The churn in economic policy thinking

The several flaws of the Bretton Woods system of international cooperation exposed after 2008 need to be addressed

Policy economists are going back to the drawing board. The anaemic global recovery more than eight years after the North Atlantic financial crisis has led macroeconomists to either seek new prescriptions or revive old ones to get economies back on track. The political backlash in many parts of the world against inequality within nations—even as inequality at the global level has reduced because of the progress in China and India—has forced new discussions on development policy.

Exhibit A: The December issue of the Finance and Development quarterly published by the International Monetary Fund has several discussions about the distributional consequences of free trade. One underlying theme in these essays is that world trade has increased global welfare at the aggregate level but there has been no structured attempt to compensate the losers in order to ensure that nobody is worse off—the classic Pareto principle of welfare economics. This comes even as the multilateral lender has altered its position on a range of other issues such as the efficacy of fiscal spending or capital account convertibility. Japan has even been asked to toy with an incomes policy to deal with its weak consumer demand, a policy option that was last seriously considered way back in the 1970s.

Exhibit B: Thirteen of the best development economists in the world have this month released a statement in Stockholm outlining the new contours of development policy. This group includes four former chief economists of the World Bank, and three Indians—Kaushik Basu, Ravi Kanbur and Ashwini Deshpande. They begin by arguing that rapid economic growth is needed to spread opportunity as well as generate resources to fund social objectives. The Stockholm statement by these development economists stresses the need for programmes to address inequality, climate change and inclusive growth. One of the most interesting recommendations is to focus on social norms to build the sort of trust that is found in successful economies.

These are two of the most recent examples of fundamental rethinking about the goals of economic policy. It is important to recognize the risk of maverick politicians across the world throwing the baby out with the bathwater. For example, rising protectionist sentiment in many rich countries could threaten the open global trading system that has been the bedrock of economic progress. Similarly, it is hard to see how the poor can benefit when there is no macroeconomic stability because of reckless fiscal and monetary policies.

The problem in recent years has been one of overreach. Free trade agreements have been replaced by more ambitious attempts to harmonize regulations, protect the rights of investors and guarantee intellectual property—not the sort of issues that traditional free trade advocates would have argued for. In international macroeconomics, the Bretton Woods goal of current account convertibility was replaced by a push towards capital account convertibility to benefit the financial sector.

The new intellectual initiatives are undoubtedly welcome. Economic policy thinking has to keep up with the times. It has to develop new ways to deal with old problems. However, it is also important to get the basics right. There is irrefutable evidence that the biggest gains against global poverty have been made when markets allocate resources, trade barriers are low, taxes are stable, private property is protected, rules are more important than discretion and there is macroeconomic stability. What needs to be done is more explicit focus on issues such as inequality, climate change and skills.

The global system is now at an interesting juncture. This system was put in place after the terrible episodes of protectionism, macro instability and economic stagnation led to the slaughter in a world war. The Bretton Woods system of international cooperation segued the second wave of globalization after 1990, as the Soviet Union collapsed and countries such as China and India joined the world economy. There have been several flaws in this system that were exposed after 2008, but the economic progress as well as the improvement in social indicators during this period cannot be ignored either.

The backlash against globalization in many rich countries presents a profound challenge to the framework of global institutions. It is now imperative that countries such as China and India step up to the podium to protect the global system that has helped them make such dramatic progress over the past 25 years—and at the same time take a more active part in the ongoing intellectual churn—a modernsamudra manthan—that should hopefully lead to a new policy consensus.

Where did the Bretton Woods consensus go wrong? 

Preparing for Policy Implementation 3.0

The eradication of polio in India was a remarkable achievement. The government implemented a universal immunization programme aimed at 100% coverage of children under the age of 5. A standard dose of vaccine was given to every child across the country including remote villages. It was a huge logistics operation.

Though right now India’s logistics management capabilities are being severely tested to deliver new currency notes to banks and ATMs around the country, India’s ability for “Policy Implementation 1.0”, which requires management of large logistical challenges, is remarkable. The country has the ability to carry out a standard procedure in millions of locations, many in very difficult conditions. It conducts the world’s largest elections, bringing electronic voting machines even to remote places in the high mountains. The issuance of unique, electronic identity cards to all Indians—the Aadhaar project—was the latest illustration of the country’s logistical capabilities in implementing a public policy.

