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In an indication of the continuing distress in the Micro Small and Medium Enterprises (MSME) sector, one in every six loans disbursed under the Emergency Credit Line Guarantee Scheme (ECLG Scheme) launched as part of the Covid-19 relief package in May 2020 has turned bad in just 27 months.
According to information obtained by The Indian Express under the Right to Information Act. The defaults are mainly in the lower end of the loan bands (up to Rs 20 lakh), the data reveals.
Replying to an RTI, the National Credit Guarantee Trustee Company Ltd (NCGTC) – a company set up by the Union Ministry of Finance to manage and provide guarantees to these loans – has said that loans to 16.22 lakh accounts, or 16.4 per cent of the total 98.86 lakh accounts, disbursed since May 2020 turned into Non-Performing Assets (NPA).
While the total NPAs or bad loans as per the RTI response dated August 25 this year stood at Rs 11,893.06 crore, the total loan amount disbursed till August 25 this year amounted to Rs 2,81,375.99 crore. The quantum of loans that could be provided by banks was increased from Rs 50 crore initially in a phased manner, and the Rs 500 crore ceiling was finally removed in May 2021.
The government announced the ECLG Scheme for the MSME sector in May 2020, two months after the national lockdown announced in March. Loans under the ECLG scheme’s first component (ECLGS 1.0) allowed a two-year moratorium.
The interest rate charged was capped at 9.25 per cent for banks and 14 per cent for Non-Banking Financial Corporations (NBFCs). MSMEs were provided additional loans up to a maximum of 20 per cent of their outstanding debt.
The maximum loan provided was Rs 50 crore. These loans were to be categorised as NPAs when they remained unpaid even three months after the two-year moratorium.Most loans that have now turned bad were awarded under ECLGS 1.0.
A banker involved in the exercise said the current NPA categorisation norms state that if even one loan account of a customer turns bad, all loan accounts will be categorised as NPAs, irrespective of the fact the other accounts continue to be serviced.
The banker said some accounts may have turned bad even before the mandatory three-month period due to non-payment of other loans, indicating that the company or individual was not able to service loans due to financial stress.
Radars along Bangladesh coast, no border deaths: Delhi-Dhaka statement (Page no. 3)
(GS Paper 2, International Relations)
Bring the number of deaths along the border to zero; finalise defence projects under Line of Credit; start talks for a comprehensive trade pact in 2022; conclude the Teesta water-sharing treaty soon; ensure uninterrupted supply of essential goods to Dhaka; build railway links in Bangladesh; allow coastal radars along the neighbouring country’s coast.
These are the key takeaways from Bangladesh Prime Minister Sheikh Hasina’s meetings with Prime Minister Narendra Modi and other top leaders during her visit to India over the last two days.
Having forged a strong partnership over the last 50 years, both countries are working on an increasingly wide range of sectoral collaboration,” she said at a function to award the Mujib Scholarship to direct descendants of Indian soldiers and officers killed or critically wounded during the Liberation War of Bangladesh in 1971. “I want our friendship to last forever,” she said.
Hasina said the award of 200 of these scholarships — 100 each at the Class 10 and Class 12 levels — was a token of Bangladesh’s “homage” to the “heroes who made the supreme sacrifice” in 1971.
A day after the bilateral meeting between Modi and Hasina in New Delhi, the two countries also released a joint statement.
Recognising that peaceful border management is a “shared priority”, the statement said that the two leaders directed officials to “expedite work to complete all pending developmental works within 150 yards of the Zero Line, including fencing starting with the Tripura sector with the objective of maintaining a tranquil and crime-free border.
It said that both sides noted with appreciation the stepped-up efforts by their border forces against smuggling of arms, narcotics and fake currency, and to prevent trafficking, particularly of women and children.
Both leaders reiterated their strong commitment to eliminate terrorism in all its forms and manifestations and decided to further strengthen their cooperation to counter and prevent the spread of terrorism, violent extremism and radicalisation in the region and beyond.
Hasina reiterated Bangladesh’s “long pending request for concluding the interim agreement on the sharing of waters of the Teesta River, the draft of which was finalised in 2011”.
The statement said the two leaders “welcomed the recent finalisation of a Joint Feasibility Study which recommended that the Comprehensive Economic Partnership Agreement (CEPA) will be beneficial for both countries.
