC, which had laid down nine conditions to be fulfilled for the ULBs to lay claim to the performance grant, which were all very relevant and in the form of reforms.

For example, repeated recommendations relating to the strengthening of State Finance Commissions did not make much impact and that seems to be the reason to require the states to prescribe through an Act the qualifications of members of SFCs through passage of legislation. It seems more than clear that many states could not act promptly with respect to these nine reforms, and as a result the total performance grant claimed must be too small.

The FFC, after leaving it to the states to lay down the required procedures, talks of only three eligibility criteria for the urban bodies: the submission of audited annual accounts; an increase in "own-revenues" over the preceding year; and the yearly publication of benchmarks relating to basic urban services.

Further, the FFC has emphatically recommended that no further conditions or directions other than those indicated by the Commission should be imposed either by the central or the state governments for release of funds. This should make it easier for the ULBs to claim most if not all of the performance grant component. In the context of a general unwillingness of both states and local bodies to adopt reform, this change in approach should help.

There are other recommendations also which could help improve the urban governance system in the country. Saying that there is considerable scope for local bodies to improve revenues from their own sources, the FFC puts the onus on the state governments to take measures to augment those resources - by taking action relating to property tax, levy of vacant land tax, sharing of land conversion charges with municipalities, and many others. The importance of municipal bonds as a key source of revenue for the urban bodies has once again been emphasised by this Commission by recommending that local bodies and states explore the issuance of municipal bonds as a source of finance with suitable support from the Union.

Basing its argument on the point that improvements in the quality of basic services are likely to lead to an increase in the willingness of citizens to pay for the services, the FFC says grants to local bodies should be spent on strengthening the delivery of basic services such as water supply, sanitation, sewerage, solid waste management, street lighting, roads and others.

While the FFC has ensured that urban local bodies get more resources during the five-year period from 2015 to 2020, it has also given a detailed agenda for action. Who will monitor whether states are taking these up in all seriousness and providing the required support measures? Since the central government is presently giving shape to two high-profile urban programmes ("Smart Cities" and "500 Habitations"), it would be desirable to introduce these requirements laid down by the FFC as reform conditions to be met by the states during this five-year period.

This would be a major contribution to strengthening urban governance in the country and ensure improvements in basic services delivery across India's cities and towns.

Five game-changers in the Budget

This Budget signals a shift from a hand-out to a hand-up economy. Many are disappointed that it did not go far enough: the path of fiscal consolidation was delayed; big-bang reforms were postponed; the middle class, women, the environment and agriculture were neglected. This is all partly true. Perhaps the Delhi election results made the government more cautious. But the Budget does have some features which, if implemented and followed up seriously, could alter India's economic governance fundamentally and change the role of the state in the economy.

The new GDP numbers have also delivered a "doosra", making it harder to assess the Budget. They may be an improvement technically but don't yet meet the smell test, as every other indicator does not show the economy doing so well. And if the economy was doing as well as the new GDP numbers show, then why deviate from the fiscal consolidation path?

But leaving that aside for now, the Budget does contain five game-changers.

The first is fiscal devolution. By accepting fully and budgeting for the recommendations of theFourteenth Finance Commission or FFC, the Budget puts teeth into the idea of cooperative and competitive federalism. The net transfers to the states do not go up by a lot - some 0.35 per cent of GDP - but the states will have much greater freedom to decide how to spend their resources. In the past not only was the Centre keeping too much of the divisible pool in its own hands, it was also forcing states to spend their fungible financing on the state share of centrally designed flagship schemes. A know-it-all Centre, at the apex of which sat the Planning Commission, decided on central schemes for the entire country and required states to implement them with matching funds. So the same scheme would be designated for health, education, rural electrification or mid-day meals in Kerala, Nagaland, Rajasthan and Jammu and Kashmir, where the development needs or the state implementation capacity were very different. Very little flexibility was permitted. With the fiscal devolution now in the Budget, each state will have much greater freedom on how to spend its funds, how to design them to match administrative capacity - and the number of centrally sponsored schemes will be reduced. The onus of delivering and accountability will be on states, not on the Centre.