Policy Implementation 1.0 can work well when one size fits all—the same dose of the same polio vaccine, the same procedure for voting, the same identity card. However, many public policies require something in addition to the ability to deliver a standard product or carry out a standard procedure across the country. They require “Policy Implementation 2.0” capabilities, to change behaviour of citizens and obtain cooperation of communities. An example is sanitation. Large programmes for installing toilets have not been able to change behaviour to eradicate open defecation. Public health programmes invariably require better local governance, rather than central delivery of services. India’s persistent neglect of local governance capabilities is the principal reason for public health in India lagging behind China, Vietnam, Thailand, Indonesia, and many other developing countries.

More complex changes in the economy require coherence amongst many policies, coordination amongst many agencies, and cooperation of many stakeholders. They require even more sophisticated “Policy Implementation 3.0” competencies. Industrial policy is an example of a 3.0 level policy challenge. As in the case of Policy 2.0, the behaviour of stakeholders must be changed—in this case, entrepreneurs. However, several conditions in the economy must be changed together to improve conditions for enterprises to be productive and to attract more investments into the economy. Physical infrastructure must be improved. An array of regulations and institutions must be tuned concerning labour management, corporate governance, land acquisition, and other subjects. Often, financial institutions need change too.

The complexity of Policy Implementation 3.0 generally provokes two opposite responses. One is, “just leave it to the market”. The market will figure out what is best. The other response, when large-scale change is required, is to use a top-down implementation approach.

When the market is not working, or when the market is not producing the outcomes society wants, citizens demand that the government must act. This is the challenge for many ideologically pro-market governments today. In the US and the UK, for example, citizens are demanding that their governments must do something to create more jobs by inducing more production within their countries. Therefore, the need for some form of “industrial policy” has emerged in these countries too.

The opposite response, to leave it to the market, is central planning. This approach was adopted by many countries, including India, for industrial development following the example of the Soviet Union. Central planning down to the last level—how much of what will be produced by whom—was basically a Policy Implementation 1.0 approach applied to a Policy 3.0 challenge. With contradictions in regulations by many ministries and departments, and with further regulations attempting to sort out the contradictions, Indian industrial development got tied up in knots of red tape. Entrepreneurship and innovation were stifled.

In 1991, India threw out central planning of industry. Industrial policy became a bad word following the fashion of the Washington Consensus which urged governments to leave industrial development to the market. That has not worked too well for India either. Manufacturing has not grown as much as it should have considering India’s need for more jobs outside the agricultural sector, and considering the potential India had, which was comparable to China’s, whose manufacturing sector has grown since then to seven-eight times the size of India’s.

So India is at the crossroads again. What approach should it take to create more jobs? Jobs cannot be planted into the economy top-down by the government (except jobs on government’s own rolls). A jobs policy must stimulate changes in behaviour of entrepreneurs, employees, and investors. To do this, it must make many changes in many areas in a coherent and coordinated manner. It must apply a Policy Implementation 3.0 process.

Policy Implementation 3.0 requires participation of many ministries and agencies, and many stakeholders. The agencies have their own turfs and tend to operate in their own silos. Coordination amongst them is generally difficult. Stakeholders in a jobs policy, such as employers, unions, environmentalists, landowners, and communities, will have contending views on many matters. To bring them together, to convert the confusion amongst agencies into coordination, and the contentions amongst stakeholders into collaboration, requires the application of systematic processes for their participation in the shaping and implementation of policies.

Policy Implementation 3.0 requires a different mindset towards management of complex systems, as well as different competencies than Policy Implementation 1.0 (or even 2.0). India’s progress will not be as fast as it could be, and needs to be, until governments at the Centre and in the states change their approaches to development and implementation of policies. Less top-down control; more systematic participation. In fact, a principal role of the Centre must be to build capabilities at various levels of governance, in cities, in states, and in the Centre itself, for participative policy formulation and implementation.

A looming demographic disaster

A looming demographic disaster

Increasing inequality and growing unemployment are a sure-fire recipe for social strife

In the two decades between 1991-92 when the brave new world of liberalization dawned on us and 2011-12, total employment in the country grew at a compound annual growth rate (CAGR) of a piffling 1.43%. That little nugget of information, along with lots of other data, has been recently published in a report on Measuring Productivity at the Industry Level—the India KLEMS database, available on the Reserve Bank of India website.

In the decade 2001-02 to 2011-12, according to the database, total employment increased at an even lower CAGR of 1.22%. And this is the period when we had a huge boom in the economy. Value added in the economy at constant prices over this period had a CAGR of 7.8%. The question is: if employment during this global boom was so low, what are the prospects of employment growth now?