They directed trade officials on both sides to start negotiations within the calendar year 2022 and to complete these at the earliest, in time for Bangladesh’s final graduation from LDC (Least Developed Countries) status.
Expressing satisfaction at the intensification of defence ties, the leaders agreed for “early finalisation of projects under the Line of Credit for defence, which would be beneficial for both the countries.
The statement said India welcomed the “finalisation of initial procurement plans for vehicles for the Bangladesh Armed Forces in this regard and looked forward to enhancing bilateral defence ties.
Govt. and Politics
Ukraine conflict, Covid hit global supply chains: PM at Russia meet (Page no. 7)
(GS Paper 2, International Relations)
With Russian President Vladimir Putin listening, Prime Minister Narendra Modi said the Ukraine conflict and the Covid pandemic have had a “major impact” on global supply chains, leading to shortages of foodgrains, fertilisers and fuels.
In an online plenary session address at the Eastern Economic Forum — being held in the Russian city of Vladivostok and also attended by Putin — Modi, without mentioning the Russian invasion, said India has stressed the need to pursue diplomacy and dialogue “since the beginning of the Ukraine conflict”.
India’s “ancient doctrine of VasudhaivaKutumbakam has taught us to see the world as a family, and in today’s globalised world, events in one part of the world create an impact on the whole world.
The Ukraine conflict and the Covid pandemic have had a major impact on global supply chains. Shortages of foodgrains, fertilisers and fuels are a major concern for developing countries. Since the beginning of the Ukraine conflict, we have stressed the need to take the path of diplomacy and dialogue… We support all peaceful efforts to end this conflict.
Modi said India welcomes the recent agreement regarding the safe export of cereals and fertilisers. “India is keen to strengthen its partnership with Russia on Arctic issues.
There is also immense potential for cooperation in the field of energy. Along with energy, India has also made significant investments in the Russian Far East in the areas of pharma and diamonds.
His comments come in the backdrop of concerns raised by the West, including the US and Europe, over countries buying oil from Russia. Ukraine has criticised India for buying Russian oil. Defending the decision, India has said it is buying oil to meet energy needs and minimise the inflationary impact.
Modi said Russia can become an important partner for the Indian steel industry with the supply of coking coal, and there is scope for cooperation in the mobility of talent.
Indian talent has contributed to the development of many developed regions of the world. I believe that the talent and professionalism of Indians can bring about rapid development in the Russian Far East.
Recalling his participation at the forum summit in 2019, Modi said India had announced its “Act Far-East” policy at that time, as a result of which its cooperation with the Russian Far East had increased in various fields.
Cabinet clears India-Maldives MoU on disaster management (Page no. 7)
(GS Paper 2, International Relations)
The Union Cabinet approved a Memorandum of Understanding (MoU) on cooperation between India and Maldives in the filed of disaster management. The MoUwas signed between the National Disaster Management Authorities (NDMA) of the two countries on August 2.
The Union Cabinet, Chaired by Hon’ble Prime Minister has ex-post facto approved the Memorandum of Understanding (MoU) signed between the National Disaster Management Authority of the Republic of India and the National Disaster Management Authority of the Republic of Maldives on cooperation in the field of Disaster Management.
Express Network
Air clears to show the good, and the bad: 95 of 131 cities improve, 27 worsen (Page no. 9)
(GS Paper 3, Environment)
Twenty cities out of 131 selected by the Union Environment Ministry for its National Clean Air Programme (NCAP) have attained the National Ambient Air Quality Standards (60 microgram per cubic meter) in 2021-22, compared to their 2017 levels.
Ninety-five of these 131 cities have shown air quality improvement, with Varanasi recording the most marked improvement — of 53% — in air quality levels, the ministry stated. Varanasi had an annual average concentration of PM10 of 244 in 2017, which dropped to 144 in 2021.
Marking the UN International Day of Clean Air for Blue Skies, Union Environment Minister Bhupender Yadav said, “When we commenced the Clean Air Mission programme last year, it was our endeavour to work on it from the grassroots level, as the topic of clean air is a matter of priority for the government.
Our aim is for NCAP to address the problems of air pollution at regional level, as circumstances and reasons for it are different in different regions.