The second is universal social security, or "Jan Kalyan". Three new schemes - Atal Pension Yojana, PM Jyoti Bima Yajana, and PM Suraksha Bima Yojana - have been announced dealing with accident, health and old-age insurance. If India wants to become a more capitalistic and a less socialist economy, a safety net is vital as it will allow bolder labour reforms in future, and boost consumption. Lack of safety nets makes any reforms in labour markets more risky and also forces people to save more for health and old-age needs.

The third is the proposed bankruptcy law, without which business contracts are not easily enforceable, bad loans remain on the books for too long and risk aversion sets in. A good bankruptcy law will allow much quicker dispute resolution, and will allow economic contractual issues be taken to special bankruptcy courts and reduce the burden on the court system.

The fourth is the revival of "strategic disinvestment" - the Indian euphemism for privatisation. This was first pushed forward by the first National Democratic Alliance government under Atal Bihari Vajpayee, and has been fortunately revived in this budget. Several Navratnas are being considered - IOC, NALCO, BHEL, NMDC, and the Dredging Corporation of India (a Miniratna). India has locked up large amounts of capital in these companies with low returns, and it's time to take a more strategic look at how to unlock this capital - so that these companies must become globally competitive or be privatised.

The fifth game changer is the Investment and Infrastructure Fund. The Rs 70,000 crore increase in infrastructure spending is good, but it's a drop in the bucket compared to what India needs. India does not have the fiscal space that China and some other East Asian countries followed for their infrastructure investment. A new PPP model is the only way out to try and bring in private capital. The new Infrastructure and Investment Fund can be used to leverage a new PPP approach. The Congress government set up an Investment Fund in the 1990s to hold the proceeds from disinvestment. But this fund was gradually diluted and for all practical purposes absorbed into the normal budget. But the new fund can be used to leverage additional resources, issue attractive tax-free infrastructure bonds only if it is run as a separate commercial entity, like a sovereign wealth fund, and not as a revenue arm of the Budget.

Some Budget decisions should be reconsidered. The decision to treat foreign portfolio investment the same as foreign direct investment is one such bad idea which could come back to haunt India in the future. India needs to find ways to attract genuine FDI. Treating FPI on a par with FDI will pad up the numbers on foreign investment but will take away the pressure to carry out the kind of reforms we need to attract genuine FDI for 'Make in India'.

One Budget is not enough to change course fully. Incrementalism can only work if subsequent Budgets and opportunities in between Budgets are used to reform as well. The FM must also signal that the subsequent budgets will tackle the missed reforms - the delivery of food and fertiliser subsidies, widening the tax base and introduction of the GST, power sector reforms and more aggressive reforms of PSUs and state-controlled banks. A directional roadmap is needed.

Such a golden opportunity to change the role of the state will not come easily again and must be grasped. The state must not be a producer but an enabler. As the old saying goes: "Jahan raja vyapari, wahan praja bhikhari" ("where the king is in business, there the people are beggars").

Gandhi statue unveiled at Britain’s Parliament Square

Gandhi is the first Indian and the only person never to have been in a public office to be honoured with a statue at the Square.

A historic bronze statue of Mahatma Gandhi was unveiled at the Parliament Square in London on Saturday, standing adjacent to iconic leaders such as Britain’s war—time Prime Minister Winston Churchill and anti—apartheid icon Nelson Mandela.

A galaxy of political leaders led by British Prime Minister David Cameron and Finance Minister Arun Jaitley were joined by Bollywood legend Amitabh Bachchan and the Mahatma Gandhi’s grandson Gopalkrishna Gandhi at the ceremony to unveil the 9—foot statue of the Father of the Nation.

Gandhi is the first Indian and the only person never to have been in a public office to be honoured with a statue at the Square.

The statue was unveiled jointly by Cameron and Jaitley as chants of “Raghupati Raghav Raja Ram,” a popular bhajan that was Gandhi’s favourite, reverberated in the air.

“This statue is a magnificent tribute to one of the most towering figures in the history of world politics and by putting Mahatma Gandhi in this famous Square, we are giving him an eternal home in our country,” said Cameron.

Quoting some of Gandhi’s famous words, Cameron highlighted how his teachings remain as potent today.