Indeed, if the government’s plans to ensure greater tax compliance and if its push to digital payments are successful it is very likely that the informal sector will be hard hit, which will mean lower employment in the sector which accounts by far the most jobs. Since the expansion of the formal sector will take time and in any case its record of absorbing labour has so far been underwhelming, rising unemployment and underemployment will be the number one headache for the government. This is all the more likely given the backlash against globalisation in the advanced economies and the increase in protectionism. And that is not taking into account the continuous push towards more labour-saving technologies, including robotics.

Has there been a change in the structure of employment in the country since liberalisation? Well, in 1991-92 13.8% of workers were in regular employment, 31% were casual workers, while 55.2% were self-employed. Twenty years later, in 2011-12, the percentage of workers in regular employment went up to 18.5%, the percentage of casual workers was 29.8% and the rest 51.7% were self-employed.

So there has been some improvement in regular employment, but it is painfully slow. That more than half of the working population is self-employed is not because of the great entrepreneurial energies of the masses, but simply because they are forced to eke out a precarious existence by taking in one another’s washing, in Mark Twain’s memorable phrase. Very clearly, even after two decades of liberalisation, not only do we have jobless growth, but the quality of the jobs on offer is also abysmal for the mass of the population.

As economies develop the number of workers in agriculture diminishes as they find employment in manufacturing and in services, sectors with higher productivity. How has that played out in India? It’s true there has been a substantial movement out of agriculture. In 1991-92, jobs in agriculture and allied activities were 64.6% of total employment, trade accounted for 7.5% and construction employed a mere 3.3%.

Two decades later, agriculture and allied activities accounted for 48.1% of total employment, construction 10.4%, trade 9.7% and transport & storage another 4.1%—these sectors were the biggest employers. The construction sector has seen the most increase in share of jobs for the masses. Note that the clampdown on black money is likely to result in the sector being depressed for some time, with dire implications for job growth.

The database also shows that the share of labour income in value added has been coming down steadily. Out of the 27 industry groups, labour’s share of value added was lower in 17 sectors in 2011-12, compared to 1991-92. This is particularly true for the industrial sector. Conversely, the capital income share in gross value added has gone up. Capital has reaped far more gains from liberalisation than labour, a fact also seen in the steady rise in the wealth of the richest 1% of the population, detailed in the Credit Suisse wealth reports.

What about productivity? Except for a few sectors, there has been substantial improvement in labour productivity. Unfortunately though, the index of labour productivity for the construction sector, which was 100 in 1980-81, fell to 87.44 in 2011-12, as Gaurav Kapur, independent economist, points out. Note that a big chunk of the rise in employment has been in construction, which means the new jobs for the masses have been in a sector with declining labour productivity. If we take total factor productivity, which depends on technological change and innovation and the intensity with which inputs are utilised then we see that, apart from a few sectors like telecom, TFP growth has been relatively slow. One reason for this is undoubtedly the large informal sector.

In short, the last two decades have proved that while growth is necessary, it is not enough. Unless many more jobs are created for the masses, India’s much-touted demographic dividend is likely to turn into a demographic disaster, with mass migration from villages to city slums, adding to a vast lumpenproletariat with little stake in a stable society. Increasing inequality and growing unemployment is a sure-fire recipe for social strife.

International Anti-Corruption Day (IACD)

The International Anti-Corruption Day (IACD) is observed annually on December 9 to raise public awareness of corruption and what people can do to fight it. Observance of the day aims to promote and strengthen measures to prevent and combat corruption more efficiently and effectively. It also highlights the role of the United Nations Convention against Corruption in combating and preventing it. 2016 Theme: “United against corruption for development, peace and security”.

 Background The UN General Assembly (UNGA) had designated December 9 as International Anti-Corruption Day by passing resolution 58/4 of October 31, 2003. It was adopted to raise people’s awareness of corruption and role of the United Nations Convention against Corruption (UNCAC) in combating and preventing it. The UNCAC is the first legally binding, international anti-corruption instrument that provides a chance to mount a global response to corruption.

2016 Global Terrorism Index (GTI) India was ranked 7th among

According to the 2016 Global Terrorism Index (GTI) India was ranked 7th among 163 countries in the list of most impacted by terrorism in 2015. The fourth edition of the index was released by Sydney-based think-tank Institute for Economics & Peace. India is one of six Asian countries ranked in the top 10 nations most impacted by terrorism.