Stating that one of the challenges the government has faced in implementing NCAP has been lack of adequate data, Yadav said this issue is “being addressed”. From now, he said, urban centres “must take into account mitigation of air pollution during planning stages”.
PM10 data disclosed by the ministry shows that all metropolitan cities — Delhi, Bengaluru, Mumbai, Chennai, Kolkata and Hyderabad — have shown significant improvement in air quality in 2021-22 compared to 2017.
Other major cities to have shown an improvement include Noida, Chandigarh, Navi Mumbai, Pune, Guwahati, Patna, Raipur, Ahmedabad, Jamshedpur, Ranchi, Dimapur, Kohima, Amritsar, Jalandhar, Ludhiana, Alwar, Jaipur, Jodhpur, Udaipur, Madurai, Agra, Allahabad, Ghaziabad, Kanpur, Lucknow, Dehradun, Rishikesh, Asansol, and Howrah.
But, the data shows, 27 cities have shown a deterioration in air quality over the same period. Among them is Korba — the district in Chhattisgarh houses 10 thermal coal power plants — for which the state human rights commission had sought a report on the district’s poor air quality from the state government several years ago.
Among states, Madhya Pradesh has been the poorest performer, as six of seven cities from the state selected by the Centre for NCAP have shown a deterioration in air quality.
These are Bhopal, Dewas, Indore, Jabalpur, Sagar and Ujjain. Gwalior, the seventh city from MP, has shown a negligible improvement, with annual average concentration of PM10 improving from 110 in 2017 to 109 in 2021-22.
The Editorial Page
Counting every citizen (Page no. 12)
(GS Paper 2, Polity and Governance)
The book How India Became Democratic by OrnitShani details how our first national voter list was compiled and magnificently captures the almost pathological worry of election officials about missing anybody and their determination to ensure everybody voted in 1952.
This instinct for inclusiveness is not shared by some J&K politicians who call for rejecting voter list preparations that follow our Constitution’s algorithm for including all state residents.
We must reject this self-interested, parochial and unconstitutional whining because voter lists that enrol many lakhs of missing residents will accelerate statehood restoration and competitive politics.
Ghulam Nabi Azad’s new party is hardly the new breed of local politicians we cheer for but is nonetheless welcome because its birth declared poornaswaraj from dynastic rule and Azad promises to prioritise job creation. Both evils have long plagued J&K.
Changing your mind about electoral politics used to be fatal in J&K; the assassination of MirwaizMaulvi Farooq of the Awami Action League felt baffling in 1990 because the hardline leader consistently supported Pakistan.
But his tentative suggestion that peace needed political dialogue led to his murder by PoK-based HizbulMujahideen (the Askari wing of Jamaat-E-Islami).
Pakistan-exported terrorism created a nine-year election-free J&K starting in 1987, but couldn’t prevent elected state governments after 1996 from four assembly elections. Pakistan’s queasy relationship with democracy — no PM has ever completed a full term — comes from their deep state embracing national poet Muhammad Iqbal’s lament “jamhooriyatektarz-e-hukumathaijisme logon koginajaata he, tolanahin” (democracy counts people instead of weighing them). Pervez Musharraf, then concurrently President, Prime Minister, and Army Chief of Pakistan — condescendingly “weighed” citizens by making college degrees compulsory for all election candidates.
In contrast, India’s election track record is enviable. Our first parliamentary elections in 1952 required a Constitution, a list of 17 crore voters (of whom 85 per cent could not read or write), and 2.25 lakh polling booths.
They were highly competitive: 30 parties fielded 1,874 candidates, and the Congress Party got 45 per cent of the votes but 75 per cent of the seats.
Since then, half of the 17 general elections have led to a new central government. Our voter population is 91 crore, and more than 370 political parties campaign assuming everybody votes where they live.
J&K’s next assembly elections will be the first under the Indian Constitution — the last 11 assembly elections held under the J&K state Representation of People Act with six-year government tenures were hardly fair because they excluded residents from voting based on their birthplace, birth date, or ancestors.
The National Conference (NC) won all 75 seats in the first state election of 1951 because 43 NC candidates were elected unopposed a week before voting, nominations of 13 candidates of PrajaParishad were rejected (this party later merged with the Jana Sangh), two independent candidates opted out, and two Ladakh seats were won by nominal NC members.