“This statue celebrates the incredibly special friendship between the world’s oldest democracy and its largest, as well as the universal power of Gandhi’s message,” Cameron said.

“Our ties with India have remained close throughout history and continue to go from strength to strength —— through mutual respect as equals, cooperation and trade, and of course through the one—and—a—half million Indians who do so much to make Britain the country it is today, bringing our two countries closer, to the benefit of both,” he said.

Jaitley, invited to the UK especially for the unveiling, said the statue was a tribute to the British sense of civility that they now choose to honour someone who was conventionally regarded as their adversary.

“It is a great tribute to both British liberalism and British democracy that they have now chosen Gandhi to share what is the most prominent public space in this country. It is a great day when two adversaries and contrarian viewpoints converge to appreciate each other,” Jaitley said.

“The statue will help ensure that the legacy of Gandhi lives on for future generations. It also marks an important, historic moment celebrating the strong bond between our two nations. India and the UK share the same values and we are a partnership of equals. This lasting friendship is just one of many legacies left by Gandhi, which I am keen that we work hard to strengthen further,” he said.

current affairs

Union Government has selected legendary boxer and five-time world boxing champion MC Mary Kom as Brand Ambassador for the North East Region.

It was announced by Union Minister of Development of North Eastern Region (DoNER) Jitendra Singh at a two-day business summit in New Delhi.

MC Mary Kom was selected to showcase the potential of the North East region which can offer Rs. 2.4 trillion business opportunities across various sectors.

...............Pakistan successfully tested its first indigenously built all-weather armed drone named Burraq and a laser guided missile named Barq.

By successfully testing of Burraq, Pakistan became the 9th country in the World to develop an unmanned combat aerial vehicle (UCAV) domestically.

..................India’s Dr. Alka Beotra has been nominated as a member of the World Association of Anti-Doping Scientists’ (WAADS) executive board.

She is only Asian in the six-member executive board of WAADS and will have tenure of 3 years starting from March 2015.

At present, Dr. Alka Beotra is Scientific Director of National Dope Testing Laboratory (NDTL).

...............Top 10 Universities in World Reputation Rankings 2015 are

• Harvard University (US).
• University of Cambridge (UK).
• University of Oxford (UK).
• Massachusetts Institute of Technology (US).
• Stanford University (US).
• University of California, Berkeley (US).
• Princeton University (US).
• Yale University (US).
• California Institute of Technology (US).
• Columbia University (US).
• The top ten universities are all located in the US and United Kingdom (UK). US alone has 8 universities in the top ten rankings. While, UK has 2 universities in the top 10 ranking.
• 2015 reputation rankings shows that US alone has 43 higher education institutions in the top 100. While, United has 12 universities in the top 100.
• Germany is third best-represented nation in the ranking after the US and the UK. It has 6 universities in top 100.

Major Highlights of the Insurance Laws (Amendment) Bill 2015

The Insurance Laws (Amendment) Bill, 2015 was passed by the Lok Sabha on 4th March, 2015 and by the Rajya Sabha yesterday i.e. on 12th March, 2015.The passage of the Bill thus paved the way for major reform related amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999. The Insurance Laws (Amendment) Act 2015 to be so enacted, will seamlessly replace the Insurance Laws (Amendment) Ordinance, 2014, which came into force on 26th December 2014. The amendment Act will remove archaic and redundant provisions in the legislations and incorporates certain provisions to provide Insurance Regulatory and Development Authority of India (IRDAI) with the flexibility to discharge its functions more effectively and efficiently. It also provides for enhancement of the foreign investment cap in an Indian Insurance Company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control.



2. Capital Availability: In addition to the provisions for enhanced foreign equity, the amended law will enable capital raising through new and innovative instruments under the regulatory supervision of IRDAI. Greater availability of capital for the capital intensive insurance sector would lead to greater distribution reach to under / un-served areas, more innovative product formulations to meet diverse insurance needs of citizens, efficient service delivery through improved distribution technology and enhanced customer service standards. The Rules to operationalize the new provisions in the Law related to foreign equity investors have already been notified on 19th Feb 2015 under powers accorded by the ordinance.