Global facts in 2016 GTI

According to GTI 2016, Iraq was the worst hit by terror in 2015 followed by Afghanistan and Nigeria. Pakistan and Syria were ranked fourth and fifth respectively. Deaths from terror attacks globally declined 10%from the highest recorded level of 32,765 in 2014 to 29,376 in 2015. Economic loss from terrorism is $635 billion over 16 years from 2000 to 2015. This amount is equivalent to annual gross domestic product (GDP) of Egypt and Malaysia. The economic impact of terrorism, as a proportion of a country’s GDP, is highest in Iraq at 17.3%, followed by Afghanistan (16.8%) and Syria (8.3%). ISIS has overtaken its African affiliate Boko Haram as the world’s deadliest terrorist group in 2015. It expanded to 11 countries in 2015 from six in 2014. Since 2014, the loss has declined from a 16-year high of $106 billion to the second-highest level of $90 billion, at constant 2015 prices. Violent conflict in 2015, as a whole, caused $13.6 trillion loss to global economy (in purchasing parity terms), or 13.3% of global GDP. OECD countries, the world’s most developed saw 650% rise in terror-related deaths from 77 in 2014 to 577 in 2015. Turkey (OECD member) witnessed 337 deaths in 2015, highest among OECD countries. These attacks were carried by the separatist Kurdistan Worker’s Party (PKK) and ISIS.

India related facts in 2016 GTI In India, as many as 797 terrorist attacks were recorded in 2015 up by 4% since 2014. Besides, 289 terrorism-related deaths were recorded in India, a 45% decline over 2014. However, number of Indian Army and paramilitary soldiers killed this year is at an eight-year high. 2015 attacks were the highest since 2000, 80% were non-lethal. India experienced 7% of all terrorist attacks around the world, the fourth highest after Iraq (20%), Afghanistan (14%) and Pakistan (8%). In 2015, India suffered fewer terror attacks (797) than only Iraq (2,415), Afghanistan (1,715) and Pakistan (1,008). India suffered twice as many attacks as Syria (384). About Global Terrorism Index (GTI) The GTI systematically rank the nations of the world according to terrorist activity. It scores a country is calculated based on weightage assigned to four indicators. They are total number of terrorist incidents, injuries, fatalities and property damage sustained in the year in question.

According to the 2016 Global Terrorism Index (GTI) India was ranked 7th among 163 countries in the list of most impacted by terrorism in 2015. The fourth edition of the index was released by Sydney-based think-tank Institute for Economics & Peace. India is one of six Asian countries ranked in the top 10 nations most impacted by terrorism. Global facts in 2016 GTI According to GTI 2016, Iraq was the worst hit by terror in 2015 followed by Afghanistan and Nigeria. Pakistan and Syria were ranked fourth and fifth respectively. Deaths from terror attacks globally declined 10%from the highest recorded level of 32,765 in 2014 to 29,376 in 2015. Economic loss from terrorism is $635 billion over 16 years from 2000 to 2015. This amount is equivalent to annual gross domestic product (GDP) of Egypt and Malaysia. The economic impact of terrorism, as a proportion of a country’s GDP, is highest in Iraq at 17.3%, followed by Afghanistan (16.8%) and Syria (8.3%). ISIS has overtaken its African affiliate Boko Haram as the world’s deadliest terrorist group in 2015. It expanded to 11 countries in 2015 from six in 2014. Since 2014, the loss has declined from a 16-year high of $106 billion to the second-highest level of $90 billion, at constant 2015 prices. Violent conflict in 2015, as a whole, caused $13.6 trillion loss to global economy (in purchasing parity terms), or 13.3% of global GDP. OECD countries, the world’s most developed saw 650% rise in terror-related deaths from 77 in 2014 to 577 in 2015. Turkey (OECD member) witnessed 337 deaths in 2015, highest among OECD countries. These attacks were carried by the separatist Kurdistan Worker’s Party (PKK) and ISIS. India related facts in 2016 GTI In India, as many as 797 terrorist attacks were recorded in 2015 up by 4% since 2014. Besides, 289 terrorism-related deaths were recorded in India, a 45% decline over 2014. However, number of Indian Army and paramilitary soldiers killed this year is at an eight-year high. 2015 attacks were the highest since 2000, 80% were non-lethal. India experienced 7% of all terrorist attacks around the world, the fourth highest after Iraq (20%), Afghanistan (14%) and Pakistan (8%). In 2015, India suffered fewer terror attacks (797) than only Iraq (2,415), Afghanistan (1,715) and Pakistan (1,008). India suffered twice as many attacks as Syria (384). About Global Terrorism Index (GTI) The GTI systematically rank the nations of the world according to terrorist activity. It scores a country is calculated based on weightage assigned to four indicators. They are total number of terrorist incidents, injuries, fatalities and property damage sustained in the year in question.