Have Room and Must spend (Page no. 12)
(GS Paper 2, Centre State Relations)
Three recent developments have brightened the outlook for capital expenditure by state governments. First, the Union government has stepped up tax devolution during July-August.
Second, the interest-free capex loan scheme for states has seen a sharp pickup in off-take in July. Third, the norms for the adjustment of off-budget borrowings for the current fiscal have been eased. We believe all of these will reduce the stress on state finances and support higher capex in the coming months.
First, the Centre has stepped up the amount of tax devolution to states, releasing a double tranche in August. We believe this was warranted given the expected overshooting of its tax revenues relative to the budget estimates for 2022-23.
We estimate that Rs 3.2 lakh crore has been devolved in the first five months of this year. This implies a growth of 49 per cent over the corresponding period last year. This should encourage the states to step up their capital spending in the post-GST compensation months.
Based on our projection, tax devolution will need to be as high as Rs 9.3 lakh crore this year, overshooting the budget estimates by more than Rs 1 lakh crore.
Therefore, the amount left to be disbursed to the states in the remainder of the year is quite substantial. Additional double tranches may be prudent every quarter after the advance tax inflows are received to ensure that there isn’t too much back-ending of the devolution in the fourth quarter as was the case last year.
The Centre could also consider sharing with states the likely amount of devolution prior to the start of each quarter. This revenue visibility would enable states to plan their capital spending, given the lead time required to plan and execute capital projects.
It may also result in more accurate assessments of their quarterly market borrowings, which have been woefully off-the-mark in recent quarters.
Second, this year, the Centre massively stepped up interest-free loans to states, which are earmarked for capital spending. The scheme for special assistance to states for capital investment was launched in October 2020 as part of the measures to support economic activity which had been negatively impacted by the Covid-19 pandemic.
In the Union budget 2022-23, the Centre had stepped up the allocation towards this scheme to Rs 1 lakh crore for the current fiscal from under Rs 15,000 crore in the previous two years.
This amount will be given to the states as a loan, over and above the normal borrowing ceiling fixed. But, not all states had included the estimated inflows from the capex scheme in their respective budgets, although this does not prevent them from participating in the scheme.
The Idea Page
Thought for Food (Page no. 13)
(GS Paper 3, Economy)
According to the Food and Agriculture Organisation, the Food Price Index has increased by 30 per cent in the year 2021-22. The last time it had increased in similar proportion was in 2010-11.
This phenomenon was one of the factors that led to the Arab Spring. Currently, at a time when the Covid-19 pandemic had already disrupted the food supply chains around the world in 2020, tensions are exacerbated by Vladimir Putin’s war on Ukraine: Russia and Ukraine represent 27 per cent of the world market for wheat, 16 per cent for corn, 23 per cent for barley, and 53 per cent for sunflower.
In peacetime, the Black Sea ports, now blocked, account for about 95 per cent of grain exports from Ukraine. Railways could have taken over, and Ukraine certainly has a rather exceptional railroad network.
Unfortunately, the gauge of the railway tracks built by the USSR in Ukraine is not the same as in neighbouring countries. As a result, wagons have to be transferred one at a time at the border.
Twenty-six countries, mainly in Africa, West Asia and Asia, depend on Russia and Ukraine for more than 50 per cent of their wheat imports. India wanted to fill in this gap and, in April 2022, the Prime Minister said that “India can feed the world if the WTO allows it”.
However, just one month later, New Delhi banned wheat exports to control rising domestic prices amid concerns over production due to the heatwave and uncertainty about existing reserves due to private sector hoarding.
This is not a new phenomenon. In 2009, the International Assessment of Agricultural Knowledge, Science and Technology for Development (IAASTD), a World Bank initiative, in a report — Agriculture at a Crossroads — observed that speculation with agricultural commodities on the commodity futures exchanges was one of the main reasons for the spike in food prices.
The original purpose of futures markets was that farmers could transfer the price risk — a “future” contract would allow them to sell the produce at the current price but for delivery in the future.
This safeguarded both sellers and buyers against any excessive price jumps — for example, those caused by the vagaries of the weather or conflicts and war. It was a mechanism to ensure that the basic livelihood and survival of farmers were not jeopardised.
However, the arrival of large pension funds, hedge funds and investment banks in these markets has resulted in excessive speculation. The derivative markets set a benchmark for the prices in the real world, and this is where excessive speculation became a problem.