The four public sector general insurance companies, presently required as per the General Insurance Business (Nationalisation) Act, 1972 (GIBNA, 1972) to be 100% government owned, are now allowed to raise capital, keeping in view the need for expansion of the business in the rural and social sectors, meeting the solvency margin for this purpose and achieving enhanced competitiveness subject to the Government equity not being less than 51% at any point of time.



3. Consumer Welfare: Further, the amendments to the laws will enable the interests of consumers to be better served through provisions like those enabling penalties on intermediaries / insurance companies for misconduct and disallowing multilevel marketing of insurance products in order to curtail the practice of mis-selling. The amended Law has several provisions for levying higher penalties ranging from up to Rs.1 Crore to Rs. 25 Crore for various violations including mis-selling and misrepresentation by agents / insurance companies.  With a view to serve the interest of the policy holders better, the period during which a policy can be repudiated on any ground, including mis-statement of facts etc., will be confined to three years from the commencement of the policy and no policy would be called in question on any ground after three years.

The amendments provide for an easier process for payment to the nominee of the policy holder, as the insurer would be discharged of its legal liabilities once the payment is made to the nominee.

It is now obligatory in the law for insurance companies to underwrite third party motor vehicle insurance as per IRDAI regulations. Rural and Social sector obligations for insurers are retained in the amended laws.



4. Empowerment of IRDAI: The Act will entrust responsibility of appointing insurance agents to insurers and provides for IRDAI to regulate their eligibility, qualifications and other aspects. It enables agents to work more broadly across companies in various business categories; with the safeguard that conflict of interest would not be allowed by IRDAI through suitable regulations.

IRDAI is empowered to regulate key aspects of Insurance Company operations in areas like solvency, investments, expenses and commissions and to formulate regulations for payment of commission and control of management expenses.

It empowers the Authority to regulate the functions, code of conduct, etc., of surveyors and loss assessors. It also expands the scope of insurance intermediaries to include insurance brokers, re- insurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors and such other entities, as may be notified by the Authority from time to time.

Further, properties in India can now be insured with a foreign insurer with prior permission of IRDAI; which was earlier to be done with the approval of the Central Government.



5. Health Insurance: The amendment Act defines 'health insurance business' inclusive of travel and personal accident cover and discourages non-serious players by retaining capital requirements for health insurers at the level of Rs. 100 Crore, thereby paving the way for promotion of health insurance as a separate vertical.



6. Promoting Reinsurance Business in India: The amended law enables foreign reinsurers to set up branches in India and defines‘re-insurance’ to mean “the insurance of part of one insurer’s risk by another insurer who accepts the risk for a mutually acceptable premium”, and thereby excludes the possibility of 100% ceding of risk to a re-insurer, which could lead to companies acting as front companies for other insurers. Further, it enables Lloyds and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49% cap.



7. Strengthening of Industry Councils: The Life Insurance Council and General Insurance Council have now been made self-regulating bodies by empowering them to frame bye-laws for elections, meetings and levy and collect fees etc. from its members. Inclusion of representatives of self-help groups and insurance cooperative societies in insurance councils has also been enabled to broad base the representation on these Councils.



8. Robust Appellate Process: Appeals against the orders of IRDAI are to be preferred to SAT as the amended Law provides for any insurer or insurance intermediary aggrieved by any order made by IRDAI to prefer an appeal to the Securities Appellate Tribunal (SAT).

9. Thus, the amendments incorporate enhancements in the Insurance Laws in keeping with the evolving insurance sector scenario and regulatory practices across the globe. The amendments will enable the Regulator to create an operational framework for greater innovation, competition and transparency, to meet the insurance needs of citizens in a more complete and subscriber friendly manner. The amendments are expected to enable the sector to achieve its full growth potential and contribute towards the overall growth of the economy and job creation

NASA launches 4 spacecraft to solve magnetic mystery

NASA launched four identical spacecraft Thursday on a billion-dollar mission to study the explosive give-and-take of the Earth and sun’s magnetic fields.

The unmanned Atlas rocket – and NASA’s Magnetospheric Multiscale spacecraft – soared into a clear late-night sky, right on time. Within two hours, all four observatories were flying free.