Read more at: http://currentaffairs.gktoday.in/month/current-affairs-december-2016/page/4

According to the 2016 Global Terrorism Index (GTI) India was ranked 7th among 163 countries in the list of most impacted by terrorism in 2015. The fourth edition of the index was released by Sydney-based think-tank Institute for Economics & Peace. India is one of six Asian countries ranked in the top 10 nations most impacted by terrorism. Global facts in 2016 GTI According to GTI 2016, Iraq was the worst hit by terror in 2015 followed by Afghanistan and Nigeria. Pakistan and Syria were ranked fourth and fifth respectively. Deaths from terror attacks globally declined 10%from the highest recorded level of 32,765 in 2014 to 29,376 in 2015. Economic loss from terrorism is $635 billion over 16 years from 2000 to 2015. This amount is equivalent to annual gross domestic product (GDP) of Egypt and Malaysia. The economic impact of terrorism, as a proportion of a country’s GDP, is highest in Iraq at 17.3%, followed by Afghanistan (16.8%) and Syria (8.3%). ISIS has overtaken its African affiliate Boko Haram as the world’s deadliest terrorist group in 2015. It expanded to 11 countries in 2015 from six in 2014. Since 2014, the loss has declined from a 16-year high of $106 billion to the second-highest level of $90 billion, at constant 2015 prices. Violent conflict in 2015, as a whole, caused $13.6 trillion loss to global economy (in purchasing parity terms), or 13.3% of global GDP. OECD countries, the world’s most developed saw 650% rise in terror-related deaths from 77 in 2014 to 577 in 2015. Turkey (OECD member) witnessed 337 deaths in 2015, highest among OECD countries. These attacks were carried by the separatist Kurdistan Worker’s Party (PKK) and ISIS. India related facts in 2016 GTI In India, as many as 797 terrorist attacks were recorded in 2015 up by 4% since 2014. Besides, 289 terrorism-related deaths were recorded in India, a 45% decline over 2014. However, number of Indian Army and paramilitary soldiers killed this year is at an eight-year high. 2015 attacks were the highest since 2000, 80% were non-lethal. India experienced 7% of all terrorist attacks around the world, the fourth highest after Iraq (20%), Afghanistan (14%) and Pakistan (8%). In 2015, India suffered fewer terror attacks (797) than only Iraq (2,415), Afghanistan (1,715) and Pakistan (1,008). India suffered twice as many attacks as Syria (384). About Global Terrorism Index (GTI) The GTI systematically rank the nations of the world according to terrorist activity. It scores a country is calculated based on weightage assigned to four indicators. They are total number of terrorist incidents, injuries, fatalities and property damage sustained in the year in question.

Read more at: http://currentaffairs.gktoday.in/month/current-affairs-december-2016/page/4

According to the 2016 Global Terrorism Index (GTI) India was ranked 7th among 163 countries in the list of most impacted by terrorism in 2015. The fourth edition of the index was released by Sydney-based think-tank Institute for Economics & Peace. India is one of six Asian countries ranked in the top 10 nations most impacted by terrorism. Global facts in 2016 GTI According to GTI 2016, Iraq was the worst hit by terror in 2015 followed by Afghanistan and Nigeria. Pakistan and Syria were ranked fourth and fifth respectively. Deaths from terror attacks globally declined 10%from the highest recorded level of 32,765 in 2014 to 29,376 in 2015. Economic loss from terrorism is $635 billion over 16 years from 2000 to 2015. This amount is equivalent to annual gross domestic product (GDP) of Egypt and Malaysia. The economic impact of terrorism, as a proportion of a country’s GDP, is highest in Iraq at 17.3%, followed by Afghanistan (16.8%) and Syria (8.3%). ISIS has overtaken its African affiliate Boko Haram as the world’s deadliest terrorist group in 2015. It expanded to 11 countries in 2015 from six in 2014. Since 2014, the loss has declined from a 16-year high of $106 billion to the second-highest level of $90 billion, at constant 2015 prices. Violent conflict in 2015, as a whole, caused $13.6 trillion loss to global economy (in purchasing parity terms), or 13.3% of global GDP. OECD countries, the world’s most developed saw 650% rise in terror-related deaths from 77 in 2014 to 577 in 2015. Turkey (OECD member) witnessed 337 deaths in 2015, highest among OECD countries. These attacks were carried by the separatist Kurdistan Worker’s Party (PKK) and ISIS. India related facts in 2016 GTI In India, as many as 797 terrorist attacks were recorded in 2015 up by 4% since 2014. Besides, 289 terrorism-related deaths were recorded in India, a 45% decline over 2014. However, number of Indian Army and paramilitary soldiers killed this year is at an eight-year high. 2015 attacks were the highest since 2000, 80% were non-lethal. India experienced 7% of all terrorist attacks around the world, the fourth highest after Iraq (20%), Afghanistan (14%) and Pakistan (8%). In 2015, India suffered fewer terror attacks (797) than only Iraq (2,415), Afghanistan (1,715) and Pakistan (1,008). India suffered twice as many attacks as Syria (384). About Global Terrorism Index (GTI) The GTI systematically rank the nations of the world according to terrorist activity. It scores a country is calculated based on weightage assigned to four indicators. They are total number of terrorist incidents, injuries, fatalities and property damage sustained in the year in question.