The revolutionary’s due (Page no. 13)
(GS Paper 1, History)
In the year of ‘AzadiKaAmritMahotsav’, the nation pays tribute to Subhas Bose on September 8 as his statue rises tall next to India Gate.
The transfer of power to India took place on August 15, 1947. Had Bose and his Indian National Army (INA) succeeded, India would have attained freedom, not inherited it through a transfer of power.
The British endeavoured to black out news concerning the Indian National Army throughout its existence. As a consequence, very little was known of the INA in India.
The British called it “JIFs” — Japanese Inspired Forces. Subhas Bose was portrayed as a dissenting radical maverick, driven by personal ambitions.
Not till the INA trials began did India get to know about it. The impact was tremendous. Nothing had ever caught the Indian imagination in such a manner.
The British depended on the armed forces to subjugate India. Despite ascribing dubious motives to those who joined the INA, there was no doubt that the average “jawan” had done so for patriotic reasons. The British well knew that once this feeling seeped into the army, it would become impossible for them to hold India.
Bose had hoped to capture Imphal. That would give the INA a large number of Indian soldiers. Once this was achieved, fighting in India would create revolutionary conditions.
When the fighting commenced, the INA had only one division stationed on India’s borders. Another was on the move towards Burma. And the third was in the process of formation.
All three divisions were expected to be in Burma by the time Imphal fell. Bose was confident of raising three more divisions from among the Indian troops that would fall to him after the capture of Imphal.
With six divisions, the INA would be the single largest force in the region. The rapid advance into India would create the right conditions for the Indian army to switch sides along with the people of the Northeast.
Bose knew that Japan was losing the war. Even so, he strove to gain a foothold in India. It was a touch-and-go situation. The fate of the operation was to be decided in 24 hours. If, in those 24 hours, the British garrison at Imphal had not been reinforced by a whole division, the INA would be inside India.
Bose’s push needed to be backed by Japanese air power to deny British reinforcements. But that support did not materialise. Till the last day in Imphal, the intelligence reports indicated that the British Indian garrison was about to surrender to the INA.
Explained
PM SHRI: Schools upgraded to ‘NEP labs’ (Page no. 15)
(GS Paper 2, International Relations)
Two days after Prime Minister Narendra Modi announced that 14,500 schools across India will be upgraded to showcase components of the National Education Policy (NEP), 2020, the Union Cabinet approved a new centrally sponsored scheme under which the initiative will be implemented.
According to the Ministry of Education, the scheme will be called PM SHRI Schools (PM Schools for Rising India). Under the scheme, 14,500 schools across India’s states and Union Territories will be redeveloped to reflect the key features of the NEP, 2020.
The idea was first discussed with the Education Ministers of states and UTs during a conference organised by the Ministry of Education in June at Gandhinagar in Gujarat.
Union Education Minister Dharmendra Pradhan said the Centre has held many rounds of discussions with the states on the implementation of the scheme. The idea of PM SHRI, he said, was to create a set of schools that would be able to act as “NEP labs”.
The NEP for schools envisages a curricular structure and teaching style categorised in four stages: foundational, preparatory, middle, and secondary.
According to the NEP, the foundational years (pre-school and grades I and II) should involve play-based learning. At the preparatory level (grades III-V), light textbooks are to be introduced along with some formal classroom teaching.
Subject teachers are to be introduced at the middle level (grades VI-VIII). The secondary stage (grades IX-XII) will be multidisciplinary, with no hard separation between arts and sciences or other disciplines.
It also proposed that board exams be held twice a year, including one for helping students to improve their scores, and that two types of papers on mathematics should be offered — a standard paper, and a different one to test higher levels of competency.
A centrally sponsored scheme is one in which the cost of implementation is mostly split in a 60:40 ratio between the Union government and the states/UTs. The mid-day meal scheme (now PM Poshan) or the PM AwasYojana are examples of centrally sponsored schemes.
In the case of the Northeastern states, Himachal Pradesh, Uttarakhand, Jammu and Kashmir, and UTs without legislatures, the Centre’s contribution can go up to 90 per cent.
PM SHRI will be implemented at a cost of Rs 27,360 crore over the next five years, in which the Centre’s share will be Rs 18,128 crore.