”Just picture-perfect,” launch manager Omar Baez said early Friday. ”Everybody’s cheering. … Can’t ask for any more.”

The quartet of observatories is being placed into an oblong orbit stretching tens of thousands of miles into the magnetosphere – nearly halfway to the moon at one point. They will fly in pyramid formation, between 6 miles (10 kilometers) and 250 miles (402 kilometers) apart, to provide 3-D views of magnetic reconnection on the smallest of scales.

Magnetic reconnection is what happens when magnetic fields like those around Earth and the sun come together, break apart, then come together again, releasing vast energy. This repeated process drives the aurora, as well as solar storms that can disrupt communications and power on Earth. Data from this two-year mission should help scientists better understand so-called space weather.

Each observatory resembles a giant octagonal wheel, stretching more than 11 feet (3.35 meters) across and 4 feet (1.22 meters) high, and weighing 3,000 pounds (1,360.79 kilograms) apiece. Numbered and stacked like tires on top of the rocket for launch, No. 4 popped free first more than an hour after liftoff, followed every five minutes by another.

”They’re all healthy and turned on. Essentially, we’re all green and headed into our mission,” said NASA project manager Craig Tooley.

Once the long, sensor-laden booms are extended in a few days, each spacecraft could span a baseball field.

Principal investigator Jim Burch from the Southwest Research Institute in San Antonio said measurements will be made down to the electron scale, significantly smaller than previous heliophysics missions. In all, there are 100 science sensors. Primary science-gathering will begin this summer, following a five-month checkout.

The findings from the $1.1 billion mission will be useful in understanding magnetic reconnection throughout the universe. Closer to home, space weather scientists along with everyone on Earth hopefully will benefit.

”We’re not setting out here to solve space weather,” Burch said. ”We’re setting out to learn the fundamental features of magnetic reconnection because that’s what drives space weather.

India, Sri Lanka sign 4 agreements

 India and Sri Lanka today signed four agreements during Narendra Modi's maiden visit to the country, the first bilateral tour by an Indian premier in 28 years, with the Prime Minister announcing a slew of measures aimed at resetting ties with the strategic neighbour.

Prime Minister Modi, who arrived here this morning on the final stop of his three-nation tour of Indian Ocean island nations, met Lankan President Maithripala Sirisena and discussed bilateral and issues of regional importance.

"I am conscious of the significance of this visit. This is the first stand alone bilateral visit by an Indian Prime Minister since 1987," Modi said at a joint press meet with Sirisena, who was in India last month on his first foreign trip after assuming office in January.

The Prime Minister said his meeting with Sirisena has been very productive. It "gives me confidence and optimism about the future of our relations," Modi said.

The two sides signed four agreements on visa, customs, youth development and building Rabindranath Tagore memorial in Sri Lanka.

"The agreement today on cooperation between our customs authorities is a step in that direction. It will simplify trade and reduce non-tariff barriers on both sides," he said.

Modi said the progress made by two countries reflects "our shared commitment to stronger economic cooperation".

"Our trade has seen impressive growth over the past decade. I am aware of your concerns about trade with India. As I said in Delhi, we will try and address them," he said.
Modi said India stands ready to help Trincomalee become a petroleum hub and announced that New Delhi will provide a fresh Line of Credit of up to USD 318 million for the railways sector in Lanka.

"This will be used to procure rolling stock, and to restore and upgrade existing railway track," he said.

The Prime Minister also said that the Reserve Bank of India and the Central Bank of Sri Lanka have agreed to enter into a Currency Swap Agreement of USD 1.5 billion to help keep the Sri Lankan rupee stable.

He lauded the efforts of newly elected President Sirisena and assured him of all help from India.

"We stand with you in your efforts to build a future that accommodates the aspirations of all sections of society, including the Sri Lankan Tamil community, for a life of equality, justice, peace and dignity in a united Sri Lanka.

"We believe that early and full implementation of the 13th Amendment and going beyond it would contribute to this process," said Modi, who is here as part of his three-nation tour of Indian Ocean island nations that took him to Seychelles and Mauritius.