Read more at: http://currentaffairs.gktoday.in/month/current-affairs-december-2016/page/4

According to the 2016 Global Terrorism Index (GTI) India was ranked 7th among 163 countries in the list of most impacted by terrorism in 2015. The fourth edition of the index was released by Sydney-based think-tank Institute for Economics & Peace. India is one of six Asian countries ranked in the top 10 nations most impacted by terrorism. Global facts in 2016 GTI According to GTI 2016, Iraq was the worst hit by terror in 2015 followed by Afghanistan and Nigeria. Pakistan and Syria were ranked fourth and fifth respectively. Deaths from terror attacks globally declined 10%from the highest recorded level of 32,765 in 2014 to 29,376 in 2015. Economic loss from terrorism is $635 billion over 16 years from 2000 to 2015. This amount is equivalent to annual gross domestic product (GDP) of Egypt and Malaysia. The economic impact of terrorism, as a proportion of a country’s GDP, is highest in Iraq at 17.3%, followed by Afghanistan (16.8%) and Syria (8.3%). ISIS has overtaken its African affiliate Boko Haram as the world’s deadliest terrorist group in 2015. It expanded to 11 countries in 2015 from six in 2014. Since 2014, the loss has declined from a 16-year high of $106 billion to the second-highest level of $90 billion, at constant 2015 prices. Violent conflict in 2015, as a whole, caused $13.6 trillion loss to global economy (in purchasing parity terms), or 13.3% of global GDP. OECD countries, the world’s most developed saw 650% rise in terror-related deaths from 77 in 2014 to 577 in 2015. Turkey (OECD member) witnessed 337 deaths in 2015, highest among OECD countries. These attacks were carried by the separatist Kurdistan Worker’s Party (PKK) and ISIS. India related facts in 2016 GTI In India, as many as 797 terrorist attacks were recorded in 2015 up by 4% since 2014. Besides, 289 terrorism-related deaths were recorded in India, a 45% decline over 2014. However, number of Indian Army and paramilitary soldiers killed this year is at an eight-year high. 2015 attacks were the highest since 2000, 80% were non-lethal. India experienced 7% of all terrorist attacks around the world, the fourth highest after Iraq (20%), Afghanistan (14%) and Pakistan (8%). In 2015, India suffered fewer terror attacks (797) than only Iraq (2,415), Afghanistan (1,715) and Pakistan (1,008). India suffered twice as many attacks as Syria (384). About Global Terrorism Index (GTI) The GTI systematically rank the nations of the world according to terrorist activity. It scores a country is calculated based on weightage assigned to four indicators. They are total number of terrorist incidents, injuries, fatalities and property damage sustained in the year in question.

Read more at: http://currentaffairs.gktoday.in/month/current-affairs-december-2016/page/4

According to the 2016 Global Terrorism Index (GTI) India was ranked 7th among 163 countries in the list of most impacted by terrorism in 2015. The fourth edition of the index was released by Sydney-based think-tank Institute for Economics & Peace. India is one of six Asian countries ranked in the top 10 nations most impacted by terrorism. Global facts in 2016 GTI According to GTI 2016, Iraq was the worst hit by terror in 2015 followed by Afghanistan and Nigeria. Pakistan and Syria were ranked fourth and fifth respectively. Deaths from terror attacks globally declined 10%from the highest recorded level of 32,765 in 2014 to 29,376 in 2015. Economic loss from terrorism is $635 billion over 16 years from 2000 to 2015. This amount is equivalent to annual gross domestic product (GDP) of Egypt and Malaysia. The economic impact of terrorism, as a proportion of a country’s GDP, is highest in Iraq at 17.3%, followed by Afghanistan (16.8%) and Syria (8.3%). ISIS has overtaken its African affiliate Boko Haram as the world’s deadliest terrorist group in 2015. It expanded to 11 countries in 2015 from six in 2014. Since 2014, the loss has declined from a 16-year high of $106 billion to the second-highest level of $90 billion, at constant 2015 prices. Violent conflict in 2015, as a whole, caused $13.6 trillion loss to global economy (in purchasing parity terms), or 13.3% of global GDP. OECD countries, the world’s most developed saw 650% rise in terror-related deaths from 77 in 2014 to 577 in 2015. Turkey (OECD member) witnessed 337 deaths in 2015, highest among OECD countries. These attacks were carried by the separatist Kurdistan Worker’s Party (PKK) and ISIS. India related facts in 2016 GTI In India, as many as 797 terrorist attacks were recorded in 2015 up by 4% since 2014. Besides, 289 terrorism-related deaths were recorded in India, a 45% decline over 2014. However, number of Indian Army and paramilitary soldiers killed this year is at an eight-year high. 2015 attacks were the highest since 2000, 80% were non-lethal. India experienced 7% of all terrorist attacks around the world, the fourth highest after Iraq (20%), Afghanistan (14%) and Pakistan (8%). In 2015, India suffered fewer terror attacks (797) than only Iraq (2,415), Afghanistan (1,715) and Pakistan (1,008). India suffered twice as many attacks as Syria (384). About Global Terrorism Index (GTI) The GTI systematically rank the nations of the world according to terrorist activity. It scores a country is calculated based on weightage assigned to four indicators. They are total number of terrorist incidents, injuries, fatalities and property damage sustained in the year in question.

Read more at: http://currentaffairs.gktoday.in/month/current-affairs-december-2016/page/4

The governance of Reserve Bank of India

The governance of Reserve Bank of India
If the central bank’s board rubber-stamped the currency exchange decision, it is clear then that RBI’s autonomy has been compromised
In a recent interview I had with Y.V. Reddy, a former governor of Reserve Bank of India (RBI), about financial inclusion, the first observation he made was: “The RBI board has representatives from agriculture, social services and even scientists. Most central banks are monetary authorities packed with economists. RBI is not just a monetary authority worried exclusively about issues of inflation, but much beyond.”
RBI not only has a central board, but also has four regional boards. The regional boards are required to look at issues that come up in the respective regions, and deal with local financial institutions like cooperatives. The chairs of the regional boards are on the central board. In addition to these four people, the Union government nominates 10 more directors on the central board. In the past, the incumbent board member would continue beyond his or her term till the new board was appointed, ensuring that there was no void, even if there was a delay in fresh appointments. This was changed to put a hard stop to the term of the board member irrespective of whether a replacement was found. Thus the RBI board started having vacancies.
Typically, a board member could serve up to two terms of four years each, though Y.H. Malegam exceptionally served many more terms, and deservedly so. The people on the central board of RBI—though appointed by the Central government—were people of eminence and independence. We have had Y.C. Deveshwar, Azim Premji, Kumar Mangalam Birla (who resigned when the group applied for a banking licence), G.M. Rao, who brought the perspective of business; Kiran Karnik, who brought in a public policy perspective; Dipankar Gupta, A. Vaidyanathan, Indira Rajaraman, who brought in diverse academic perspectives and people like Amrita Patel, Ela Bhatt and Shashi Rajagopalan, who brought in the perspective of peoples’ organizations and civil society. These are names of people who were on the central board in the last three terms. In addition, even the regional boards had people of diverse backgrounds and people of no less eminence than M. Govinda Rao.
The composition of the central board, as Reddy points out, shows larger concerns, beyond inflation and monetary policy, because RBI policies usually have much larger ramifications. The central board of RBI, in the past three years, is shrinking. There have been no new appointments to the local boards in the current National Democratic Alliance regime. The last appointment to a regional board was that of Nachiket Mor, who was appointed chair of the board of eastern region by the United Progressive Alliance-II. All the positions of all the local boards except that of Mor have fallen vacant and have not been filled up. Even in the eastern regional board, Mor is the lone member, and it is safe to presume that these one-man meetings may not be happening. So, much for hearing the decentralized voices!
Thus, we have one representative from the local boards on the central board as against four positions. In the central board, everybody appointed by the previous government has demitted office. The current government in its tenure has made only three appointments to those 10 positions and the rest have remained vacant for a very long time. In addition, one position on the board from the side of officials—that of a deputy governor is also lying vacant after Urjit Patel assumed governor’s office. Thus, the RBI is operating with less than half of its board size; and less than a third of its size for independent members.
The gazette notification that withdraws the legal tender status in the preamble states that the decision of the government has been on the recommendation of the central board of directors of the RBI. This is a very important decision that is affecting the economy as a whole and also brings to the fore, the capability, trust, reputation of the central bank. A decision of this nature should have been accompanied by at least a document laying out the road map and must have been discussed in a meeting which could have lasted for hours. The question is, did this recommendation to the government happen after due deliberations within the central board of the RBI? Were the views of all the board members heard? Were they recorded? And was this a unanimous decision? In any case, how fair is it for a board having four independent members and six executives (representing the RBI and government) to take a call on such an important economic and social decision when the expected structure is to have 14 independent members and seven executives? Does the current constitution, of six officials and four independent members, represents the spirit of how the board was expected to be constituted?
It is not clear from the public domain if there was a special meeting of the central board called for discussing the withdrawal of legal tender issue. Given the nature of secrecy, we assume that a special meeting was called. The question is, whether this decision actually emanated from the inputs that RBI received, deliberated within about the ramifications and then recommended to the government? From what we have seen in the discourse, this was a decision of the prime minister only, implemented by the RBI. The decision of the central board to recommend withdrawal of the legal tender status possibly did not emanate from due process within the central board of RBI. The board did not have enough time to deliberate on the important issue and offer counsel.
If secrecy was of prime importance, and the decision was that of the prime minister and the central board rubber-stamped the decision, then it is clear that the autonomy of the RBI has been compromised at the highest level on one of the most important decisions. Secrecy cannot be a foil for breaking down the governance structures. If indeed this decision was of the government, there must have been alternative legal routes in which the government could own up to this decision, like promulgating an ordinance as was done in 1978.
RBI is a classic case of minimum governance maximum government, exactly the opposite of what the honourable Prime Minister—when he was a candidate—promised.

India’s designation as a “major defence partner” of the US

Defence minister Manohar Parrikar and US secretary of defence Ashton Carter on Thursday finalised India’s designation as a “major defence partner” of the US. This was announced in the India-US joint statement issued at the close of Carter’s visit to New Delhi. Thursday’s meeting between Carter and Parrikar was the seventh since the Narendra Modi government took office in May 2014.
Carter is on his farewell visit to Asia as the eight-year-old Barack Obama administration prepares to hand over charge to the new administration of President-elect Donald Trump.

A US Congressional conference committee had on 30 November asked Carter and secretary of state John Kerry to take steps necessary to recognise India as US’s “major defence partner” in a bid to strengthen bilateral security cooperation.
The provision also asked the defence secretary and the secretary of state for an assessment of the extent to which India possesses capabilities to support and carry out military operations of mutual interest of the two countries. The US administration’s move to designate India as such now needs to be formally passed by the Congress—the House of Representatives and the Senate—before US President Barack Obama can sign it as law.
So what does it mean to be a “major defence partner” partner of the US?
According to a joint statement issued by the two sides on Thursday, the designation “is a status unique to India”.
It “institutionalises the progress made to facilitate defence trade and technology-sharing with India to a level at par with that of the United States’ closest allies and partners, and ensures enduring cooperation into the future,” the statement said.
India is not a treaty partner of the US—which is a formal alliance partner with close cooperation with Washington like Japan or Australia. Neither is it part of the North Atlantic Treaty Organisation, which includes countries like Britain.
But India is seeking benefits granted to the closest allies of the US, such as Australia—that the Pentagon was hesitant to concede in the past.
Thursday’s joint statement does not specify details of the benefits that will accrue to India under the designation.
But it is expected that procurement of weapons’ systems, spares for those platforms already in the Indian inventory and most critically the transfer of technology will get smoother.
It was during Prime Minister Modi’s visit to Washington in June that the US said it recognized India as a “major defence partner”.
The joint statement issued then had acknowledged the US-India defence relationship as a possible “anchor of stability”, with the US saying it will “continue to work toward facilitating technology sharing with India to a level commensurate with that of its closest allies and partners”.
During Parrikar’s visit to the US in August, the two sides had discussed the framework of the designation which was later negotiated by the two sides.